Saks Incorporated Announces Results for the First Quarter Ended April 29, 2006; Results Include Gain from NDSG Transaction.BIRMINGHAM, Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. . -- Retailer Saks Incorporated Saks Incorporated (NYSE: SKS) is a Fortune 500 operator of department stores in the United States. While currently headquartered in Birmingham, Alabama, the company is in the process of moving to New York City. Saks Incorporated was formerly known as Proffitt's, Inc. (NYSE NYSE See: New York Stock Exchange : SKS SKS Szkolny Klub Sportowy (Polish: School Sports Club) SKS Some Kind Soul SKS Samozariadnyia Karabina Simonova (Russian military carbine) SKS Vojens Lufthavn, Denmark - Jojens ) ("Saks" or the "Company") today announced results for the first quarter ended April 29, 2006. The Company currently operates Saks Fifth Avenue Saks Fifth Avenue is a chain of upscale American department stores that is owned and operated by Saks Fifth Avenue Enterprises (SFAE), a subsidiary of Saks Incorporated. It competes in the elite luxury department store market with Neiman Marcus, Bergdorf Goodman and Barneys New Enterprises ("SFAE SFAE San Francisco Art Exchange SFAE Staff For Acquisition Executive ") which is comprised of 54 Saks Fifth Avenue luxury department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. , 50 Saks Off 5th outlet stores An outlet store or factory outlet is a retail store in which manufacturers sell their stock directly to the public through their own branded stores. The stores can be can be brick and mortar or online. , and saks.com. The Company also operates Saks Department Store Group ("SDSG SDSG Space Division Switching Group SDSG Spinal Deformity Study Group SDSG Software Development Support Group (Nintendo) ") consisting of 38 Parisian specialty department stores and 60 Club Libby Lu Club Libby Lu is a chain of stores primarily targeted to preteen girls. As of 2006, the store chain operates 62 stores in 28 states in the United States. Club Libby Lu was founded by Mary Drolet, a former executive at Claire's and Montgomery Ward, in August 2000[1]. specialty stores Noun 1. specialty store - a store that sells only one kind of merchandise shop, store - a mercantile establishment for the retail sale of goods or services; "he bought it at a shop on Cape Cod" . On July 5, 2005, the Company sold substantially all of the assets directly involved in the Company's SDSG Proffitt's and McRae's department store operations to Belk, Inc., and on March 6, 2006, the Company sold substantially all of the assets directly involved in the Company's SDSG Northern Department Store Group ("NDSG NDSG Novell Desktop Systems Group ") business to The Bon-Ton Stores, Inc. In January 2006, the Company announced that it is exploring strategic alternatives for Parisian. This process is currently underway. Earnings Overview Saks Incorporated recorded net income of $81.5 million, or $.60 per share, for the first quarter ended April 29, 2006. The quarter included a net after-tax gain Net after-tax gain Capital gain after income taxes have been paid. of $70.3 million, or $.52 per share, primarily related to the gain on the NDSG transaction of $72.8 million, or $.54 per share, partially offset by asset impairments and dispositions of $2.6 million, or $.02 per share. The current year quarter also included (amounts are net of taxes): --expenses of approximately $1.0 million, or $.01 per share, related to legal and other costs associated with the previously disclosed investigations by the Securities and Exchange Commission and the Office of the United States Attorney United States Attorneys (also known as federal prosecutors) represent the United States federal government in United States district court and United States court of appeals. There are 93 U.S. for the Southern District of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , which are ongoing; --expenses of approximately $4.0 million, or $.03 per share, related to retention (as the Company must maintain adequate staffing to support its operations and to fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. the obligations under its interim support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services agreements with Belk and Bon-Ton) and severance (as the Company downsizes its organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. ); and --income of approximately $2.5 million, or $.02 per share, due to the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. conclusion of certain tax examinations. The Company recorded net income of $16.2 million, or $.11 per share, for the prior year first quarter ended April 30, 2005, which included an after-tax gain of $1.4 million, or $.01 per share, primarily related to the disposition of assets associated with certain SFAE store closings. The prior year first quarter also included legal and other expenses related to the investigations totaling approximately $2.2 million, or $.02 per share. For the current year first quarter, consolidated comparable store sales declined 1.9%. Total revenues declined 32.9% for the quarter, primarily reflecting the sale of the Proffitt's/McRae's and NDSG businesses. The consolidated gross margin rate declined by 20 basis points from last year, primarily related to the timing of the sale of the NDSG business (see "Comments on the Quarter" below). As a percent of sales, selling, general, and administrative expenses increased by approximately 60 basis points over the prior year. Excluding the impact of expenses related to the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. investigations and retention/severance as well as expenses in the prior year related to litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and supply chain initiatives (see "Comments on the Quarter - SDSG" below), the SG&A rate as a percent of sales would have been approximately 40 basis points higher than the prior year. First Quarter Segment Performance and Commentary
For the first quarter ended April 29, 2006, operating income (loss) by
segment (in millions) was as follows:
Quarter Ended Quarter Ended
Apr. 29, 2006 Apr. 30, 2005
------------- -------------
SDSG $ (1.8) $20.1
SFAE 39.7 40.8
Items not allocated 189.1 (8.9)
----- ------
Total $227.0 $52.0
Items not allocated to the business segments are comprised of the gain on the sale of the NDSG business (totaling $211.3 million on a pre-tax basis for the quarter ended April 29, 2006); the cost of certain services performed on behalf of the entire company; and those items not considered by corporate management in assessing segment operating performance, such as impairments, gains or losses on long-lived assets, certain store closing charges, debt restructuring Debt Restructuring A method used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage. Notes: charges, and certain retention and severance costs. Expenses associated with the investigations have been allocated to SFAE. Comments on the Quarter SDSG For the first quarter, SDSG generated an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $1.8 million compared to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $20.1 million last year. Operating income on a year-over-year basis was negatively affected by approximately $40 million from the sale of the Proffitt's/McRae's and NDSG businesses and positively affected by approximately $7 million related to prior year litigation and supply chain initiatives expenses. Excluding the impact of these items, SDSG's operating income would have significantly improved over last year. SDSG's first quarter consolidated performance reflected a comparable store sales decline of 1.5% and a total sales decline of 56.5% (related to the sale of Proffitt's/McRae's and NDSG). Parisian posted a low-single digit comparable store sales increase for the quarter. The current year first quarter included NDSG results only for the first five weeks ended March 4, 2006, which typically is the lowest gross margin rate period for the quarter, and consequently, the consolidated SDSG gross margin rate fell for the quarter. Consolidated SDSG SG&A expenses were flat as a percent of sales year-over-year. SFAE SFAE's first quarter operating income totaled $39.7 million, a slight decline from $40.8 million posted in the prior year. First quarter year-over-year SFAE operating income would have increased modestly excluding the year-over-year decrease in operating income contribution associated with the New Orleans New Orleans (ôr`lēənz –lənz, ôrlēnz`), city (2006 pop. 187,525), coextensive with Orleans parish, SE La., between the Mississippi River and Lake Pontchartrain, 107 mi (172 km) by water from the river mouth; founded store (approximately $3.8 million on a pre-tax basis) and the year-over-year decline in investigation related expenses (approximately $1.9 million on a pre-tax basis). Stephen I Stephen I, king of Hungary: see Stephen, Saint (975–1038). Stephen I or Saint Stephen orig. Vajk (born 970/975, Esztergom, Hung.—died Aug. . Sadove, Chief Executive Officer, commented, "The first quarter comparable store sales decline of 2.2% was disappointing and below our expectations. However, the sales shortfall was offset by gross margin rate improvement resulting from lower levels of clearance merchandise as we entered the first quarter. SG&A dollars declined modestly during the first quarter, and SG&A as a percent of sales was flat year-over-year. "We are making progress at SFAE. We are implementing the process changes that I believe will substantially improve the future operating performance of the business. This is a work-in-progress, and we expect to see improved operating results in fall 2006 and even more improvement in 2007. In the near term, second quarter results may be adversely affected if sales trends experienced during the first quarter continue, which could lead to excess markdowns and gross margin exposure." Sadove continued, "We are keenly focused on improving the operations of Saks Fifth Avenue by getting 'back to basics' in many areas of the business. Specifically, we are intent on: --restoring comparable store sales momentum through renewed attention to our core customer and a heightened focus on appropriate merchandise assortments by market; --improving our gross margin rate performance through improved inventory management, driven by organizational changes, improved disciplines, and an enhanced merchandise planning Merchandise Planning is a strategic and systematic approach used by retailers, particularly in fashion and non-food areas. It is aimed at maximising return on investment, through planning and monitoring sales, margins and inventory in order to increase profitability. system currently being implemented; --reducing operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. ; and --spending capital in a disciplined manner with a focus on return on investment." Balance Sheet Highlights Consolidated inventories at April 29, 2006 totaled $854 million, a 45% decrease over the prior year, which primarily related to the sale of Proffitt's/McRae's and NDSG. Consolidated comparable store inventories decreased nearly 2% over last year, with a slight increase at SDSG and a modest decline at SFAE. The Company ended the quarter with approximately $1.152 billion of cash on hand, which reflected the proceeds from the NDSG transaction. Subsequent to quarter end, on May 1, 2006, the Company paid its previously announced $4 per share special cash dividend to shareholders of record on April 14, 2006, which totaled $547 million. Douglas E. Coltharp, Chief Financial Officer of the Company, noted, "We believe this special dividend was an efficient and straightforward way to distribute to all of our shareholders a substantial portion of the NDSG sale proceeds." Following the payment of the special dividend, the Company had approximately $575 million of invested cash. Coltharp further noted, "We plan to maintain a portion of this cash to provide flexibility for further balance sheet refinements, to invest in our core business, and to cover any residual transition costs related to the disposition of our department store businesses. Our current plan is to target any excess cash for additional shareholder distributions in the form of share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. , an additional dividend, or a combination of both. The pool of funds available for future shareholder distributions may be augmented by the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from any monetization Monetization The securitization of the gross revenues of a contract. of the Parisian business resulting from the strategic alternatives process currently underway." The Company reduced its $800 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility commitment to $500 million commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with the sale of NSDG, reflecting the reduced working capital and liquidity needs associated with its residual businesses. At quarter end, the Company had no outstanding borrowings on its revolving credit facility. Total funded debt Funded Debt Long-term debt that matures after more than one year. Notes: This is usually issued as a bond or a long-term note. See also: Bond, Debt, Maturity, Note Funded debt Debt maturing after more than one year. (including capitalized leases) at April 29, 2006 declined from one year ago by nearly 50% to approximately $694 million, and debt-to-capitalization was 30.3%. The Company has remaining availability of approximately 37.8 million shares under its 70 million share repurchase authorization. The Company did not repurchase any shares during the first quarter. Outlook for the Balance of 2006 and Beyond Sadove noted, "Our main focus areas for the remainder of 2006 continue to be to: --substantially improve the operating performance of SFAE, particularly in the second half of the year, predicated upon low-to-mid single digit comps and substantial year-over-year improvement in the SFAE gross margin rate; --complete the strategic alternatives process for Parisian; --fulfill our transition service agreements for Proffitt's/McRae's with Belk (through mid-2006) and for NDSG with Bon-Ton (through mid-2007); --begin implementing a plan for a cost-effective support infrastructure, which process will accelerate once the transition service periods end; and --effectively and efficiency deploy any incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. transaction proceeds and appropriately structure the balance sheet. The Company today reiterated the information provided in its March 1, 2006 fiscal year end earnings release under the heading, "Outlook for 2006." Certain information is repeated below. Management believes that the following assumptions are reasonable for 2006 (assuming a full year of operation for Parisian): --Interest expense approximating $50 million. --Depreciation and amortization ranging from $160 million to $170 million. --An effective tax rate of approximately 40.0%. For the full year, management expects net capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. will total approximately $175 million to $200 million. The major components of this spending include approximately: (i) $60 million for SFAE expansions and remodels, (ii) $30 million for new Parisian stores, (iii) $15 million for Parisian expansions and remodels, and (iv) the balance primarily for merchandising, maintenance capital, and information technology. The Company's three-to-four year operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: goal for SFAE remains at 8%. This operating margin goal assumes the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of the Parisian business and includes the absorption of approximately $20 million of the previously "unallocated" corporate expenses. Store News Closings/Openings In the first quarter, the Company closed its underperforming Parisian stores in the Columbiana Centre Columbiana Centre is one of South Carolina's dominant shopping mall, with 817,000 square feet of retail space. The mall is located just off Interstate 26 on Harbison Blvd in Columbia, South Carolina. in Columbia, South Carolina Columbia is the state capital and largest city of South Carolina. As of 2006, estimates for the population of the city proper is 122,819[1]. Columbia is the county seat of Richland County, but a small portion of the city extends into Lexington County. and in the Montgomery Mall in Montgomery, Alabama Montgomery is the capital and second most populous city of the U.S. state of Alabama and the county seat of Montgomery County. Montgomery is notable for its historic involvement during the Civil War, for being the first capital of the Confederacy, and for being a primary site in . The Company will open new Parisian stores in Birmingham, Alabama Birmingham (pronounced [ˈbɝmɪŋˌhæm]) is the largest city in the U.S. state of Alabama and is the county seat of Jefferson County. and in Little Rock, Arkansas Little Rock, Arkansas required military intervention to desegregate schools (1957–1958). [Am. Hist.: Van Doren, 556–557] See : Bigotry in fall 2006. In October 2004, the Company announced its intention to close three Saks Fifth Avenue stores - Palos Verdes Palos Verdes is often used to refer to a group of coastal cities on the Palos Verdes Peninsula in the Los Angeles/South Bay area of California. This affluent bedroom community is known for its dramatic views, good schools [1] extensive horse trails [2] , California; Mission Viejo, California “Mission Viejo” redirects here. For other uses, see Mission Viejo (disambiguation). Mission Viejo (anglicized pronunciation IPA: /ˈmɪʃənviːˈeɪhoʊ/ ; and Ft. Worth, Texas - once satisfactory arrangements could be negotiated to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. these locations. The Palos Verdes store closed on May 13, 2006. In conjunction with the Palos Verdes store closing, the Company will record charges primarily related to the lease termination, inventory write down, and severance costs. These charges will be recorded in the second fiscal quarter of 2006 and are expected to total approximately $2 million on a pre-tax basis. Conversely con·verse 1 intr.v. con·versed, con·vers·ing, con·vers·es 1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak. 2. , the Company has decided to continue operation of its Saks Fifth Avenue Mission Viejo Mission Vi·e·jo A community of southern California southeast of Irvine. It is mainly residential. Population: 96,300. store. Sadove commented, "After further analysis, we believe that the Mission Viejo store can achieve our profitability standards if appropriate resources are dedicated to this location." No closing date has yet been determined for the Ft. Worth location. New Orleans In November 2006, the Company intends to reopen re·o·pen tr. & intr.v. re·o·pened, re·o·pen·ing, re·o·pens 1. To open or be opened again: Officials reopened the airport after the snow was cleared. Schools reopen in September. its Saks Fifth Avenue store in New Orleans, which suffered damage related to Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. . Sadove noted, "We are anxious to reopen our New Orleans
store, which was one of our most profitable locations. The tourist and
convention business is rebounding, and the Canal Place Canal Place is a 58.1 acre park operated by the National Park Service located in Cumberland, Maryland. The park includes the Western Maryland Railway Station, Station Plaza, a picnic area, a canal boat replica, a pedestrian bridge to Washington’s Headquarters, picnic area, Mall, where our
store is located, has already reopened. Saks Fifth Avenue has a great
franchise and many loyal customers and associates in New Orleans, and we
look forward to our return there."For the first quarter, year-over-year total company revenues were negatively affected by approximately $15 million and operating income was negatively affected by approximately $4 million. Prior to the closing, the New Orleans store generated annual revenues in excess of $50 million and operating income of approximately $12 million. International Building upon its successful international ventures in Saudi Arabia Saudi Arabia (sä  `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. and the United Arab Emirates United Arab Emirates, federation of sheikhdoms (2005 est. pop. 2,563,000), c.30,000 sq mi (77,700 sq km), SE Arabia, on the Persian Gulf and the Gulf of Oman. , in April, the Company announced it had
entered into a licensing and consulting agreement with Roosevelt China
Investments Corp. ("RCIC RCIC Rite of Christian Initiation of ChildrenRCIC Reactor Core Isolation Cooling (Nuclear Power) RCIC Regulatory Compliance Information Center ") to locate and develop appropriate sites for potential Saks Fifth Avenue stores within the People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China ("PRC") and Macau. RCIC will own and operate the stores under the license agreement with Saks Fifth Avenue. The first Saks Fifth Avenue store is expected to open in 2008 in a heritage building in the historic Bund district of downtown Shanghai, PRC. "While our primary focus remains on our domestic stores, the opening of carefully chosen licensed locations abroad can extend the reach of our brand and generate an incremental income stream for Saks," noted Sadove. Sales Detail
Total sales numbers below represent owned department sales and leased
department commissions. Total sales (in millions) for the first
quarter ended April 29, 2006 compared to last year's first quarter
ended April 30, 2005 were:
Total Comparable
This Year Last Year (Decrease) (Decrease)
--------- --------- --------- ---------
SDSG $ 367.5 $ 844.3 (56.5%) (1.5%)
SFAE 672.3 705.8 (4.7%) (2.2%)
--------- --------- --------- ---------
Total $1,039.8 $1,550.1 (32.9%) (1.9%)
Leased department commissions included in the total sales numbers
above were as follows (sales in millions):
Quarter Ended
-------------
Apr. 29, 2006 Apr. 30, 2005
--------------- -------------
SDSG leased commissions $ 1.9 $ 3.9
SFAE leased commissions 6.5 6.3
------- -------
Total leased commissions $ 8.4 $ 10.2
Conference Call Information Management has scheduled a conference call at 10:00 a.m. Eastern Time on Tuesday, May 16, 2006 to discuss first quarter results. To participate, please call (706) 643-1966 (10 minutes prior to the call). A replay of the call will be available for 48 hours following the live call. The dial-in number for the replay is (706) 645-9291 (conference ID number 4592585). Interested parties also have the opportunity to listen to the conference call over the Internet by visiting the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of Saks Incorporated's corporate website at http://www.saksincorporated.com/investor_relations.html. To listen to the live call, please go to the address listed at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call, and a transcript will be posted on the Company's web site within 24 to 48 hours. To be placed on the Company's e-mail notification list for press releases, SEC filings, certain analytical information, and/or upcoming events, please go to www.saksincorporated.com, click on "Investor Relations," click on "e-mail Alerts," and fill out the requested information. Forward-looking Information The information contained in this press release that addresses future results or expectations is considered "forward-looking" information within the definition of the Federal securities laws. Forward-looking information in this document can be identified through the use of words such as "may," "will," "intend," "plan," "project," "expect," "anticipate," "should," "would," "believe," "estimate," "contemplate," "possible," and "point." The forward-looking information is premised on many factors, some of which are outlined below. Actual consolidated results might differ materially from projected forward-looking information if there are any material changes in management's assumptions. The forward-looking information and statements are or may be based on a series of projections and estimates and involve risks and uncertainties. These risks and uncertainties include such factors as: the level of consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. for apparel and other merchandise carried by the Company and its ability to respond quickly to consumer trends; adequate and stable sources of merchandise; the competitive pricing environment within the department and specialty store industries as well as other retail channels; the effectiveness of planned advertising, marketing, and promotional campaigns; favorable customer response to relationship marketing efforts of proprietary credit card loyalty programs; appropriate inventory management; effective expense control; successful operation of the Company's proprietary credit card strategic alliance with HSBC HSBC Hongkong and Shanghai Banking Corporation HSBC Humane Society of Broward County (Florida) HSBC Humane Society of Bay County (Bay County, Michigan) Bank Nevada, N.A.; geo-political risks; changes in interest rates; the outcome of the formal investigation by the Securities and Exchange Commission and the inquiry the Company understands has been commenced by the Office of the United States Attorney for the Southern District of New York into the matters that were the subject of the investigations conducted during 2004 and 2005 by the Audit Committee of the Company's Board of Directors and any related matters that may be under investigation or the subject of inquiry; the ultimate amount of reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. to vendors of improperly collected markdown Markdown The difference between the highest current bid price among broker-dealers in the market and the lower price that a dealer charges a customer. Notes: The broker offers a lower price to try stimulate trading in hopes that they will make the money back on the extra allowances; the ultimate impact of improper timing of recording of inventory markdowns; the ultimate impact of incorrect timing of recording of vendor markdown allowances; the outcome of the shareholder litigation that has been filed relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the matters that were the subject of the Audit Committee's initial investigation; the effects of the delay in the filing with the SEC of the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended January 29, 2005 and its Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. for the fiscal quarters ended April 30, 2005 and July 30, 2005; the ability of The Bon-Ton Stores, Inc. to obtain financing to complete its purchase of the Company's NDSG business; and the success of the Company's exploration of strategic alternatives for its Parisian business. For additional information regarding these and other risk factors, please refer to Exhibit 99.1 to the Company's Form 10-K for the fiscal year ended January 28, 2006 filed with the SEC, which may be accessed via EDGAR Edgar or Eadgar (both: ĕd`gər), 943?–975, king of the English (959–75), son of Edmund, king of Wessex. In 957 the Mercians and Northumbrians rebelled against Edgar's brother Edwy and chose Edgar as their king. through the Internet at www.sec.gov. Management undertakes no obligation to correct or update any forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , whether as a result of new information, future events, or otherwise. Persons are advised, however, to consult any further disclosures management makes on related subjects in its reports filed with the SEC and in its press releases.
SAKS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except for Per Share Data)
(UNAUDITED)
Three Months Ended
-------------------------------------
April 29, 2006 April 30, 2005
------------------ ------------------
Net sales $1,039,753 100.0% $1,550,059 100.0%
Cost of sales 637,540 61.3% 946,662 61.1%
---------- ----------
Gross margin 402,213 38.7% 603,397 38.9%
Selling, general and
administrative expenses 275,134 26.5% 402,157 25.9%
Other operating expenses, 106,551 10.2% 152,194 9.8%
Store pre-opening costs 286 0.0% 260 0.0%
Impairments and dispositions (206,803) -19.9% (3,249) -0.2%
---------- ----------
Operating income 227,045 21.8% 52,035 3.4%
Other income (expense):
Interest expense (14,115) -1.4% (28,210) -1.8%
Other income, net 8,819 0.8% 2,258 0.1%
---------- ----------
Income before provision
for income taxes 221,749 21.3% 26,083 1.7%
Provision for income taxes 140,250 13.5% 9,912 0.6%
---------- ----------
Net income $ 81,499 7.8% $ 16,171 1.0%
========== ==========
Basic earnings per common share: $ 0.61 $ 0.12
Diluted earnings per common
share: $ 0.60 $ 0.11
Weighted average common shares:
Basic 134,260 138,326
Diluted 136,097 143,739
SAKS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
(UNAUDITED)
--------------------------
April 29, April 30,
2006 2005
------------ -------------
RESTATED
-------------
ASSETS
Current assets
Cash and cash equivalents $ 1,152,216 $ 287,754
Merchandise inventories 853,929 1,380,014
Other current assets 177,817 154,378
Deferred income taxes, net 37,846 168,286
Current assets - held for sale - 174,489
---------- -----------
Total current assets 2,221,808 2,164,921
Property and equipment, net 1,317,551 1,759,338
Property and equipment, net - held for sale - 266,310
Goodwill and intangibles, net 4,510 323,561
Deferred income taxes, net 136,238 175,936
Other assets 42,132 85,724
Other assets - held for sale - -
------------ -------------
TOTAL ASSETS $ 3,722,239 $ 4,775,790
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 250,164 $ 413,750
Accrued expenses and other current
liabilities 445,610 521,745
Dividend payable 547,560 2,287
Current portion of long-term debt 7,576 7,383
Current liabilities - held for sale - 48,155
---------- -----------
Total current liabilities 1,250,910 993,320
Long-term debt 686,335 1,343,470
Long-term debt - held for sale - -
Other long-term liabilities 188,204 335,032
Long-term liabilities - held for sale - 4,624
Total shareholders' equity 1,596,790 2,099,344
------------ -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,722,239 $ 4,775,790
---------- -----------
SAKS INCORPORATED
SEGMENT INFORMATION
(Dollars In Thousands)
(UNAUDITED)
Three Months Ended
--------------------------------
April 29, 2006 April 30, 2005
----------------- --------------
Net Sales:
Saks Department Stores Group $ 367,451 $ 844,289
Saks Fifth Avenue Enterprises 672,302 705,770
---------------- -------------
$ 1,039,753 $ 1,550,059
Operating Income:
Saks Department Stores Group $ (1,816) $ 20,148
Saks Fifth Avenue Enterprises 39,693 40,830
Items not allocated 189,168 (8,943)
---------------- -------------
$ 227,045 $ 52,035
Depreciation and Amortization:
Saks Department Stores Group $ 8,035 $ 31,887
Saks Fifth Avenue Enterprises 27,126 25,191
Other 604 560
---------------- -------------
$ 35,765 $ 57,638
SAKS INCORPORATED
SUMMARY OF CHARGES AND GAINS
(Dollars In Thousands)
(UNAUDITED)
Three Months Ended
----------------------------
April 29, 2006 April 30, 2005
-------------- --------------
Summary of (Charges) and Gains:
-------------------------------
Impairments and Dispositions - In
Normal Course $ (4,417) $ -
Bon-Ton Transaction:
Impairments and Dispositions 211,260 -
SFAE Store Closings:
Impairments and Dispositions (12) 3,150
Gross Margin (markdowns) - 313
SG&A (principally severance) 205 (657)
Other (41) (492)
Income Taxes:
Income Tax Effect of Above Items (136,711) (879)
------------- -------------
Net, After-Tax Certain Gains and
Charges $ 70,284 $ 1,435
============= =============
Cash/Non-Cash Summary of (Charges) and
Gains:
-----------------------------------------
Cash Gains and Charges $ 1,026,969 $ 12,848
Non-Cash Gains and Charges (819,974) (10,534)
Income Tax Effect (136,711) (879)
------------- -------------
Net, After-Tax Certain Gains and
Charges $ 70,284 $ 1,435
============= =============
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