CHICAGO, Oct. 1 /PRNewswire-FirstCall/ -- Hartmarx Corporation
(NYSE: HMX) today reported operating results for its third quarter
and nine months ended August 31, 2008. Third quarter revenues were
$124.0 million compared to $135.2 million in 2007. The net loss was
$2.4 million or $.07 per diluted share in the current period
compared to net earnings of $.5 million or $.01 per diluted share
last year. For the nine months, revenues were $374.5 million
compared to $411.2 million in 2007. The net loss was $7.4 million,
or $.21 per diluted share in the current year compared to net
earnings of $2.5 million or $.07 per diluted share in 2007. Homi B.
Patel, chairman and chief executive officer of Hartmarx, commented,
"Our very disappointing third quarter and year-to-date operating
results are reflective of a most challenging economic and retail
environment. Low consumer confidence, declines in discretionary
apparel purchases particularly by professional men, volatility in
the financial services sector, large retailers' requests to defer
advance order shipments and the deteriorating credit worthiness of
small specialty store retailers all contributed to a very difficult
quarter. The Company also continues to be adversely impacted by the
residual effects of its previously announced strategy to reduce
moderate tailored clothing product offerings, resulting in lower
sales, increased liquidations of surplus inventories, and losses
associated with licensing minimums related to brands which will no
longer be marketed in 2009." Mr. Patel continued, "In this
extremely uncertain economy, we are committed to reducing expenses
further and improving operational productivity and cash flows,
despite its adverse impact on current year revenues and earnings.
During the third quarter we disposed of surplus inventories which
lowered our gross margin rate but, along with strict disciplines on
new inventory commitments, resulted in an $18.6 million or 11%
reduction in net inventories, exceeding the percentage revenue
decline. We have continued paring down staffing levels in various
administrative functions. Fourth quarter results, to be reported in
January, will reflect additional severance costs associated with
lower staffing levels in general and the closing of a sewing
facility in Missouri affecting approximately 150 employees. We also
expect by fiscal year-end to reduce leased office and distribution
square footage, actions which collectively would adversely impact
fiscal 2008 results, but be beneficial to operating results in 2009
and beyond. In light of the current environment, we will continue
to carefully review the profit contribution prospects of certain
other product lines in relation to their required working capital
investment. We are currently estimating full-year revenues in the
range of $490 - $500 million, which would result in fourth quarter
revenues in the range of $115 - $125 million. This compares to the
prior year fourth quarter and full-year revenues of $151.2 million
and $562.4 million, respectively. The fourth quarter net loss
excluding non-recurring items is estimated in the range of $.05 -
$.10 per diluted share compared to the prior year's fourth quarter
loss per diluted share of $.19. This would aggregate to a full year
loss per diluted share in the range of $.25 - $.35 in 2008 compared
to the prior year loss per diluted share of $.12. While we remain
committed to our stated long-term growth strategies, we are
operating our business in a very cautious and conservative manner,"
Mr. Patel concluded. At August 31, inventories of $148.0 million
declined $18.6 million or 11% from the year earlier levels of
$166.5 million. The trailing year total debt increase of $21.6
million to $155.9 million at August 31 this year reflected
approximately $36 million of outflows attributable to acquisitions,
capital expenditures and share repurchases. To date, approximately
1.1 million shares have been repurchased pursuant to the Company's
3 million share authorization; there were no share repurchases
during the third quarter. The third quarter revenue decline was
principally attributable to the tailored product categories
included in the Men's Apparel Group segment. This segment also
included the Monarchy product lines, acquired in August, 2007,
which contributed $6.0 million to the current year third quarter
revenues ($.9 million of revenues in 2007) and $13.6 million for
the nine months. The Women's Apparel Group segment represented
approximately 25% of consolidated revenues this year compared to
26% in last year's third quarter. The third quarter operating loss
was $2.1 million in 2008 compared to operating earnings of $3.0
million in 2007. The decline was principally attributable to the
Men's Apparel Group segment, although the Women's Apparel Group
segment earnings were also lower. The decrease reflected both the
$11.2 million decline in sales and a lower gross margin rate of
32.8% for the quarter compared to 34.5% in 2007, resulting
principally from fewer full-price sales and the disposition of
surplus inventories. Selling, general and administrative expenses
for the three months were $43.5 million compared to $44.4 million
in 2007 on the lower sales, representing 35.1% of sales compared to
32.8% in 2007. The current period included, among other things,
$2.1 million of incremental expenses related to Monarchy, which
were more than offset by other expense reductions across the
Company. Interest expense declined to $1.8 million compared to $2.0
million in 2007, reflecting lower rates as average borrowing levels
were higher. The current period net loss was $2.4 million compared
to net earnings of $.5 million in last year's third quarter. For
the nine months, revenues this year were $374.5 million with an
operating loss of $7.4 million, compared to sales of $411.2 million
and operating earnings of $10.9 million in 2007, reflecting this
year's lower sales, gross margins and operating margins in both the
Men's Apparel Group and Women's Apparel Group segments. The women's
segment represented approximately 23% of consolidated revenues this
year compared to 24% in the prior nine-month period. The
year-to-date gross margin rate was 33.0% this year compared to
34.7% last year, reflecting fewer full-price sales, the liquidation
of surplus inventories and, to a lesser extent, the lower
percentage of women's segment sales. Selling, general and
administrative expenses for the nine months of 2008 were $132.7
million compared to last year's $133.5 million on the lower sales,
representing 35.4% of sales compared to 32.5% in 2007. The current
year included $5.8 million of incremental expenses associated with
the Monarchy acquisition, which were more than offset by other
expense reductions across the Company. Year-to-date interest
expense declined to $5.8 million this year compared to $6.8 million
in the prior year with the decrease attributable to lower rates as
average borrowing levels were higher. The year-to-date net loss was
$7.4 million this year compared to net earnings of $2.5 million
last year. The year-to-date effective tax benefit rate of 43.7%
compared to the prior year's effective tax rate of 38.6% reflected
an income tax settlement during the second quarter which had an
approximate $1 million favorable impact on the year-to-date
recorded tax benefit. Hartmarx produces and markets business,
casual and golf apparel under its own brands, including Hart
Schaffner Marx, Hickey Freeman, Palm Beach, Coppley, Monarchy,
Manchester Escapes, Society Brand, Racquet Club, Naturalife,
Pusser's of the West Indies, Brannoch, Sansabelt, Exclusively
Misook, Barrie Pace, Eye, Christopher Blue, Pine IV, Worn, Blue
House Drive, One Girl Who..., Zooey by alice heller and b.chyll. In
addition, the Company has certain exclusive rights under licensing
agreements to market selected products under a number of premier
brands such as Austin Reed, Tommy Hilfiger, Burberry men's tailored
clothing, Ted Baker, Bobby Jones, Jack Nicklaus, Claiborne, Pierre
Cardin, Perry Ellis, Lyle & Scott, Golden Bear, Jag and Dr.
Martens. The Company's broad range of distribution channels
includes fine specialty and leading department stores,
value-oriented retailers and direct mail catalogs. The comments set
forth above contain forward-looking statements made in reliance
upon the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements can
be identified by the use of forward-looking terminology such as
"anticipate," "believe," "continue," "estimate," "expect,"
"intend," "may," "should" or "will" or the negatives thereof or
other comparable terminology. Forward-looking statements are not
guarantees as actual results could differ materially from those
expressed or implied in such forward-looking statements. The
statements could be significantly impacted by such factors as the
level of consumer spending for men's and women's apparel, the
prevailing retail environment, the Company's relationships with its
suppliers, customers, licensors and licensees, actions of
competitors that may impact the Company's business, possible
acquisitions and the impact of unforeseen economic changes, such as
interest rates, or in other external economic and political factors
over which the Company has no control. The reader is also directed
to the Company's periodic filings with the Securities and Exchange
Commission for additional factors that may impact the Company's
results of operations and financial condition. 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. HARTMARX CORPORATION --- UNAUDITED
FINANCIAL SUMMARY -- (000's omitted, except per share amounts)
Statement of Earnings Three Months Ended Nine Months Ended August
31, August 31, 2008 2007 2008 2007 Net sales $ 123,956 $135,202 $
374,479 $411,182 Licensing and other income 808 656 1,833 1,665
124,764 135,858 376,312 412,847 Cost of goods sold 83,352 88,494
251,074 268,467 Selling, general & administrative expenses
43,468 44,407 132,670 133,498 126,820 132,901 383,744 401,965
Operating earnings (loss) (2,056) 2,957 (7,432) 10,882 Interest
expense 1,803 2,018 5,789 6,795 Earnings (loss) before taxes
(3,859) 939 (13,221) 4,087 Tax provision (benefit) (1,425) 397
(5,773) 1,578 Net earnings (loss) $ (2,434) $ 542 $ (7,448) $ 2,509
Earnings (loss) per share: Basic $ (.07) $ .02 $ (.21) $ .07
Diluted $ (.07) $ .01 $ (.21) $ .07 Average shares: Basic 35,063
36,045 34,942 36,053 Diluted 35,063 36,652 34,942 36,639 * * *
August 31, Condensed Balance Sheet 2008 2007 Cash $ 4,765 $ 5,015
Accounts receivable, net 91,335 96,950 Inventories 147,987 166,548
Prepaid expenses and other assets 34,119 24,123 Goodwill and
intangible assets 99,953 99,675 Deferred income taxes 70,131 38,582
Prepaid/intangible pension asset - 37,843 Net fixed assets 34,818
32,227 Total assets $483,108 $500,963 Accounts payable and accrued
expenses $ 91,823 $ 92,802 Total debt 155,909 134,338 Accrued
pension liability 13,488 8,477 Shareholders' equity 221,888 265,346
Total liabilities and shareholders' equity $ 483,108 $500,963 Book
value per share $ 6.17 $ 7.24 Selected cash flow data
(year-to-date): Capital expenditures $ 14,749 $ 8,893 Depreciation
of fixed assets 4,097 4,005 Amortization of intangible assets,
long-lived assets and stock compensation expense 4,325 4,787 This
information is preliminary and may be changed prior to filing Form
10-Q. No investment decisions should be based solely on this data.
DATASOURCE: Hartmarx Corporation CONTACT: Lisa Wells for Hartmarx
Corporation, +1-212-826-3529 Web Site: http://www.hartmarx.com/
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