Kenneth Cole Productions Reports Second Quarter 2012 Results

Aug 01, 2012, 07:30 ET from Kenneth Cole Productions, Inc.

NEW YORK, Aug. 1, 2012 /PRNewswire/ -- Kenneth Cole Productions, Inc. (NYSE: KCP) today reported financial results for the second quarter ended June 30, 2012.  The Company reported a loss per fully-diluted share for the period of $(0.20) versus net income per share of $0.03 in the year-ago period.  On a non-GAAP basis, after adjusting for (i) costs associated with the proposed acquisition of the Company by a group led by Mr. Kenneth D. Cole and (ii) one-time transition costs relating to changing distribution centers described below, the Company's adjusted net loss per fully-diluted share for the second quarter was $(0.03).

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Net revenues in the second quarter were $97.3 million versus the year-ago level of $102.2 million.  Wholesale revenues decreased 3.3% to $50.3 million versus the year-ago period primarily from private label footwear and Reaction handbags.  Consumer Direct revenues decreased 6.1% to $37.2 million versus the year-ago period due to the operation of two fewer stores and a comparable store sales decline of 2.7%.  Licensing revenues in the second quarter declined 7.8% to $9.8 million versus the prior year's level due principally to the transition of the women's apparel business to an in-house operation from a licensing model and the resetting of contractual minimum royalties of a licensee.

Gross profit, as a percentage of revenues, was 40.6% for the second quarter ended June 30, 2012, unchanged from the year-ago period.

Selling, general and administrative expenses ("SG&A") in the quarter were $43.7 million, or 44.9% of revenues, versus $40.4 million, or 39.6% of revenues, in the year-ago period.  In the current quarter, the Company incurred certain charges for transition costs to a new distribution center as a result of one of its third-party logistics operator's insolvency, as well as professional service costs in connection with the proposed acquisition of the Company by a group led by Mr. Kenneth D. Cole.  Excluding these one-time items adjusted SG&A in the second quarter was $39.7 million, or 40.8% of revenues versus 39.6% in the year-ago period.   

The net loss for the second quarter was $(3.7) million or $(0.20) per fully diluted share versus income of $0.6 million or $0.03 per fully diluted share in the prior year's quarter.  Excluding the two items described in the previous paragraph, the adjusted loss per fully diluted share would have been $(0.03) for the second quarter as compared to adjusted earnings per fully diluted share of $0.04 in the year-ago period.

The Company noted that due to losses in prior periods, it did not provide for any federal income tax (benefit)/expense in its (loss)/earnings per share calculations.

The Company ended the quarter with $49.0 million in cash and no long-term debt.  Inventory increased 20.3% to $49.7 million versus the prior year's level of $41.3 million.

Presentation of Financial Information In addition to providing financial results and guidance in accordance with GAAP, the Company has provided non-GAAP adjusted earnings per share information for the quarter ended June 30, 2012.  This non-GAAP financial information is provided to enhance the user's overall understanding of the Company's current financial performance.  Specifically, the Company believes the non-GAAP adjusted results provide useful information to both management and investors by excluding charges that the Company believes are not indicative of the Company's core operating results.  The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP.  A reconciliation of this non-GAAP information to the Company's actual and expected results is included in the financial tables of this press release.

About Kenneth Cole Productions, Inc. Kenneth Cole Productions, Inc. designs, sources, and markets a broad range of footwear, handbags, apparel and accessories under the brand names Kenneth Cole New York; Kenneth Cole Reaction; Unlisted; and Le Tigre, as well as footwear under the proprietary trademark Gentle Souls.  The Company has also granted a wide variety of third party licenses for the production of men's, women's and children's apparel as well as fragrances, watches, jewelry, eyewear, and several other accessory categories.  The Company's products are distributed through department stores, better specialty stores, company-owned retail stores and its e-commerce website.  Further information can be found at http://www.kennethcole.com/.

Forward Looking Statement Disclosure The statements contained in this release, which are not historical facts, may be deemed to constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Actual future results might differ materially from those projected in such statements due to a number of risks and uncertainties, including but not limited to, demand and competition for the Company's products, the ability to enter into new product license agreements or to renew or replace existing product licensee agreements, changes in consumer preferences or fashion trends, delays in anticipated store openings, and changes in the Company's relationships with retailers, licensees, vendors and other resources.  The forward looking statements contained herein are also subject to other risks and uncertainties that are described in the Company's reports and registration statements filed with the Securities and Exchange Commission.

 

Kenneth Cole Productions, Inc.

 

(unaudited)

 

(In thousands, except

per share & outstanding share amounts)

Quarter Ended

Six Months Ended

06/30/12

06/30/11

06/30/12

06/30/11

Net sales

$87,540

$91,643

$195,221

$199,339

Royalty Revenue

9,778

10,602

18,937

20,379

Net revenues

$97,318

$102,245

$214,158

$219,718

Gross profit

39,533

41,496

82,683

83,167

Selling, gen'l & administrative expenses

39,700

40,441

85,861

86,746

Distribution center transition and proposed

    transaction costs

 

3,856

 

--

4,401

--

Store closing and severance costs

127

--

378

12,482

Total Operating Expense

43,683

40,441

90,640

99,228

Operating (loss) income

(4,150)

1,055

(7,957)

(16,061)

Deferred compensation plan investment (loss)/gain

(645)

--

1,071

--

Interest & other income, net

32

73

64

120

Investment impairment

(24)

(376)

(32)

(376)

Total Interest & Other (Expense) Income

(637)

(303)

1,103

(256)

(Loss) Income before taxes

(4,787)

752

(6,854)

(16,317)

Income tax (benefit) expense

(1,092)

173

(1,279)

306

Net (loss) income

$(3,695)

$579

$(5,575)

$(16,623)

Net (loss) income per share:Basic

$(0.20)

$0.03

$(0.30)

$(0.91)

Net (loss) income per share:Diluted

$(0.20)

$0.03

$(0.30)

$(0.91)

Average shares outstanding:Basic

18,364,000

18,296,000

18,285,000

18,268,000

Average shares outstanding:Diluted

18,364,000

18,581,000

18,285,000

18,268,000

Balance Sheet Data:

06/30/12

06/30/11

Cash & Cash Equivalents

$48,969

$56,247

Accounts Receivable, Net

33,703

35,785

Inventory

49,736

41,329

Total Assets

234,056

246,077

Working Capital

93,749

75,362

Accounts Payable & Accrued Expenses

34,674

46,904

Long-term Debt

-

-

Total Shareholders' Equity

142,821

130,537

                                                                           

Kenneth Cole Productions, Inc.

 

(unaudited)

 

  • As required by the Securities and Exchange Commission Regulation G, the following table contains information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results.

(In thousands, except

Quarter Ended

per share & outstanding share amounts)

06/30/12

06/30/11

Net (loss) income, as reported

$(3,695)

$579

Income tax (benefit) expense, as reported

(1,092)

173

(Loss) income before taxes, as reported

(4,787)

752

Proposed transaction charges

1,925

--

Warehouse transition charges

1,931

--

Investment impairment

24

376

Total Other Charges

3,880

376

Adjusted (Loss) income before taxes

(907)

1,128

Adjusted Income tax (benefit) expense *

(354)

440

Adjusted Net (loss) income

(553)

688

Net (loss) income per share: Basic, as reported

$(0.20)

$0.03

Other Charges per share: Basic

(0.17)

0.01

Adjusted Net (loss) income per share: Basic

$(0.03)

$0.04

Net (loss) income per share: Diluted, as reported

$(0.20)

$0.03

Other Charges per share:  Diluted

(0.17)

0.01

Adjusted Net (loss) income per share: Diluted

$(0.03)

$0.04

Average shares outstanding:Basic

18,364,000

18,296,000

Average shares outstanding:Diluted

18,364,000

18,581,000

* Assumes a 39% tax rate

 

SOURCE Kenneth Cole Productions, Inc.



RELATED LINKS

http://www.kennethcole.com