ascena retail group, inc. (NASDAQ:ASNA) (the “Company”)
today reported a net loss on a GAAP basis for its fiscal second
quarter ended January 28, 2017 of $0.18 per diluted share compared
to a net loss of $0.12 per diluted share in the year-ago
period.
David Jaffe, President and Chief Executive Officer of ascena
retail group, inc., commented, "Reflecting on our second quarter
results, we saw a continuation of trends that have been in place
for some time. While we remain generally pleased with selling
performance during peaks, our base business remained soft due to
ongoing store traffic headwinds and overall customer price
sensitivity, which have become persistent issues impacting our
larger sector. While our second quarter comp sales were in line
with our guidance, we were forced to be much more promotional than
planned to achieve this level of performance."
Jaffe concluded, "As I reflect on our strategic position, we
continue to see the disruptive trend toward ecommerce transactions,
and the growing influence of online engagement on traditional brick
and mortar activity across our sector. We’ve invested heavily in
our omni-channel platform over a multi-year period, and we continue
to aggressively evolve our organization to embrace and serve
customers in this new retailing paradigm. Yet, there is much more
to do. As part of our Change for Growth transformation work, we are
developing advanced analytics and customer experience management
capabilities that will enhance our opportunities to drive revenue
and margin. We continue to aggressively pursue cost structure
opportunities, including refinement of our operating model and our
ongoing fleet optimization work. We view these initiatives as
critical enablers that will allow us to profitably serve our
customers in a highly dynamic sector."
Fiscal Second Quarter
Results
Overview
Current and prior year second quarter results include certain
acquisition and integration costs, as well as non-cash purchase
accounting adjustments associated with the acquisition of ANN INC.
("ANN"), which was completed on August 21, 2015. In
addition, the second quarter of Fiscal 2017 includes restructuring
charges incurred under the Company's Change for Growth program. A
summary of year-over-year changes in restructuring and acquisition
and integration expenses is presented in the notes to the unaudited
condensed consolidated financial information, included herein.
Net Sales and Comparable Sales
Net sales for the second quarter of Fiscal 2017 were $1.748
billion compared to $1.842 billion in the year-ago period. The
decrease in sales reflected the impact of the 4% comparable sales
decline. The Company’s sales and comparable sales data for the
fiscal second quarter on a brand and segment basis is summarized
below:
Net Sales (millions) Comparable
Sales
Three Months Ended
January 28,2017
January 23,2016
Ann Taylor (9 )% $ 206.6 $
227.8
LOFT (2 )% 401.6 409.7
Total Premium
Fashion (5 )% 608.2 637.5
maurices (8 )% 274.5
291.6
dressbarn (3 )% 207.1 221.6
Total
Value Fashion (6 )% 481.6 513.2
Lane Bryant (5 )%
269.8 282.3
Catherines flat 77.5 81.3
Total
Plus Fashion (4 )% 347.3 363.6
Justice (1 )%
311.1 327.5
Total Kids Fashion (1 )% 311.1
327.5
Total Company (4 )% $ 1,748.2 $
1,841.8
Gross margin
Gross margin on a GAAP basis decreased to $946 million, or 54.1%
of sales, for the second quarter of Fiscal 2017 compared to $968
million, or 52.6% of sales in the year-ago period. Prior year gross
margin included an unfavorable, non-cash purchase accounting
adjustment of approximately $23 million associated with the
write-up of ANN's inventory to fair market value, which
negatively impacted gross margin rate by approximately 120 basis
points. The remainder of the increase in margin rate reflects
increases at our Premium Fashion and Plus Fashion
segments, which resulted from improved inventory productivity,
promotional offer refinement, realization of ANN deal
synergies, and product cost favorability resulting from the cost of
goods sold initiative at our Premium Fashion segment. These
increases were mostly offset by lower rates at our Kids
Fashion segment, which resulted from higher promotional
activity to address soft performance of its more casual apparel
assortment, and at our Value Fashion segment, caused by a
higher level of promotional selling at maurices.
Buying, distribution, and occupancy expenses
Buying, distribution, and occupancy (“BD&O”) expenses on a
GAAP basis for the second quarter of Fiscal 2017 were $320 million,
or 18.3% of sales, compared to $330 million, or 17.9% of sales in
the year-ago period. BD&O expenses as a percent of net sales
de-levered as occupancy cost reductions from ongoing fleet
optimization and synergy savings achieved in the quarter were more
than offset by the impact of declining comparable sales volume.
Selling, general, and administration expenses
Selling, general, and administrative (“SG&A”) expenses on a
GAAP basis for the second quarter of Fiscal 2017 were $538 million,
or 30.8% of sales, compared to $550 million, or 29.8% of sales in
the year-ago period. SG&A expenses as a percent of net sales
increased as operating expense reductions, lower performance-based
compensation and transformation-related cost savings were more than
offset by the impact of declining comparable sales volume.
Operating loss
The Company incurred an Operating loss on a GAAP basis for the
second quarter of Fiscal 2017 of $45 million, or 2.6% of second
quarter sales compared to an Operating loss of $17 million, or 0.9%
of second quarter sales last year. The higher Operating loss
in the current year primarily reflects the decline in gross margin
dollars at our Value Fashion and Kids Fashion
segments, offset in part by synergies and cost savings initiatives
at our Premium Fashion segment.
Effective tax rate
The effective tax rate was 49.2% for the three months ended
January 28, 2017 versus 49.3% in the year-ago period. The
effective tax rate for the second quarter of Fiscal 2017 was higher
than the statutory federal and state tax rate primarily due to the
impact of permanent items on a relatively low level of pretax
income and due to the impact of the earnings mix on the overall
state effective rate.
Net loss and earnings per share
The Company reported a Net loss of $35 million, or $0.18 per
diluted share, in the second quarter of Fiscal 2017, compared to a
Net loss of $23 million last year, or $0.12 per diluted share.
Fiscal Second Quarter Balance Sheet
Highlights
Cash and cash equivalents
The Company ended the second quarter of Fiscal 2017 with Cash
and cash equivalents of $300 million. Of this amount, approximately
$228 million was held outside of the U.S.
Inventory
The Company ended the second quarter of Fiscal 2017 with
inventory of $676 million, up 2% from $660 million at the end of
the year-ago period, and included approximately $20 million in
early receipts related to a shift in timing of the Chinese New Year
holiday compared to the year-ago period.
Capital expenditures
Capital expenditures totaled $48 million in the second quarter
of Fiscal 2017.
Capital structure
The Company ended the second quarter of Fiscal 2017 with total
debt of $1.597 billion, which represents the remaining balance on
its $1.8 billion term loan used to acquire ANN.
Third Quarter and Fiscal Year 2017
Outlook
Excluding restructuring, acquisition and integration related
expenses, and non-cash ANN purchase accounting adjustments,
the Company expects non-GAAP EPS of $0.07 to $0.12 during the third
quarter of Fiscal 2017 and continues to expect full year Fiscal
2017 non-GAAP EPS in the range of $0.37 to $0.42.
Real Estate
The Company's store information on a brand-by-brand basis for
the second quarter is as follows:
Quarter Ended January 28, 2017
Store LocationsBeginning of
Q2
Store LocationsOpened
Store LocationsClosed
Store LocationsEnd of Q2
Ann Taylor 340 — (12) 328
LOFT
683 1 (6) 678
maurices 1,006 7 (1) 1,012
dressbarn
809 2 (16) 795
Lane Bryant 776 3 (9) 770
Catherines
370 — (1) 369
Justice 936 — (10) 926
Total 4,920 13 (55) 4,878
Conference Call
Information
The Company will conduct a conference call today, March 6, 2017,
at 4:30 PM Eastern Time to review its second quarter Fiscal 2017
results, followed by a question and answer session. Parties
interested in participating in this call should dial in at (877)
930-8316 prior to the start time, the conference ID is 70074738.
The call will also be simultaneously broadcast at www.ascenaretail.com. A recording of the call will
be available shortly after its conclusion and until March 13, 2017
by dialing (855) 859-2056, the conference ID is 70074738, and until
April 6, 2017 via the Company’s website at www.ascenaretail.com.
Non-GAAP Financial
Results
As noted above, the comparability of the Company's operational
results for the periods presented herein has been affected by
certain transactions. The Company believes that non-GAAP financial
measures, when reviewed in conjunction with GAAP financial
measures, can provide more information to assist investors in
evaluating current period performance, trends and
period-over-period comparative results. Non-GAAP measures eliminate
amounts that do not reflect the fundamental performance of the
Company’s businesses. Such items include costs such as (i)
acquisition and integration expenses, (ii) restructuring and other
related charges incurred under the Company's Change for Growth
initiative, and (iii) non-cash charges associated with the purchase
accounting adjustments of ANN's assets and liabilities to
fair market value, primarily reflecting inventory expense,
depreciation and amortization expense, and lease-related
adjustments. Reference is made to Note 2 of the unaudited condensed
consolidated financial information included herein for more
information.
Many investors also use non-GAAP measures as a common basis for
comparing the performance of different companies. A general
limitation of non-GAAP measures is that they are not prepared in
accordance with U.S. generally accepted accounting principles and
may not be comparable to similarly titled measures of other
companies due to differences in methods of calculation and excluded
items. Non-GAAP measures should be considered in addition to, not
as a substitute for, the Company’s Operating income (loss) and Net
income (loss) per common share, as well as other measures of
financial performance and liquidity reported in accordance with
U.S. generally accepted accounting principles.
Additionally, a reconciliation of the projected non-GAAP EPS,
which are forward-looking non-GAAP financial measures, to the most
directly comparable GAAP financial measures, is not provided
because the Company is unable to provide such reconciliation
without unreasonable effort. The inability to provide a
reconciliation is due to the uncertainty and inherent difficulty
predicting the occurrence, the financial impact and the periods in
which the non-GAAP adjustments may be recognized. These GAAP
measures may include the impact of such items as restructuring
charges, acquisition and integration related expenses, asset
impairments and the tax effect of all such items. As previously
stated, the Company has historically excluded these items from
non-GAAP financial measures. The Company currently expects to
continue to exclude these items in future disclosures of non-GAAP
financial measures and may also exclude other items that may arise
(collectively, “non-GAAP adjustments”). The decisions and events
that typically lead to the recognition of non-GAAP adjustments,
such as actions under the Company's Change for Growth program, or
acquisition and integration expenses, are inherently unpredictable
as to if or when they may occur. For the same reasons, the Company
is unable to address the probable significance of the unavailable
information, which could be material to future results.
Forward-Looking
Statements
Certain statements made within this press release may constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially. The Company does
not undertake to publicly update or review its forward-looking
statements even if experience or future changes make it clear that
our projected results expressed or implied will not be achieved.
Detailed information concerning a number of factors that could
cause actual results to differ materially from the information
contained herein is readily available in the Company’s most recent
Annual Report on Form 10-K.
About ascena retail group,
inc.
ascena retail group, inc. (NASDAQ:ASNA) is a leading
national specialty retailer offering apparel, shoes, and
accessories for women under the Premium Fashion segment
(Ann Taylor, LOFT, and Lou & Grey),
Value Fashion segment (maurices and
dressbarn), Plus Fashion segment (Lane
Bryant and Catherines), and for tween girls under
the Kids Fashion segment (Justice). ascena retail
group, inc. operates ecommerce websites and approximately 4,900
stores throughout the United States, Canada and Puerto
Rico.
For more information about ascena retail group, inc. visit:
ascenaretail.com, AnnTaylor.com, LOFT.com, louandgrey.com,
maurices.com, dressbarn.com, lanebryant.com, cacique.com,
Catherines.com, and shopjustice.com.
ascena retail group, inc.
Condensed Consolidated Statements of
Operations (Unaudited)
(millions, except per share
data)
Three Months Ended
January 28,
% of Net
January 23,
% of Net
2017
Sales
2016
Sales
Net sales $ 1,748.2 100.0 % $ 1,841.8 100.0 % Cost of goods
sold (802.4 ) (45.9 )% (873.8 ) (47.4 )%
Gross margin 945.8
54.1 % 968.0 52.6 %
Other costs and expenses: Buying,
distribution and occupancy expenses (320.1 ) (18.3 )% (329.9 )
(17.9 )% Selling, general and administrative expenses (538.1 )
(30.8 )% (549.5 ) (29.8 )% Acquisition and integration expenses
(15.8 ) (0.9 )% (16.0 ) (0.9 )% Restructuring and other related
charges (20.2 ) (1.2 )% — — % Depreciation and amortization expense
(96.3 ) (5.5 )% (89.4 ) (4.9 )%
Operating loss (44.7 ) (2.6
)% (16.8 ) (0.9 )% Interest expense (25.0 ) (1.4 )% (27.8 ) (1.5 )%
Interest income and other income (expense), net 0.4 — % (0.8 ) — %
Gain on extinguishment of debt — — % 0.8 — %
Loss
before benefit for income taxes (69.3 ) (4.0 )% (44.6 ) (2.4 )%
Benefit for income taxes 34.1 2.0 % 22.0 1.2 %
Net
loss $ (35.2 ) (2.0 )% $ (22.6 ) (1.2 )%
Net loss per
common share: Basic $ (0.18 ) $ (0.12 ) Diluted $ (0.18 ) $
(0.12 )
Weighted average common shares outstanding:
Basic 194.8 $ 195.8 Diluted 194.8 $ 195.8
See accompanying notes.
ascena retail group, inc.
Condensed Consolidated Statements of
Operations (Unaudited)
(millions, except per share
data)
Six Months Ended
January 28,
% of Net
January 23,
% of Net
2017
Sales
2016
Sales
Net sales $ 3,426.6 100.0 % $ 3,513.8 100.0 % Cost of goods
sold (1,466.8 ) (42.8 )% (1,643.1 ) (46.8 )%
Gross margin
1,959.8 57.2 % 1,870.7 53.2 %
Other costs and expenses:
Buying, distribution and occupancy expenses (640.7 ) (18.7 )%
(632.9 ) (18.0 )% Selling, general and administrative expenses
(1,062.5 ) (31.0 )% (1,036.2 ) (29.5 )% Acquisition and integration
expenses (27.8 ) (0.8 )% (58.5 ) (1.7 )% Restructuring and other
related charges (32.1 ) (0.9 )% — — % Depreciation and amortization
expense (190.2 ) (5.6 )% (171.9 ) (4.9 )%
Operating income
(loss) 6.5 0.2 % (28.8 ) (0.8 )% Interest expense (50.3 ) (1.5
)% (48.3 ) (1.4 )% Interest income and other income (expense), net
0.3 — % (0.2 ) — % Gain on extinguishment of debt — — % 0.8
— %
Loss before benefit for income taxes (43.5 ) (1.3
)% (76.5 ) (2.2 )% Benefit for income taxes 22.7 0.7 % 35.8
1.0 %
Net loss $ (20.8 ) (0.6 )% $ (40.7 ) (1.2 )%
Net loss per common share: Basic $ (0.11 ) $ (0.21 )
Diluted $ (0.11 ) $ (0.21 )
Weighted average common
shares outstanding: Basic 194.6 190.3 Diluted
194.6 190.3
See accompanying notes.
ascena retail group, inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(millions)
January 28,
July 30,
2017
2016
ASSETS Current assets: Cash and cash equivalents $
299.5 $
371.8
Inventories 676.1 649.3 Prepaid expenses and other current assets
192.8 218.9
Total current assets 1,168.4
1,240.0 Property and equipment, net 1,545.3 1,630.1 Goodwill
1,279.3 1,279.3 Other intangible assets, net 1,270.0 1,268.7 Other
assets 96.2 88.2
Total assets $ 5,359.2
$ 5,506.3
LIABILITIES AND EQUITY Current
liabilities: Accounts payable $ 464.0 $ 429.4 Accrued expenses
and other current liabilities 354.4 420.3 Deferred income 141.6
110.0 Current portion of long term debt — 54.0
Total current liabilities 960.0 1,013.7 Long-term debt, less
current portion 1,532.0 1,594.5 Lease-related liabilities 369.2
387.1 Deferred income taxes 442.1 442.2 Other non-current
liabilities 196.4 205.5
Total liabilities
3,499.7 3,643.0
Equity 1,859.5 1,863.3
Total liabilities and equity $ 5,359.2 $
5,506.3
See accompanying notes.
ascena retail group, inc.
Segment Information (Unaudited)
(millions)
Three Months Ended Six Months
Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Net sales:
Premium Fashion (a) $ 608.2 $ 637.5 $
1,187.4 $ 1,138.7
Value Fashion 481.6 513.2 985.7 1,043.3
Plus Fashion 347.3 363.6 665.0 698.9
Kids Fashion
311.1 327.5 588.5
632.9 Total net sales $ 1,748.2 $ 1,841.8 $
3,426.6 $ 3,513.8
Three Months Ended
Six Months Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Operating (loss) income:
Premium Fashion (a)(b) $
22.7 $ (5.8 ) $ 66.3 $ (53.9 )
Value Fashion (19.8 ) (1.3 )
(7.7 ) 33.7
Plus Fashion (10.0 ) (6.9 ) (3.8 ) (3.5 )
Kids Fashion (1.6 ) 13.2 11.6 53.4 Unallocated acquisition
and integration expenses (15.8 ) (16.0 ) (27.8 ) (58.5 )
Unallocated restructuring and other charges (20.2 ) —
(32.1
)
— Total operating (loss) income $ (44.7 ) $ (16.8 ) $
6.5 $ (28.8 )
Three Months Ended Six Months
Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Non-GAAP adjusted operating income:
Premium Fashion
(a)(b)(c) $ 34.2 $ 24.1 $ 88.8 $ 88.0
Value Fashion
(19.8 ) (1.3 ) (7.7 ) 33.7
Plus Fashion (10.0 ) (6.9 ) (3.8
) (3.5 )
Kids Fashion (1.6 ) 13.2
11.6 53.4 Total adjusted operating
income $ 2.8 $ 29.1 $ 88.9 $ 171.6
(a)
Results for the six months ended January
23, 2016 include the post-acquisition results of ANN, which
was acquired on August 21, 2015. Accordingly, ANN's results
for the first two quarters of Fiscal 2016 have been included herein
for the post-acquisition period from August 22, 2015 to January 30,
2016. The remainder of the Company's businesses ended the second
quarter of Fiscal 2016 on January 23, 2016. The effect of
ANN's one-week reporting period difference is not material.
All segments of the Company are on the same fiscal calendar as of
the end of Fiscal 2016.
(b)
Includes the impact of non-cash expenses
associated with the purchase accounting adjustments of ANN's
assets and liabilities to fair market value. For the three months
and six months ended January 28, 2017, adjustments of $11.5 million
and $22.5 million, respectively, primarily consist of depreciation
and amortization associated with the write-up of ANN's
customer relationships and property and equipment and other
purchase accounting adjustments, which are primarily lease-related.
For the three and six months ended January 23, 2016, adjustments of
$29.9 million and $140.6 million, respectively, primarily consist
of the impact of non-cash inventory expense associated with the
purchase accounting adjustment of ANN's inventory to fair
market value, and depreciation and amortization expense associated
with the write-up of ANN's customer relationships and
property and equipment. Reference is made to Note 2 of the
unaudited condensed consolidated financial information included
herein for a reconciliation of operating income on a GAAP basis to
adjusted operating income.
(c)
Results for the six months ended January
23, 2016 include $1.3 million reflecting ANN's operating
income for the three-week stub period from the end of their last
fiscal quarter prior to the acquisition date through the
acquisition date. Reference is made to Note 2 of the unaudited
condensed consolidated financial information included herein for a
reconciliation of operating income on a GAAP basis to adjusted
operating income.
ascena retail group, inc.Notes to Unaudited Condensed
Consolidated Financial Information
Note 1. Basis of Presentation
On August 21, 2015, the Company acquired 100% of the outstanding
common stock of ANN INC. ("ANN"). ANN, which
comprises the operations of the Company's Premium Fashion
segment, utilizes a 52-53 week fiscal year following the National
Retail Federation calendar. Accordingly, ANN's results for
the first two quarters of Fiscal 2016 have been included herein for
the post-acquisition period from August 22, 2015 to January 30,
2016. The remainder of the Company's businesses ended the second
quarter of Fiscal 2016 on January 23, 2016. The effect of
ANN's one-week reporting period difference is not material
to the condensed consolidated financial statements for the three or
months ended January 23, 2016. All segments of the Company are on
the same fiscal calendar as of the end of Fiscal 2016.
Note 2. Reconciliation of Non-GAAP Financial Measures
As noted above, the comparability of the Company's operational
results for the periods presented herein has been affected by
certain transactions. The Company believes that the non-GAAP
financial measures presented below, when reviewed in conjunction
with GAAP financial measures, can provide more information to
assist investors in evaluating current period performance, trends
and period-over-period comparative results. Non-GAAP measures
eliminate amounts that do not reflect the fundamental performance
of the Company’s businesses. These items include costs such as (i)
acquisition and integration expenses, (ii) restructuring and other
related charges incurred under the Company's Change for Growth
initiative, and (iii) non-cash charges associated with the purchase
accounting adjustments of ANN's assets and liabilities to
fair market value, primarily reflecting inventory expense,
depreciation and amortization expense, and lease-related
adjustments.
Many investors also use non-GAAP measures as a common basis for
comparing the performance of different companies. A general
limitation of non-GAAP measures is that they are not prepared in
accordance with U.S. generally accepted accounting principles and
may not be comparable to similarly titled measures of other
companies due to differences in methods of calculation and excluded
items. Non-GAAP measures should be considered in addition to, not
as a substitute for, the Company’s Operating income (loss) and Net
income (loss) per common share, as well as other measures of
financial performance and liquidity reported in accordance with
U.S. generally accepted accounting principles.
The following tables reconcile non-GAAP financial measures to
the most directly comparable GAAP financial measures and include
Gross margin, BD&O expense, SG&A expense, Operating (loss)
income, Income tax benefit, Net (loss) income and Net income (loss)
per common share for all periods presented.
Three Months Ended Six Months Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Gross margin - reported GAAP basis $ 945.8 $ 968.0 $ 1,959.8
$ 1,870.7 Impact of non-cash purchase accounting adjustments (a)
0.7 23.7 1.4 127.9 Impact of
ANN prior to August 21, 2015
(b) — — — 74.5
Non-GAAP Gross
margin $ 946.5 $ 991.7 $ 1,961.2 $ 2,073.1
Three Months Ended Six Months Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Buying, distribution & occupancy expense - reported GAAP
basis $ (320.1 ) $ (329.9 ) $ (640.7 ) $ (632.9 ) Impact of
non-cash purchase accounting adjustments (a) 0.3 (2.7 ) 1.3 (2.7 )
Impact of
ANN prior to August 21, 2015 (b) — —
— (27.4 )
Non-GAAP Buying, distribution &
occupancy expense $ (319.8 ) $ (332.6 ) $ (639.4 ) $ (663.0 )
ascena retail group, inc.
Notes to Unaudited Condensed
Consolidated Financial Information - (continued)
(millions, except per share
data)
Note 2. Reconciliation of Non-GAAP
Financial Measures (continued)
Three Months Ended Six Months
Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Selling, general & administrative expense - reported GAAP
basis $ (538.1 ) $ (549.5 ) $ (1,062.5 ) $ (1,036.2 ) Impact of
non-cash purchase accounting adjustments (a) 1.7 1.7 3.2 1.7 Impact
of
ANN prior to August 21, 2015 (b) — — —
(39.9 )
Non-GAAP Selling, general &
administrative expense $ (536.4 ) $ (547.8 ) $ (1,059.3 ) $
(1,074.4 )
Three Months Ended Six Months Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Operating (loss) income - reported GAAP basis $ (44.7 ) $
(16.8 ) $ 6.5 $ (28.8 ) Impact of non-cash purchase accounting
adjustments (a) 11.5 29.9 22.5 140.6 Impact of
ANN prior to
August 21, 2015 (b) — — — 1.3 Acquisition and integration expenses
(c) 15.8 16.0 27.8 58.5 Restructuring and other related charges (d)
20.2 — 32.1 —
Non-GAAP
Operating income $ 2.8 $ 29.1 $ 88.9 $
171.6
Three Months Ended Six Months
Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Income tax benefit - reported GAAP basis $ 34.1 $ 22.0 $
22.7 $ 35.8 Income tax impact of non-GAAP adjustments (e) (26.0 )
(20.8 ) (39.3 ) (79.2 )
Non-GAAP income tax benefit
(expense) $ 8.1 $ 1.2 $ (16.6 ) $ (43.4 )
Three Months Ended Six Months Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Net (loss) income - reported GAAP basis $ (35.2 ) $ (22.6 )
$ (20.8 ) $ (40.7 ) Impact of non-cash purchase accounting
adjustments (a) 11.5 29.9 22.5 140.6 Impact of
ANN prior to
August 21, 2015 (b) — — — 1.3 Acquisition and integration expenses
(c) 15.8 16.0 27.8 58.5 Restructuring and other related charges (d)
20.2 — 32.1 — Impact of
ANN acquisition on debt (f) — — —
(6.8 ) Gain on extinguishment of debt — (0.8 ) — (0.8 ) Income tax
impact of non-GAAP adjustments (e) (26.0 ) (20.8 ) (39.3 ) (79.2 )
Non-GAAP net (loss) income $ (13.7 ) $ 1.7 $
22.3 $ 72.9
ascena retail group, inc.
Notes to Unaudited Condensed
Consolidated Financial Information - (continued)
(millions, except per share
data)
Note 2. Reconciliation of Non-GAAP
Financial Measures (continued)
Three Months Ended Six Months
Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Diluted net loss per common share - reported GAAP basis $
(0.18 ) $ (0.12 ) $ (0.11 ) $ (0.21 ) Per share impact of
non-cash purchase accounting adjustments (a) 0.06 0.16 0.12 0.74
Per share impact of
ANN prior to August 21, 2015 (b) — — —
0.01 Per share impact of acquisition and integration related
expenses (c) 0.08 0.08 0.14 0.31 Per share impact of restructuring
and other related charges (d) 0.10 — 0.16 — Per share impact of
ANN acquisition on debt (f) — — — (0.04 ) Per share impact
of gain on extinguishment of debt — — — — Per share income tax
impact of non-GAAP adjustments (e) (0.13 ) (0.11 ) (0.20 ) (0.42 )
Per share impact of
ANN acquisition on EPS (g) — —
— (0.02 )
Non-GAAP diluted net (loss)
income per common share $ (0.07 ) $ 0.01 $ 0.11 $
0.37
(a)
Includes the impact of non-cash expenses
associated with the purchase accounting adjustments of ANN's
assets and liabilities to fair market value such as adjustments to
Cost of goods sold related to the write-up of ANN's
inventory, depreciation and amortization related to the write-up of
ANN's customer relationships and property and equipment and
other purchase accounting adjustments, which are primarily
lease-related. Amounts recorded in each period presented are as
follows:
Three Months Ended Six Months Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Gross margin $ 0.7 $ 23.7 $ 1.4 $ 127.9 Other operating expenses
2.0 (1.0 ) 4.5
(1.0 ) Depreciation and amortization 8.8 7.2 16.6
13.7 $ 11.5 $ 29.9 $ 22.5
$ 140.6
(b)
Represents ANN's results for the
three-week stub period from the end of their last fiscal quarter
prior to the acquisition date through the acquisition date and has
been adjusted to exclude transaction-related expenses incurred by
ANN resulting from the acquisition.
(c)
Primarily reflects costs related to the
ANN acquisition and include severance and retention-related
expenses, settlement charges and professional fees related to a
pension plan acquired in the ANN acquisition which was
terminated in the second quarter of Fiscal 2017, legal, consulting
and investment-banking related transactions costs and other
integration costs to combine the operations and infrastructure of
the ANN business into the Company's. Amounts recorded in
each period presented are as follows:
Three Months Ended Six Months Ended
January 28,
January 23,
January 28,
January 23,
2017
2016
2017
2016
Severance and retention $ 8.2 $ 10.9 $ 10.5 $
30.7
ANN pension settlement 4.1 — 8.0 — Transaction costs — — —
20.5 Other integration expenses 3.5 5.1 9.3
7.3 $ 15.8 $ 16.0 $ 27.8 $ 58.5
ascena retail group, inc.Notes to Unaudited Condensed
Consolidated Financial Information - (continued)(millions,
except per share data)
Note 2. Reconciliation of Non-GAAP Financial Measures
(continued)
(d)
For the three and six months ended January
28, 2017 primarily reflects costs incurred under the Company's
Change for Growth program. Expenses for the three months ended
January 28, 2017 include $12.2 million of severance and related
expenses and $8.0 million for professional fees. For the six months
ended January 28, 2017 expenses include $20.3 million of severance
and related expenses and $11.8 million for professional fees.
(e)
Non-GAAP income tax benefit (expense) is
calculated based on the estimated full year effective tax rate for
non-GAAP net (loss) income.
(f)
Primarily represents the incremental
interest expense for the stub period prior to the acquisition date
on the $1.8 billion term loan used to fund the cash portion of the
purchase price of the ANN acquisition at an interest rate of
5.25% as well as the impact of the related deferred financing fees.
This impact, which is not included in the reported GAAP results and
is included to enhance comparability between the periods, assumes
that the ANN acquisition had occurred as of the beginning of
Fiscal 2016 and the related debt incurred was outstanding as of the
beginning of Fiscal 2016.
(g)
Reflects the impact on EPS for the six
months ended January 23, 2016 of using 197.0 million weighted
average common shares for adjusted net income per diluted common
share compared to the 190.3 million used to calculate EPS on a
reported GAAP basis. The weighted average number of common shares
on an adjusted basis reflects the impact of the additional shares
issued in the acquisition of ANN as outstanding for the
entire period as if the acquisition had occurred as of the
beginning of the period presented. The weighted average number of
diluted common shares on an adjusted basis also reflects the
dilutive effect of stock options and other securities, which were
excluded from the reported GAAP amount due to the net loss reported
during the period.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170306006212/en/
For investors:ICR, Inc.James Palczynski,
203-682-8229Partnerjp@icrinc.comorFor media:ascena retail
group, inc.Sue Ross, 218-491-2110Executive Vice President, ascena
Corporate Affairssue.ross@ascenaretail.com
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