Joe’s Jeans Inc. (the “Company”) (NASDAQ: JOEZ) today announced
financial results for the first quarter ended February 28, 2014.
Highlights were:
- Consolidated first quarter net sales
increased 61% to $47.3 million;
- Wholesale net sales increased 72%;
- Retail store net sales increased 22%;
and
- Operating income of $1.3 million
compared to an operating loss of $6.4 million in the prior year
period.
For the first quarter ended February 28, 2014, overall net sales
were $47.3 million compared to $29.4 million in the prior year
comparative period, or a 61% increase. We completed our acquisition
of Hudson Clothing Holdings, Inc. (“Hudson”) on September 30, 2013
and our results for the first quarter of fiscal 2014 reflect the
first full quarter of operation for Hudson as one of our
subsidiaries.
Our overall gross profit for the quarter increased to $21.5
million from $14.3 million in the prior year comparative period, or
a 50% increase. Our overall gross margin in the first quarter of
fiscal 2014 was 45% compared to 49% in the first quarter of fiscal
2013. Impacting our gross profit and gross margins for the quarter
was a non-cash charge of approximately $1.0 million related to the
fair value step up of inventory acquired in connection with the
acquisition of Hudson that was subsequently sold in the first
quarter of fiscal 2014. Excluding this charge, our gross margin for
the first quarter of fiscal 2014 would have been 47%. Operating
expense in the first quarter of fiscal 2014 was $20.2 million
compared to $20.7 million a year ago. Operating expense includes
approximately $165,000 in transaction expenses associated with the
acquisition of Hudson and for the first quarter of fiscal 2013,
includes an $8.7 million expense related to the contingent
consideration buy out expense in connection with the new agreement
entered into with Mr. Joe Dahan in February 2013. Excluding the
transaction expenses, our operating expense would have been $20.0
million for the first quarter of fiscal 2014. Our operating income
was $1.3 million compared to an operating loss of $6.4 million in
the prior year comparative period. We had a net loss of $2.2
million compared to $6.4 million in the prior year period. As a
result, our fully diluted loss per share was $0.03 for the first
quarter of fiscal 2014 compared to a fully diluted loss per share
of $0.10 in same period a year ago.
Excluding transaction expenses and the charge related to the
fair value step up of inventory, our operating income would have
been $2.5 million. We also recorded as other expense a $2.6 million
non-cash charge relating to the change in fair market value of the
convertible note conversion feature. Excluding this change in fair
market value, the above mentioned transaction costs and fair value
step up charge, our net income would have been approximately
$100,000 and our fully diluted earnings per share would have been
$0.00 for the quarter. We refer you to our reconciliation of these
non-GAAP financial measures at the end of this release.
Marc Crossman, President and Chief Executive Officer, commented,
“With our first full quarter of operations of our Hudson
subsidiary, we are pleased with our overall results for the
quarter. Excluding the transaction expenses and inventory charge,
our operating income would have been $2.5 million.” Crossman
continued, “In addition, we continue to have healthy cash flows, as
we generated $2.4 million in cash flow from operations and had
borrowing availability under our revolving credit facility of $26
million as of February 28, 2014.”
Wholesale
Net sales for our wholesale segment in the first quarter of
fiscal 2014 increased 72% to $39.6 million compared to $23.1
million in the year ago period. Wholesale net sales for the first
quarter of fiscal 2014 included $17.3 million in wholesale net
sales for a full quarter from Hudson®. In addition, within our
wholesale business, both of our men’s and women’s Joe’s® sales
channels experienced growth. Gross margin percentages for our
wholesale segment were 42% for the first quarter of fiscal 2014
compared to 44% in the prior year comparable quarter and were
impacted by the charge related to the fair value step up of Hudson
inventory. Excluding this charge, our gross margin percentage would
have been 45%. For the first quarter, wholesale operating expense
increased to $6.4 million compared to $3.5 million in the year ago
period. Our wholesale operating income increased to $10.4 million
in the first quarter of fiscal 2014 compared to $6.7 million in the
prior year comparative period.
Mr. Crossman commented, “The addition of $17.3 million in
wholesale net sales from Hudson added to the top and bottom line
for our wholesale operations for the quarter. We were also pleased
to see growth from both our Joe’s® men’s and women’s wholesale
divisions for the quarter on a comparative basis and we are
optimistic about our wholesale channel as we move into the back
half of the year.”
Retail
Net sales from our retail segment in the first quarter increased
22% to $7.7 million compared to $6.3 million in the prior year
comparative period. The growth in retail sales was driven by
revenue contribution of $1.1 million from Hudson’s e-shop as well
as growing our store base from 30 to 34 stores in the comparative
periods. Gross margin percentages for our retail segment decreased
to 61% from 64% in the year ago period and were impacted by heavier
promotional activity in the retail channel as our competitors were
more promotional. Retail operating expense increased as a result of
additional expenses associated with expanding our store base
compared to the prior year period. Overall, for the first quarter,
we had an operating loss of $988,000 compared to an operating loss
of $326,000 in the year ago period for our retail segment.
Mr. Crossman commented, “Our retail division continues to
develop and mature along with our same store sales base. Both our
Joe’s® and Hudson® e-shops continue to drive sales and profits for
our retail segment.”
Corporate and Other
For the first quarter of fiscal 2014, our corporate and other
expenses were $8.1 million compared to $12.8 million in the first
quarter a year ago. Corporate and other expenses decreased due to
an $8.7 million expense related to the contingent consideration buy
out expense in connection with the new agreement entered into with
Mr. Joe Dahan in February 2013 that we did not have in the first
quarter of fiscal 2014. Offsetting this decrease was $165,000 of
transaction related expenses in connection with the acquisition of
Hudson and $4.0 million of expenses associated with Hudson’s
corporate operations in the first quarter of fiscal 2014. Excluding
the transaction expenses and expenses associated with Hudson’s
corporate operations, our Joe’s corporate expenses would have
decreased by approximately $144,000.
The Company will host a conference call on Wednesday, April 9,
2014 at 4:30 p.m. Eastern Time with the Company’s Chief Executive
Officer, Marc Crossman, and its Chief Financial Officer, Hamish
Sandhu, to discuss financial results for the first quarter ended
February 28, 2014.
To access the live call, please dial 1(800) 264-7882 or 1(847)
413-3708. The conference ID number and participant passcode is
37013998 and is titled the “Q1 2014 Joe’s Jeans Inc. Earnings
Conference Call.” The information provided on the teleconference is
only accurate at the time of the conference call, and the Company
will take no responsibility for providing updated information. A
telephone replay of the conference call will be available beginning
at 7:00 p.m. Eastern Time on April 9, 2014 until 2:59 a.m. Eastern
Time on April 17, 2014 by dialing 1(888) 843-7419 or 1(630)
652-3042 and using the conference passcode 37013998#. In addition,
the conference call will be archived for two weeks on the Company’s
website at www.joesjeans.com.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for
earnings that exclude the effect of transaction expenses, an
amortization charge related to the fair value step up of inventory
in connection with the acquisition of Hudson, a contingent
consideration buy out expense and a loss on an embedded conversion
derivative. Generally, a non-GAAP financial measure is a numerical
measure of a company's historical or future financial performance,
financial position, or cash flows that either excludes or includes
amounts that are not normally excluded or included in the most
directly comparable measure calculated and presented in accordance
with accounting principles generally accepted in the United States
(GAAP). Management used these non-GAAP financial measures to
internally evaluate the performance of its business and make
operating decisions. We believe that providing the non-GAAP
measures is useful to investors for a number of reasons. The
non-GAAP measures provide a consistent basis for investors to
understand our financial performance in comparison to historical
periods, and it allows investors to evaluate our performance using
the same methodology and information as that used by management.
However, investors need to be aware that non-GAAP measures are
subject to inherent limitations because they do not include all of
the expenses included under GAAP and they involve the exercise of
judgment of which charges are excluded from the non-GAAP financial
measure. These non-GAAP financial measures are intended to
complement, and not considered as an alternative to, the most
directly comparable GAAP financial measure.
We have provided a reconciliation table of the non-GAAP measure
to the equivalent GAAP measure.
JOE'S JEANS INC. AND SUBSIDIARIES NON-GAAP
CONDENSED CONSOLIDATED STATEMENTS OF NET (LOSS) INCOME AND
COMPREHENSIVE (LOSS) INCOME (in thousands, except per share
data) Three months
ended February 28, February
28, 2014 2013 (unaudited)
GAAP net loss and comprehensive loss $ (2,178 ) $ (6,388 )
Transaction expenses and amortization of
inventory fair value step up, net of tax
714 Loss on embedded conversion derivative, net of tax 1,563
Contingent consideration buy-out expense, net of tax
- 8,104
Non-GAAP net income and comprehensive
income, excluding transaction expenses, amortization of inventory
fair value step up and contingent consideration buy-out expense
$ 99 $
1,716 GAAP loss per common share
- basic
$ (0.03 )
$ (0.10 )
Non-GAAP earnings per common share -
basic
$ 0.00 $
0.03 GAAP loss per common share -
diluted
$ (0.03 )
$ (0.10 )
Non-GAAP earnings per common share -
diluted
$ 0.00 $
0.03 Adjusted weighted average shares
outstanding: Basic 67,938 66,646 Diluted 68,559 67,641
JOE'S JEANS INC. AND SUBSIDIARIES NON-GAAP
OPERATING INCOME AND SEGMENT RESULTS (in thousands)
Three months ended
February 28, February 28, 2014
2013 (unaudited) GAAP operating income (loss)
$ 1,306 $ (6,396 ) Transaction expenses and amortization of
inventory fair value step up 1,165 Contingent consideration buy-out
expense
- 8,732
Non-GAAP operating income, excluding transaction expenses,
amortization of inventory fair value step up, loss on embedded
conversion derivative and contingent consideration buy-out expense
$ 2,471 $
2,336 Non- GAAP operating income:
Wholesale, excluding amortization of inventory fair value step up $
11,371 $ 6,704 Retail (988 ) (326 ) Corporate and other, excluding
transaction expenses and contingent consideration buy-out expense
(7,912 )
(4,042 ) Non-GAAP operating income,
excluding transaction expenses, amortization of inventory fair
value step up and contingent consideration buy-out expense
$ 2,471 $
2,336 JOE'S JEANS INC. AND
SUBSIDIARIES NON-GAAP SEGMENT OPERATING EXPENSES (in
thousands) Three months
ended February 28, February
28, 2014 2013 (unaudited) GAAP
operating expenses: Wholesale $ 6,389 $ 3,528 Retail 5,713 4,409
Corporate and other
8,077
12,774 GAAP operating expenses
$
20,179 $ 20,711 Non-
GAAP operating expenses: Wholesale $ 6,389 $ 3,528 Retail 5,713
4,409 Corporate and other, excluding transaction expenses and
contingent consideration buy-out expense
7,912
4,042 Non-GAAP operating expenses, excluding
transaction expenses and excluding contingent consideration buy-out
expense
$ 20,014 $
11,979 JOE'S JEANS INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF NET (LOSS)
INCOME AND COMPREHENSIVE (LOSS) INCOME (in thousands, except
per share data) Three months
ended February 28, February
28, 2014 2013 (unaudited) Net sales $
47,344 $ 29,430 Cost of goods sold
25,859
15,115 Gross profit 21,485 14,315
Operating expenses Selling, general and administrative
18,952 11,487 Depreciation and amortization 1,227 492 Contingent
consideration buy-out expense
-
8,732 20,179
20,711 Operating income (loss) 1,306 (6,396 )
Interest expense 3,321 70 Other expense
2,550
- Loss before provision for taxes
(4,565 ) (6,466 ) Income tax benefit
(2,387
) (78 ) Net loss and
comprehensive loss
$ (2,178
) $ (6,388 )
Loss per common share - basic
$
(0.03 ) $ (0.10
) Loss per common share - diluted
$ (0.03 ) $
(0.10 ) Weighted average shares
outstanding: Basic 67,938 66,646 Diluted 67,938 66,646
The following table sets forth certain segment information for
the three months ended February 28, 2014 and 2013,
respectively:
JOE'S JEANS INC. AND
SUBSIDIARIES
SEGMENT RESULTS (in thousands)
Three months ended February 28,
February 28, 2014 2013
(unaudited) Net sales: Wholesale $ 39,615 $ 23,087 Retail
7,729 6,343
$ 47,344 $
29,430 Gross profit: Wholesale $ 16,760
$ 10,232 Retail
4,725
4,083 $ 21,485
$ 14,315 Operating income
(loss): Wholesale $ 10,371 $ 6,704 Retail (988 ) (326 ) Corporate
and other
(8,077 )
(12,774 ) $
1,306 $ (6,396
)
About Joe’s Jeans Inc.
Joe’s Jeans Inc. designs, produces and sells apparel and
apparel-related products to the retail and premium markets under
the Joe's® brand and related trademarks. The Company also acquired
in September 2013 Hudson Clothing Holdings, Inc., a leading global
designer and marketer of women’s and men’s premium branded denim
apparel bearing the Hudson® brand name, and operates it as a wholly
owned subsidiary. Visit: joesjeans.com or facebook.com/joesjeans
and hudsonjeans.com or facebook.com/HudsonJeans.
This release contains forward-looking statements within the
meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, as amended. The matters discussed in
this document involved estimates, projections, goals, forecasts,
assumptions, risks and uncertainties that could cause actual
results or outcomes to differ materially from those expressed in
the forward-looking statements. All statements in this news release
that are not purely historical facts are forward-looking
statements, including statements containing the words “intend,”
“believe,” “estimate,” “project,” “expect” or similar expressions.
Any forward-looking statement inherently involves risks and
uncertainties that could cause actual results to differ materially
from the forward-looking statements. Factors that would cause or
contribute to such differences include, but are not limited to: our
ability to successfully integrate the business of Hudson Clothing
Holdings, Inc., or Hudson, and realize cost savings and any other
synergies; unexpected costs or unexpected liabilities that may
arise from the transaction; the inability to retain key personnel;
the diversion of management's time and attention from our ongoing
business during this time period, the impact of the acquisition on
our stock price, the anticipated benefits of the acquisition on our
financial results, business performance and product offerings, the
risk that the credit ratings of the combined company or its
subsidiaries may be different from what the companies expect,
continued acceptance of our product, product demand, competition,
capital adequacy, general economic conditions and the potential
inability to raise additional capital, if required, the risk that
the Company will be unsuccessful in gauging fashion trends and
changing customer preferences; the risk that changes in general
economic conditions, consumer confidence, or consumer spending
patterns will have a negative impact on the Company’s financial
performance or strategies; the highly competitive nature of the
Company’s business in the United States and internationally and its
dependence on consumer spending patterns, which are influenced by
numerous other factors; the Company’s ability to respond to the
business environment and fashion trends; continued acceptance of
the Company’s brands in the marketplace; the ability to generate
positive cash flow from operations; competitive factors, including
the possibility of major customers sourcing product overseas in
competition with our products; the risk that acts or omissions by
the Company’s first party vendors could have a negative impact on
the Company’s reputation; a possible oversupply of denim in the
marketplace; and other risks. The Company discusses certain of
these factors more fully in its additional filings with the SEC,
including its last annual report on Form 10-K filed with the SEC,
and this release should be read in conjunction with that annual
report together with all of the Company’s other filings made with
the SEC through the date of this release. The Company urges you to
consider all of these risks, uncertainties and other factors
carefully in evaluating the forward-looking statements contained in
this release.
Any forward-looking statement is based on information current as
of the date of this document and speaks only as of the date on
which such statement is made, and the Company undertakes no
obligation to update these statements to reflect events or
circumstances after the date on which such statement is made.
Readers are cautioned not to place undue reliance on
forward-looking statements.
Joe’s Jeans Inc.Hamish Sandhu323-837-3700 x 304(Investor
Relations)
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