Fourth Quarter Results
For the fourth quarter of 2002, the Company reported a net loss of $4.6 million, or a diluted loss of $0.11 per share, compared to net earnings of $1.4 million, or diluted earnings of $0.03 per share, for the fourth quarter of 2001. As previously announced, the 2002 fourth quarter results include restructuring, impairment and severance charges of $8.5 million, or $6.1 million net of tax, associated with various actions the Company is taking to lower operating costs. Excluding the charges, net earnings for the fourth quarter of 2002 were $1.5 million, or diluted earnings of $0.03 per share. The 2001 fourth quarter results include severance charges of $0.5 million, or $0.3 million, net of tax. Excluding the charges, net earnings for the 2001 fourth quarter were $1.7 million, or diluted earnings of $0.04 per share.
Carlos Alberini, President and Chief Operating Officer, commented, "Given the ongoing difficult retail environment, we continue to focus on careful inventory control and expense management. At the same time, we are pursuing targeted initiatives across our product lines designed to improve our offerings and increase revenues. We are encouraged by the recent product changes we have made and see many opportunities to grow the top line in our business units. Moreover, with the steps we have taken to enhance the efficiency of our business model, we expect these gains to improve profitability."
Total net revenue for the fourth quarter of 2002 declined 8.7% to $167.4 million from $183.4 million in the fourth quarter of 2001. The Company's retail stores, including those in Canada, generated revenues of $130.9 million in the 2002 fourth quarter, a 6.8% increase from $122.6 million reported in the same period a year ago. Comparable store sales decreased 0.9% during the fourth quarter of 2002 from the year-ago period. Net revenue from the Company's wholesale segment was $26.4 million in the fourth quarter of 2002 compared to $52.3 million in the year-ago period. Wholesale revenue in the fourth quarter last year included $4.8 million in kids' business, which was licensed out beginning in 2002. Excluding sales from the kids' business in the year-ago fourth quarter, wholesale revenue declined 44.4% in the 2002 fourth quarter. Licensing segment net revenue increased 17.7% to $10.1 million in the 2002 fourth quarter from $8.6 million in the fourth quarter last year.
Full Year 2002 Results
For the full year ended December 31, 2002, the Company reported a net loss of $11.3 million, or a diluted loss of $0.26 per share, versus net earnings of $6.2 million, or diluted earnings of $0.14 per share, in the comparable 2001 period. The 2002 results include litigation settlement proceeds of $4.3 million, or $2.9 million, net of tax, and restructuring, impairment and severance charges of $9.2 million, or $6.2 million, net of tax. Excluding the litigation settlement and charges, the net loss for 2002 was $8.0 million, or a diluted loss of $0.18 per share. The 2001 results include restructuring, impairment and severance charges of $5.5 million, or $3.2 million net of tax. Excluding these charges, net earnings for 2001 were $9.4 million, or diluted earnings of $0.21 per share.
Total net revenue for 2002 declined 13.9% to $583.1 million from $677.6 million in 2001. The Company's retail stores, including those in Canada, generated revenue of $384.5 million for 2002, an increase of 1.0% from $380.6 million for last year. Comparable store sales decreased 4.1% for the 2002 year. Net revenue from the Company's wholesale segment was $159.6 million in 2002, compared to $260.1 million in 2001. Wholesale revenue for 2001 included $27.6 million in the kids' business, which was licensed out beginning in 2002. Excluding sales from the kids' business in 2001, wholesale revenue declined 31.4% in 2002. Licensing segment net revenue for 2002 increased 5.8% to $39.0 million from $36.9 million for the prior year.
Securitization Transaction
On January 16, 2003, the Company announced a securitization transaction in which its indirect wholly owned subsidiary Guess? Royalty Finance LLC began to privately offer $75,000,000 of its Secured Notes Due 2011. Prior to that, on September 27, 2002, the Company entered into a new $85 million credit facility led by Wachovia Securities, Inc. According to the terms of the credit facility agreement, the Company had committed to refinance or extend the maturity of its existing subordinated debt by February 28, 2003. The Company intends to use the proceeds of the securitization to refinance the subordinated debt due in August 2003; however, the process of marketing and completing the securitization has taken longer than originally expected due to the technical nature of the transaction, and the Company now anticipates that the transaction will not close before February 28, 2003. As a result, the Company and its lenders amended the credit facility effective February 25, 2003, to extend the deadline to April 30, 2003.
Change in Earnings Guidance Practice
Previously, the Company has provided guidance on short-term earnings expectations. Effective with this announcement, the Company will no longer issue specific earnings guidance or comment on the earnings forecasts issued by others. The Company will continue to discuss strategic and operational initiatives it is undertaking to drive its business, its view on the anticipated performance of key components of its business, and retail trends and other factors expected to affect its performance. In this regard, the Company anticipates that February same store sales will decline, on a percentage basis, in the low single digits.
Share Repurchase Program
In May 2001, the Board of Directors authorized the Company to repurchase shares of its own stock in the amount of up to $15 million from time to time in open market transactions. During 2002, the Company purchased 606,000 shares at an aggregated cost of $3.2 million, or an average of $5.21 per share. Since the inception of the share repurchase program in May 2001, the Company has purchased 1,137,100 shares at an aggregated cost of $7.1 million, or an average of $6.26 per share. The Company did not purchase any of its own stock in the fourth quarter of 2002.
The Company will hold a conference call at 4:30 pm (ET) on February 26, 2003 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at www.guess.com via the "Investor's Page" link from the "Guess, Inc." section of the site. The webcast will be archived on the website through Wednesday, March 5th at 7:30 pm (ET).
Guess?, Inc. designs, markets, distributes and licenses one of the world's leading lifestyle collections of contemporary apparel, accessories and related consumer products.
Except for historical information contained herein, certain matters discussed in this press release including but not limited to the Company's expected results of operations and plans to reduce costs and estimated charges, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are only expectations, and involve known and unknown risks and uncertainties, which may cause actual results in future periods and other future events to differ materially from what is currently anticipated. Factors which may cause actual results in future periods to differ from current expectations include, among other things, the continued availability of sufficient working capital, the successful integration of new stores into existing operations, the continued desirability and customer acceptance of existing and future product lines, possible cancellations of wholesale orders, the success of competitive products and the availability of adequate sources of capital. In addition to these factors, the economic and other factors identified in the Company's most recent annual report on Form 10-K for the fiscal year ended December 31, 2001, including but not limited to the risk factors discussed therein, could affect the forward-looking statements contained herein and in the Company's other public documents.
Guess?, Inc. and Subsidiaries
Condensed Consolidated Statements of
Operations
(in thousands, except per share
data)
(Unaudited)
Fourth Quarter Ended
--------------- ---------------
Dec 31, Dec 31,
2002 2001
$ % $ %
--------------- ---------------
Net revenue
Product sales $157,300 94.0% $174,816 95.3%
Net royalties 10,073 6.0% 8,560 4.7%
--------------- ---------------
167,373 100.0% 183,376 100.0%
Cost of sales 110,323 65.9% 123,060 67.1%
--------------- ---------------
Gross profit 57,050 34.1% 60,316 32.9%
Selling, general and administrative
expenses 52,752 31.5% 54,194 29.6%
Litigation settlement (250)(0.1%) -- --
Gain on disposition of property and
equipment 0 -- --
Restructuring, impairment and severance
charges 8,524 5.1% 535 0.3%
--------------- ---------------
Earnings (loss) from operations (3,976)(2.4%) 5,587 3.0%
Other (income) expense:
Interest expense, net 2,467 1.5% 3,321 1.8%
Other, net (20)(0.0%) --
--------------- ---------------
Earnings (loss) before income taxes
(benefit) (6,423)(3.9%) 2,266 1.2%
Income taxes (benefit) (1,800)(1.1%) 900 0.5%
--------------- ---------------
Net earnings (loss) $(4,623)(2.8%) $1,366 0.7%
=============== ===============
Net earnings (loss) per share:
Basic $(0.11) $0.03
Diluted $(0.11) $0.03
Weighted number of shares outstanding:
Basic 43,499 43,347
Diluted 43,499 43,602
Year Ended
-------------------------------
Dec 31, Dec 31,
2002 2001
$ % $ %
-------------------------------
Net revenue
Product sales $544,081 93.3%$640,700 94.6%
Net royalties 39,058 6.7% 36,920 5.4%
-------------------------------
583,139 100.0% 677,620 100.0%
Cost of sales 383,806 65.8% 447,825 66.1%
-------------------------------
Gross profit 199,333 34.2% 229,795 33.9%
Selling, general and administrative
expenses 202,930 34.8% 201,527 29.7%
Litigation settlement (4,250) (0.7%) -- --
Gain on disposition of property and
equipment -- -- (1,063)(0.2%)
Restructuring, impairment and severance
charges 9,179 1.6% 5,502 0.8%
-------------------------------
Earnings (loss) from operations (8,526) (1.5%) 23,829 3.5%
Other (income) expense:
Interest expense, net 9,131 1.6% 12,605 1.9%
Other, net (825) (0.1%) 482 0.1%
-------------------------------
Earnings (loss) before income taxes
(benefit) (16,832) (3.0%) 10,742 1.6%
Income taxes (benefit) (5,550) (1.0%) 4,500 0.7%
-------------------------------
Net earnings (loss) $(11,282) (2.0%) $6,242 0.9%
===============================
Net earnings (loss) per share:
Basic $(0.26) $0.14
Diluted $(0.26) $0.14
Weighted number of shares outstanding:
Basic 43,392 43,656
Diluted 43,392 43,958
Guess?, Inc. and Subsidiaries
Consolidated Segment Data
(in thousands)
(Unaudited)
Fourth Quarter
Ended Year Ended
------------------------------------
Dec 31, Dec 31, Dec 31, Dec 31,
2002 2001 2002 2001
------------------------------------
Net revenue:
Retail operations $130,938 $122,550 $384,456 $380,576
Wholesale operations 26,362 52,266 159,625 260,124
Licensing operations 10,073 8,560 39,058 36,920
------------------------------------
$167,373 $183,376 $583,139 $677,620
====================================
Earnings (loss) from operations:
Retail operations $9,981 $10,870 $3,120 $4,134
Wholesale operations (22,533) (12,236) (44,944) (11,234)
Licensing operations 8,576 6,953 33,298 30,929
------------------------------------
$(3,976) $5,587 $(8,526) $23,829
====================================
Guess?, Inc. and Subsidiaries
Selected Condensed Consolidated Balance Sheet Data
(in thousands)
(Unaudited)
Dec 31, Dec 31,
2002 2001
------------------
ASSETS
Cash and cash equivalents $31,753 $31,870
Receivables, net 35,437 40,500
Inventories, net 95,683 96,105
Other current assets 26,114 20,561
Property and equipment, net 128,097 145,385
Other assets 32,448 28,042
------------------
Total Assets $349,532 $362,463
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities (Note 1) $167,561 $93,773
Notes payable and long-term debt, excluding current
installments 1,480 80,119
Other liabilities 14,211 10,647
Stockholders' equity 166,280 177,924
------------------
Total Liabilities and Stockholders' Equity $349,532 $362,463
==================
Note 1: Includes the Company's 9 1/2% Senior Subordinated Notes due
August 2003 in the amount of $79.6 million. The Company is in
the process of refinancing these notes with a securitization
transaction in which its wholly owned subsidiary, Guess
Royalty Finance LLC is privately offering $75 million of its
Secured Notes Due 2011.
Guess?, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Data
(in thousands)
(Unaudited)
Year Ended
----------------
Dec 31, Dec 31,
2002 2001
----------------
Net cash provided by operating activities $29,589 $71,780
Net cash used in investing activities (22,470)(20,215)
Net cash used in financing activities (7,354)(32,914)
Effect of exchange rates on cash 118 (113)
----------------
Net (decrease) increase in cash and cash equivalents (117) 18,538
Cash and cash equivalents at the beginning of the year 31,870 13,332
----------------
Cash and cash equivalents at the end of the year $31,753 $31,870
================
Supplemental information:
Depreciation and amortization $37,979 $41,022
Rent 53,147 49,614
Guess?, Inc. and Subsidiaries
Retail Store Data
Year Ended
---------------------------------
Dec 31, Dec 31,
2002 2001
------------- ----------------
Number of stores at the
beginning of the year 227 212
Store openings 24 18
Store closures (2) (3)
------------- ----------------
Number of stores at the
end of the year 249 227
============= ================
Total store square footage at
the end of the year 1,277,000 1,171,000
============= ================
CONTACT: Guess?, Inc.
Carlos Alberini, 213/765-3582
Frederick G. Silny, 213/765-3289
or
Kekst and Company
Wendi Kopsick or Molly Morse
212/521-4800
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