The Talbots, Inc. (NYSE:TLB) today reported improved results for
the fourth quarter and fiscal year ended January 30, 2010.
Adjusted fourth quarter income from continuing operations
increased to $7.4 million or $0.13 per diluted share, excluding
special items, compared to last year’s adjusted loss from
continuing operations of $123.4 million or $2.30 per share. Fourth
quarter special items include:
- Merger costs of $8.2 million or
$0.15 per share;
- Restructuring charges of $0.6
million or $0.01 per share.
On a reported (GAAP) basis, fourth quarter loss from continuing
operations was $1.5 million or $0.03 per share, compared to last
year’s loss from continuing operations of $131.3 million or $2.45
per share.
“We delivered a strong fourth quarter, capping off a successful
year of tremendous change and innovation. Our strategic
transformation – re-energizing our brand, modernizing our
merchandise, streamlining our organization and improving our
business processes – firmly positions us for future growth and
profitability,” said Trudy F. Sullivan, Talbots President and Chief
Executive Officer.
“With the completion of the BPW merger and related transactions,
we now have a very strong balance sheet and capital structure, so
we can focus our energy on deepening our relationship with our
customers and maximizing value for all of our stakeholders.”
Fourth Quarter 2009 Operating
Results:
- Adjusted operating income,
excluding special items, was $13.3 million, an increase of $106.2
million compared to prior year’s adjusted operating loss. On a
reported (GAAP) basis, operating income was $4.5 million, an
increase of $105.3 million compared to prior year’s operating
loss.
- Total sales from continuing
operations decreased 3.7% to $315.9 million, compared to $327.9
million last year. Markdown selling declined 21% and full-price
selling increased 10%.
- Comparable store sales declined
7.2% in the quarter, with January comps up high single digits.
Store sales were $261.2 million versus $278.7 million last
year.
- Direct marketing sales,
including catalog and Internet, were $54.7, an 11% increase
compared to last year’s $49.2 million, reflecting strong customer
demand, better fulfillment and lower return rates.
- Cost of sales, buying and
occupancy as a percent of net sales improved 2,070 basis points
compared to last year. This improvement was due primarily to a
substantial increase in pure merchandise margin of 1,900 basis
points, resulting from strong IMU, improved full-price selling and
a decrease in buying and occupancy costs of 170 basis points.
- SG&A expense as a percent of
net sales decreased 1,180 basis points, reflecting a $42.4 million
or 30% decline in SG&A expenses over the prior year.
- Total inventory decreased 30.9%
to $142.7 million, compared to $206.6 million at the end of fiscal
2008.
Full Year 2009 Operating
Results:
Adjusted full year loss from continuing operations was $5.5
million or $0.10 per share, excluding special items, compared to
last year’s adjusted loss from continuing operations of $118.9
million or $2.25 per share. Full year 2009 special items
include:
- Restructuring charges of $10.3
million or $0.19 per share;
- Merger costs of $8.2 million or
$0.15 per share;
- Impairment of store assets of
$1.4 million or $0.03 per share.
On a reported (GAAP) basis, fiscal year 2009 loss from
continuing operations was $25.3 million or $0.47 per share,
compared to last year’s loss from continuing operations of $139.5
million or $2.63 per share.
- Adjusted operating income,
excluding special items, was $11.2 million, an increase of $88.9
million compared to the prior year’s adjusted operating loss. On a
reported (GAAP) basis, operating loss was $8.7 million, an increase
of $89.7 million compared to the prior year’s operating loss.
- Total net sales from continuing
operations were $1,235.6 million for the fifty-two week period,
compared to $1,495.2 million last year. Store sales were $1,027.9
million compared to $1,261.6 million last year. Comparable store
sales declined 19.3% for the fifty-two week period.
- Direct marketing sales,
including catalog and Internet, declined 11% to $207.7 million,
compared to $233.6 million last year.
- Cost of sales, buying and
occupancy as a percent of net sales declined 370 basis points
compared to last year, due primarily to a substantial increase in
pure merchandise margin of 630 basis points, resulting from strong
IMU and improved full-price selling. This improvement is offset by
a 260 basis point increase in occupancy and buying costs due to the
negative leverage from the decline in sales.
- Expenses declined $147 million
as part of our $150 million cost reduction program, which included
a $120 million or 23% decline in SG&A expenses and a $27
million expense savings in buying and occupancy compared to the
prior year.
Completion of Comprehensive
Financing Solution
On April 7, 2010, the Company announced the successful closing
and completion of the BPW acquisition and the related transactions
to delever its balance sheet and position it for future growth,
including: (i) the repurchase of approximately 29.9 million shares
held by Talbots former majority stockholder, Aeon (U.S.A.), Inc.;
(ii) the repayment of all outstanding debt to Aeon totaling
approximately $486.5 million plus accrued interest and other costs;
and (iii) a new up to $200 million senior secured revolving credit
facility arranged by GE Capital Markets and agented by GE Capital,
Corporate Retail Finance.
Outlook
For the full year 2010, the Company anticipates a top-line sales
increase in the range of approximately 3% to 5% compared to the
prior year period. Adjusted operating income, excluding
restructuring, impairment and merger costs, is anticipated to be in
the range of approximately 5% to 6% of sales. These anticipated
results compared to fiscal 2009 sales of $1,235.6 million and
adjusted operating income of $11.2 million, or 0.9% of sales.
For the first quarter 2010, the Company anticipates a top line
sales increase in the range of 4% to 5% compared to the prior year
period. Adjusted operating income, excluding restructuring,
impairment and merger costs, is anticipated to be in the range of
approximately 4.5% to 6% of sales. These anticipated results
compare to first quarter fiscal 2009 sales of $306.2 million and an
adjusted operating loss of $15.8 million, or (5.2%) of sales.
The above outlook is based on the Company’s current internal
assumptions and estimates, is subject to its accompanying
forward-looking statement and is not a guarantee of future
performance.
Conference Call
Details
As previously announced, Talbots will host a conference call
today April 13, 2010, at 10:00 a.m. local time to discuss fourth
quarter and fiscal 2009 results. To listen to the live call, please
dial 866-336-2423, passcode “TLB” or 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 through April 15, 2010. This
archived call may be accessed by dialing (800) 642-1687; passcode
67487680.
The Talbots, Inc. is a leading specialty retailer and direct
marketer of women’s apparel, shoes and accessories. At the end of
fiscal 2009, the Company operated 580 Talbots brand stores in 46
states, the District of Columbia, and Canada. Talbots brand on-line
shopping site is located at www.talbots.com.
Cautionary Statement and Certain Risk Factors to
Consider
In addition to the information set forth in this press release,
you should carefully consider the risk factors and risks and
uncertainties included in the Company’s Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q, as well as in this press
release below.
This press release contains forward-looking information with the
meaning of The Private Securities Litigation Reform Act of 1995.
These statements may be identified by such forward-looking
terminology as “expect,” “achieve,” “plan,” “look,” “believe,”
“anticipate,” “outlook,” “will,” “would,” “should,” “potential,” or
similar statements or variations of such terms. All of the
information concerning our outlook, future liquidity, future
financial performance and results, future credit facilities and
availability, future cash flows and cash needs, and other future
financial performance or financial position, as well as our
assumptions underlying such information, constitute forward-looking
information. Our forward-looking statements are based on a series
of expectations, assumptions, estimates and projections about the
Company, are not guarantees of future results or performance, and
involve substantial risks and uncertainty, including assumptions
and projections concerning our liquidity, internal plan,
regular-price and markdown selling, operating cash flows, and
credit availability for all forward periods. Our business and our
forward-looking statements involve substantial known and unknown
risks and uncertainties, including the following risks and
uncertainties:
- the continuing material impact
of the deterioration in the U.S. economic environment on our
business, continuing operations, liquidity, financing plans and
financial results, including substantial negative impact on
consumer discretionary spending and consumer confidence,
substantial loss of household wealth and savings, the disruption
and significant tightening in the U.S. credit and lending markets,
and potential long-term unemployment levels;
- satisfaction of all borrowing
conditions under our credit facilities including accuracy of all
representations and warranties, no events of default, absence of
material adverse effect or change, and all other borrowing
conditions;
- any lack of sufficiency of
available cash flows and other internal cash resources to satisfy
all future operating needs and other cash requirements;
- ability to access on
satisfactory terms, or at all, adequate financing and sources of
liquidity necessary to fund our business and continuing operations
and to obtain further increases in our credit facilities as may be
needed from time to time;
- the success and customer
acceptance of our new merchandise offerings;
- risks associated with our
appointment of an exclusive global merchandise buying agent, the
anticipated benefits and cost savings from this arrangement may not
be realized or may take longer to realize than expected and the
risk that upon any cessation of the relationship, for any reason,
we would be unable to successfully transition to an internal or
other external sourcing function;
- ability to continue to purchase
merchandise on open account purchase terms at existing or future
expected levels and with acceptable payment terms and the risk that
suppliers could require earlier or immediate payment or other
security due to any payment concerns;
- risks and uncertainties in
connection with any need to source merchandise from alternate
vendors;
- any disruption in our supply of
merchandise;
- ability to successfully execute,
fund, and achieve supply chain initiatives, anticipated lower
inventory levels, cost reductions, and other initiatives;
- the risk that anticipated
benefits from the sale of the J. Jill brand business may not be
realized or may take longer to realize than expected, and the risk
that estimated or anticipated costs, charges and liabilities to
settle and complete the transition and exit from and disposal of
the J. Jill brand business, including both retained obligations and
contingent risk for assigned obligations, may materially differ
from or be materially greater than anticipated;
- future store closings and
success of and necessary funding for closing underperforming
stores;
- ability to reduce spending as
needed;
- ability to achieve our 2010
financial plan for operating results, working capital and cash
flows;
- any negative publicity
concerning the specialty retail business in general or our business
in particular;
- ability to accurately estimate
and forecast future regular-price and markdown selling, operating
cash flows and other future financial results and financial
position;
- risk of impairment of goodwill
and other intangible and long-lived assets;
- the impact of the deterioration
in investment return and net asset values in the capital markets
and the impact on increased expense and funding for pension and
other postretirement obligations; and
- risks and uncertainties
associated with the outcome of litigation, claims and proceedings
and risk that actual liabilities, assessments and financial or
business impact will exceed any estimated, accrued or expected
amounts or outcomes.
All of our forward-looking statements are as of the date of this
press release only. In each case, actual results may differ
materially from such forward-looking information. The Company can
give no assurance that such expectations or forward-looking
statements will prove to be correct. An occurrence of or any
material adverse change in one or more of the risk factors or risks
and uncertainties referred to in this press release or included in
our periodic reports filed with the Securities and Exchange
Commission could materially and adversely affect our continuing
operations and our future financial results, cash flows, prospects,
and liquidity. Except as required by law, the Company does not
undertake or plan to update or revise any such forward-looking
statements to reflect actual results, changes in plans,
assumptions, estimates or projections, or other circumstances
affecting such forward-looking statements occurring after the date
of this release, even if such results, changes or circumstances
make it clear that any forward-looking information will not be
realized. Any public statements or disclosures by us following this
release which modify or impact any of the forward-looking
statements contained in this release will be deemed to modify or
supersede such statements in this release.
THE TALBOTS, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED) Amounts in thousands
except per share data Thirteen
Weeks Ended Fifty-Two Weeks Ended January
30,2010 January 31,2009 January
30,2010 January 31,2009 Net
Sales $ 315,925 $ 327,912 $ 1,235,632 $ 1,495,170 Costs and
Expenses Cost of sales, buying and occupancy 204,292 280,068
821,278 1,049,785 Selling, general and administrative 98,285
140,692 403,204 523,136 Restructuring charges 613 7,645 10,273
17,793 Merger costs 8,216 - 8,216 - Impairment of store assets
- 269 1,351 2,845
Operating Income (Loss) 4,519 (100,762 ) (8,690 )
(98,389 ) Interest Interest expense 6,558 5,083 28,394
20,589 Interest income 18 53 271
299 Interest Expense - net 6,540
5,030 28,123 20,290
Loss Before Taxes (2,021 ) (105,792 ) (36,813 )
(118,679 ) Income Tax (Benefit) Expense (548 )
25,521 (11,505 ) 20,842 Loss
from Continuing Operations (1,473 ) (131,313 ) (25,308 ) (139,521 )
Income (Loss) from Discontinued Operations 5,563
(230,220 ) (4,104 ) (416,138 )
Net Income (Loss) $ 4,090 $ (361,533 ) $ (29,412 ) $
(555,659 ) Basic Net Income (Loss) Per Share: Continuing
Operations $ (0.03 ) $ (2.45 ) $ (0.47 ) $ (2.63 ) Discontinued
Operations 0.10 (4.30 ) (0.08 )
(7.78 ) Net Income (Loss) $ 0.07 $ (6.75 ) $ (0.55 ) $
(10.41 ) Diluted Net Income (Loss) Per Share: Continuing
Operations $ (0.03 ) $ (2.45 ) $ (0.47 ) $ (2.63 ) Discontinued
Operations 0.10 (4.30 ) (0.08 )
(7.78 ) Net Income (Loss) $ 0.07 $ (6.75 ) $ (0.55 ) $
(10.41 )
Weighted Average Number of Shares
of Common Stock Outstanding:
Basic 53,884 53,512
53,797 53,436 Diluted 54,497
53,512 53,797 53,436
Cash Dividends Paid Per Share $ - $ 0.13
$ - $ 0.52
THE TALBOTS, INC.
AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) Amounts in thousands
January 30,2010 January 31,2009
Cash and cash equivalents $ 112,775 $ 16,718 Customer
accounts receivable - net 163,587 169,406 Merchandise inventories
142,696 206,593 Other current assets 57,789 67,094 Assets held for
sale - current - 109,966 Total current
assets 476,847 569,777 Property and equipment - net 220,404
277,363 Goodwill 35,513 35,513 Trademarks 75,884 75,884 Other
assets 17,170 12,756 TOTAL
ASSETS $ 825,818 $ 971,293 Accounts
payable $ 104,118 $ 122,034 Accrued liabilities 148,177 148,356
Current portion of related party debt 486,494 - Notes payable to
banks - 148,500 Current portion of long-term debt - 70,377
Liabilities held for sale - current - 94,190
Total current liabilities 738,789 583,457 Related
party debt less current portion - 20,000 Long-term debt less
current portion - 238,000 Deferred rent under lease commitments
111,137 115,282 Deferred income taxes 28,456 28,456 Other
liabilities 133,072 164,195 Stockholders' deficit (185,636 )
(178,097 ) TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 825,818 $ 971,293
THE TALBOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Amounts in thousands Year Ended January
30,2010 January 31,2009 CASH FLOWS
FROM OPERATING ACTIVITIES: Net loss $ (29,412 ) $ (555,659 ) Loss
from discontinued operations, net of tax (4,104 )
(416,138 )
Loss from continuing
operations
(25,308 ) (139,521 ) Depreciation and amortization 74,309 84,526
Impairment of store assets 1,351 2,845 Deferred and other items
(14,694 ) 53,536 Changes in: Customer accounts receivable 5,950
41,156 Merchandise inventories 64,311 41,325 Accounts payable
(17,275 ) (20,898 ) Accrued liabilities (14,016 ) (3,665 ) All
other working capital 6,559 (43,044 )
Net cash provided by operating
activities
81,187 16,260 CASH FLOWS FROM
INVESTING ACTIVITIES: Additions to property and equipment (20,980 )
(44,698 ) Proceeds from disposal of property and equipment
61 2,555
Net cash used in investing
activities
(20,919 ) (42,143 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from related party borrowings 475,000 20,000
Payments on related party borrowings (8,506 ) - Payments on
long-term borrowings (308,351 ) (80,502 ) Gross payments on working
capital notes payable (156,500 ) (15,000 ) Gross proceeds from
working capital notes payable 8,000 57,000 Proceeds from working
capital notes payable, net - 106,500 Payment of debt issuance costs
(4,760 ) (866 ) Proceeds from options exercised - 888 Purchase of
treasury stock (556 ) (1,505 ) Cash dividends -
(28,752 )
Net cash provided by financing
activities
4,327 57,763 EFFECT OF EXCHANGE
RATE CHANGES ON CASH 503 (464 ) CASH FLOWS FROM DISCONTINUED
OPERATIONS: Operating activities (34,110 ) (20,119 ) Investing
activities 63,827 (18,684 ) Effect of exchange rate changes on cash
23 (154 ) 29,740 (38,957 ) NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS 94,838 (7,541 ) CASH AND
CASH EQUIVALENTS, BEGINNING OF PERIOD 16,551 24,280
DECREASE (INCREASE) IN CASH AND
CASH EQUIVALENTS OF DISCONTINUED OPERATIONS
1,386 (188 ) CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 112,775 $ 16,551
SEC
Regulation G THE
TALBOTS, INC. AND SUBSIDIARIES Reconciliation of GAAP
loss from continuing operations to non-GAAP income (loss) from
continuing operations (unaudited) Amounts in thousands
except per share amounts For the 13 weeks ended
January 30, 2010
For the 13 weeks ended
January 31, 2009
Loss from Continuing Operations $ (1,473 ) $ (0.03 ) $
(131,313 ) $ (2.45 ) Restructuring charges 613 0.01 7,645 0.14
Merger costs 8,216 0.15 - - Impairment of store assets -
- 269 0.01
Income (Loss) from Continuing
Operations before restructuring, merger costs and impairment
charges
$ 7,356 $ 0.13 $ (123,399 ) $ (2.30 )
For the 52 weeks ended
January 30, 2010
For the 52 weeks ended
January 31, 2009
Loss from Continuing Operations $ (25,308 ) $ (0.47 ) $
(139,521 ) $ (2.63 ) Restructuring charges 10,273 0.19 17,793 0.33
Merger costs 8,216 0.15 - - Impairment of store assets 1,351
0.03 2,845 0.05
Loss from Continuing Operations
before restructuring, merger costs and impairment charges
$ (5,468 ) $ (0.10 ) $ (118,883 ) $ (2.25 )
Reconciliation of GAAP
operating income (loss) to non-GAAP operating income (loss)
(unaudited)
Amounts in thousands except pre-tax per share amounts
For the 13 weeks ended
January 30, 2010
For the 13 weeks ended
January 31, 2009
Operating Income (Loss) $ 4,519 $ 0.08 $ (100,762 ) $ (1.88
) Restructuring charges 613 0.01 7,645 0.14 Merger costs 8,216 0.15
- - Impairment of store assets - -
269 0.01
Operating Income (Loss), excluding
restructuring, merger costs and impairment charges
$ 13,348 $ 0.24 $ (92,848 ) $ (1.73 )
For the 52 weeks ended
January 30, 2010
For the 52 weeks ended
January 31, 2009
Operating Loss $ (8,690 ) $ (0.16 ) $ (98,389 ) $ (1.84 )
Restructuring charges 10,273 0.19 17,793 0.33 Merger costs 8,216
0.15 - - Impairment of store assets 1,351 0.03
2,845 0.05
Operating Income (Loss), excluding
restructuring, merger costs and impairment charges
$ 11,150 $ 0.21 $ (77,751 ) $ (1.46 )
First quarter 2010 and full year 2010 Outlook, GAAP to non-GAAP
reconciling information The Company's outlook for the first
quarter 2010 and full year 2010 excludes any impact of
restructuring, impairment and merger costs. Merger costs for the
first quarter 2010 and full year 2010 are anticipated to be
approximately $25.9 million and $29.4 million, respectively. At
this time, the Company cannot reasonably estimate the impact that
restructuring charges or store impairment charges will have on
income from continuing operations during these periods.
For the 13 weeks ended
May 2, 2009
Operating Loss $ (22,219 ) $ (0.41 ) Restructuring charges
6,396 0.12 Merger costs - - Impairment of store assets 19
-
Operating Loss, excluding
restructuring, merger costs and impairment charges
$ (15,804 ) $ (0.29 )
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