TLB Talbots (The)

The Talbots, Inc. (NYSE:TLB) today announced results for the third quarter ended October 28, 2006. Net income in the third quarter was $8.1 million or $0.15 per share on a reported basis and includes acquisition related costs and adjustments of approximately $0.16 per share and $0.04 per share of stock option expense. Excluding these acquisition related costs and stock option expense, earnings per diluted share were $0.35 for the combined company, compared to the $0.37 reported last year for the Talbots only brand. Total consolidated Company sales for the quarter were $569 million. By brand, retail store sales increased to $383 million for Talbots compared to $363 million last year, and were $77 million for J. Jill. Consolidated direct marketing sales for the thirteen-week period were $109 million, including catalog and Internet. Sales for the J. Jill brand represent approximately 20% of the total combined company sales volume. Total Company comparable store sales rose 2.3% for the third quarter. By brand, comparable store sales for Talbots increased 4.0% and were negative 6.6% for the J. Jill brand. Arnold B. Zetcher, Chairman, President and Chief Executive Officer, commented, �We were pleased to report third quarter earnings per share at the high end of our expectations, particularly as the Talbots brand benefited from the successful implementation of several strategic initiatives developed late last year and put in place this quarter. Sharper pricing across all merchandise categories, increased style count especially in novelty, strategic changes to our product flow and key adjustments to our promotional calendar all helped contribute to our strong results.� �We were also encouraged by our positive customer response to Talbots brand merchandise across all channels. Talbots experienced healthy third quarter sales, driven by a strong assortment of updated, modern classic merchandise.� �As we previously announced, our integration efforts with the J. Jill brand have progressed significantly better than expected, which enabled us to advance certain actions into the third quarter that were originally planned for later in the year and early next year. We closed our Hingham Telemarketing Center and migrated a number of key J. Jill information systems to Talbots architecture. While the associated expenses of these and other factors affected our third quarter earnings by $0.16 per share, we expect to benefit from cost savings synergies of approximately $36 million in 2007, up from our original estimate of $25 million.� �For J. Jill, comparable store sales results for the quarter were as expected, which is a continued modest improvement over the prior quarter trends. We feel good about the progress we are making, particularly in unifying our promotional and marketing calendar. Further, we are seeing a positive customer response from our one-price policy across all channels. We have made adjustments to our holiday merchandise and will look for ongoing improvement in our sales trends. As previously stated, our product should reflect a greater impact of our new merchandising leadership in the second quarter of fiscal 2007.� �Total Company direct marketing business, including catalog and Internet, was in line with our expectations for the third quarter, increasing 70% over last year, reflecting the inclusion of J. Jill direct marketing sales for this year�s third quarter.� Mr. Zetcher continued, �Our store expansion program is on target. We opened 31 Talbots stores and 18 J. Jill stores during the quarter. At the end of the period, we had a total of 1,346 stores, which included 1,118 Talbots stores and 228 J. Jill stores. We remain on track to open 24 new stores and close four in the fourth quarter, ending the year with approximately 1,366 total stores.� Operating Results for the Thirty-Nine-Week Period Total Company operating performance for the 39-week period ending October 28, 2006 includes J. Jill brand results for the period beginning May 3, 2006, which was the effective date of the acquisition. For the 39-week period, total consolidated Company net income was $31.6 million or $0.59 per diluted share on a reported basis and includes acquisition related costs and adjustments of approximately $0.31 per share and $0.11 per share of stock option expense. Excluding these costs, consolidated earnings per diluted share were $1.01, compared to the $1.35 reported last year for the Talbots only brand. Total consolidated Company sales were $1,593 million for the 39-week period. By brand, retail store sales increased to $1,171 million for Talbots compared to $1,130 million last year, and were $151 million for J. Jill from the date of the acquisition. Consolidated direct marketing sales, including catalog and Internet, were $271 million. Total Company comparable store sales rose 1.5% for the 39-week period. By brand, comparable store sales for Talbots increased 2.6%. J. Jill�s comparable store sales were negative 7.4% for the period beginning May 3, 2006 through October 28, 2006. Fourth Quarter Comments Mr. Zetcher added, �As we look ahead to the fourth quarter, we are pleased with the early success of our forward Talbots brand Holiday/Gift catalog, which was mailed to customers in mid-October. Since early November, we have also seen healthy comp store sales trends from our core Talbots brand customers, which is a significant improvement from the softness we experienced in the latter part of October. However, while our core customer remains strong, we have not yet seen the level of demand from the non core customer that we anticipate.� �In addition, we are only two weeks into the quarter and have a number of marketing initiatives planned throughout the period that we expect to benefit from, including our important semi-annual sale event that traditionally begins the day after Christmas. Given these factors, at this early stage in the fourth quarter we believe we are not in a position to provide our outlook for earnings per share and plan to give additional details when we are further into the period.� �With a successful third quarter under our belt, we anticipate that our Company will benefit over the long term, as we feel we are taking the appropriate actions to help drive improved top and bottom line performance.� �Our overall objective, particularly as we enter the fourth quarter, is to get as much of the J. Jill integration work behind us so that we start fiscal 2007 as clean as possible. To that end, we are reconfirming our expectation for this transaction to be accretive to earnings in fiscal 2007 with synergies and after acquisition-related costs and adjustments. We remain focused on creating the leading brand portfolio for the age 35+ female market,� concluded Mr. Zetcher. Additional Disclosures As previously announced, Talbots will host a conference call today, November 15, 2006 at 10:00 am local time to discuss third quarter results. To listen to the live web cast please log on to www.thetalbotsinc.com/ir/ir.asp. The call will be archived on its web site www.thetalbotsinc.com for a period of twelve months. In addition, an audio replay of the call will be available shortly after its conclusion and archived until November 17, 2006. This call may be accessed by dialing (877) 519-4471, passcode 8098745. The Talbots, Inc. is a leading international specialty retailer and cataloger of women�s, children�s and men�s apparel, shoes and accessories. The Company currently operates a total of 1,358 stores in 47 states, the District of Columbia, Canada and the U.K., with 1,124 stores under the Talbots brand name and 234 stores under the J. Jill brand name. Both brands target the age 35 plus customer population. Talbots brand on-line shopping site is located at www.talbots.com and the J. Jill brand on-line shopping site is located at www.jjill.com The foregoing contains forward-looking information within the meaning of The Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as �expect,� �look,� �believe,� �anticipate,� �outlook,� �will,� �would,� �would yield,� or similar statements or variations of such terms. All of the �outlook� information (including future revenues, future comparable sales, future earnings, future EPS, and other future financial performance or operating measures) constitutes forward-looking information. Our outlook and other forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our Company which involve risks and uncertainty, including assumptions and projections concerning store traffic, levels of store sales including regular-price selling and markdown selling, and customer preferences. All of our outlook information and other forward-looking statements are as of the date of this release only. The Company can give no assurance that such outlook or expectations will prove to be correct and does not undertake to update or revise any �outlook� information or any other forward-looking statements to reflect actual results, changes in assumptions, estimates or projections, or other circumstances occurring after the date of this release, even if such results, changes or circumstances make it clear that any projected results will not be realized. Our forward-looking statements involve substantial known and unknown risks and uncertainties as to future events which may or may not occur, including the risk that the J. Jill business will not be successfully integrated, the risk that the cost savings and other synergies from the transaction may not be fully realized or may take longer to realize than expected, the risk that the acquisition will disrupt Talbots or J. Jill�s core business, the reaction of Talbots and J. Jill customers and suppliers to the transaction, diversion of management time on merger-related issues, effectiveness of the Company�s brand awareness and marketing programs, any different or any increased negative trends in its regular-price or markdown selling, effectiveness and profitability of new concepts, success of our expected marketing events in driving sales, success of our catalogs in driving both our direct marketing sales and in driving store traffic, acceptance of the Company�s fashions including its seasonal fashions, the Company�s ability to anticipate and successfully respond to changing customer tastes and preferences and to produce the appropriate balance of merchandise offerings, the Company�s ability to sell its merchandise at regular prices as well as its ability to successfully execute its major sale events including the timing and levels of markdowns and appropriate balance of available markdown inventory, any difference between estimated and actual stock option expense, and retail economic conditions including consumer spending. In each case, actual results may differ materially from such forward-looking information. Certain other factors that may cause actual results to differ from such forward-looking statements are included in the Company�s periodic reports filed with the Securities and Exchange Commission and available on the Talbots website under �Investor Relations� and you are urged to carefully consider all such factors. (tables to follow) THE TALBOTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005 � Amounts in thousands except per share data � � Thirteen Weeks Ended Thirty-Nine Weeks Ended October 28, October 29, October 28, October 29, � 2006� � 2005� � 2006� � 2005� � Net Sales $ 568,640� $ 426,330� $ 1,593,029� $ 1,322,438� � Costs and Expenses Cost of sales, buying and occupancy 358,667� 264,459� 1,030,116� 827,298� Selling, general and administrative � 189,063� � 128,963� � 496,248� � 375,462� � Operating Income 20,910� 32,908� 66,665� 119,678� � Interest Interest expense 8,452� 1,207� 22,833� 3,170� Interest income � 440� � 266� � 6,662� � 891� � Interest Expense - net � 8,012� � 941� � 16,171� � 2,279� � Income Before Taxes 12,898� 31,967� 50,494� 117,399� � Income Tax Expense � 4,837� � 11,988� � 18,935� � 44,025� � Net Income $ 8,061� $ 19,979� $ 31,559� $ 73,374� � Net Income Per Share: � Basic $ 0.15� $ 0.38� $ 0.60� $ 1.38� � Diluted $ 0.15� $ 0.37� $ 0.59� $ 1.35� � � Weighted Average Number of Shares of Common Stock Outstanding: � � Basic � 52,854� � 52,722� � 52,564� � 53,026� � Diluted � 53,718� � 53,936� � 53,365� � 54,270� � Cash Dividends Paid Per Share $ 0.13� $ 0.12� $ 0.38� $ 0.35� THE TALBOTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) OCTOBER 28, 2006, JANUARY 28, 2006, AND OCTOBER 29, 2005 � Amounts in thousands � � October 28, January 28, October 29, � 2006� � 2006� � 2005� � Cash and cash equivalents $ 42,991� $ 103,020� $ 11,363� Customer accounts receivable - net 228,907� 209,749� 214,125� Merchandise inventories 367,934� 246,707� 266,023� Other current assets � 84,053� � 61,185� � 63,253� Total current assets 723,885� 620,661� 554,764� � Property and equipment - net 529,883� 387,536� 391,848� Goodwill - net 255,866� 35,513� 35,513� Trademarks - net 155,884� 75,884� 75,884� Other intangible assets - net 87,804� -� -� Deferred income taxes -� 6,407� 387� Other assets � 29,634� � 20,143� � 19,782� � TOTAL ASSETS $ 1,782,956� $ 1,146,144� $ 1,078,178� � � Accounts payable $ 117,732� $ 85,343� $ 50,600� Income taxes payable 34,944� 37,909� 31,616� Accrued liabilities 157,541� 121,205� 116,130� Notes payable to banks 40,000� -� -� Current portion of long-term debt � 80,457� � -� � -� Total current liabilities 430,674� 244,457� 198,346� � Long-term debt less current portion 409,011� 100,000� 100,000� Deferred rent under lease commitments 125,175� 110,864� 112,656� Deferred income taxes 75,909� -� -� Other liabilities 87,577� 63,855� 58,776� Stockholders' equity � 654,610� � 626,968� � 608,400� � TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,782,956� $ 1,146,144� $ 1,078,178� � THE TALBOTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005 � Amounts in thousands � � Thirty-Nine Weeks Ended October 28, October 29, � 2006� � 2005� � CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 31,559� $ 73,374� Depreciation and amortization 86,888� 68,470� Deferred and other items 15,871� 7,507� Changes in: Customer accounts receivable (19,126) (14,799) Merchandise inventories (73,579) (27,082) Accounts payable 21,957� (14,491) Income taxes payable 7,134� 4,466� All other working capital � 11,475� � 79� � 82,179� � 97,524� � CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of The J. Jill Group, Inc., net of cash acquired (493,900) -� Additions to property and equipment (66,028) (55,088) Maturities of marketable securities � 16,729� � -� � (543,199) � (55,088) � CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under notes payable 485,000� -� Payment of notes payable (65,212) -� Proceeds from options exercised 3,435� 6,155� Excess tax benefit from options exercised 489� -� Debt issuance costs (1,318) -� Cash dividends (20,474) (18,945) Purchase of treasury stock � (1,113) � (49,993) � 400,807� � (62,783) � EFFECT OF EXCHANGE RATE CHANGES ON CASH 184� (101) � NET DECREASE IN CASH AND CASH EQUIVALENTS (60,029) (20,448) � CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD � 103,020� � 31,811� � CASH AND CASH EQUIVALENTS, END OF PERIOD $ 42,991� $ 11,363� The Talbots, Inc. (NYSE:TLB) today announced results for the third quarter ended October 28, 2006. Net income in the third quarter was $8.1 million or $0.15 per share on a reported basis and includes acquisition related costs and adjustments of approximately $0.16 per share and $0.04 per share of stock option expense. Excluding these acquisition related costs and stock option expense, earnings per diluted share were $0.35 for the combined company, compared to the $0.37 reported last year for the Talbots only brand. Total consolidated Company sales for the quarter were $569 million. By brand, retail store sales increased to $383 million for Talbots compared to $363 million last year, and were $77 million for J. Jill. Consolidated direct marketing sales for the thirteen-week period were $109 million, including catalog and Internet. Sales for the J. Jill brand represent approximately 20% of the total combined company sales volume. Total Company comparable store sales rose 2.3% for the third quarter. By brand, comparable store sales for Talbots increased 4.0% and were negative 6.6% for the J. Jill brand. Arnold B. Zetcher, Chairman, President and Chief Executive Officer, commented, "We were pleased to report third quarter earnings per share at the high end of our expectations, particularly as the Talbots brand benefited from the successful implementation of several strategic initiatives developed late last year and put in place this quarter. Sharper pricing across all merchandise categories, increased style count especially in novelty, strategic changes to our product flow and key adjustments to our promotional calendar all helped contribute to our strong results." "We were also encouraged by our positive customer response to Talbots brand merchandise across all channels. Talbots experienced healthy third quarter sales, driven by a strong assortment of updated, modern classic merchandise." "As we previously announced, our integration efforts with the J. Jill brand have progressed significantly better than expected, which enabled us to advance certain actions into the third quarter that were originally planned for later in the year and early next year. We closed our Hingham Telemarketing Center and migrated a number of key J. Jill information systems to Talbots architecture. While the associated expenses of these and other factors affected our third quarter earnings by $0.16 per share, we expect to benefit from cost savings synergies of approximately $36 million in 2007, up from our original estimate of $25 million." "For J. Jill, comparable store sales results for the quarter were as expected, which is a continued modest improvement over the prior quarter trends. We feel good about the progress we are making, particularly in unifying our promotional and marketing calendar. Further, we are seeing a positive customer response from our one-price policy across all channels. We have made adjustments to our holiday merchandise and will look for ongoing improvement in our sales trends. As previously stated, our product should reflect a greater impact of our new merchandising leadership in the second quarter of fiscal 2007." "Total Company direct marketing business, including catalog and Internet, was in line with our expectations for the third quarter, increasing 70% over last year, reflecting the inclusion of J. Jill direct marketing sales for this year's third quarter." Mr. Zetcher continued, "Our store expansion program is on target. We opened 31 Talbots stores and 18 J. Jill stores during the quarter. At the end of the period, we had a total of 1,346 stores, which included 1,118 Talbots stores and 228 J. Jill stores. We remain on track to open 24 new stores and close four in the fourth quarter, ending the year with approximately 1,366 total stores." Operating Results for the Thirty-Nine-Week Period Total Company operating performance for the 39-week period ending October 28, 2006 includes J. Jill brand results for the period beginning May 3, 2006, which was the effective date of the acquisition. For the 39-week period, total consolidated Company net income was $31.6 million or $0.59 per diluted share on a reported basis and includes acquisition related costs and adjustments of approximately $0.31 per share and $0.11 per share of stock option expense. Excluding these costs, consolidated earnings per diluted share were $1.01, compared to the $1.35 reported last year for the Talbots only brand. Total consolidated Company sales were $1,593 million for the 39-week period. By brand, retail store sales increased to $1,171 million for Talbots compared to $1,130 million last year, and were $151 million for J. Jill from the date of the acquisition. Consolidated direct marketing sales, including catalog and Internet, were $271 million. Total Company comparable store sales rose 1.5% for the 39-week period. By brand, comparable store sales for Talbots increased 2.6%. J. Jill's comparable store sales were negative 7.4% for the period beginning May 3, 2006 through October 28, 2006. Fourth Quarter Comments Mr. Zetcher added, "As we look ahead to the fourth quarter, we are pleased with the early success of our forward Talbots brand Holiday/Gift catalog, which was mailed to customers in mid-October. Since early November, we have also seen healthy comp store sales trends from our core Talbots brand customers, which is a significant improvement from the softness we experienced in the latter part of October. However, while our core customer remains strong, we have not yet seen the level of demand from the non core customer that we anticipate." "In addition, we are only two weeks into the quarter and have a number of marketing initiatives planned throughout the period that we expect to benefit from, including our important semi-annual sale event that traditionally begins the day after Christmas. Given these factors, at this early stage in the fourth quarter we believe we are not in a position to provide our outlook for earnings per share and plan to give additional details when we are further into the period." "With a successful third quarter under our belt, we anticipate that our Company will benefit over the long term, as we feel we are taking the appropriate actions to help drive improved top and bottom line performance." "Our overall objective, particularly as we enter the fourth quarter, is to get as much of the J. Jill integration work behind us so that we start fiscal 2007 as clean as possible. To that end, we are reconfirming our expectation for this transaction to be accretive to earnings in fiscal 2007 with synergies and after acquisition-related costs and adjustments. We remain focused on creating the leading brand portfolio for the age 35+ female market," concluded Mr. Zetcher. Additional Disclosures As previously announced, Talbots will host a conference call today, November 15, 2006 at 10:00 am local time to discuss third quarter results. To listen to the live web cast please log on to www.thetalbotsinc.com/ir/ir.asp. The call will be archived on its web site www.thetalbotsinc.com for a period of twelve months. In addition, an audio replay of the call will be available shortly after its conclusion and archived until November 17, 2006. This call may be accessed by dialing (877) 519-4471, passcode 8098745. The Talbots, Inc. is a leading international specialty retailer and cataloger of women's, children's and men's apparel, shoes and accessories. The Company currently operates a total of 1,358 stores in 47 states, the District of Columbia, Canada and the U.K., with 1,124 stores under the Talbots brand name and 234 stores under the J. Jill brand name. Both brands target the age 35 plus customer population. Talbots brand on-line shopping site is located at www.talbots.com and the J. Jill brand on-line shopping site is located at www.jjill.com The foregoing contains forward-looking information within the meaning of The Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as "expect," "look," "believe," "anticipate," "outlook," "will," "would," "would yield," or similar statements or variations of such terms. All of the "outlook" information (including future revenues, future comparable sales, future earnings, future EPS, and other future financial performance or operating measures) constitutes forward-looking information. Our outlook and other forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our Company which involve risks and uncertainty, including assumptions and projections concerning store traffic, levels of store sales including regular-price selling and markdown selling, and customer preferences. All of our outlook information and other forward-looking statements are as of the date of this release only. The Company can give no assurance that such outlook or expectations will prove to be correct and does not undertake to update or revise any "outlook" information or any other forward-looking statements to reflect actual results, changes in assumptions, estimates or projections, or other circumstances occurring after the date of this release, even if such results, changes or circumstances make it clear that any projected results will not be realized. Our forward-looking statements involve substantial known and unknown risks and uncertainties as to future events which may or may not occur, including the risk that the J. Jill business will not be successfully integrated, the risk that the cost savings and other synergies from the transaction may not be fully realized or may take longer to realize than expected, the risk that the acquisition will disrupt Talbots or J. Jill's core business, the reaction of Talbots and J. Jill customers and suppliers to the transaction, diversion of management time on merger-related issues, effectiveness of the Company's brand awareness and marketing programs, any different or any increased negative trends in its regular-price or markdown selling, effectiveness and profitability of new concepts, success of our expected marketing events in driving sales, success of our catalogs in driving both our direct marketing sales and in driving store traffic, acceptance of the Company's fashions including its seasonal fashions, the Company's ability to anticipate and successfully respond to changing customer tastes and preferences and to produce the appropriate balance of merchandise offerings, the Company's ability to sell its merchandise at regular prices as well as its ability to successfully execute its major sale events including the timing and levels of markdowns and appropriate balance of available markdown inventory, any difference between estimated and actual stock option expense, and retail economic conditions including consumer spending. In each case, actual results may differ materially from such forward-looking information. Certain other factors that may cause actual results to differ from such forward-looking statements are included in the Company's periodic reports filed with the Securities and Exchange Commission and available on the Talbots website under "Investor Relations" and you are urged to carefully consider all such factors. -0- *T (tables to follow) THE TALBOTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005 Amounts in thousands except per share data Thirteen Weeks Ended Thirty-Nine Weeks Ended ------------------------ ----------------------- October 28, October 29, October 28, October 29, 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Net Sales $ 568,640 $ 426,330 $1,593,029 $1,322,438 Costs and Expenses Cost of sales, buying and occupancy 358,667 264,459 1,030,116 827,298 Selling, general and administrative 189,063 128,963 496,248 375,462 ----------- ----------- ----------- ----------- Operating Income 20,910 32,908 66,665 119,678 Interest Interest expense 8,452 1,207 22,833 3,170 Interest income 440 266 6,662 891 ----------- ----------- ----------- ----------- Interest Expense - net 8,012 941 16,171 2,279 ----------- ----------- ----------- ----------- Income Before Taxes 12,898 31,967 50,494 117,399 Income Tax Expense 4,837 11,988 18,935 44,025 ----------- ----------- ----------- ----------- Net Income $ 8,061 $ 19,979 $ 31,559 $ 73,374 =========== =========== =========== =========== Net Income Per Share: Basic $ 0.15 $ 0.38 $ 0.60 $ 1.38 =========== =========== =========== =========== Diluted $ 0.15 $ 0.37 $ 0.59 $ 1.35 =========== =========== =========== =========== Weighted Average Number of Shares of Common Stock Outstanding: Basic 52,854 52,722 52,564 53,026 =========== =========== =========== =========== Diluted 53,718 53,936 53,365 54,270 =========== =========== =========== =========== Cash Dividends Paid Per Share $ 0.13 $ 0.12 $ 0.38 $ 0.35 =========== =========== =========== =========== *T -0- *T THE TALBOTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) OCTOBER 28, 2006, JANUARY 28, 2006, AND OCTOBER 29, 2005 Amounts in thousands October 28, January 28, October 29, 2006 2006 2005 ----------- ----------- ----------- Cash and cash equivalents $ 42,991 $ 103,020 $ 11,363 Customer accounts receivable - net 228,907 209,749 214,125 Merchandise inventories 367,934 246,707 266,023 Other current assets 84,053 61,185 63,253 ----------- ----------- ----------- Total current assets 723,885 620,661 554,764 Property and equipment - net 529,883 387,536 391,848 Goodwill - net 255,866 35,513 35,513 Trademarks - net 155,884 75,884 75,884 Other intangible assets - net 87,804 - - Deferred income taxes - 6,407 387 Other assets 29,634 20,143 19,782 ----------- ----------- ----------- TOTAL ASSETS $1,782,956 $1,146,144 $1,078,178 =========== =========== =========== Accounts payable $ 117,732 $ 85,343 $ 50,600 Income taxes payable 34,944 37,909 31,616 Accrued liabilities 157,541 121,205 116,130 Notes payable to banks 40,000 - - Current portion of long-term debt 80,457 - - ----------- ----------- ----------- Total current liabilities 430,674 244,457 198,346 Long-term debt less current portion 409,011 100,000 100,000 Deferred rent under lease commitments 125,175 110,864 112,656 Deferred income taxes 75,909 - - Other liabilities 87,577 63,855 58,776 Stockholders' equity 654,610 626,968 608,400 ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,782,956 $1,146,144 $1,078,178 =========== =========== =========== *T -0- *T THE TALBOTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005 Amounts in thousands Thirty-Nine Weeks Ended October 28, October 29, 2006 2005 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 31,559 $ 73,374 Depreciation and amortization 86,888 68,470 Deferred and other items 15,871 7,507 Changes in: Customer accounts receivable (19,126) (14,799) Merchandise inventories (73,579) (27,082) Accounts payable 21,957 (14,491) Income taxes payable 7,134 4,466 All other working capital 11,475 79 ----------- ----------- 82,179 97,524 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of The J. Jill Group, Inc., net of cash acquired (493,900) - Additions to property and equipment (66,028) (55,088) Maturities of marketable securities 16,729 - ----------- ----------- (543,199) (55,088) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under notes payable 485,000 - Payment of notes payable (65,212) - Proceeds from options exercised 3,435 6,155 Excess tax benefit from options exercised 489 - Debt issuance costs (1,318) - Cash dividends (20,474) (18,945) Purchase of treasury stock (1,113) (49,993) ----------- ----------- 400,807 (62,783) ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 184 (101) NET DECREASE IN CASH AND CASH EQUIVALENTS (60,029) (20,448) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 103,020 31,811 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 42,991 $ 11,363 =========== =========== *T