NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of The Jones Group Inc. and our subsidiaries. All intercompany balances and transactions have been eliminated. The results of operations of acquired companies are included in our operating results from the respective dates of acquisition. We also have a 34.25% interest in GRI, which is accounted for under the equity method of accounting.
We design, contract for the manufacture of and market a broad range of women's collection sportswear, suits and dresses, casual sportswear and jeanswear for women and children and women's and men's footwear and accessories. We sell our products through a broad array of distribution channels, including better specialty and department stores and mass merchandisers, primarily in the United States, Canada and Europe. We also operate our own network of retail and factory outlet stores, concession locations and e-commerce web sites. In addition, we license the use of several of our brand names to select manufacturers and distributors of women's and men's apparel and accessories worldwide.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Credit Risk
Financial instruments which potentially subject us to concentration of credit risk consist principally of cash investments and accounts receivable. We place our cash and cash equivalents in investment-grade, highly-liquid U.S. government agency and corporate money market accounts. We perform ongoing credit evaluations of our customers' financial condition and, generally, require no collateral from our customers. The allowance for non-collection of accounts receivable is based upon the expected collectibility of all accounts receivable.
Derivative Financial Instruments
Our primary objectives for holding derivative financial instruments are to manage foreign currency and interest rate risks. We do not use financial instruments for trading or other speculative purposes. We have historically used derivative financial instruments to hedge both the fair value of recognized assets or liabilities (a "fair value" hedge) and the variability of anticipated cash flows of a forecasted transaction (a "cash flow" hedge). Our strategies related to derivative financial instruments have been:
|
·
|
the use of foreign currency forward contracts to hedge a portion of anticipated future short-term inventory purchases to offset the effects of changes in foreign currency exchange rates (primarily between the U.S. Dollar and the Canadian Dollar);
|
|
·
|
the use of foreign currency forward contracts to hedge a portion of anticipated repayments of intercompany debt (primarily between the U.S. Dollar and the British Pound); and
|
|
·
|
the use of interest rate swaps and caps to effectively convert a portion of our outstanding fixed-rate debt to variable-rate debt to take advantage of lower interest rates.
|
Our foreign currency forward contracts relating to inventory purchases are highly effective hedges because all the critical terms of the derivative instruments match those of the hedged item, and our interest rate swaps overall have been highly effective based on regression analyses (our interest rate cap agreement and foreign currency forward contracts relating to intercompany repayments have not been designated as hedges). On the date a qualifying derivative contract is entered into, we designate the derivative as either a fair value hedge or a cash flow hedge. Changes in derivative fair values that are designated as fair value hedges are recognized in earnings as offsets to the changes in fair value of the
related hedged assets and liabilities. Changes in derivative fair values that are designated as cash flow hedges are deferred and recorded as a component of accumulated other comprehensive income until the associated
hedged transactions impact the income statement, at which time the deferred gains and losses are reclassified to either cost of sales for inventory purchases or to selling, general and administrative ("SG&A") expenses for all other items. Changes in derivative fair values that have not been designated as hedges are recorded as SG&A expenses. Any ineffective portion of a hedging derivative's change in fair value will be immediately recognized in cost of sales for foreign currency forward contracts and interest expense for interest rate swap contracts. Differentials to be paid or received under interest rate swap contracts and changes in the fair value of interest rate cap contracts are recorded as adjustments to interest expense. Gains or losses generated from the early termination of interest rate swap contracts are amortized over the remaining terms of the contracts as adjustments to interest expense. The fair values of the derivatives, which are based on observable inputs such as yield curves or foreign exchange spot rates, are reported as other current assets, other assets, accrued expenses and other current liabilities or other noncurrent liabilities, as appropriate.
Accounts Receivable
Accounts receivable are reported at amounts we expect to be collected, net of trade discounts and deductions for co-op advertising arrangements with our customers, allowances we provide to our retail customers to effectively flow goods through the retail channels, an allowance for potential non-collection due to the financial position of our customers and credit card accounts, and an allowance for estimated sales returns.
Inventories and Cost of Sales
Inventories are valued at the lower of cost or market. Inventory values are determined using the FIFO (first in, first out) and weighted average cost methods. We reduce the carrying cost of inventories for obsolete or slow moving items as necessary to properly reflect inventory value. The cost elements included in inventory consist of all direct costs of merchandise (net of purchase discounts and vendor allowances), overhead (primarily design and production costs), inbound freight and merchandise acquisition costs such as commissions and import fees.
Cost of sales includes the inventory cost elements listed above as well as warehouse outbound freight, merchandise freight between our distribution centers and retail locations and realized gains or losses on foreign currency forward contracts associated with inventory purchases. Our cost of sales may not be comparable to those of other entities, since some entities include all of the costs associated with their distribution functions in cost of sales while we include these costs in SG&A expenses. Distribution costs included in SG&A expenses for 2013, 2012 and 2011 were $93.0 million, $94.1 million and $93.3 million, respectively.
Property, Plant, Equipment and Depreciation and Amortization
Property, plant and equipment are recorded at cost. Depreciation and amortization are computed by the straight-line method over the estimated useful lives of the assets. Leasehold improvements recorded at the inception of a lease are amortized using the straight-line method over the life of the lease or the useful life of the improvement, whichever is shorter; for improvements made during the lease term, the amortization period is the shorter of the useful life or the remaining lease term (including any renewal periods that are deemed to be reasonably assured). Property under capital leases is amortized over the lives of the respective leases or the estimated useful lives of the assets, whichever is shorter.
Operating Leases
Total rent payments under operating leases that include scheduled payment increases and rent holidays are amortized on a straight-line basis over the term of the lease. Rent expense on our buildings and retail stores is classified as an SG&A expense and, for certain stores, includes contingent rents that are based on a percentage of retail sales over stated levels. Landlord allowances are amortized by the straight-line method over the term of the lease as a reduction of rent expense.
Goodwill and Other Intangibles
Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations accounted for under the purchase method of accounting. We test at least annually our
goodwill and other intangibles without determinable lives (primarily tradenames and trademarks) for impairment through the use of discounted cash flow models. Other intangibles with determinable lives, including license agreements, are amortized over the estimated useful lives of the assets (currently ranging from 17 months to 23 years).
Foreign Currency Translation
The financial statements of foreign subsidiaries are translated into U.S. Dollars in accordance with ASC Section 830, "Foreign Currency Matters." Where the functional currency of a foreign subsidiary is its local currency, balance sheet accounts are translated at the current exchange rate and income statement items are translated at the average exchange rate for the period. Gains and losses resulting from translation are accumulated in a separate component of stockholders' equity. Gains and losses on transactions denominated and settled in a foreign currency are reflected in the consolidated statements of operations. Net foreign currency gains (losses) included in operations were $2.9 million, $7.0 million and $(5.7) million in 2013, 2012 and 2011, respectively.
Defined Benefit Plans
Our funding policy is to contribute at least the minimum amount to meet the funding ratio requirements of the Pension Protection Act.
Treasury Stock
Treasury stock is recorded at acquisition cost. Gains and losses on disposition are recorded as increases or decreases to additional paid-in capital with losses in excess of previously recorded gains charged directly to retained earnings. When treasury shares are retired and returned to authorized but unissued status, the carrying value in excess of par is allocated to additional paid-in capital and retained earnings on a pro rata basis.
Revenue Recognition
Wholesale apparel and footwear and accessories sales are recognized either when products are shipped or, in certain situations, upon acceptance by the customer. Retail sales are recorded at the time of register receipt. Allowances for estimated returns are provided when sales are recorded primarily by reducing revenues for the total revenues related to estimated returns, with an offsetting reduction to cost of sales for the cost of the estimated returns. Sales taxes collected from retail customers are excluded from reported revenues. Licensing income is recognized based on the higher of contractual minimums or sales of licensed products realized by our licensees.
Shipping and Handling Costs
Shipping and handling costs billed to customers are recorded as revenue. Freight costs associated with shipping goods to customers are recorded as a cost of sales.
Advertising Expense
We record national advertising campaign costs as an expense when the advertising first takes place and we expense advertising production costs as incurred, net of reimbursements for cooperative advertising. Net advertising expense was $75.9 million, $83.1 million and $68.9 million in 2013, 2012 and 2011, respectively, net of co-operative advertising reimbursements of $8.8 million, $8.9 million and $11.7 million, respectively.
Income Taxes
We use the asset and liability method of accounting for income taxes. Current tax assets and liabilities are recognized for the estimated Federal, foreign, state and local income taxes payable or refundable on the tax returns for the current year. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred income tax provisions are based on the changes to the respective assets and liabilities from period to period. Valuation allowances are recorded to reduce deferred tax assets when uncertainty regarding their realizability exists.
Earnings per Share
We have outstanding restricted stock grants that contain nonforfeitable rights to dividends (whether paid or unpaid) which qualify these shares as participating securities, requiring them to be included in the computation of earnings per share pursuant to the two-class method. Under the two-class method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. Basic earnings per common share is calculated by dividing earnings allocated to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the effect of unvested restricted stock not classified as participating securities and common shares issuable upon exercise of stock options. The difference between reported basic and diluted weighted-average common shares results from the assumption that all dilutive stock options outstanding were exercised and all outstanding restricted shares have vested.
The following options to purchase shares of common stock were outstanding during a portion of 2011 but were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of the common shares and, therefore, would be antidilutive. For 2012 and 2013, any stock options and shares of nonparticipating restricted stock outstanding were not included in the computation of diluted earnings per share due to the net loss for the year.
|
For the year ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Number of options (in millions)
|
|
|
N/
|
A
|
|
|
N/
|
A
|
|
|
4.4
|
|
|
Weighted average exercise price
|
|
|
|
|
|
|
|
|
|
$
|
34.74
|
|
Restricted Stock
Compensation cost for restricted stock that vests based upon the passage of time or on the achievement of a performance condition is measured as the excess, if any, of the quoted market price of our stock at the date the common stock is granted over the amount the employee must pay to acquire the stock (which is generally zero). Compensation cost for restricted stock that vests upon the achievement of a performance condition is also based upon the probability that the performance condition will be satisfied. Compensation cost for restricted stock that vests based upon the achievement of a market condition is determined based on a Monte Carlo valuation model and is recognized regardless of whether or not the market condition is satisfied.
Compensation cost, net of projected forfeitures, is recognized over the period between the issue date and the date any restrictions lapse, with compensation cost for grants with a graded vesting schedule recognized on a straight-line basis over the requisite service period for the total award.
Long-Lived Assets
We review certain long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In that regard, we assess the recoverability of such assets based upon estimated non-discounted cash flow forecasts. If an asset impairment is identified, the asset is written down to fair value based on discounted cash flow or other fair value measures.
Cash Equivalents
We consider all highly liquid short-term investments to be cash equivalents.
Noncontrolling Interests
For our consolidated subsidiaries that are not wholly-owned, we allocate earnings and losses to the noncontrolling interests based on their ownership percentage. For redeemable noncontrolling interests, the amounts reported on the balance sheet represent the higher of the carrying amount or the redemption value.
New Accounting Standards
In March 2013, the FASB issued ASU 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." ASU 2013-05 requires an entity to release any related cumulative translation adjustment into net income when it ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. For an equity method investment that is a foreign entity, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method investment. Additionally, the amendments clarify that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity (that is, irrespective of any retained investment) and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition). Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. For public entities, the amendments are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity's fiscal year of adoption. The adoption of ASU 2013-05 will not have a material impact on our results of operations or our financial position.
In July 2013, the FASB issued ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." ASU 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this Update are effective for fiscal years (and interim periods within those years) beginning after December 15, 2013. The adoption of ASU 2013-11 will not have a material impact on our results of operations or our financial position.
AGREEMENT TO BE ACQUIRED BY SYCAMORE PARTNERS
On December 19, 2013, we entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for the acquisition of Jones by an affiliate of Sycamore Partners, L.P. and Sycamore Partners A, L.P. ("Sycamore"). Under the terms of the Merger Agreement, which was unanimously approved by our Board of Directors, Sycamore will acquire all of the outstanding shares of our common stock for $15.00 per share in cash. The transaction, which is structured as a one-step merger with Jones as the surviving corporation (the "Merger"), is subject to customary closing conditions, including approval of the holders of a majority of our shares that vote on the proposal to adopt the Merger. In connection with the transactions contemplated by the Merger Agreement, we have also agreed to suspend payment of our regular quarterly dividend. Concurrently with the signing of the Merger Agreement, Sycamore entered into separate purchase agreements with certain of its controlled affiliates which provide for the transfer of ownership of certain of our lines of business to such affiliates upon completion of the Merger.
We currently plan to complete the proposed Merger in the second fiscal quarter of 2014. However, we cannot assure you that the Merger will be completed nor can we predict the exact timing of the completion of the Merger, because it is subject to the satisfaction of various conditions, many of which are beyond our control. If the Merger is approved by our shareholders and is consummated, our shares of common stock will cease to be traded on The New York Stock Exchange and we will no longer be a publicly-traded company.
Sycamore has informed us that, in connection with the financing of the Merger and the other transactions contemplated by the Merger Agreement, it currently intends (i) to optionally redeem and discharge in full as of the effective time of the Merger our 5.125% Senior Notes due 2014; (ii) to conduct and consummate as of the effective time of the Merger the required change of control offer for our 6.875% Senior Notes due 2019 at the required offer price of 101% under the indenture governing these notes and (iii) for all our 6.125% Senior Notes due 2034 to remain outstanding obligations of Jones following the effective time of the Merger.
(LOSS) EARNINGS PER SHARE
The computation of basic and diluted (loss) earnings per share is as follows:
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(19.7
|
)
|
|
$
|
(55.0
|
)
|
|
$
|
51.5
|
|
|
Less: income attributable to noncontrolling interests
|
|
|
0.1
|
|
|
|
1.1
|
|
|
|
0.8
|
|
|
(Loss) income attributable to Jones
|
|
|
(19.8
|
)
|
|
|
(56.1
|
)
|
|
|
50.7
|
|
|
Less: (loss) income allocated to participating securities
|
|
|
(0.7
|
)
|
|
|
(1.8
|
)
|
|
|
1.5
|
|
|
(Loss) income available to common stockholders of Jones
|
|
$
|
(19.1
|
)
|
|
$
|
(54.3
|
)
|
|
$
|
49.2
|
|
|
Weighted-average common shares outstanding - basic
|
|
|
73.0
|
|
|
|
74.9
|
|
|
|
79.6
|
|
|
Effect of dilutive employee stock options and restricted stock
|
|
|
-
|
|
|
|
-
|
|
|
|
1.7
|
|
|
Weighted-average common shares and share equivalents outstanding - diluted
|
|
|
73.0
|
|
|
|
74.9
|
|
|
|
81.3
|
|
|
(Loss) earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.26
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
0.62
|
|
|
Diluted
|
|
|
(0.26
|
)
|
|
|
(0.72
|
)
|
|
|
0.61
|
|
ACQUISITIONS
KG Group Holdings Limited
On June 2, 2011, we acquired 100% of the equity interests in KG Group Holdings Limited ("Kurt Geiger"), a privately-held wholesaler and retailer of luxury footwear and accessories, for $150.0 million in cash and the assumption of $174.1 million of debt, which was immediately repaid following the transaction. Kurt Geiger markets products under four of its own brands -
Kurt Geiger, KG, Carvela
and
Miss KG
- and over 100 other luxury brands in more than 200 retail locations, including concessions in Europe's leading department stores, including Harrods, Selfridges, Liberty, House of Fraser, Fenwick John Lewis and Brown Thomas, as well as company-operated stores.
Approximately £6.2 million ($10.2 million) of the purchase price payable to certain selling shareholders who are senior managers of Kurt Geiger has been rolled over into 5% Loan Notes (the "Loan Notes"), which are payable on or before April 16, 2016 and are subject to forfeiture in the event of termination of employment under certain circumstances. This amount is recorded as compensation expense over the term of the Loan Notes and is not reported as a component of the cost of the acquisition.
We pursued the acquisition of Kurt Geiger to increase our international presence and further extend our reach into the designer footwear business. Kurt Geiger's wholesale footwear business is reported in our international wholesale segment and its retail business is reported in our international retail segment.
The following table summarizes the fair values of the assets acquired and liabilities assumed from Kurt Geiger on June 2, 2011.
|
(In millions)
|
|
Weighted-average amortization life (in months)
|
|
|
Fair
Value
|
|
|
Cash
|
|
|
|
|
$
|
6.9
|
|
|
Accounts receivable
|
|
|
|
|
|
19.7
|
|
|
Inventories
|
|
|
|
|
|
55.1
|
|
|
Other current assets
|
|
|
|
|
|
9.5
|
|
|
Property, plant and equipment
|
|
|
|
|
|
27.0
|
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
Trademarks - nonamortized
|
|
|
|
|
|
95.1
|
|
|
Trademarks - amortized
|
|
|
120
|
|
|
|
0.1
|
|
|
Goodwill
|
|
|
|
|
|
|
99.3
|
|
|
Customer relationships
|
|
|
232
|
|
|
|
125.7
|
|
|
Order backlog
|
|
|
9
|
|
|
|
2.8
|
|
|
Favorable lease agreements
|
|
|
99
|
|
|
|
6.8
|
|
|
Total assets acquired
|
|
|
|
|
|
|
448.0
|
|
|
Accounts payable
|
|
|
|
|
|
|
30.6
|
|
|
Other current liabilities
|
|
|
|
|
|
|
28.5
|
|
|
Long-term debt
|
|
|
|
|
|
|
174.1
|
|
|
Unfavorable lease agreements
|
|
|
100
|
|
|
|
0.2
|
|
|
Deferred taxes
|
|
|
|
|
|
|
64.6
|
|
|
Total liabilities assumed
|
|
|
|
|
|
|
298.0
|
|
|
Total purchase price
|
|
|
|
|
|
$
|
150.0
|
|
The gross contractual accounts receivable acquired from Kurt Geiger was $19.8 million.
The fair values of the acquired intangibles were determined using discounted cash flow models using a discount factor based on an estimated risk-adjusted weighted average cost of capital. The customer relationships and order backlog were valued using multi-period excess earnings models, the trademarks using a relief-from-royalty model and the lease agreements using an incremental cash flow income approach model.
The acquisition resulted in the recognition of $99.3 million of goodwill, which will not be deductible for tax purposes. Goodwill largely consists of expected synergies resulting from the leveraging of the combined networks of partners, infrastructure and strong department store relationships to expand product distribution worldwide, as well as the acquired assembled workforce, which does not qualify as an amortizable intangible asset, and the potential for product extensions, such as apparel.
Brian Atwood
On July 2, 2012, we acquired an 80% interest in
Brian Atwood
-related intellectual property (the "intellectual property") from BA Holding Group, Inc., BKA International, Inc. and Brian Atwood, we acquired 100% of the equity interests in Atwood Italia S.r.l., and we acquired certain assets and assumed certain liabilities of Brian Atwood, Ltd. (collectively, "Brian Atwood"). The purchase price was $5.5 million, of which $5.0 million was paid in 2012 and $0.5 million was paid in 2013.
The remaining 20% interest in the intellectual property was recorded as a noncontrolling interest, with the fair value based on projected cash flows related to that property. Brian Atwood has the right, under certain conditions, to require us to repurchase a portion of his noncontrolling ownership interest at a predetermined multiple of the previous year's distributable cash flows generated by the intellectual property.
We pursued the acquisition of Brian Atwood to increase our international presence and further extend our reach into the designer footwear business. Brian Atwood's luxury wholesale footwear business is reported in our international wholesale segment.
The following table summarizes the fair values of the assets acquired and liabilities assumed from Brian Atwood on July 2, 2012.
|
(In millions)
|
|
Weighted-average
amortization life (in months)
|
|
|
Fair
Value
|
|
|
Cash
|
|
|
|
|
$
|
0.6
|
|
|
Accounts receivable
|
|
|
|
|
|
0.5
|
|
|
Other current assets
|
|
|
|
|
|
0.4
|
|
|
Property, plant and equipment
|
|
|
|
|
|
0.1
|
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
240
|
|
|
|
7.5
|
|
|
Goodwill
|
|
|
|
|
|
|
3.2
|
|
|
Customer relationships
|
|
|
6
|
|
|
|
0.4
|
|
|
Order backlog
|
|
|
3
|
|
|
|
0.7
|
|
|
Total assets acquired
|
|
|
|
|
|
|
13.4
|
|
|
Accounts payable
|
|
|
|
|
|
|
1.7
|
|
|
Notes payable
|
|
|
|
|
|
|
2.8
|
|
|
Other current liabilities
|
|
|
|
|
|
|
1.8
|
|
|
Deferred taxes
|
|
|
|
|
|
|
0.3
|
|
|
Other long-term liabilities
|
|
|
|
|
|
|
0.1
|
|
|
Total liabilities assumed
|
|
|
|
|
|
|
6.7
|
|
|
Fair value of noncontrolling interest
|
|
|
|
|
|
|
1.2
|
|
|
Total purchase price
|
|
|
|
|
|
$
|
5.5
|
|
The gross contractual accounts receivable acquired from Brian Atwood was $0.5 million.
The fair values of the acquired intangibles were determined using discounted cash flow models using a discount factor based on an estimated risk-adjusted weighted average cost of capital. The customer relationships were valued using a "with and without" model, the trademarks using a relief-from-royalty model and the order backlog using multi-period excess earnings model.
The acquisition resulted in the recognition of $3.2 million of goodwill, which will not be deductible for tax purposes. Goodwill largely consists of expected synergies resulting from the leveraging of the combined networks of partners, infrastructure and customer relationships to expand product distribution worldwide, as well as the acquired assembled workforce, which does not qualify as an amortizable intangible asset, and the potential for both product extensions, such as apparel, and the introduction of
Brian Atwood
retail locations. The goodwill has been assigned to our domestic wholesale footwear and accessories segment, as we pursued the acquisition to acquire majority ownership interest in the
Brian Atwood
-related trademarks, under which our existing
B Brian Atwood
domestic footwear business is licensed.
The following table provides total revenues and results of operations from the acquired Brian Atwood business included in our results for 2012 subsequent to the acquisition.
|
(In millions)
|
|
|
|
|
Total revenues
|
|
$
|
4.3
|
|
|
Loss before provision for income taxes
|
|
|
(5.6
|
)
|
Pro Forma Information
Pro forma total revenues and results of operations reflecting the acquisition of Brian Atwood are not presented, as the acquisition is not material to our financial position or our results of operations.
Acquisition Expenses
During 2011, pretax charges totaling $4.9 million were recorded for legal expenses and other transactions related to the Kurt Geiger acquisition. During 2012, pretax charges totaling $0.7 million were recorded for legal expenses and other transactions related to the Brian Atwood acquisition. These charges, which were expensed in accordance with the accounting guidance for business combinations, were recorded as SG&A costs in our licensing and other segment.
EQUITY METHOD INVESTMENTS
On June 20, 2008, we acquired a 10% equity interest in GRI Group Limited ("GRI"), an international accessories and apparel brand management and retail-distribution network, for $20.2 million. On June 24, 2009, we increased our equity interest to 25% for an additional $15.2 million. The selling shareholders of GRI were entitled to receive an additional cash payment equaling 60% of the amount of GRI's fiscal year 2011 net income that exceeded a certain threshold, and on June 21, 2012, we made a cash payment to them of $3.5 million in satisfaction of the obligation. On August 30, 2013, we increased our equity interest to 34.25% for an additional $14.7 million. GRI is the exclusive licensee of several of our brands in Asia, including
Nine West, Anne Klein, AK Anne Klein, Easy Spirit, Enzo Angiolini
and
Joan & David
. GRI also distributes other women's apparel, shoes and accessory brands not owned by us. See "Accounts Receivable and Significant Customers" for additional information regarding GRI.
ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS
Accounts receivable consist of the following:
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
378.6
|
|
|
$
|
408.4
|
|
|
Allowances for doubtful accounts, returns, discounts and co-op advertising
|
|
|
(31.6
|
)
|
|
|
(27.4
|
)
|
|
|
|
$
|
347.0
|
|
|
$
|
381.0
|
|
A significant portion of our sales are to retailers throughout the United States and Canada. We have one significant customer in our domestic wholesale sportswear, domestic wholesale jeanswear and domestic wholesale footwear and accessories operating segments. Macy's, Inc. accounted for approximately 15%, 18% and 19% of consolidated gross revenues for 2013, 2012 and 2011, respectively, and accounted for approximately 13% and 17% of accounts receivable at December 31, 2013 and 2012, respectively.
Due to our 34.25% ownership interest in GRI, GRI is deemed to be a related party. Included in accounts receivable are amounts due from GRI in the amount of $17.7 million and $15.6 million at December 31, 2013 and 2012, respectively. Net revenues from GRI amounted to $56.4 million, $66.3 million and $65.9 million for 2013, 2012 and 2011, respectively.
ACCRUED RESTRUCTURING COSTS
Jewelry
During 2009, we decided to discontinue the domestic manufacturing, product development and sourcing activities of our jewelry business, and during 2010 we announced the closing of our jewelry distribution center. We accrued $1.0 million of termination benefits and associated employee costs during 2010 related to both decisions. During 2011, 2012 and 2013, we recorded $0.1 million, $0.4 million and $0.1 million, respectively, of lease obligation costs relating to closed facilities. These costs are reported as SG&A expenses in the domestic wholesale footwear and accessories segment.
The details of the jewelry restructuring accruals are as follows:
|
(In millions)
|
|
One-time
termination
benefits
|
|
|
Lease
obligations
|
|
|
Total jewelry restructuring
|
|
|
Balance, December 31, 2010
|
|
$
|
1.3
|
|
|
$
|
2.3
|
|
|
$
|
3.6
|
|
|
Additions
|
|
|
-
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Payments and reductions
|
|
|
(1.3
|
)
|
|
|
(0.9
|
)
|
|
|
(2.2
|
)
|
|
Balance, December 31, 2011
|
|
|
-
|
|
|
|
1.5
|
|
|
|
1.5
|
|
|
Additions
|
|
|
-
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
Payments and reductions
|
|
|
-
|
|
|
|
(0.5
|
)
|
|
|
(0.5
|
)
|
|
Balance, December 31, 2012
|
|
|
-
|
|
|
|
1.4
|
|
|
|
1.4
|
|
|
Additions
|
|
|
-
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Payments and reductions
|
|
|
-
|
|
|
|
(0.5
|
)
|
|
|
(0.5
|
)
|
|
Balance, December 31, 2013
|
|
$
|
-
|
|
|
$
|
1.0
|
|
|
$
|
1.0
|
|
The net accrual of $1.4 million at December 31, 2012 is reported as $0.4 million of accrued expenses and other current liabilities and $1.0 million of other noncurrent liabilities. The net accrual of $1.0 million at December 31, 2013 is reported as $0.4 million of accrued expenses and other current liabilities and $0.6 million of other noncurrent liabilities.
Texas Warehouse
On December 1, 2009, we announced the closing of warehouse facilities in Socorro, Texas. We accrued $3.4 million of termination benefits and associated employee costs for 220 employees. During 2011, we recorded $0.5 million of lease obligation costs relating to the warehouse. These costs are reported as SG&A expenses in the domestic wholesale jeanswear segment. The closing was substantially completed by the end of April 2010.
The details of the Texas warehouse restructuring accruals are as follows:
|
(In millions)
|
|
Lease
obligations
|
|
|
Balance,
December 31, 2010
|
|
$
|
4.1
|
|
|
Additions
|
|
|
0.5
|
|
|
Payments and reductions
|
|
|
(3.7
|
)
|
|
Balance, December 31, 2011
|
|
|
0.9
|
|
|
Payments and reductions
|
|
|
(0.1
|
)
|
|
Balance, December 31, 2012
|
|
|
0.8
|
|
|
Payments and reductions
|
|
|
-
|
|
|
Balance, December 31, 2013
|
|
$
|
0.8
|
|
The net accruals of $0.8 million at both December 31, 2013 and 2012 are reported as accrued expenses and other current liabilities.
Retail Stores
We continue to review our retail operations for underperforming locations. As a result of these reviews, we have decided to close domestic retail locations that no longer provide strategic benefits. During 2011, 2012 and 2013, we closed 96, 103 and 108 locations, respectively, and anticipate closing additional locations in 2014. We expect to operate a smaller and more productive chain of domestic locations, with outlet stores comprising a significantly higher percentage of the overall retail portfolio. We will continue to critically assess individual store profitability, including consideration of converting certain locations to brands that offer the greatest opportunity for revenue growth.
Total termination benefits and associated employee costs for all locations closed since 2009 and identified to be closed are expected to be $13.9 million for approximately 2,950 employees, including both store employees and administrative support personnel. We accrued $1.6 million, $1.7 million and $3.0 million of termination benefits and associated employee costs during 2011, 2012 and 2013, respectively.
We also incurred $0.5 million, $0.4 million and $3.7 million during 2011, 2012 and 2013, respectively, for costs to terminate leases. In connection with our decision to close these stores, we reviewed the associated long-term assets for impairments. As a result of these reviews, we recorded $8.0 million, $0.8 million and $6.3 million of impairment losses in 2011, 2012 and 2013, respectively, on leasehold improvements and furniture and fixtures located in the stores to be closed. These costs are reported as SG&A expenses in the domestic retail segment.
The details of the restructuring accruals are as follows:
|
(In millions)
|
|
One-time
termination
benefits
|
|
|
Balance, December 31, 2010
|
|
$
|
2.2
|
|
|
Additions
|
|
|
1.6
|
|
|
Payments and reductions
|
|
|
(2.5
|
)
|
|
Balance, December 31, 2011
|
|
|
1.3
|
|
|
Additions
|
|
|
1.7
|
|
|
Payments and reductions
|
|
|
(2.1
|
)
|
|
Balance, December 31, 2012
|
|
|
0.9
|
|
|
Additions
|
|
|
3.0
|
|
|
Payments and reductions
|
|
|
(1.5
|
)
|
|
Balance, December 31, 2013
|
|
$
|
2.4
|
|
The net accruals of $0.9 million and $2.4 million at December 31, 2012 and 2013, respectively, are reported as accrued expenses and other current liabilities.
PROPERTY, PLANT AND EQUIPMENT
Major classes of property, plant and equipment are as follows:
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
Useful
lives
(years
|
)
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
$
|
77.9
|
|
|
$
|
78.1
|
|
|
|
10 – 20
|
|
|
Leasehold improvements
|
|
|
238.4
|
|
|
|
255.3
|
|
|
|
1 – 20
|
|
|
Machinery, equipment and software
|
|
|
399.7
|
|
|
|
385.3
|
|
|
|
3 – 20
|
|
|
Furniture and fixtures
|
|
|
110.6
|
|
|
|
104.6
|
|
|
|
1 – 8
|
|
|
Construction in progress
|
|
|
17.9
|
|
|
|
20.1
|
|
|
|
-
|
|
|
|
|
|
844.5
|
|
|
|
843.4
|
|
|
|
|
|
|
Less: accumulated depreciation and amortization
|
|
|
595.5
|
|
|
|
565.3
|
|
|
|
|
|
|
|
|
$
|
249.0
|
|
|
$
|
278.1
|
|
|
|
|
|
Depreciation and amortization expense relating to property, plant and equipment (including capitalized leases) reflected in results from operations was $71.0 million, $69.6 million and $67.5 million in 2013, 2012 and 2011, respectively. At December 31, 2013, we had outstanding commitments of approximately $14.0 million relating primarily to the construction or remodeling of retail store locations and office facilities.
Included in property, plant and equipment are the following capitalized leases:
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
Useful
lives
(years
|
)
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
37.8
|
|
|
$
|
37.8
|
|
|
|
10 - 20
|
|
|
Machinery and equipment
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
3 - 5
|
|
|
|
|
|
38.0
|
|
|
|
38.0
|
|
|
|
|
|
|
Less: accumulated amortization
|
|
|
23.2
|
|
|
|
21.2
|
|
|
|
|
|
|
|
|
$
|
14.8
|
|
|
$
|
16.8
|
|
|
|
|
|
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method. Accounting rules require that we test at least annually for possible goodwill impairment. We perform our test in the fourth fiscal quarter of each year using a discounted cash flow analysis that requires that certain assumptions and estimates be made regarding industry economic factors and future profitability and cash flows. We test goodwill at the segment level where acquired businesses have been fully integrated into our existing structure and at one level below the segment level where acquired businesses have not been fully integrated. As a result of the 2012 impairment analysis, we determined that the goodwill balance existing in our international retail segment was impaired as a result of decreases in projected revenues and profitability for our Kurt Geiger retail business resulting from economic conditions in Europe. Accordingly, we recorded an impairment charge of $47.6 million. As a result of the 2013 impairment analysis, we determined that the goodwill balance existing in our domestic wholesale sportswear segment and the goodwill in our domestic wholesale footwear and accessories segment related to our Brian Atwood business were impaired as a result of decreases in projected revenues and profitability. Accordingly, we recorded an impairment charge of $49.9 million.
The following table presents, by segment and in total, changes in the carrying amount of goodwill for 2012 and 2013.
|
(In millions)
|
|
Domestic Wholesale Sportswear
|
|
|
Domestic Wholesale Jeanswear
|
|
|
Domestic Wholesale Footwear & Accessories
|
|
|
Domestic Retail
|
|
|
International Wholesale
|
|
|
International Retail
|
|
|
Total
|
|
|
Balance, January 1, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
46.7
|
|
|
$
|
519.2
|
|
|
$
|
859.8
|
|
|
$
|
120.6
|
|
|
$
|
111.6
|
|
|
$
|
50.4
|
|
|
$
|
1,708.3
|
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
(519.2
|
)
|
|
|
(813.2
|
)
|
|
|
(120.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,453.0
|
)
|
|
Net goodwill
|
|
|
46.7
|
|
|
|
-
|
|
|
|
46.6
|
|
|
|
-
|
|
|
|
111.6
|
|
|
|
50.4
|
|
|
|
255.3
|
|
|
Acquisition of Brian Atwood
|
|
|
-
|
|
|
|
-
|
|
|
|
3.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3.2
|
|
|
Impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(47.6
|
)
|
|
|
(47.6
|
)
|
|
Foreign currency translation effects
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.9
|
|
|
|
2.5
|
|
|
|
4.4
|
|
|
Balance, December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
46.7
|
|
|
|
519.2
|
|
|
|
863.0
|
|
|
|
120.6
|
|
|
|
113.5
|
|
|
|
52.7
|
|
|
|
1,715.7
|
|
|
Accumulated impairment losses
|
|
|
-
|
|
|
|
(519.2
|
)
|
|
|
(813.2
|
)
|
|
|
(120.6
|
)
|
|
|
-
|
|
|
|
(47.4
|
)
|
|
|
(1,500.4
|
)
|
|
Net goodwill
|
|
|
46.7
|
|
|
|
-
|
|
|
|
49.8
|
|
|
|
-
|
|
|
|
113.5
|
|
|
|
5.3
|
|
|
|
215.3
|
|
|
Impairment
|
|
|
(46.7
|
)
|
|
|
-
|
|
|
|
(3.2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(49.9
|
)
|
|
Foreign currency translation effects
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.0
|
|
|
|
-
|
|
|
|
1.0
|
|
|
Balance, December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
46.7
|
|
|
|
519.2
|
|
|
|
863.0
|
|
|
|
120.6
|
|
|
|
114.5
|
|
|
|
53.7
|
|
|
|
1,717.7
|
|
|
Accumulated impairment losses
|
|
|
(46.7
|
)
|
|
|
(519.2
|
)
|
|
|
(816.4
|
)
|
|
|
(120.6
|
)
|
|
|
-
|
|
|
|
(48.4
|
)
|
|
|
(1,551.3
|
)
|
|
Net goodwill
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
46.6
|
|
|
$
|
-
|
|
|
$
|
114.5
|
|
|
$
|
5.3
|
|
|
$
|
166.4
|
|
We also perform our annual impairment test for indefinite-lived trademarks during the fourth fiscal quarter of the year.
As a result of these analyses, we recorded trademark impairment charges of $7.2 million, $21.5 million and $31.5 million for 2013, 2012 and 2011, respectively, as a result of decreases in projected revenues for certain brands. All trademark impairment charges for 2013 and 2011 are reported as SG&A expenses in the licensing and other segment. The charge for 2012 was recorded as a $21.4 million SG&A expense in the licensing and other segment and a $0.1 million SG&A expense in the
international retail segment. In 2012, we also determined that the acquired customer relationship intangible asset from the acquisition of Kurt Geiger was impaired due to decreases in projected wholesale revenues, and we recorded a $5.6 million impairment charge. This impairment charge is reported as an SG&A expense in the international wholesale segment.
The components of other intangible assets are as follows:
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
Gross
Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Gross
Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Amortized intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
154.2
|
|
|
$
|
34.8
|
|
|
$
|
151.6
|
|
|
$
|
24.4
|
|
|
License agreements
|
|
|
61.7
|
|
|
|
56.0
|
|
|
|
61.4
|
|
|
|
54.5
|
|
|
Trademarks
|
|
|
24.5
|
|
|
|
11.4
|
|
|
|
24.5
|
|
|
|
4.9
|
|
|
Acquired favorable leases
|
|
|
13.4
|
|
|
|
4.9
|
|
|
|
13.1
|
|
|
|
3.5
|
|
|
Covenants not to compete
|
|
|
3.8
|
|
|
|
2.9
|
|
|
|
3.8
|
|
|
|
2.1
|
|
|
|
|
|
257.6
|
|
|
|
110.0
|
|
|
|
254.4
|
|
|
|
89.4
|
|
|
Indefinite-life trademarks
|
|
|
704.8
|
|
|
|
-
|
|
|
|
704.7
|
|
|
|
-
|
|
|
|
|
$
|
962.4
|
|
|
$
|
110.0
|
|
|
$
|
959.1
|
|
|
$
|
89.4
|
|
Amortization expense for intangible assets subject to amortization was $14.4 million, $16.8 million and $14.8 million for 2013, 2012 and 2011, respectively. Amortization expense for intangible assets subject to amortization for each of the years in the five-year period ending December 31, 2018 is estimated to be $14.9 million in 2014, $13.5 million in 2015, $13.2 million in 2016, $12.9 million in 2017 and $11.2 million in 2018.
The cash flow models we use to estimate the fair values of our goodwill and trademarks involve several assumptions. Changes in these assumptions could materially impact our fair value estimates. Assumptions critical to our fair value estimates are: (i) discount rates used to derive the present value factors used in determining the fair value of the reporting units and trademarks; (ii) royalty rates used in our trademark valuations; (iii) projected revenue growth rates; and (iv) projected long-term growth rates used in the derivation of terminal year values. These and other assumptions are impacted by economic conditions and expectations of management and may change in the future based on period-specific facts and circumstances. The following table shows the assumptions we used to derive our fair value estimates as part of our annual impairment testing for 2013 and 2012.
|
|
2013
|
|
2012
|
|
|
Goodwill
|
Trademarks
|
|
Goodwill
|
Trademarks
|
|
Discount rates
|
12.0%
|
12.0%
|
|
12.0%
|
12.0%
|
|
Royalty rates
|
--
|
1.0% - 8.0%
|
|
--
|
1.0% - 8.0%
|
|
Weighted-average revenue growth rates
|
4.7%
|
6.5%
|
|
5.4%
|
6.2%
|
|
Long-term growth rates
|
3.0%
|
0% - 3.0%
|
|
3.0%
|
0% - 3.0%
|
While the fair value of each operating segment at December 31, 2013 significantly exceeded the segment's carrying value, should economic conditions and trends (such as reduced consumer spending or the failure to achieve projected results) deteriorate throughout 2014 and beyond, especially in the United Kingdom and Europe, the carrying values of trademarks and goodwill could become further impaired.
FAIR VALUES
ASC Subtopic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Subtopic 820-10 outlines a valuation framework, creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements, and details the disclosures that are required for items measured at fair value. We currently do not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis. We are permitted to choose to measure many financial instruments and certain other items at fair value, although we did not elect the fair value measurement option for any of our financial assets or liabilities.
Our financial assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows:
|
·
|
Level 1 - inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;
|
|
·
|
Level 2 - inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); and
|
|
·
|
Level 3 - unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing assets or liabilities based on the best information available.
|
Assets and Liabilities Measured at Fair Value on a Recurring Basis
We have certain financial assets and liabilities that are required to be measured at fair value. These include:
|
·
|
the assets and liabilities of The Jones Group Inc. Deferred Compensation Plan (the "Rabbi Trust"), which represent deferred employee compensation invested in mutual funds and which fall within Level 1 of the fair value hierarchy;
|
|
·
|
deferred director fees, which represent phantom units of our common stock that have a fair value based on the market price of our common stock and which fall within Level 1 of the fair value hierarchy;
|
|
·
|
foreign currency forward contracts, which have fair values calculated by comparing foreign exchange forward rates to the contract rates discounted at our incremental borrowing rate, which fall within Level 2 of the fair value hierarchy;
|
|
·
|
interest rate swap and cap contracts, which have fair values calculated by comparing current yield curves and LIBOR rates to the stated contract rates adjusted for estimated risk of counterparty nonperformance, which fall within Level 2 of the fair value hierarchy;
|
|
·
|
long-term debt that is hedged by interest rate swaps as a fair-value hedge, calculated by comparing current yield curves and LIBOR rates to the stated contract rates of the associated interest rate swaps, which falls within Level 2 of the fair value hierarchy; and
|
|
·
|
consideration liabilities recorded as a result of the acquisition of Moda Nicola International, LLC ("Moda") and Stuart Weitzman Holdings, LLC ("SWH"), which have fair values based on our projections of financial results and cash flows for the acquired business and a discount factor based on our weighted average cost of capital, and which fall within Level 3 of the fair value hierarchy.
|
In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis at December 31, 2012 and 2013.
|
(In millions)
Description
|
Classification
|
|
Total Value
|
|
|
Quoted prices in active markets for identical assets (Level 1
|
)
|
|
Significant other observable inputs (Level 2
|
)
|
|
Significant unobserv-able inputs (Level 3
|
)
|
|
December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rabbi Trust assets
|
Prepaid expenses and other current assets
|
|
$
|
8.4
|
|
|
$
|
8.4
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest rate cap
|
Other long-term assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
British Pound – U.S. Dollar forward contract
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Canadian Dollar – U.S. Dollar forward contracts
|
Prepaid expenses and other current assets
|
|
|
0.2
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
-
|
|
|
Total assets
|
|
$
|
8.6
|
|
|
$
|
8.4
|
|
|
$
|
0.2
|
|
|
$
|
-
|
|
|
Rabbi Trust liabilities
|
Accrued employee compensation and benefits
|
|
$
|
8.4
|
|
|
$
|
8.4
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Deferred director fees
|
Accrued expenses and other current liabilities
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
-
|
|
|
Acquisition consideration
|
Current portion of acquisition consideration payable
|
|
|
30.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30.3
|
|
|
Acquisition consideration
|
Acquisition consideration payable, net of current portion
|
|
|
6.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6.0
|
|
|
Total liabilities
|
|
$
|
44.9
|
|
|
$
|
8.6
|
|
|
$
|
-
|
|
|
$
|
36.3
|
|
|
December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rabbi Trust assets
|
Prepaid expenses and other current assets
|
|
$
|
9.1
|
|
|
$
|
9.1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest rate swaps
|
Other long-term assets
|
|
|
1.1
|
|
|
|
-
|
|
|
|
1.1
|
|
|
|
-
|
|
|
Interest rate cap
|
Other long-term assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Canadian Dollar – U.S. Dollar forward contracts
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total assets
|
|
$
|
10.2
|
|
|
$
|
9.1
|
|
|
$
|
1.1
|
|
|
$
|
-
|
|
|
Rabbi Trust liabilities
|
Accrued employee compensation and benefits
|
|
$
|
9.1
|
|
|
$
|
9.1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest rate swaps
|
Other long-term liabilities
|
|
|
1.6
|
|
|
|
-
|
|
|
|
1.6
|
|
|
|
-
|
|
|
Deferred director fees
|
Accrued expenses and other current liabilities
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
-
|
|
|
|
-
|
|
|
Hedged portion of 6.875% Senior Notes due 2019
|
Long-term debt
|
|
|
336.0
|
|
|
|
-
|
|
|
|
336.0
|
|
|
|
-
|
|
|
Acquisition consideration
|
Current portion of acquisition consideration payable
|
|
|
2.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.6
|
|
|
Acquisition consideration
|
Acquisition consideration payable, net of current portion
|
|
|
4.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4.0
|
|
|
Total liabilities
|
|
$
|
353.6
|
|
|
$
|
9.4
|
|
|
$
|
337.6
|
|
|
$
|
6.6
|
|
The following table presents the changes in Level 3 acquisition consideration liabilities for 2012 and 2013.
|
(In millions)
|
|
Acquisition of Moda
|
|
|
Acquisition of SWH
|
|
|
Total acquisition consideration payable
|
|
|
Balance, January 1, 2012
|
|
$
|
14.8
|
|
|
$
|
195.6
|
|
|
$
|
210.4
|
|
|
Payments
|
|
|
(3.5
|
)
|
|
|
(255.0
|
)
|
|
|
(258.5
|
)
|
|
Total adjustments included in earnings
|
|
|
(3.9
|
)
|
|
|
88.3
|
|
|
|
84.4
|
|
|
Balance, December 31, 2012
|
|
|
7.4
|
|
|
|
28.9
|
|
|
|
36.3
|
|
|
Payments
|
|
|
(2.5
|
)
|
|
|
(27.4
|
)
|
|
|
(29.9
|
)
|
|
Total adjustments included in earnings
|
|
|
0.7
|
|
|
|
(0.5
|
)
|
|
|
0.2
|
|
|
Balance, December 31, 2013
|
|
$
|
5.6
|
|
|
$
|
1.0
|
|
|
$
|
6.6
|
|
The following table represents quantitative information about the Level 3 contingent consideration liability measurements at December 31, 2013.
|
(In millions)
|
|
Fair Value at December 31, 2013
|
|
Valuation
technique
|
Unobservable
inputs
|
Range
(Weighted Average)
|
|
Acquisition of Moda
|
|
$
|
5.6
|
|
Discounted projection of financial results
|
Net sales growth
Gross margin multiplier
Discount rate
|
9.9% - 47.3% (32.1%)
1.31 - 1.50 (1.39)
12.0%
|
The valuation processes for the contingent consideration liability for the acquisition of Moda is based on the associated acquisition agreement. Our inputs include probability-weighted projections of financial results for the acquired business and a discount rate based on our weighted average cost of capital. We internally calculate the estimated liability using projected financial information provided by the operating divisions.
The significant unobservable inputs used in the fair value measurement of the Moda contingent consideration liability are net sales growth, a gross margin multiplier (as defined in the acquisition agreement) and a discount factor. An increase in the net sales or gross margin multiplier inputs would increase the fair value of the liability, while an increase in the discount rate would decrease the fair value of the liability. There is no interrelationship between the unobservable inputs. Changes in the fair value of the Moda contingent consideration liability are reported as adjustments to SG&A expenses in the domestic wholesale sportswear segment.
The remaining contingent consideration liability related to the acquisition of SWH is $1.0 million. Changes in the fair value of the contingent consideration liability for SWH are reported as adjustments to interest expense. Payment of the remaining liability will be deferred until certain conditions are met.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
In accordance with the fair value hierarchy described above, the following table shows the fair value of our non-financial assets and liabilities that were measured at fair value on a nonrecurring basis during the years ended December 31, 2011, 2012 and 2013, and the total losses recorded as a result of the remeasurement process.
|
(In millions)
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
Description
|
|
Fair
Value
|
|
|
Quoted prices in active markets for identical assets
(Level 1)
|
|
|
Significant other observable inputs
(Level 2)
|
|
|
Significant unobserv-able inputs
(Level 3)
|
|
|
Total
losses recorded during year
|
|
|
For the year ended December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
$
|
1.2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1.2
|
|
|
$
|
10.2
|
|
|
Transportation equipment
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.4
|
|
|
Trademarks
|
|
|
75.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75.7
|
|
|
|
31.5
|
|
|
For the year ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
0.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
1.1
|
|
|
Trademarks
|
|
|
43.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43.6
|
|
|
|
21.5
|
|
|
Customer relationships
|
|
|
8.9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8.9
|
|
|
|
5.6
|
|
|
Goodwill
|
|
|
5.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5.2
|
|
|
|
47.6
|
|
|
For the year ended December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
0.8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.8
|
|
|
|
8.6
|
|
|
Trademarks
|
|
|
8.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8.4
|
|
|
|
7.2
|
|
|
Goodwill
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49.9
|
|
During 2011, 2012 and 2013, property and equipment utilized in our retail operations with carrying amounts of $11.4 million, $1.2 million and $9.4 million, respectively, were written down to fair values of $1.2 million, $0.1 million and $0.8 million, respectively, primarily as a result of our decision to close underperforming retail locations. These losses were recorded as SG&A expenses in the domestic retail segment. We consider long-term assets utilized in a retail location to be impaired when a pattern of operating losses at the location indicate that future operating losses are probable and that the resulting cash flows will not be sufficient to recover the carrying value of the associated long-term assets.
During 2011, trademarks with a carrying amount of $107.2 million were written down to a fair value of $75.7 million. These losses were recorded as SG&A expenses in the licensing and other segment.
During 2011, we determined that certain transportation equipment with a carrying value of $1.0 million had a fair value of $0.6 million based on quoted market prices. The loss of $0.4 million was recorded as SG&A expenses in the licensing and other segment.
During 2012, certain acquired customer relationships from the acquisition of Kurt Geiger with a carrying amount of $14.5 million were written down to a fair value of $8.9 million due to decreases in projected wholesale revenues resulting from economic conditions in Europe. The loss of $5.6 million was recorded as an SG&A expense in the international wholesale segment.
During 2012, trademarks with a carrying amount of $65.1 million were written down to a fair value of $43.6 million. The loss of $21.5 million was recorded as a $21.4 million SG&A expense in the licensing and other segment and a $0.1 million SG&A expense in the international retail segment.
During 2012, goodwill in our international retail segment with a carrying amount of $52.8 million was written down to a fair value of $5.2 million as a result of decreases in projected revenues and profitability for our Kurt Geiger retail business resulting from economic conditions in Europe.
During 2013, trademarks with a carrying amount of $15.6 million were written down to a fair value of $8.4 million. The loss of $7.2 million was recorded as in the licensing and other segment.
During 2013, goodwill in our domestic wholesale sportswear segment with a carrying amount of $46.7 million and in our domestic footwear and accessories segment related to our Brian Atwood business with a carrying value of $3.2 million were written down to fair values of zero as a result of decreases in projected revenues and profitability for this segment.
For further information regarding the losses recorded for trademarks and goodwill, see "Goodwill and Other Intangible Assets."
Financial Instruments
As a result of our global operating and financing activities, we are exposed to changes in interest rates and foreign currency exchange rates which may adversely affect results of operations and financial condition. In seeking to minimize the risks and/or costs associated with such activities, we manage exposure to changes in interest rates and foreign currency exchange rates through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The instruments eligible for utilization include forward, option, swap and cap agreements. We do not use financial instruments for trading or other speculative purposes. At December 31, 2013, we had the following derivative financial instruments outstanding:
|
·
|
foreign exchange contracts to exchange Canadian Dollars for a total notional value of US $4.7 million at a weighted average exchange rate of 1.063 maturing through February 2014 and
|
|
·
|
an interest rate cap (to limit our exposure to increases in the variable rates of our previously-used interest rate swaps) maturing in November 2014.
|
At December 31, 2013 and 2012, the fair values of cash and cash equivalents, receivables and accounts payable approximated their carrying values due to the short-term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosures were valued using market comparable inputs. These inputs include broker quotes, quoted market prices, interest rates and exchange rates for the same or similar instruments. The fair value and related carrying amounts for items not disclosed elsewhere are as follows.
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
Fair Value Level
|
|
|
Carrying Amount
|
|
|
Fair
Value
|
|
|
Carrying Amount
|
|
|
Fair
Value
|
|
|
Senior Notes, including hedged items recorded at fair value
|
|
|
1
|
|
|
$
|
917.5
|
|
|
$
|
904.8
|
|
|
$
|
924.3
|
|
|
$
|
884.5
|
|
|
Other long-term debt, including current portion
|
|
|
2
|
|
|
|
10.3
|
|
|
|
9.5
|
|
|
|
10.2
|
|
|
|
9.3
|
|
|
Notes receivable
|
|
|
2
|
|
|
|
7.5
|
|
|
|
6.8
|
|
|
|
-
|
|
|
|
-
|
|
Financial instruments expose us to counterparty credit risk for nonperformance and to market risk for changes in interest and currency rates. We manage exposure to counterparty credit risk through specific minimum credit standards and procedures to monitor the amount of credit exposure. Our financial instrument counterparties are substantial investment or commercial banks with significant experience with such instruments.
CREDIT FACILITIES
We have a secured revolving credit agreement expiring on April 28, 2016 (the "Credit Facility") with several lending institutions to borrow an aggregate principal amount of up to $650 million. The terms and conditions of our Credit Facility provide for, among other things: (1) a $350 million U.S. commitment which may be drawn by the U.S. borrowers as revolving loans in U.S. Dollars or letters of credit in Canadian Dollars, U.S. Dollars, or an "LC Alternative Currency" (namely Euros, sterling, or any other currency acceptable to the lenders); and (2) a $300 million international commitment which may be drawn by the U.S. borrowers or by any Canadian or European borrowers as revolving loans or letters of credit in Canadian Dollars, U.S. Dollars, or an LC Alternative Currency. Up to the entire amount of the Credit Facility is available for cash borrowings, with an overall sublimit of up to $350 million for all letters of credit. All of the overall $350 million sublimit may be used for trade letters of credit; and within that overall sublimit, there are additional sublimits, including (but not limited to) $50 million for standby letters of credit and $150 million for letters of credit under the U.S. commitment denominated in an LC Alternative Currency.
Borrowings under the Credit Facility may be used to refinance certain existing indebtedness, to make certain investments (including acquisitions), and for general corporate purposes in the ordinary course of business. Such borrowings bear interest either based on the alternate base rate, as defined in the Credit Facility, or based on Eurocurrency rates, each with a margin that depends on the availability remaining under the Credit Facility. The Credit Facility contains customary events of default.
Availability under the Credit Facility is determined with reference to a borrowing base consisting of a percentage of eligible inventory, accounts receivable, credit card receivables and licensee receivables, minus reserves determined by the joint collateral agents. At December 31, 2013, we had no cash borrowings and $19.6 million of letters of credit outstanding, and our remaining availability was $387.2 million. If availability under the Credit Facility falls below a stated level, we will be required to comply with a minimum fixed charge coverage ratio. The Credit Facility also contains affirmative and negative covenants that, among other things, will limit or restrict our ability to (1) incur indebtedness, (2) create liens, (3) merge, consolidate, liquidate or dissolve, (4) make investments (including acquisitions), loans or advances, (5) sell assets, (6) enter into sale and leaseback transactions, (7) enter into swap agreements, (8) make certain restricted payments (including dividends and other payments in respect of capital stock), (9) enter into transactions with affiliates, (10) enter into restrictive agreements, and (11) amend material
documents. The Credit Facility is secured by a first priority lien on substantially all of our personal property.
The weighted-average interest rate for our credit facilities, based primarily on 30-day LIBOR borrowing rates, was 2.25% and 2.0% at December 31, 2013 and 2012, respectively.
LONG-TERM DEBT
Long-term debt consists of the following:
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Note Payable, due 2014
|
|
$
|
-
|
|
|
$
|
0.1
|
|
|
5.0% Loan Notes, due 2016
|
|
|
10.3
|
|
|
|
10.1
|
|
|
5.125% Senior Notes due 2014, net of unamortized discount of $0.0 and $0.1 and including fair value adjustments of $4.3 and $9.4
|
|
|
254.3
|
|
|
|
259.3
|
|
|
6.875% Senior Notes due 2019, net of unamortized premium of $2.8 and $3.4 and including fair value adjustments of $10.7 and $11.9
|
|
|
413.5
|
|
|
|
415.3
|
|
|
6.125% Senior Notes due 2034, net of unamortized discount of $0.3 and $0.3
|
|
|
249.7
|
|
|
|
249.7
|
|
|
|
|
|
927.8
|
|
|
|
934.5
|
|
|
Less current portion
|
|
|
254.4
|
|
|
|
0.1
|
|
|
|
|
$
|
673.4
|
|
|
$
|
934.4
|
|
Long-term debt maturities during the next five years amount to $250.0 million in 2014 and $10.3 million in 2016. All of our notes contain certain covenants, including, among others, restrictions on liens, sale-leaseback transactions and additional secured debt, and pay interest semiannually. The weighted-average interest rate of our long-term debt, excluding the effects of our interest rate swaps, was 6.2% at both December 31, 2013 and 2012.
In September 2012, we issued an additional $100.0 million of 6.875% Senior Notes due 2019 (the "2019 Notes"). Net proceeds (including a premium of $3.5 million) were $100.9 million, which will be used for general corporate purposes. These additional notes are being treated as a single series with, and have the same terms as, the previously issued 2019 Notes and are fungible with the previously-issued 2019 Notes.
In connection with the purchase of Kurt Geiger, approximately £6.2 million of the purchase price payable to certain selling shareholders who are senior managers of Kurt Geiger has been rolled over into 5% Loan Notes, which are payable on or before April 16, 2016 and are subject to forfeiture in the event of termination of employment under certain circumstances. For more information, see "Acquisitions."
DERIVATIVES
We recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. Additionally, the fair value adjustments will affect either equity or net income, depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity.
Interest Rate Swaps and Caps
On December 14, 2010, we entered into three interest rate swap transactions to effectively convert the entire amount of our $250 million fixed-rate 5.125% Senior Notes due 2014 (the "2014 Notes") to variable-rate debt. Under the terms of the transactions, we were required to make semiannual variable-rate payments to the counterparties calculated based on three-month LIBOR rates (which were reset on the 15
th
day of each calendar quarter) plus 3.46%, and the counterparties were obligated to make semiannual fixed-rate payments to us of 5.125%. The swap transactions had an effective date of December 17, 2010 and a termination date of November 15, 2014, the date the 2014 Notes mature. On June 8, 2012, we de-designated the hedging relationship between the swaps and the 2014 Notes and received $5.7 million
upon termination of the swaps. The related fair market valuation adjustment to the 2014 Notes is being amortized as a reduction of interest expense over the remaining life of the 2014 Notes.
On March 3, 2011, we entered into three interest rate swap transactions to effectively convert $150 million of our 2019 Notes to variable-rate debt. Under the terms of the transactions, we were required to make semiannual variable-rate payments to the counterparties calculated based on three-month LIBOR rates (which were reset on the 15
th
day of each calendar quarter) plus 3.73%, and the counterparties were obligated to make semiannual fixed-rate payments to us of 6.875%. The swap transactions had an effective date of March 7, 2011 and a termination date of March 15, 2019, the date the 2019 Notes mature. On August 3, 2011 we de-designated the hedging relationship between the swaps and the 2019 Notes and received $8.1 million upon termination of the swaps. The related fair market valuation adjustment to the 2019 Notes is being amortized as a reduction of interest expense over the remaining life of the 2019 Notes.
On March 19, 2012, we entered into three interest rate swap transactions to effectively convert $150 million of our 2019 Notes to variable-rate debt. Under the terms of the transactions, we were required to make semiannual variable-rate payments to the counterparties calculated based on one-month LIBOR rates (which were reset on the 15
th
day of each calendar quarter) plus 5.195%, and the counterparties were obligated to make semiannual fixed-rate payments to us of 6.875%. The swap transactions had an effective date of March 21, 2012 and a termination date of March 15, 2019, the date the 2019 Notes mature. On May 31, 2012, we de-designated the hedging relationship between the swaps and the 2019 Notes and received $3.5 million upon termination of the swaps. The related fair market valuation adjustment to the 2019 Notes is being amortized as a reduction of interest expense over the remaining life of the 2019 Notes.
During 2013, we entered into various interest rate swap transactions to effectively convert a portion of our 2019 Notes to variable-rate debt. Under the terms of the transactions, we are required to make semiannual variable-rate payments to the counterparties (which are reset in arrears on each payment date) as shown in the table below, and the counterparties are obligated to make semiannual fixed-rate payments to us of 6.875%. The swap transactions all have a termination date of March 15, 2019, the date the 2019 Notes mature.
|
Date of transaction
|
Effective date
|
|
Number of swaps
|
|
|
Amount of 2019 Notes
hedged (in millions)
|
|
Variable rate payments
|
|
July 17, 2013
|
July 19, 2013
|
|
|
3
|
|
|
$
|
90.0
|
|
Six-month LIBOR + 4.75%
|
|
August 13, 2013
|
August 15, 2013
|
|
|
3
|
|
|
|
90.0
|
|
Six-month LIBOR + 4.5925%
|
|
August 19, 2013
|
August 21, 2013
|
|
|
3
|
|
|
|
75.0
|
|
Six-month LIBOR + 4.4275%
|
|
September 5, 2013
|
September 9, 2013
|
|
|
3
|
|
|
|
70.0
|
|
Six-month LIBOR + 4.2425%
|
We have an outstanding interest rate cap that was used in conjunction with previous interest rate swaps on our 2014 Notes to limit our floating rate exposure. The cap has a termination date of November 15, 2014.
The swap transactions were designated as hedges of the fair value of the related notes. The fair values of the swaps were recorded either as an asset or a liability, with changes in their fair values recorded through interest expense. The changes in fair value of the notes related to the hedged portion of the notes were also recorded through interest expense. As these changes in fair value did not exactly offset each other, the net effect on earnings represented the ineffectiveness of the hedging instruments. We evaluate effectiveness under the "long haul" method of accounting. The interest rate cap has not been designated as a hedging instrument; as a result, all changes in the fair value of the cap are recorded through interest expense.
We recorded net increases in interest expense related to the ineffectiveness of the swaps and the changes in the fair value of the cap as follows.
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
1.1
|
|
|
$
|
1.3
|
|
|
$
|
1.0
|
|
|
Interest rate cap
|
|
|
-
|
|
|
|
0.2
|
|
|
|
1.1
|
|
|
Net increase in interest expense
|
|
$
|
1.1
|
|
|
$
|
1.5
|
|
|
$
|
2.1
|
|
Foreign Currency Forward Contracts
We use foreign currency forward contracts for the specific purpose of hedging the exposure to variability in forecasted cash flows associated primarily with inventory purchases. Fair values of foreign currency forward contracts are calculated by comparing each agreement's contractual exchange rate with the currency exchange forward and spot rates at the reporting date.
We have outstanding forward contracts to exchange Canadian Dollars for U.S. Dollars. These contracts are designated as cash flow hedges, as the principal terms of the contracts are the same as the underlying forecasted foreign currency cash flows. Therefore, changes in the fair value of these forward contracts are highly effective in offsetting changes in the expected foreign currency cash flows. Changes in the fair value of these contracts are recorded in accumulated other comprehensive income, net of related tax effects, with the corresponding asset or liability recorded in the balance sheet. Amounts recorded in accumulated other comprehensive income are reflected in current-period earnings when the hedged transaction affects earnings.
Since the foreign currency derivatives we use in our risk management strategies are highly effective hedges because all the critical terms of the derivative instruments match those of the hedged item, we record no ineffectiveness related to our cash flow hedges. If foreign currency exchange rates do not change from their December 31, 2013 amounts, we estimate that any reclassifications from other comprehensive income to earnings within the next 12 months will not be material.
We also currently have outstanding forward contracts to exchange British Pounds for U.S. Dollars. These contracts have not been designated as hedges. Therefore, changes in the fair value of these contracts are recorded in SG&A expenses, with the corresponding asset or liability recorded in the balance sheet.
The notional amounts of our foreign exchange contracts outstanding at December 31, 2013, 2012 and 2011 are as follows. For additional information, see "Fair Values."
|
(In millions)
|
|
Notional Amounts
|
|
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Canadian Dollar – U.S. Dollar forward exchange contracts
|
|
US$4.7
|
|
|
US$16.1
|
|
|
US$5.3
|
|
|
British Pound – U.S. Dollar forward exchange contract
|
|
|
-
|
|
|
£
|
6.0
|
|
|
|
-
|
|
Fair Values of Derivative Instruments
|
(In millions)
|
December 31, 2013
|
|
December 31, 2012
|
|
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
Other long-term assets
|
|
$
|
1.1
|
|
|
|
$
|
-
|
|
|
Foreign exchange contracts
|
Prepaid expenses and other current assets
|
|
|
-
|
|
Prepaid expenses and other current assets
|
|
|
0.2
|
|
|
Total derivative assets
|
|
|
$
|
1.1
|
|
|
|
$
|
0.2
|
|
|
Interest rate swap contracts
|
Other long-term liabilities
|
|
$
|
1.6
|
|
|
|
$
|
-
|
|
|
Total derivative liabilities
|
|
|
$
|
1.6
|
|
|
|
$
|
-
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate cap contract
|
Other long-term assets
|
|
$
|
-
|
|
Other long-term assets
|
|
$
|
-
|
|
|
Total derivative assets
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
Effect of Derivatives on the Statement of Operations - Derivatives Designated as Hedging Instruments
|
(In millions)
|
|
Amount of Pretax Gain (Loss) due to
Ineffectiveness Recognized in Income
|
|
|
Derivative type
|
Location of Pretax Gain (Loss)
due to Ineffectiveness
Recognized in Income
|
2013
|
|
2012
|
|
2011
|
|
|
Interest rate swap contracts
|
Interest expense
|
|
$
|
(1.1
|
)
|
|
$
|
(1.3
|
)
|
|
$
|
(1.0
|
)
|
|
(In millions)
|
|
Amount of Pretax Gain (Loss) Recognized in Other Comprehensive Income
|
|
Location of Pretax
Loss Reclassified
from Other Comprehensive
Income into Income
|
|
Amount of Pretax Gain (Loss) Reclassified from Other Comprehensive Income into Income
|
|
|
Derivative type
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Foreign exchange contracts
|
|
$
|
0.7
|
|
|
$
|
0.1
|
|
|
$
|
(0.3
|
)
|
Cost of sales
|
|
$
|
0.8
|
|
|
$
|
(0.1
|
)
|
|
$
|
(0.8
|
)
|
Effect of Derivatives on the Statement of Operations - Derivatives Not Designated as Hedging Instruments
|
(In millions)
|
|
Amount of Pretax Gain (Loss)
Recognized in Income
|
|
|
Derivative type
|
Location of Pretax Gain (Loss)
Recognized in Income
|
2013
|
|
2012
|
|
2011
|
|
|
Interest rate cap contract
|
Interest expense
|
|
$
|
-
|
|
|
$
|
(0.2
|
)
|
|
$
|
(1.1
|
)
|
|
British Pound – U.S. Dollar forward contract
|
Selling, general and administrative expenses
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
-
|
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in Accumulated Other Comprehensive (Loss) Income by Component
|
(In millions)
|
|
Gains (Losses) on Cash Flow Hedges
|
|
|
Defined Benefit Pension Items
|
|
|
Foreign Currency Translation
|
|
|
Total
|
|
|
Balance, January 1, 2011
|
|
$
|
(0.3
|
)
|
|
$
|
(16.4
|
)
|
|
$
|
8.3
|
|
|
$
|
(8.4
|
)
|
|
For the year ended December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications
|
|
|
(0.2
|
)
|
|
|
(9.3
|
)
|
|
|
(14.4
|
)
|
|
|
(23.9
|
)
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
|
|
0.5
|
|
|
|
2.2
|
|
|
|
-
|
|
|
|
2.7
|
|
|
Net comprehensive (loss) income
|
|
|
0.3
|
|
|
|
(7.1
|
)
|
|
|
(14.4
|
)
|
|
|
(21.2
|
)
|
|
Balance, December 31, 2011
|
|
|
-
|
|
|
|
(23.5
|
)
|
|
|
(6.1
|
)
|
|
|
(29.6
|
)
|
|
For the year ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
11.7
|
|
|
|
11.5
|
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.2
|
|
|
Net comprehensive (loss) income
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
11.7
|
|
|
|
11.7
|
|
|
Balance, December 31, 2012
|
|
|
0.1
|
|
|
|
(23.6
|
)
|
|
|
5.6
|
|
|
|
(17.9
|
)
|
|
For the year ended December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications
|
|
|
0.5
|
|
|
|
6.0
|
|
|
|
5.2
|
|
|
|
11.7
|
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
|
|
(0.6
|
)
|
|
|
0.7
|
|
|
|
-
|
|
|
|
0.1
|
|
|
Net comprehensive income
|
|
|
(0.1
|
)
|
|
|
6.7
|
|
|
|
5.2
|
|
|
|
11.8
|
|
|
Balance, December 31, 2013
|
|
$
|
-
|
|
|
$
|
(16.9
|
)
|
|
$
|
10.8
|
|
|
$
|
(6.1
|
)
|
Reclassifications Out of Accumulated Other Comprehensive Loss
|
|
|
Amount Reclassified from Accumulated Other Comprehensive Loss (a)
|
|
|
|
For the year ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Line Item in the Statement of Operations
|
|
Gains (losses) on foreign exchange contracts
|
|
$
|
0.8
|
|
|
$
|
(0.1
|
)
|
|
$
|
(0.8
|
)
|
Cost of goods sold
|
|
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
0.3
|
|
Provision for income taxes
|
|
|
|
|
0.6
|
|
|
|
(0.1
|
)
|
|
|
(0.5
|
)
|
Net of tax
|
|
Amortization of defined benefit pension actuarial losses
|
|
|
(1.1
|
)
|
|
|
(2.2
|
)
|
|
|
(3.4
|
)
|
Selling, general and administrative expenses
|
|
|
|
|
0.4
|
|
|
|
2.1
|
|
|
|
1.2
|
|
Provision for income taxes
|
|
|
|
|
(0.7
|
)
|
|
|
(0.1
|
)
|
|
|
(2.2
|
)
|
Net of tax
|
|
Total reclassifications
|
|
$
|
(0.1
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
(2.7
|
)
|
|
(a) - Amounts in parenthesis indicate debits to profit/loss.
OBLIGATIONS UNDER CAPITAL LEASES
Obligations under capital leases consist of the following:
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Warehouses, office facilities and equipment
|
|
$
|
21.3
|
|
|
$
|
23.4
|
|
|
Less: current portion
|
|
|
2.2
|
|
|
|
2.1
|
|
|
Obligations under capital leases - noncurrent
|
|
$
|
19.1
|
|
|
$
|
21.3
|
|
We lease an office facility in Bristol, Pennsylvania under a 20-year net lease that runs until July 2018 and requires minimum annual rent payments of approximately $1.2 million. The building was capitalized at $12.2 million, which approximated the present value of the minimum lease payments.
In 2003, we entered into a sale-leaseback agreement for our Virginia warehouse facility. This transaction resulted in a net gain of $7.5 million that has been deferred and is being amortized over the lease term, which runs until March 2023 and requires minimum annual rent payments of $2.4 million. The building was capitalized at $25.6 million, which approximated the present value of the minimum lease payments.
The following is a schedule by year of future minimum lease payments under capital leases, together with the present value of the net minimum lease payments as of December 31, 2013:
|
Year Ending December 31,
|
|
|
|
|
(In millions)
|
|
|
|
|
2014
|
|
$
|
3.7
|
|
|
2015
|
|
|
3.7
|
|
|
2016
|
|
|
3.7
|
|
|
2017
|
|
|
3.7
|
|
|
2018
|
|
|
3.2
|
|
|
Later years
|
|
|
10.4
|
|
|
Total minimum lease payments
|
|
|
28.4
|
|
|
Less: amount representing interest
|
|
|
7.1
|
|
|
Present value of net minimum lease payments
|
|
$
|
21.3
|
|
COMMON STOCK
The Board of Directors has authorized several programs to repurchase our common stock from time to time in open market transactions. We repurchased 1.2 million shares of our common stock during 2013 for $14.5 million, 4.2 million shares of our common stock during 2012 for $44.0 million and 7.2 million shares of our common stock during 2011 for $78.0 million. As of December 31, 2013, $156.9 million of Board authorized repurchases was still available. However, under the Merger Agreement, we are prohibited from repurchasing any additional common stock until the effective time of the Merger (or the termination of the Merger Agreement).
COMMITMENTS AND CONTINGENCIES
(a) CONTINGENT LIABILITIES. We have been named as a defendant in various actions and proceedings, including actions brought by certain employees whose employment has been terminated arising from our ordinary business activities. We and the individual members of our board of directors have been named as defendants in certain lawsuits relating to the Merger Agreement and the proposed Merger. The lawsuits generally allege that our directors breached their fiduciary duties by authorizing the Merger for an inadequate price following an inadequate process. The lawsuits also allege that Jones, Sycamore and certain of its affiliates aided and abetted the alleged breaches of fiduciary duties by the directors. Plaintiffs seek an injunction preventing consummation of the Merger, rescission in the event the Merger is consummated, damages and attorneys' fees and costs. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, in our opinion, any such liability will not have a material adverse effect on our financial position or results of operations.
(b) ROYALTIES. We have an exclusive license to produce, market and distribute costume jewelry in the United States, Canada, Mexico and Japan under the
Givenchy
trademark pursuant to an agreement with Givenchy, which expires on December 31, 2015. The agreement requires us to pay a percentage of net sales against guaranteed minimum royalty and advertising payments as set forth in the agreement.
We have a sub-license agreement with VCJS LLC ("VCJS") to design, develop, produce and distribute in the United States, Mexico and Canada
Jessica Simpson
jeanswear, activewear and sportswear under the
Jessica Simpson
(signature) trademark which VCJS licenses from With You, Inc. ("WYI"). The agreement, which expires on December 31, 2014 (October 15, 2014 if the master license between WYI and VCJS is not renewed), requires us to pay a percentage of net sales against guaranteed minimum royalty and pooled marketing fee payments as set forth in the agreement.
We also have a distribution and retail license agreement with VCJS to distribute products bearing the trademarks
Vince Camuto
,
Vince Camuto Signature
and
Jessica Simpson
in various European territories. The agreement, which ends on December 31, 2018 (unless terminated earlier or renewed) requires us to pay a percentage of net sales against guaranteed minimum royalty and pooled marketing fee payments as set forth in the agreement. The agreement contains renewal options under certain conditions through December 31, 2024.
We have an exclusive licensing and distribution agreement with Rafe IP Holdings LLC, a company affiliated with one of our employees, to design, develop, produce and distribute women's footwear, handbags, small leather goods and jewelry in the United States, Australia, Canada, Japan, the Philippines, Singapore and Korea under the
Rafe
and
Rafe New York
trademarks. The agreement, which expires on December 31, 2016, requires us to pay a percentage of net sales as set forth in the agreement. The agreement contains renewal options under certain conditions through December 31, 2026.
We have an exclusive license to design, develop, produce and distribute footwear worldwide under the
Lipsy
trademark pursuant to an agreement with Lipsy Limited, which expires on March 18, 2015. The agreement requires us to pay a percentage of net sales against guaranteed minimum royalty payments as set forth in the agreement.
Minimum payments under these license agreements are as follows.
|
Year Ending December 31,
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Givenchy
|
|
$
|
0.8
|
|
|
$
|
0.9
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Jessica Simpson/Vince Camuto
|
|
|
3.5
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
Lipsy
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$
|
4.4
|
|
|
$
|
1.3
|
|
|
$
|
0.3
|
|
|
$
|
0.3
|
|
|
$
|
0.3
|
|
(c) LEASES. Total rent expense charged to operations for 2013, 2012 and 2011 was as follows.
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Minimum rent
|
|
$
|
123.7
|
|
|
$
|
127.1
|
|
|
$
|
119.4
|
|
|
Contingent rent
|
|
|
2.4
|
|
|
|
2.5
|
|
|
|
3.5
|
|
|
Less: sublease rent
|
|
|
(1.4
|
)
|
|
|
(2.3
|
)
|
|
|
(4.5
|
)
|
|
|
|
$
|
124.7
|
|
|
$
|
127.3
|
|
|
$
|
118.4
|
|
The following is a schedule by year of minimum rental payments required under operating leases:
|
Year Ending December 31,
|
|
|
|
|
(In millions)
|
|
|
|
|
2014
|
|
$
|
130.4
|
|
|
2015
|
|
|
146.7
|
|
|
2016
|
|
|
105.2
|
|
|
2017
|
|
|
81.7
|
|
|
2018
|
|
|
77.3
|
|
|
Later years
|
|
|
368.0
|
|
|
|
|
$
|
909.3
|
|
Certain of the leases provide for renewal options and the payment of real estate taxes and other occupancy costs. Future rental commitments for leases have not been reduced by minimum non-cancelable sublease income aggregating $25.0 million.
STATEMENT OF CASH FLOWS
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid (received) during the year for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
82.3
|
|
|
$
|
147.1
|
|
|
$
|
45.9
|
|
|
Net income tax payments (refunds)
|
|
|
9.4
|
|
|
|
5.8
|
|
|
|
(9.6
|
)
|
|
Supplemental disclosures of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of restricted stock issued to employees
|
|
|
29.8
|
|
|
|
24.6
|
|
|
|
21.4
|
|
|
Shares withheld for taxes upon vesting of restricted stock
|
|
|
2.7
|
|
|
|
0.3
|
|
|
|
-
|
|
|
Note payable and deferred compensation recorded related to acquisition of Kurt Geiger
|
|
|
-
|
|
|
|
-
|
|
|
|
10.2
|
|
INCOME TAXES
The following summarizes the provision (benefit) for income taxes:
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(3.1
|
)
|
|
$
|
2.1
|
|
|
$
|
(4.9
|
)
|
|
State and local
|
|
|
2.1
|
|
|
|
1.5
|
|
|
|
0.6
|
|
|
Foreign
|
|
|
2.1
|
|
|
|
9.9
|
|
|
|
6.0
|
|
|
|
|
|
1.1
|
|
|
|
13.5
|
|
|
|
1.7
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
14.1
|
|
|
|
(11.6
|
)
|
|
|
26.7
|
|
|
State and local
|
|
|
0.5
|
|
|
|
(2.6
|
)
|
|
|
0.6
|
|
|
Foreign
|
|
|
(9.3
|
)
|
|
|
(12.2
|
)
|
|
|
(9.4
|
)
|
|
|
|
|
5.3
|
|
|
|
(26.4
|
)
|
|
|
17.9
|
|
|
Provision (benefit) for income taxes
|
|
$
|
6.4
|
|
|
$
|
(12.9
|
)
|
|
$
|
19.6
|
|
The domestic and foreign components of (loss) income before provision (benefit) for income taxes are as follows:
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit) provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
8.8
|
|
|
$
|
(2.4
|
)
|
|
$
|
72.7
|
|
|
Foreign
|
|
|
(22.1
|
)
|
|
|
(65.5
|
)
|
|
|
(1.6
|
)
|
|
|
|
$
|
(13.3
|
)
|
|
$
|
(67.9
|
)
|
|
$
|
71.1
|
|
The provision (benefit) provision for income taxes on adjusted historical income differs from the amounts computed by applying the applicable Federal statutory rates due to the following:
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for Federal income taxes at the statutory rate
|
|
$
|
(4.6
|
)
|
|
$
|
(23.8
|
)
|
|
$
|
24.9
|
|
|
State and local income taxes, net of federal benefit
|
|
|
1.4
|
|
|
|
0.5
|
|
|
|
1.7
|
|
|
Foreign income tax difference
|
|
|
(8.4
|
)
|
|
|
(6.8
|
)
|
|
|
(8.9
|
)
|
|
Goodwill impairments
|
|
|
13.2
|
|
|
|
16.7
|
|
|
|
-
|
|
|
Research & development tax credit
|
|
|
(1.7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Foreign valuation allowance
|
|
|
2.8
|
|
|
|
-
|
|
|
|
-
|
|
|
Amortization of contingent liability
|
|
|
0.9
|
|
|
|
0.9
|
|
|
|
0.5
|
|
|
Officers' compensation
|
|
|
0.5
|
|
|
|
0.7
|
|
|
|
0.7
|
|
|
Acquisition costs
|
|
|
0.4
|
|
|
|
0.1
|
|
|
|
0.8
|
|
|
Life insurance / disability
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.2
|
|
|
Meals & entertainment
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
Expiration of charitable contribution carryover
|
|
|
0.7
|
|
|
|
-
|
|
|
|
-
|
|
|
Change in net reserves - uncertain tax positions
|
|
|
0.5
|
|
|
|
(1.1
|
)
|
|
|
(0.9
|
)
|
|
Other items, net
|
|
|
0.1
|
|
|
|
(0.7
|
)
|
|
|
0.3
|
|
|
Provision (benefit) for income taxes
|
|
$
|
6.4
|
|
|
$
|
(12.9
|
)
|
|
$
|
19.6
|
|
We have not provided for deferred U.S. income taxes or foreign withholding taxes on $51.2 million of foreign subsidiary undistributed earnings as of December 31, 2013. The unrecorded U.S. tax liability associated with these undistributed earnings is approximately $16.5 million at December 31, 2013. Such earnings are intended to be reinvested indefinitely and, therefore, no U.S. tax liability is required.
The following is a summary of the significant components of our deferred tax assets and liabilities:
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Deferred tax assets (liabilities):
|
|
|
|
|
|
|
|
Nondeductible accruals and allowances
|
|
$
|
64.7
|
|
|
$
|
65.4
|
|
|
Depreciation
|
|
|
(3.4
|
)
|
|
|
2.8
|
|
|
Intangible asset valuation and amortization
|
|
|
(154.7
|
)
|
|
|
(154.3
|
)
|
|
Loss and credit carryforwards
|
|
|
52.0
|
|
|
|
43.4
|
|
|
Amortization of stock-based compensation
|
|
|
15.4
|
|
|
|
15.2
|
|
|
Deferred compensation
|
|
|
3.2
|
|
|
|
2.9
|
|
|
Inventory valuation
|
|
|
(5.3
|
)
|
|
|
(6.8
|
)
|
|
Pension
|
|
|
5.2
|
|
|
|
11.0
|
|
|
Gain on sale-leaseback transaction
|
|
|
1.5
|
|
|
|
1.7
|
|
|
Prepaid expenses
|
|
|
(2.7
|
)
|
|
|
(2.1
|
)
|
|
Display costs
|
|
|
(2.9
|
)
|
|
|
(3.8
|
)
|
|
Adjustments to acquisition consideration payable
|
|
|
(2.5
|
)
|
|
|
7.8
|
|
|
Partnership differences
|
|
|
1.2
|
|
|
|
-
|
|
|
Unrealized translation loss
|
|
|
(0.3
|
)
|
|
|
0.6
|
|
|
Fair value adjustment on interest rate swaps
|
|
|
1.7
|
|
|
|
1.3
|
|
|
Inventory overhead
|
|
|
0.6
|
|
|
|
0.1
|
|
|
Valuation allowances
|
|
|
(12.2
|
)
|
|
|
(8.8
|
)
|
|
Other (net)
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Net deferred tax liability
|
|
$
|
(38.4
|
)
|
|
$
|
(23.5
|
)
|
|
Included in:
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
32.0
|
|
|
|
33.2
|
|
|
Noncurrent liabilities
|
|
|
(70.4
|
)
|
|
|
(56.7
|
)
|
|
Net deferred tax liability
|
|
$
|
(38.4
|
)
|
|
$
|
(23.5
|
)
|
As of December 31, 2013, we had net operating loss carryforwards of $515.7 million (consisting of $6.9 million of federal, $442.7 million of state and $66.1 million of foreign carryforwards) which expire through 2033, foreign and general business tax credit carryforwards of $4.3 million, which expire through 2033, and state tax credit carryforwards of $7.8 million, which expire through 2021.
Uncertain tax positions
Our total unrecognized tax benefits as of December 31, 2013 and 2012 were $0.8 million and $0.3 million, respectively (net of federal tax benefit), which included $0.2 million and $0.0 million of interest and penalties, respectively (net of federal tax benefit).
|
(In millions)
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Uncertain tax positions, beginning of year
|
|
$
|
0.3
|
|
|
$
|
4.7
|
|
|
Decreases for tax positions related to prior years
|
|
|
0.5
|
|
|
|
(1.1
|
)
|
|
Settlements with tax authorities during the year
|
|
|
(0.0
|
)
|
|
|
(3.3
|
)
|
|
Uncertain tax positions, end of year
|
|
$
|
0.8
|
|
|
$
|
0.3
|
|
If recognized as of December 31, 2013 and 2012, $0.8 million and $0.3 million, respectively (net of federal tax benefit) of our unrecognized tax benefit would reduce income tax expense and the effective tax rate.
We file a consolidated U.S. federal income tax return as well as separate, unitary and combined income tax returns in multiple state jurisdictions. In addition, we file income tax returns in various foreign jurisdictions.
The Internal Revenue Service has completed examination of our federal returns for taxable years prior to 2011. Our state income tax examinations, with limited exceptions, have been completed for the periods prior to 2009. We reasonably expect to settle all ongoing audits by December 31, 2014.
STOCK OPTIONS AND RESTRICTED STOCK
Under The Jones Group Inc. 2009 Long Term Incentive Plan, we may grant stock options and other awards from time to time to key employees, officers, directors, advisors and independent consultants to us or to any of our subsidiaries. Shares available for future option and restricted stock grants at December 31, 2013 and 2012 totaled 4.1 million and 2.7 million, respectively. Under the Merger Agreement, we are subject to restrictions on our ability to grant awards.
Compensation cost recorded for stock-based employee compensation awards (including awards to non-employee directors and consultants) reflected as an SG&A expense was $23.3 million, $19.7 million and $16.7 million for 2013, 2012 and 2011, respectively. The total tax benefit recognized for the compensation cost recorded for stock-based employee compensation awards for 2013, 2012 and 2011 totaled $7.1 million, $6.3 million and $5.1 million, respectively. Total compensation cost related to unvested awards not yet recognized at December 31, 2013 was $21.1 million, which is expected to be amortized over a weighted-average period of approximately 23 months.
Stock Options
In general, options become exercisable over either a three-year or five-year period from the grant date and expire seven years after the date of grant. In certain cases for non-employee directors, options become exercisable six months after the grant date. Our policy is to issue new shares upon the exercise of options and, when possible, to offset these new shares by repurchasing shares in the open market. We currently do not have any outstanding stock options.
The following tables summarize information about stock option transactions and related information (options in millions):
|
|
|
2012
|
|
|
2011
|
|
|
|
|
Options
|
|
|
Weighted Average Exercise Price
|
|
|
Options
|
|
|
Weighted Average Exercise Price
|
|
|
Outstanding, January 1,
|
|
|
1.9
|
|
|
$
|
36.50
|
|
|
|
4.4
|
|
|
$
|
34.74
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
32.87
|
|
|
Expired
|
|
|
(1.9
|
)
|
|
|
36.50
|
|
|
|
(2.4
|
)
|
|
|
33.43
|
|
|
Outstanding, December 31,
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1.9
|
|
|
$
|
36.50
|
|
|
Exercisable, December 31,
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1.9
|
|
|
$
|
36.50
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Weighted-average contractual term (in years) of:
|
|
|
|
|
|
|
|
Options outstanding at end of year
|
|
|
-
|
|
|
|
0.2
|
|
|
Options exercisable at end of year
|
|
|
-
|
|
|
|
0.2
|
|
|
Intrinsic value (in millions) of:
|
|
|
|
|
|
|
|
|
|
Options outstanding at end of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Options exercisable at end of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Options exercised during the year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Fair value (in millions) of options vested during the year
|
|
$
|
-
|
|
|
$
|
-
|
|
Restricted Stock
Compensation cost for restricted stock that vests based upon the passage of time or on the achievement of a performance condition is measured as the excess, if any, of the quoted market price of our stock at the date the common stock is granted over the amount the employee must pay to acquire the
stock (which is generally zero). Compensation cost for restricted stock that vests upon the achievement of a performance condition is also based upon the probability that the performance condition will be satisfied. Compensation cost for restricted stock that vests based upon the achievement of a market condition is determined based on a Monte Carlo valuation model and is recognized regardless of whether or not the market condition is satisfied.
Compensation cost, net of projected forfeitures, is recognized over the period between the issue date and the date any restrictions lapse, with compensation cost for grants with a graded vesting schedule recognized on a straight-line basis over the requisite service period for the total award. Restricted share awards generally vest over a period of approximately three years. The restrictions do not affect voting and dividend rights except for certain grants with performance and market conditions where dividends are paid only to the extent the shares vest.
Time-Based Vesting
The following tables summarize information about unvested restricted stock transactions and related information for shares subject to time-based vesting (shares in millions):
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Nonvested, January 1,
|
|
|
2.2
|
|
|
$
|
11.64
|
|
|
|
1.9
|
|
|
$
|
11.66
|
|
|
|
2.0
|
|
|
$
|
10.24
|
|
|
Granted
|
|
|
1.1
|
|
|
|
12.49
|
|
|
|
1.2
|
|
|
|
9.76
|
|
|
|
0.9
|
|
|
|
12.56
|
|
|
Vested
|
|
|
(0.5
|
)
|
|
|
13.86
|
|
|
|
(0.7
|
)
|
|
|
8.24
|
|
|
|
(0.8
|
)
|
|
|
9.27
|
|
|
Forfeited
|
|
|
(0.2
|
)
|
|
|
11.86
|
|
|
|
(0.2
|
)
|
|
|
12.43
|
|
|
|
(0.2
|
)
|
|
|
11.34
|
|
|
Nonvested, December 31,
|
|
|
2.6
|
|
|
$
|
11.85
|
|
|
|
2.2
|
|
|
$
|
11.64
|
|
|
|
1.9
|
|
|
$
|
11.66
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Fair value (in millions) of shares vested during the year
|
|
$
|
7.4
|
|
|
$
|
5.7
|
|
|
$
|
7.7
|
|
Performance Conditions
Restricted stock grants that vest subject to performance conditions will vest subject to achievement of a cumulative operating cash flow target for a specified three-year period, as follows, with interpolation for intermediate points.
|
Performance Against Budget
|
Vesting
|
|
100% or Better
|
100%
|
|
90%
|
75%
|
|
80%
|
50%
|
|
Below 80%
|
0%
|
The following tables summarize information about unvested restricted stock transactions and related information for shares with performance conditions (shares in millions):
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Nonvested, January 1,
|
|
|
1.8
|
|
|
$
|
11.48
|
|
|
|
1.5
|
|
|
$
|
10.79
|
|
|
|
1.3
|
|
|
$
|
11.21
|
|
|
Granted
|
|
|
0.8
|
|
|
|
12.00
|
|
|
|
1.0
|
|
|
|
9.34
|
|
|
|
0.6
|
|
|
|
12.61
|
|
|
Vested
|
|
|
(0.4
|
)
|
|
|
14.90
|
|
|
|
(0.6
|
)
|
|
|
6.19
|
|
|
|
(0.3
|
)
|
|
|
14.46
|
|
|
Forfeited
|
|
|
(0.1
|
)
|
|
|
10.78
|
|
|
|
(0.1
|
)
|
|
|
10.30
|
|
|
|
(0.1
|
)
|
|
|
15.28
|
|
|
Nonvested, December 31,
|
|
|
2.1
|
|
|
$
|
11.22
|
|
|
|
1.8
|
|
|
$
|
11.48
|
|
|
|
1.5
|
|
|
$
|
10.79
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Fair value (in millions) of shares vested during the year
|
|
$
|
5.9
|
|
|
$
|
3.6
|
|
|
$
|
4.8
|
|
Market Conditions
Restricted stock grants that vest subject to market conditions will vest if our total shareholder return (which is the stock price appreciation, assuming dividends are reinvested in our common stock when paid) for a specified three-year period is equal to or greater than the median total shareholder return of a peer group of apparel, footwear, and department store companies, as follows, with interpolation for intermediate points.
|
Performance Relative to Peers
|
Vesting
|
|
Median or Better
|
100%
|
|
40th Percentile
|
75%
|
|
30th
Percentile
|
50%
|
|
Below 30th Percentile
|
0%
|
The following tables summarize information about unvested restricted stock transactions and related information for shares with market conditions (shares in millions):
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Shares
|
|
|
Weighted Average Fair Value
|
|
|
Nonvested, January 1,
|
|
|
1.8
|
|
|
$
|
5.94
|
|
|
|
1.5
|
|
|
$
|
6.80
|
|
|
|
1.3
|
|
|
$
|
11.21
|
|
|
Granted
|
|
|
0.8
|
|
|
|
7.25
|
|
|
|
1.0
|
|
|
|
3.66
|
|
|
|
0.6
|
|
|
|
3.15
|
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
6.60
|
|
|
|
(0.3
|
)
|
|
|
14.46
|
|
|
Forfeited
|
|
|
(0.5
|
)
|
|
|
12.56
|
|
|
|
(0.5
|
)
|
|
|
3.33
|
|
|
|
(0.1
|
)
|
|
|
15.28
|
|
|
Nonvested, December 31,
|
|
|
2.1
|
|
|
$
|
4.87
|
|
|
|
1.8
|
|
|
$
|
5.94
|
|
|
|
1.5
|
|
|
$
|
6.80
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Fair value (in millions) of shares vested during the year
|
|
|
-
|
|
|
$
|
1.6
|
|
|
$
|
4.8
|
|
EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
We maintain several defined contribution plans under Section 401(k) of the Internal Revenue Code (the "Code"), of which the primary plan is The Jones Group Inc. Retirement Plan (the "Jones Plan"). Employees not covered by a collective bargaining agreement and meeting certain other requirements are eligible to participate in the Jones Plan. Under the Jones Plan, participants may elect to have up to 50% of their salary (subject to limitations imposed by the Code) deferred and deposited with a qualified trustee,
who in turn invests the money in a variety of investment vehicles as selected by each participant. All employee contributions into the Jones Plan are 100% vested.
We have elected to make the Jones Plan a "Safe Harbor Plan" under Section 401(k)(12) of the Code. As a result of this election, we make a fully-vested safe harbor matching contribution for all eligible participants amounting to 100% of the first 3% of the participant's salary deferred and 50% of the next 2% of salary deferred, subject to maximums set by the Department of the Treasury. We may, at our sole discretion, contribute additional amounts to all employees on a pro rata basis.
We contributed approximately $8.3 million, $8.0 million and $7.9 million to our defined contribution plans during 2013, 2012 and 2011, respectively.
Defined Benefit Plans
We maintain the Pension Plan for Associates of Nine West Group Inc. (the "Cash Balance Plan"). The Cash Balance Plan expresses retirement benefits as an account balance which increases each year through interest credits, with service credits frozen as of either December 31, 1995 or February 15, 1999, depending on the participant.
Our funding policy is to contribute at least the minimum amount to meet the funding ratio requirements of the Pension Protection Act.
We plan to contribute $4.8 million to the Cash Balance Plan in 2014. The measurement date for all plans is December 31.
Obligations and Funded Status
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Change in benefit obligation
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
62.2
|
|
|
$
|
56.8
|
|
|
Interest cost
|
|
|
2.4
|
|
|
|
2.5
|
|
|
Actuarial loss (gain) - effect of assumption changes
|
|
|
(8.0
|
)
|
|
|
5.6
|
|
|
Benefits paid
|
|
|
(4.0
|
)
|
|
|
(2.7
|
)
|
|
Benefit obligation, end of year
|
|
|
52.6
|
|
|
|
62.2
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
|
42.0
|
|
|
|
35.0
|
|
|
Actual return on plan assets
|
|
|
4.8
|
|
|
|
5.3
|
|
|
Employer contribution
|
|
|
4.8
|
|
|
|
4.4
|
|
|
Benefits paid
|
|
|
(4.0
|
)
|
|
|
(2.7
|
)
|
|
Fair value of plan assets, end of year
|
|
|
47.6
|
|
|
|
42.0
|
|
|
Underfunded status at end of year
|
|
$
|
5.0
|
|
|
$
|
20.2
|
|
Amounts Recognized on the Balance Sheet
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
$
|
5.0
|
|
|
$
|
20.2
|
|
Amounts Recognized in Accumulated Other Comprehensive Loss
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
27.4
|
|
|
$
|
38.2
|
|
Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
52.6
|
|
|
$
|
62.2
|
|
|
Accumulated benefit obligation
|
|
|
52.6
|
|
|
|
62.2
|
|
|
Fair value of plan assets
|
|
|
47.6
|
|
|
|
42.0
|
|
Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income or Loss
|
Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
(In millions)
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
2.4
|
|
|
$
|
2.5
|
|
|
Expected return on plan assets
|
|
|
(3.1
|
)
|
|
|
(2.6
|
)
|
|
Amortization of net loss
|
|
|
1.1
|
|
|
|
2.1
|
|
|
Total net periodic benefit cost
|
|
|
0.4
|
|
|
|
2.0
|
|
|
Other Changes in Plan Assets and Benefit Obligations
|
|
|
|
|
|
|
|
|
|
Recognized in Other Comprehensive Loss:
|
|
|
|
|
|
|
|
|
|
Net (gain) loss
|
|
|
(9.7
|
)
|
|
|
2.9
|
|
|
Amortization of net loss
|
|
|
(1.1
|
)
|
|
|
(2.1
|
)
|
|
Total recognized in other comprehensive loss
|
|
|
(10.8
|
)
|
|
|
0.8
|
|
|
Total recognized in net periodic benefit cost and other comprehensive loss
|
|
$
|
(10.4
|
)
|
|
$
|
2.8
|
|
The estimated net loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2014 is $0.8 million.
Assumptions
|
|
|
|
2013
|
|
|
2012
|
|
|
|
Weighted-average assumptions used to determine:
|
|
|
|
|
|
|
|
|
Benefit obligations at December 31
|
|
|
|
|
|
|
|
|
Discount rate
|
|
4.8%
|
|
|
3.9%
|
|
|
|
Net periodic benefit cost for year ended December 31
|
|
|
|
|
|
|
|
|
Discount rate
|
|
3.9%
|
|
|
4.6%
|
|
|
|
Expected long-term return on plan assets
|
|
7.0%
|
|
|
7.0%
|
|
Significant assumptions related to the calculation of our obligations include the discount rate used to calculate the present value of benefit obligations to be paid in the future and the expected long-term rate of return on assets. We review these assumptions annually based upon currently available information, including information provided by our actuaries. Based on these reviews, we increased the discount rate for benefit obligations at December 31, 2013 to 4.8%, as compared with 3.9% in the prior year, based on the Citigroup Above Median AA Spot Rates as of December 31, 2013. At December 31, 2013, an unfavorable quarter-point (0.25%) change in the discount rate would increase our benefit obligation liability by $2.0 million and
would increase our 2014 expense less than $0.1 million, while a quarter-point change in the expected long-term return on plan asset assumption would increase our 2014 expense by $0.1 million.
Estimated Future Benefit Payments
|
Year Ending December 31,
|
|
|
|
|
(In millions)
|
|
|
|
|
2014
|
|
$
|
2.3
|
|
|
2015
|
|
|
2.4
|
|
|
2016
|
|
|
2.5
|
|
|
2017
|
|
|
2.5
|
|
|
2018
|
|
|
2.7
|
|
|
2019 through 2023
|
|
|
16.3
|
|
|
|
|
$
|
28.7
|
|
Plan Assets
Our overall investment strategy is to diversify investments across types of investments and investment managers. The primary objectives are to achieve a rate of return sufficient to meet current and future plan cash requirements and to emphasize long-term growth of principal while avoiding excessive risk and maintaining fund liquidity. Permitted investment vehicles include investment-grade fixed income securities, domestic and foreign equity securities, mutual funds, guaranteed insurance contracts and real estate, while speculative and derivative investment vehicles, short selling and margin transactions are generally prohibited. The investment managers have full discretion to manage their portion of the investments subject to the objectives and policies of the respective plans. The performance of the investment managers is reviewed on a regular basis. At December 31, 2013, the target allocation percentages for fund investments were 36.0% fixed income securities, 34.5% domestic equity securities, 19.0% international equity securities, 5.5% real estate and 5.0% cash and cash equivalents.
To determine the overall expected long-term rate-of-return-on-assets assumption, we add an expected inflation rate to the expected long-term real returns of our various asset classes, taking into account expected volatility and correlation between the returns of the asset classes as follows: for equities and real estate, a historical average arithmetic real return; for government fixed-income securities, current yields on inflation-indexed bonds; and for corporate fixed-income securities, the yield on government fixed-income securities plus a blend of current and historical credit spreads.
The fair values of our pension plan assets at December 31, 2013 and 2012 by asset class are presented in the following table. All fair values are either based on quoted prices in active markets for identical assets (Level 1 in the fair value hierarchy) or derived from cash flows and interest rates (Level 2).
|
(In millions)
|
|
2013
|
|
|
2012
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Asset Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
1.7
|
|
|
$
|
-
|
|
|
$
|
1.7
|
|
|
$
|
3.5
|
|
|
$
|
-
|
|
|
$
|
3.5
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. companies (a)
|
|
|
21.2
|
|
|
|
-
|
|
|
|
21.2
|
|
|
|
16.4
|
|
|
|
-
|
|
|
|
16.4
|
|
|
International companies (b)
|
|
|
5.7
|
|
|
|
-
|
|
|
|
5.7
|
|
|
|
5.6
|
|
|
|
-
|
|
|
|
5.6
|
|
|
Real Estate (c)
|
|
|
2.5
|
|
|
|
-
|
|
|
|
2.5
|
|
|
|
2.3
|
|
|
|
-
|
|
|
|
2.3
|
|
|
Fixed income (d)
|
|
|
5.1
|
|
|
|
11.4
|
|
|
|
16.5
|
|
|
|
5.0
|
|
|
|
9.2
|
|
|
|
14.2
|
|
|
Total
|
|
$
|
36.2
|
|
|
$
|
11.4
|
|
|
$
|
47.6
|
|
|
$
|
32.8
|
|
|
$
|
9.2
|
|
|
$
|
42.0
|
|
|
(a)
|
This class consists of both index and actively
managed mutual funds that invest in large and mid-cap U.S. common stocks.
|
|
(b)
|
This class consists of both index and actively managed mutual funds that invest in large and emerging market international common stocks.
|
|
(c)
|
This class consists of actively managed mutual funds that invest in real estate investment trusts.
|
|
(d)
|
This class consists of managed mutual funds that invest in high-grade corporate, government and mortgage backed securities.
|
Other Plans
We also maintain the Nine West Group Inc. Supplemental Executive Retirement Plan, the Nine West Group Inc. Postretirement Executive Life Plan, the Nine West Group, Inc. Postretirement Medical Plan and the Nine West Group Inc. Long Term Disabled Postemployment Benefit Plan, all of which are frozen and none of which have a material effect on our results of operations or on our financial position. These plans, which are unfunded, were underfunded by $4.0 million at December 31, 2013. Of this amount, $0.3 million is reported under accrued expenses and other current liabilities and $3.7 million is reported under other noncurrent liabilities.
We also maintain The Jones Group Inc. Deferred Compensation Plan, a non-qualified defined contribution plan for certain management and other highly compensated employees (the "Rabbi Trust"). Under the plan, participants may elect to have up to 90% of their salary and annual bonus deferred and deposited with a qualified trustee, who in turn invests the money in a variety of investment vehicles as selected by each participant. The assets of the Rabbi Trust, consisting of primarily debt and equity securities, are recorded at current market prices (Level 1 in the fair value hierarchy). The trust assets are available to satisfy claims of our general creditors in the event of bankruptcy. The trust's assets, included in prepaid expenses and other current assets, and the corresponding deferred compensation liability, included in accrued employee compensation and benefits, were $9.1 million and $8.4 million at December 31, 2013 and 2012, respectively. This plan has no effect on our results of operations.
Multiemployer Pension Plans
We participate in several multiemployer defined benefit plans under terms of collective-bargaining agreements that cover certain union-represented employees, none of which are significant. We contributed $0.3 million, $0.2 million and $0.2 million to our multiemployer plans in 2013, 2012 and 2011, respectively. The risks of participating in these multiemployer plans differ from our other defined benefit plans in the following respects:
|
·
|
assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers;
|
|
·
|
if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and
|
|
·
|
if we choose to stop participating in a multiemployer plan, we may be required to contribute an amount to that plan based on the underfunded status of the plan (referred to as a withdrawal liability).
|
In 2013, we voluntarily withdrew from a multiemployer plan and have recorded a withdrawal liability of $0.2 million.
BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
We identify operating segments based on, among other things, differences in products sold and the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Our operations are comprised of six reportable segments: domestic wholesale sportswear, domestic wholesale jeanswear, domestic wholesale footwear and accessories, domestic retail, international wholesale and international retail. Segment revenues are generated from the sale of apparel, footwear and accessories through wholesale channels and our own retail locations. The wholesale segments include wholesale operations with third party department and other retail stores, the retail segments include operations by our own stores, concession locations and e-commerce web sites, and income and expenses related to trademarks, licenses and general corporate functions are reported under "licensing and other." "Eliminations" represent intercompany transactions and reclassifications between segments which do not necessarily occur in every period.
We define segment income as operating income before net interest expense, goodwill impairment charges, gains or losses on sales of subsidiaries, equity in earnings of unconsolidated affiliates and income taxes. Sales and transfers between segments generally are recorded at cost and treated as
transfers of inventory, which are not reviewed when evaluating segment performance. The wholesale segments allocate to the retail segments a portion of their SG&A costs related to the services utilized by those divisions where the retail operations benefit from those costs.
Summarized below are our revenues, income, depreciation and amortization, expenditures for long-lived assets and total assets by reportable segment for 2013, 2012 and 2011. We are an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, we do not represent that these segments, if operated independently, would report the operating profit and other financial information shown below.
|
(In millions)
|
|
Domestic Wholesale Sportswear
|
|
|
Domestic Wholesale Jeanswear
|
|
|
Domestic Wholesale Footwear & Accessories
|
|
|
Domestic Retail
|
|
|
International Wholesale
|
|
|
International Retail
|
|
|
Licensing & Other
|
|
|
Eliminations
|
|
|
Cons-olidated
|
|
|
For the year ended December 31, 2013
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
671.1
|
|
|
$
|
822.9
|
|
|
$
|
916.5
|
|
|
$
|
564.4
|
|
|
$
|
329.3
|
|
|
$
|
417.5
|
|
|
$
|
43.2
|
|
|
$
|
-
|
|
|
$
|
3,764.9
|
|
|
Segment (loss) income
|
|
$
|
(5.5
|
)
|
|
$
|
76.3
|
|
|
$
|
69.9
|
|
|
$
|
(62.0
|
)
|
|
$
|
34.8
|
|
|
$
|
3.8
|
|
|
$
|
(21.0
|
)
|
|
$
|
-
|
|
|
$
|
96.3
|
|
|
Net interest expense
|
|
|
|
|
|
|
|
(60.3
|
)
|
|
Equity in income of unconsolidated affiliate
|
|
|
|
|
|
|
|
0.6
|
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
(49.9
|
)
|
|
Loss before provision for income taxes
|
|
|
|
|
|
|
$
|
(13.3
|
)
|
|
Depreciation and amortization
|
|
$
|
4.1
|
|
|
$
|
1.2
|
|
|
$
|
6.6
|
|
|
$
|
13.7
|
|
|
$
|
1.9
|
|
|
$
|
25.6
|
|
|
$
|
57.8
|
|
|
$
|
-
|
|
|
$
|
110.9
|
|
|
Expenditures for long-lived assets
|
|
|
7.8
|
|
|
|
3.4
|
|
|
|
9.8
|
|
|
|
17.5
|
|
|
|
0.7
|
|
|
|
13.8
|
|
|
|
19.5
|
|
|
|
-
|
|
|
|
72.5
|
|
|
For the year ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
782.0
|
|
|
$
|
746.7
|
|
|
$
|
919.7
|
|
|
$
|
584.6
|
|
|
$
|
330.0
|
|
|
$
|
388.9
|
|
|
$
|
46.2
|
|
|
$
|
-
|
|
|
$
|
3,798.1
|
|
|
Segment income (loss)
|
|
$
|
38.0
|
|
|
$
|
53.0
|
|
|
$
|
57.4
|
|
|
$
|
(51.7
|
)
|
|
$
|
33.8
|
|
|
$
|
5.5
|
|
|
$
|
(13.5
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
122.3
|
|
|
Net interest expense
|
|
|
|
|
|
|
|
(145.1
|
)
|
|
Equity in income of unconsolidated affiliate
|
|
|
|
|
|
|
|
2.5
|
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
(47.6
|
)
|
|
Loss before benefit for income taxes
|
|
|
|
|
|
|
$
|
(67.9
|
)
|
|
Depreciation and amortization
|
|
$
|
5.8
|
|
|
$
|
1.1
|
|
|
$
|
8.7
|
|
|
$
|
13.3
|
|
|
$
|
3.0
|
|
|
$
|
23.8
|
|
|
$
|
54.1
|
|
|
$
|
-
|
|
|
$
|
109.8
|
|
|
Expenditures for long-lived assets
|
|
|
10.3
|
|
|
|
4.0
|
|
|
|
12.6
|
|
|
|
20.5
|
|
|
|
0.9
|
|
|
|
27.3
|
|
|
|
25.1
|
|
|
|
-
|
|
|
|
100.7
|
|
|
For the year ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
892.3
|
|
|
$
|
773.7
|
|
|
$
|
848.0
|
|
|
$
|
631.2
|
|
|
$
|
329.5
|
|
|
$
|
260.4
|
|
|
$
|
50.2
|
|
|
$
|
-
|
|
|
$
|
3,785.3
|
|
|
Segment income (loss)
|
|
$
|
74.0
|
|
|
$
|
49.6
|
|
|
$
|
40.9
|
|
|
$
|
(37.9
|
)
|
|
$
|
35.5
|
|
|
$
|
6.9
|
|
|
$
|
(30.0
|
)
|
|
$
|
1.5
|
|
|
$
|
140.5
|
|
|
Net interest expense
|
|
|
|
|
|
|
|
(73.3
|
)
|
|
Equity in income of unconsolidated affiliate
|
|
|
|
|
|
|
|
3.9
|
|
|
Income before provision for income taxes
|
|
|
|
|
|
|
$
|
71.1
|
|
|
Depreciation and amortization
|
|
$
|
9.0
|
|
|
$
|
1.2
|
|
|
$
|
10.4
|
|
|
$
|
17.2
|
|
|
$
|
4.3
|
|
|
$
|
12.9
|
|
|
$
|
49.8
|
|
|
$
|
-
|
|
|
$
|
104.8
|
|
|
Expenditures for long-lived assets
|
|
|
34.6
|
|
|
|
4.3
|
|
|
|
6.6
|
|
|
|
14.5
|
|
|
|
4.1
|
|
|
|
19.6
|
|
|
|
28.8
|
|
|
|
-
|
|
|
|
112.5
|
|
|
Total Assets (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
$
|
920.3
|
|
|
$
|
692.8
|
|
|
$
|
1,096.2
|
|
|
$
|
257.7
|
|
|
$
|
238.2
|
|
|
$
|
402.2
|
|
|
$
|
1,902.7
|
|
|
$
|
(2,998.2
|
)
|
|
$
|
2,511.9
|
|
|
December 31, 2012
|
|
|
1,061.8
|
|
|
|
683.7
|
|
|
|
1,111.9
|
|
|
|
288.0
|
|
|
|
254.9
|
|
|
|
377.1
|
|
|
|
2,062.3
|
|
|
|
(3,244.2
|
)
|
|
|
2,595.5
|
|
|
December 31, 2011
|
|
|
1,034.7
|
|
|
|
638.6
|
|
|
|
1,001.0
|
|
|
|
254.6
|
|
|
|
238.7
|
|
|
|
396.4
|
|
|
|
1,747.0
|
|
|
|
(2,595.7
|
)
|
|
$
|
2,715.3
|
|
(a) – total assets for licensing and other includes investment in equity-method investees of $56.2 million, $38.9 million and $35.6 million for 2013, 2012 and 2011, respectively.
The total assets eliminations consist of the following:
|
December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination of intersegment balances
|
|
$
|
(1,368.0
|
)
|
|
$
|
(1,450.9
|
)
|
|
$
|
(1,404.0
|
)
|
|
Reclassification of deferred tax assets
|
|
|
(137.5
|
)
|
|
|
(154.5
|
)
|
|
|
(134.9
|
)
|
|
Elimination of investments in subsidiaries
|
|
|
(1,492.7
|
)
|
|
|
(1,638.8
|
)
|
|
|
(1,056.8
|
)
|
|
|
|
$
|
(2,998.2
|
)
|
|
$
|
(3,244.2
|
)
|
|
$
|
(2,595.7
|
)
|
Revenues from external customers and long-lived assets excluding deferred taxes related to operations in the United States and foreign countries and revenues by product category are as follows:
|
On or for the Year Ended December 31,
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
3,004.4
|
|
|
$
|
3,018.0
|
|
|
$
|
3,119.2
|
|
|
United Kingdom
|
|
|
356.1
|
|
|
|
343.7
|
|
|
|
216.1
|
|
|
Canada
|
|
|
132.9
|
|
|
|
146.1
|
|
|
|
152.2
|
|
|
Other foreign countries
|
|
|
271.5
|
|
|
|
290.3
|
|
|
|
297.8
|
|
|
|
|
$
|
3,764.9
|
|
|
$
|
3,798.1
|
|
|
$
|
3,785.3
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,037.0
|
|
|
$
|
1,072.0
|
|
|
$
|
1,100.2
|
|
|
United Kingdom
|
|
|
279.4
|
|
|
|
290.4
|
|
|
|
335.4
|
|
|
Other foreign countries
|
|
|
93.8
|
|
|
|
136.4
|
|
|
|
124.2
|
|
|
|
|
$
|
1,410.2
|
|
|
$
|
1,498.8
|
|
|
$
|
1,559.8
|
|
|
Revenues by product category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sportswear
|
|
$
|
916.6
|
|
|
$
|
1,036.5
|
|
|
$
|
1,158.9
|
|
|
Jeanswear
|
|
|
827.8
|
|
|
|
746.7
|
|
|
|
773.8
|
|
|
Footwear and accessories
|
|
|
1,977.5
|
|
|
|
1,968.8
|
|
|
|
1,802.5
|
|
|
Other
|
|
|
43.0
|
|
|
|
46.1
|
|
|
|
50.1
|
|
|
|
|
$
|
3,764.9
|
|
|
$
|
3,798.1
|
|
|
$
|
3,785.3
|
|
SUPPLEMENTAL CONDENSED FINANCIAL INFORMATION
The Jones Group Inc. (the "parent company" or "Jones") and certain of its 100%-owned subsidiaries, including Jones Apparel Group, USA, Inc. ("Jones USA"), Jones Apparel Group Holdings, Inc. ("Jones Holdings") and JAG Footwear, Accessories and Retail Corporation ("JAG Footwear"), function as co-issuers and co-obligors (on a full and unconditional, joint and several basis) of our 5.125% Senior Notes due 2014, our 6.875% Senior Notes due 2019 and our 6.125% Senior Notes due 2034 (collectively, the "Notes").
The following condensed consolidating balance sheets, statements of operations, statements of comprehensive income and statements of cash flows for the parent company (Jones), the "Co-Issuers" (consisting of Jones USA, Jones Holdings and JAG Footwear, which are all our subsidiaries that act as co-issuers and co-obligors of the Notes) and the "Others" (consisting of all of our other subsidiaries, none of which guarantee any of the Notes), have been prepared using the equity method of accounting in accordance with the requirements for presentation of such information. There are no contractual restrictions on distributions from Jones USA, Jones Holdings or JAG Footwear to Jones.
Condensed Consolidating Balance Sheets
|
(In millions)
|
|
December 31, 2013
|
|
|
December 31, 2012
|
|
|
|
|
Jones
|
|
|
Co-Issuers
|
|
|
Others
|
|
|
Elim-inations
|
|
|
Cons-olidated
|
|
|
Jones
|
|
|
Co-Issuers
|
|
|
Others
|
|
|
Elim-inations
|
|
|
Cons-olidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
|
$
|
88.3
|
|
|
$
|
28.1
|
|
|
$
|
-
|
|
|
$
|
116.4
|
|
|
$
|
-
|
|
|
$
|
82.6
|
|
|
$
|
67.0
|
|
|
$
|
-
|
|
|
$
|
149.6
|
|
|
Accounts receivable
|
|
|
-
|
|
|
|
163.3
|
|
|
|
183.7
|
|
|
|
-
|
|
|
|
347.0
|
|
|
|
-
|
|
|
|
191.0
|
|
|
|
190.0
|
|
|
|
-
|
|
|
|
381.0
|
|
|
Inventories, primarily finished goods
|
|
|
-
|
|
|
|
258.2
|
|
|
|
286.5
|
|
|
|
(0.9
|
)
|
|
|
543.8
|
|
|
|
-
|
|
|
|
261.7
|
|
|
|
226.2
|
|
|
|
(1.2
|
)
|
|
|
486.7
|
|
|
Prepaid and refundable income taxes
|
|
|
-
|
|
|
|
16.8
|
|
|
|
0.4
|
|
|
|
(5.3
|
)
|
|
|
11.9
|
|
|
|
-
|
|
|
|
18.6
|
|
|
|
0.3
|
|
|
|
(13.4
|
)
|
|
|
5.5
|
|
|
Deferred taxes
|
|
|
-
|
|
|
|
17.5
|
|
|
|
14.5
|
|
|
|
-
|
|
|
|
32.0
|
|
|
|
-
|
|
|
|
17.9
|
|
|
|
15.3
|
|
|
|
-
|
|
|
|
33.2
|
|
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
29.8
|
|
|
|
21.3
|
|
|
|
(0.5
|
)
|
|
|
50.6
|
|
|
|
-
|
|
|
|
23.6
|
|
|
|
18.2
|
|
|
|
(1.1
|
)
|
|
|
40.7
|
|
|
Total current assets
|
|
|
-
|
|
|
|
573.9
|
|
|
|
534.5
|
|
|
|
(6.7
|
)
|
|
|
1,101.7
|
|
|
|
-
|
|
|
|
595.4
|
|
|
|
517.0
|
|
|
|
(15.7
|
)
|
|
|
1,096.7
|
|
|
Property, plant and equipment
|
|
|
-
|
|
|
|
58.3
|
|
|
|
190.7
|
|
|
|
-
|
|
|
|
249.0
|
|
|
|
-
|
|
|
|
64.6
|
|
|
|
213.5
|
|
|
|
-
|
|
|
|
278.1
|
|
|
Due from affiliates
|
|
|
-
|
|
|
|
329.8
|
|
|
|
497.9
|
|
|
|
(827.7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
497.7
|
|
|
|
319.0
|
|
|
|
(816.7
|
)
|
|
|
-
|
|
|
Goodwill
|
|
|
-
|
|
|
|
-
|
|
|
|
166.4
|
|
|
|
-
|
|
|
|
166.4
|
|
|
|
-
|
|
|
|
49.9
|
|
|
|
165.4
|
|
|
|
-
|
|
|
|
215.3
|
|
|
Other intangibles
|
|
|
-
|
|
|
|
5.2
|
|
|
|
847.2
|
|
|
|
-
|
|
|
|
852.4
|
|
|
|
-
|
|
|
|
6.0
|
|
|
|
863.7
|
|
|
|
-
|
|
|
|
869.7
|
|
|
Deferred taxes
|
|
|
-
|
|
|
|
93.1
|
|
|
|
-
|
|
|
|
(93.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
93.0
|
|
|
|
-
|
|
|
|
(93.0
|
)
|
|
|
-
|
|
|
Investments in subsidiaries
|
|
|
1,809.8
|
|
|
|
1,921.0
|
|
|
|
56.2
|
|
|
|
(3,730.8
|
)
|
|
|
56.2
|
|
|
|
1,811.5
|
|
|
|
1,745.4
|
|
|
|
38.9
|
|
|
|
(3,556.9
|
)
|
|
|
38.9
|
|
|
Other assets
|
|
|
-
|
|
|
|
62.6
|
|
|
|
23.6
|
|
|
|
-
|
|
|
|
86.2
|
|
|
|
-
|
|
|
|
67.7
|
|
|
|
29.1
|
|
|
|
-
|
|
|
|
96.8
|
|
|
Total assets
|
|
$
|
1,809.8
|
|
|
$
|
3,043.9
|
|
|
$
|
2,316.5
|
|
|
$
|
(4,658.3
|
)
|
|
$
|
2,511.9
|
|
|
$
|
1,811.5
|
|
|
$
|
3,119.7
|
|
|
$
|
2,146.6
|
|
|
$
|
(4,482.3
|
)
|
|
$
|
2,595.5
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations
|
|
$
|
-
|
|
|
$
|
254.4
|
|
|
$
|
2.2
|
|
|
$
|
-
|
|
|
$
|
256.6
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2.2
|
|
|
$
|
-
|
|
|
$
|
2.2
|
|
|
Current portion of acquisition consideration payable
|
|
|
-
|
|
|
|
2.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.6
|
|
|
|
-
|
|
|
|
30.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30.3
|
|
|
Accounts payable
|
|
|
0.1
|
|
|
|
140.0
|
|
|
|
113.2
|
|
|
|
-
|
|
|
|
253.3
|
|
|
|
-
|
|
|
|
156.2
|
|
|
|
101.3
|
|
|
|
-
|
|
|
|
257.5
|
|
|
Income taxes payable
|
|
|
-
|
|
|
|
19.8
|
|
|
|
5.8
|
|
|
|
(25.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
22.1
|
|
|
|
12.9
|
|
|
|
(33.6
|
)
|
|
|
1.4
|
|
|
Accrued expenses and other current liabilities
|
|
|
11.1
|
|
|
|
70.6
|
|
|
|
72.9
|
|
|
|
(0.5
|
)
|
|
|
154.1
|
|
|
|
8.5
|
|
|
|
70.6
|
|
|
|
82.8
|
|
|
|
(1.1
|
)
|
|
|
160.8
|
|
|
Total current liabilities
|
|
|
11.2
|
|
|
|
487.4
|
|
|
|
194.1
|
|
|
|
(26.1
|
)
|
|
|
666.6
|
|
|
|
8.5
|
|
|
|
279.2
|
|
|
|
199.2
|
|
|
|
(34.7
|
)
|
|
|
452.2
|
|
|
Long-term debt
|
|
|
-
|
|
|
|
673.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
673.4
|
|
|
|
-
|
|
|
|
934.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
934.4
|
|
|
Obligations under capital leases
|
|
|
-
|
|
|
|
-
|
|
|
|
19.1
|
|
|
|
-
|
|
|
|
19.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21.3
|
|
|
|
-
|
|
|
|
21.3
|
|
|
Income taxes payable
|
|
|
-
|
|
|
|
0.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.6
|
|
|
|
-
|
|
|
|
0.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.5
|
|
|
Deferred taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
163.0
|
|
|
|
(92.6
|
)
|
|
|
70.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
155.7
|
|
|
|
(99.0
|
)
|
|
|
56.7
|
|
|
Acquisition consideration payable
|
|
|
-
|
|
|
|
4.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4.0
|
|
|
|
-
|
|
|
|
6.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6.0
|
|
|
Due to affiliates
|
|
|
827.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(827.7
|
)
|
|
|
-
|
|
|
|
816.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(816.7
|
)
|
|
|
-
|
|
|
Other noncurrent liabilities
|
|
|
5.1
|
|
|
|
68.7
|
|
|
|
20.5
|
|
|
|
-
|
|
|
|
94.3
|
|
|
|
5.0
|
|
|
|
88.1
|
|
|
|
25.0
|
|
|
|
-
|
|
|
|
118.1
|
|
|
Total liabilities
|
|
|
844.0
|
|
|
|
1,234.1
|
|
|
|
396.7
|
|
|
|
(946.4
|
)
|
|
|
1,528.4
|
|
|
|
830.2
|
|
|
|
1,308.2
|
|
|
|
401.2
|
|
|
|
(950.4
|
)
|
|
|
1,589.2
|
|
|
Redeemable noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.6
|
|
|
|
-
|
|
|
|
0.6
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and additional paid-in capital
|
|
|
531.7
|
|
|
|
1,294.3
|
|
|
|
1,647.5
|
|
|
|
(2,941.9
|
)
|
|
|
531.6
|
|
|
|
521.6
|
|
|
|
1,294.3
|
|
|
|
948.0
|
|
|
|
(2,242.3
|
)
|
|
|
521.6
|
|
|
Retained earnings
|
|
|
440.2
|
|
|
|
521.6
|
|
|
|
260.9
|
|
|
|
(765.3
|
)
|
|
|
457.4
|
|
|
|
477.6
|
|
|
|
535.1
|
|
|
|
793.1
|
|
|
|
(1,304.7
|
)
|
|
|
501.1
|
|
|
Accumulated other comprehensive (loss) income
|
|
|
(6.1
|
)
|
|
|
(6.1
|
)
|
|
|
10.8
|
|
|
|
(4.7
|
)
|
|
|
(6.1
|
)
|
|
|
(17.9
|
)
|
|
|
(17.9
|
)
|
|
|
2.8
|
|
|
|
15.1
|
|
|
|
(17.9
|
)
|
|
Total Jones stockholders' equity
|
|
|
965.8
|
|
|
|
1,809.8
|
|
|
|
1,919.2
|
|
|
|
(3,711.9
|
)
|
|
|
982.9
|
|
|
|
981.3
|
|
|
|
1,811.5
|
|
|
|
1,743.9
|
|
|
|
(3,531.9
|
)
|
|
|
1,004.8
|
|
|
Noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
0.4
|
|
|
|
-
|
|
|
|
0.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.9
|
|
|
|
-
|
|
|
|
0.9
|
|
|
Total equity
|
|
|
965.8
|
|
|
|
1,809.8
|
|
|
|
1,919.6
|
|
|
|
(3,711.9
|
)
|
|
|
983.3
|
|
|
|
981.3
|
|
|
|
1,811.5
|
|
|
|
1,744.8
|
|
|
|
(3,531.9
|
)
|
|
|
1,005.7
|
|
|
Total liabilities and equity
|
|
$
|
1,809.8
|
|
|
$
|
3,043.9
|
|
|
$
|
2,316.5
|
|
|
$
|
(4,658.3
|
)
|
|
$
|
2,511.9
|
|
|
$
|
1,811.5
|
|
|
$
|
3,119.7
|
|
|
$
|
2,146.6
|
|
|
$
|
(4,482.3
|
)
|
|
$
|
2,595.5
|
|
Condensed Consolidating Statements of Operations
|
(In millions)
|
|
Year Ended December 31, 2013
|
|
|
Year Ended December 31, 2012
|
|
|
Year Ended December 31, 2011
|
|
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Net sales
|
|
$
|
-
|
|
|
$
|
2,164.8
|
|
|
$
|
1,582.2
|
|
|
$
|
(26.7
|
)
|
|
$
|
3,720.3
|
|
|
$
|
-
|
|
|
$
|
2,258.4
|
|
|
$
|
1,520.4
|
|
|
$
|
(28.2
|
)
|
|
$
|
3,750.6
|
|
|
$
|
-
|
|
|
$
|
2,370.0
|
|
|
$
|
1,387.0
|
|
|
$
|
(23.0
|
)
|
|
$
|
3,734.0
|
|
|
Licensing income
|
|
|
-
|
|
|
|
0.6
|
|
|
|
42.6
|
|
|
|
-
|
|
|
|
43.2
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
46.0
|
|
|
|
-
|
|
|
|
46.2
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
50.1
|
|
|
|
-
|
|
|
|
50.2
|
|
|
Other revenues
|
|
|
-
|
|
|
|
1.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.4
|
|
|
|
-
|
|
|
|
1.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.3
|
|
|
|
-
|
|
|
|
1.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.1
|
|
|
Total revenues
|
|
|
-
|
|
|
|
2,166.8
|
|
|
|
1,624.8
|
|
|
|
(26.7
|
)
|
|
|
3,764.9
|
|
|
|
-
|
|
|
|
2,259.9
|
|
|
|
1,566.4
|
|
|
|
(28.2
|
)
|
|
|
3,798.1
|
|
|
|
-
|
|
|
|
2,371.2
|
|
|
|
1,437.1
|
|
|
|
(23.0
|
)
|
|
|
3,785.3
|
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
1,468.5
|
|
|
|
985.1
|
|
|
|
(18.1
|
)
|
|
|
2,435.5
|
|
|
|
-
|
|
|
|
1,517.7
|
|
|
|
928.1
|
|
|
|
(18.4
|
)
|
|
|
2,427.4
|
|
|
|
-
|
|
|
|
1,568.3
|
|
|
|
882.7
|
|
|
|
(10.9
|
)
|
|
|
2,440.1
|
|
|
Gross profit
|
|
|
-
|
|
|
|
698.3
|
|
|
|
639.7
|
|
|
|
(8.6
|
)
|
|
|
1,329.4
|
|
|
|
-
|
|
|
|
742.2
|
|
|
|
638.3
|
|
|
|
(9.8
|
)
|
|
|
1,370.7
|
|
|
|
-
|
|
|
|
802.9
|
|
|
|
554.4
|
|
|
|
(12.1
|
)
|
|
|
1,345.2
|
|
|
Selling, general and administrative expenses
|
|
|
-
|
|
|
|
839.0
|
|
|
|
395.7
|
|
|
|
(8.8
|
)
|
|
|
1,225.9
|
|
|
|
-
|
|
|
|
854.8
|
|
|
|
381.0
|
|
|
|
(8.9
|
)
|
|
|
1,226.9
|
|
|
|
-
|
|
|
|
893.5
|
|
|
|
291.5
|
|
|
|
(11.8
|
)
|
|
|
1,173.2
|
|
|
Trademark impairments
|
|
|
-
|
|
|
|
-
|
|
|
|
7.2
|
|
|
|
-
|
|
|
|
7.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21.5
|
|
|
|
-
|
|
|
|
21.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31.5
|
|
|
|
-
|
|
|
|
31.5
|
|
|
Goodwill impairment
|
|
|
-
|
|
|
|
49.9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49.9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47.6
|
|
|
|
-
|
|
|
|
47.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Operating (loss) income
|
|
|
-
|
|
|
|
(190.6
|
)
|
|
|
236.8
|
|
|
|
0.2
|
|
|
|
46.4
|
|
|
|
-
|
|
|
|
(112.6
|
)
|
|
|
188.2
|
|
|
|
(0.9
|
)
|
|
|
74.7
|
|
|
|
-
|
|
|
|
(90.6
|
)
|
|
|
231.4
|
|
|
|
(0.3
|
)
|
|
|
140.5
|
|
|
Net interest expense (income) and financing costs
|
|
|
-
|
|
|
|
55.1
|
|
|
|
5.2
|
|
|
|
-
|
|
|
|
60.3
|
|
|
|
-
|
|
|
|
143.1
|
|
|
|
2.0
|
|
|
|
-
|
|
|
|
145.1
|
|
|
|
-
|
|
|
|
76.7
|
|
|
|
(3.4
|
)
|
|
|
-
|
|
|
|
73.3
|
|
|
Equity in income of unconsolidated affiliate
|
|
|
-
|
|
|
|
-
|
|
|
|
0.6
|
|
|
|
-
|
|
|
|
0.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.5
|
|
|
|
-
|
|
|
|
2.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3.9
|
|
|
|
-
|
|
|
|
3.9
|
|
|
(Loss) income before (benefit) provision for income taxes
|
|
|
-
|
|
|
|
(245.7
|
)
|
|
|
232.2
|
|
|
|
0.2
|
|
|
|
(13.3
|
)
|
|
|
-
|
|
|
|
(255.7
|
)
|
|
|
188.7
|
|
|
|
(0.9
|
)
|
|
|
(67.9
|
)
|
|
|
-
|
|
|
|
(167.3
|
)
|
|
|
238.7
|
|
|
|
(0.3
|
)
|
|
|
71.1
|
|
|
(Benefit) provision for income taxes
|
|
|
-
|
|
|
|
(73.3
|
)
|
|
|
73.3
|
|
|
|
6.4
|
|
|
|
6.4
|
|
|
|
-
|
|
|
|
(77.5
|
)
|
|
|
65.1
|
|
|
|
(0.5
|
)
|
|
|
(12.9
|
)
|
|
|
-
|
|
|
|
(36.1
|
)
|
|
|
74.2
|
|
|
|
(18.5
|
)
|
|
|
19.6
|
|
|
(Loss) income before earnings of subsidiaries
|
|
|
-
|
|
|
|
(172.4
|
)
|
|
|
158.9
|
|
|
|
(6.2
|
)
|
|
|
(19.7
|
)
|
|
|
-
|
|
|
|
(178.2
|
)
|
|
|
123.6
|
|
|
|
(0.4
|
)
|
|
|
(55.0
|
)
|
|
|
-
|
|
|
|
(131.2
|
)
|
|
|
164.5
|
|
|
|
18.2
|
|
|
|
51.5
|
|
|
Equity in (loss) earnings of subsidiaries
|
|
|
(13.4
|
)
|
|
|
159.0
|
|
|
|
-
|
|
|
|
(145.6
|
)
|
|
|
-
|
|
|
|
(55.3
|
)
|
|
|
122.9
|
|
|
|
-
|
|
|
|
(67.6
|
)
|
|
|
-
|
|
|
|
32.5
|
|
|
|
163.7
|
|
|
|
-
|
|
|
|
(196.2
|
)
|
|
|
-
|
|
|
Net (loss) income
|
|
|
(13.4
|
)
|
|
|
(13.4
|
)
|
|
|
158.9
|
|
|
|
(151.8
|
)
|
|
|
(19.7
|
)
|
|
|
(55.3
|
)
|
|
|
(55.3
|
)
|
|
|
123.6
|
|
|
|
(68.0
|
)
|
|
|
(55.0
|
)
|
|
|
32.5
|
|
|
|
32.5
|
|
|
|
164.5
|
|
|
|
(178.0
|
)
|
|
|
51.5
|
|
|
Less: income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.1
|
|
|
|
-
|
|
|
|
1.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.8
|
|
|
|
-
|
|
|
|
0.8
|
|
|
(Loss) income attributable to Jones
|
|
$
|
(13.4
|
)
|
|
$
|
(13.4
|
)
|
|
$
|
158.8
|
|
|
$
|
(151.8
|
)
|
|
$
|
(19.8
|
)
|
|
$
|
(55.3
|
)
|
|
$
|
(55.3
|
)
|
|
$
|
122.5
|
|
|
$
|
(68.0
|
)
|
|
$
|
(56.1
|
)
|
|
$
|
32.5
|
|
|
$
|
32.5
|
|
|
$
|
163.7
|
|
|
$
|
(178.0
|
)
|
|
$
|
50.7
|
|
Condensed Consolidating Statements of Comprehensive (Loss) Income
|
(In millions)
|
|
Year Ended December 31, 2013
|
|
|
Year Ended December 31, 2012
|
|
|
Year Ended December 31, 2011
|
|
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Net (loss) income
|
|
$
|
(13.4
|
)
|
|
$
|
(13.4
|
)
|
|
$
|
158.9
|
|
|
$
|
(151.8
|
)
|
|
$
|
(19.7
|
)
|
|
$
|
(55.3
|
)
|
|
$
|
(55.3
|
)
|
|
$
|
123.6
|
|
|
$
|
(68.0
|
)
|
|
$
|
(55.0
|
)
|
|
$
|
32.5
|
|
|
$
|
32.5
|
|
|
$
|
164.5
|
|
|
$
|
(178.0
|
)
|
|
$
|
51.5
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement liability adjustments, net of tax
|
|
|
6.7
|
|
|
|
6.7
|
|
|
|
-
|
|
|
|
(6.7
|
)
|
|
|
6.7
|
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
(7.1
|
)
|
|
|
(7.1
|
)
|
|
|
(1.2
|
)
|
|
|
8.3
|
|
|
|
(7.1
|
)
|
|
Change in fair value of cash flow hedges, net of tax
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
(1.0
|
)
|
|
|
0.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
0.4
|
|
|
|
(0.2
|
)
|
|
Reclassification adjustment for hedge gains and losses included in net (loss) income, net of tax
|
|
|
(0.6
|
)
|
|
|
(0.6
|
)
|
|
|
(0.6
|
)
|
|
|
1.2
|
|
|
|
(0.6
|
)
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
(0.2
|
)
|
|
|
0.1
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
(1.0
|
)
|
|
|
0.5
|
|
|
Foreign currency translation adjustments
|
|
|
5.2
|
|
|
|
5.2
|
|
|
|
5.2
|
|
|
|
(10.4
|
)
|
|
|
5.2
|
|
|
|
11.7
|
|
|
|
11.7
|
|
|
|
11.4
|
|
|
|
(23.1
|
)
|
|
|
11.7
|
|
|
|
(14.4
|
)
|
|
|
(14.4
|
)
|
|
|
(14.4
|
)
|
|
|
28.8
|
|
|
|
(14.4
|
)
|
|
Total other comprehensive income (loss)
|
|
|
11.8
|
|
|
|
11.8
|
|
|
|
5.1
|
|
|
|
(16.9
|
)
|
|
|
11.8
|
|
|
|
11.7
|
|
|
|
11.7
|
|
|
|
11.5
|
|
|
|
(23.2
|
)
|
|
|
11.7
|
|
|
|
(21.2
|
)
|
|
|
(21.2
|
)
|
|
|
(15.3
|
)
|
|
|
36.5
|
|
|
|
(21.2
|
)
|
|
Comprehensive income (loss)
|
|
|
(1.6
|
)
|
|
|
(1.6
|
)
|
|
|
164.0
|
|
|
|
(168.7
|
)
|
|
|
(7.9
|
)
|
|
|
(43.6
|
)
|
|
$
|
(43.6
|
)
|
|
$
|
135.1
|
|
|
$
|
(91.2
|
)
|
|
$
|
(43.3
|
)
|
|
$
|
11.3
|
|
|
$
|
11.3
|
|
|
$
|
149.2
|
|
|
$
|
(141.5
|
)
|
|
$
|
30.3
|
|
Condensed Consolidating Statements of Cash Flows
|
(In millions)
|
|
Year Ended December 31, 2013
|
|
|
Year Ended December 31, 2012
|
|
|
Year Ended December 31, 2011
|
|
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Jones
|
|
|
Co-
Issuers
|
|
|
Others
|
|
|
Elim-
inations
|
|
|
Cons-
olidated
|
|
|
Net cash provided by operating activities
|
|
$
|
15.4
|
|
|
$
|
60.7
|
|
|
$
|
38.3
|
|
|
$
|
(22.0
|
)
|
|
$
|
92.4
|
|
|
$
|
15.5
|
|
|
$
|
19.2
|
|
|
$
|
109.2
|
|
|
$
|
(31.2
|
)
|
|
$
|
112.7
|
|
|
$
|
16.6
|
|
|
$
|
192.7
|
|
|
$
|
97.8
|
|
|
$
|
(35.4
|
)
|
|
$
|
271.7
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of KG Group Holdings, net of cash acquired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(143.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(143.1
|
)
|
|
Acquisition of Moda Nicola International
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2.5
|
)
|
|
Acquisition of Brian Atwood, net of cash acquired
|
|
|
-
|
|
|
|
(0.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.5
|
)
|
|
|
-
|
|
|
|
(5.0
|
)
|
|
|
0.6
|
|
|
|
-
|
|
|
|
(4.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Contingent consideration paid related to investment in GRI Group Limited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3.5
|
)
|
|
|
-
|
|
|
|
(3.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Acquisition of additional equity interest in GRI Group Limited
|
|
|
-
|
|
|
|
-
|
|
|
|
(14.7
|
)
|
|
|
-
|
|
|
|
(14.7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Capital expenditures
|
|
|
-
|
|
|
|
(15.9
|
)
|
|
|
(42.8
|
)
|
|
|
|
|
|
|
(58.7
|
)
|
|
|
-
|
|
|
|
(19.8
|
)
|
|
|
(56.7
|
)
|
|
|
|
|
|
|
(76.5
|
)
|
|
|
-
|
|
|
|
(37.3
|
)
|
|
|
(60.7
|
)
|
|
|
-
|
|
|
|
(98.0
|
)
|
|
Notes receivable issued
|
|
|
|
|
|
|
(6.1
|
)
|
|
|
(1.5
|
)
|
|
|
-
|
|
|
|
(7.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Proceeds from sale of trademark
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5.0
|
|
|
|
-
|
|
|
|
5.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Other items, net
|
|
|
-
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
(22.5
|
)
|
|
|
(58.9
|
)
|
|
|
|
|
|
|
(81.4
|
)
|
|
|
-
|
|
|
|
(24.8
|
)
|
|
|
(54.7
|
)
|
|
|
-
|
|
|
|
(79.5
|
)
|
|
|
-
|
|
|
|
(182.9
|
)
|
|
|
(60.6
|
)
|
|
|
-
|
|
|
|
(243.5
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of 6.875% Senior Notes due 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
103.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
103.5
|
|
|
|
-
|
|
|
|
300.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
300.0
|
|
|
Debt issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2.6
|
)
|
|
|
-
|
|
|
|
(6.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(6.6
|
)
|
|
Costs related to secured revolving credit agreement
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
-
|
|
|
|
(3.3
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3.3
|
)
|
|
Repayment of acquired debt of KG Group Holdings
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(174.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(174.1
|
)
|
|
Repayment of long-term debt
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
Distributions to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.1
|
)
|
|
|
-
|
|
|
|
(1.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.0
|
)
|
|
|
-
|
|
|
|
(1.0
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.7
|
)
|
|
|
-
|
|
|
|
(0.7
|
)
|
|
Payments of acquisition consideration payable
|
|
|
-
|
|
|
|
(2.4
|
)
|
|
|
(7.0
|
)
|
|
|
-
|
|
|
|
(9.4
|
)
|
|
|
-
|
|
|
|
(151.0
|
)
|
|
|
(12.9
|
)
|
|
|
-
|
|
|
|
(163.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(10.1
|
)
|
|
|
-
|
|
|
|
(10.1
|
)
|
|
Repurchases of common stock
|
|
|
-
|
|
|
|
(14.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(14.5
|
)
|
|
|
-
|
|
|
|
(44.0
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(44.0
|
)
|
|
|
-
|
|
|
|
(78.0
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(78.0
|
)
|
|
Dividends paid
|
|
|
(15.4
|
)
|
|
|
(15.4
|
)
|
|
|
(6.6
|
)
|
|
|
22.0
|
|
|
|
(15.4
|
)
|
|
|
(15.5
|
)
|
|
|
(15.5
|
)
|
|
|
(15.7
|
)
|
|
|
31.2
|
|
|
|
(15.5
|
)
|
|
|
(16.6
|
)
|
|
|
(16.6
|
)
|
|
|
(18.8
|
)
|
|
|
35.4
|
|
|
|
(16.6
|
)
|
|
Principal payments on capital leases
|
|
|
-
|
|
|
|
-
|
|
|
|
(2.1
|
)
|
|
|
-
|
|
|
|
(2.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.9
|
)
|
|
|
-
|
|
|
|
(1.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.7
|
)
|
|
|
-
|
|
|
|
(1.7
|
)
|
|
Excess tax benefits from share-based payment arrangements
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
2.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.3
|
|
|
|
-
|
|
|
|
1.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.6
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(15.4
|
)
|
|
|
(32.5
|
)
|
|
|
(16.9
|
)
|
|
|
22.0
|
|
|
|
(42.8
|
)
|
|
|
(15.5
|
)
|
|
|
(107.6
|
)
|
|
|
(31.6
|
)
|
|
|
31.2
|
|
|
|
(123.5
|
)
|
|
|
(16.6
|
)
|
|
|
23.0
|
|
|
|
(31.4
|
)
|
|
|
35.4
|
|
|
|
10.4
|
|
|
Effect of exchange rates on cash
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.4
|
)
|
|
|
-
|
|
|
|
(1.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1.1
|
|
|
|
-
|
|
|
|
1.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.6
|
)
|
|
|
-
|
|
|
|
(0.6
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
-
|
|
|
|
5.7
|
|
|
|
(38.9
|
)
|
|
|
|
|
|
|
(33.2
|
)
|
|
|
-
|
|
|
|
(113.2
|
)
|
|
|
24.0
|
|
|
|
|
|
|
|
(89.2
|
)
|
|
|
-
|
|
|
|
32.8
|
|
|
|
5.2
|
|
|
|
-
|
|
|
|
38.0
|
|
|
Cash and cash equivalents, beginning
|
|
|
-
|
|
|
|
82.6
|
|
|
|
67.0
|
|
|
|
-
|
|
|
|
149.6
|
|
|
|
-
|
|
|
|
195.8
|
|
|
|
43.0
|
|
|
|
-
|
|
|
|
238.8
|
|
|
|
-
|
|
|
|
163.0
|
|
|
|
37.8
|
|
|
|
-
|
|
|
|
200.8
|
|
|
Cash and cash equivalents, ending
|
|
$
|
-
|
|
|
$
|
88.3
|
|
|
$
|
28.1
|
|
|
$
|
|
|
|
$
|
116.4
|
|
|
$
|
-
|
|
|
$
|
82.6
|
|
|
$
|
67.0
|
|
|
$
|
-
|
|
|
$
|
149.6
|
|
|
|
-
|
|
|
$
|
195.8
|
|
|
$
|
43.0
|
|
|
$
|
-
|
|
|
$
|
238.8
|
|
UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
Unaudited interim consolidated financial information for the two years ended December 31, 2013 is summarized as follows:
|
(In millions except per share data)
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
997.6
|
|
|
$
|
835.2
|
|
|
$
|
1,011.0
|
|
|
$
|
876.5
|
|
|
Total revenues
|
|
|
1,008.7
|
|
|
|
845.6
|
|
|
|
1,021.7
|
|
|
|
888.9
|
|
|
Gross profit
|
|
|
348.4
|
|
|
|
300.7
|
|
|
|
359.3
|
|
|
|
321.1
|
|
|
Operating income (loss)(1)
|
|
|
16.9
|
|
|
|
10.8
|
|
|
|
62.8
|
|
|
|
(44.1
|
)
|
|
Net (loss) income
|
|
|
0.9
|
|
|
|
(3.2
|
)
|
|
|
29.7
|
|
|
|
(47.1
|
)
|
|
Basic earnings (loss) per share
|
|
$
|
0.01
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.39
|
|
|
$
|
(0.61
|
)
|
|
Diluted earnings (loss) per share
|
|
|
0.01
|
|
|
|
(0.05
|
)
|
|
|
0.38
|
|
|
|
(0.61
|
)
|
|
Dividends declared per share
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
923.4
|
|
|
$
|
844.3
|
|
|
$
|
1,024.6
|
|
|
$
|
958.3
|
|
|
Total revenues
|
|
|
936.0
|
|
|
|
854.8
|
|
|
|
1,035.4
|
|
|
|
971.9
|
|
|
Gross profit
|
|
|
343.5
|
|
|
|
326.2
|
|
|
|
364.6
|
|
|
|
336.5
|
|
|
Operating income (loss)(2)
|
|
|
40.2
|
|
|
|
21.7
|
|
|
|
62.7
|
|
|
|
(49.9
|
)
|
|
Net (loss) income
|
|
|
(1.0
|
)
|
|
|
8.4
|
|
|
|
17.8
|
|
|
|
(80.1
|
)
|
|
Basic (loss) earnings per share
|
|
$
|
(0.01
|
)
|
|
$
|
0.11
|
|
|
$
|
0.23
|
|
|
$
|
(1.06
|
)
|
|
Diluted (loss) earnings per share
|
|
|
(0.01
|
)
|
|
|
0.10
|
|
|
|
0.22
|
|
|
|
(1.06
|
)
|
|
Dividends declared per share
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
Quarterly figures may not add to full year due to rounding.
|
(1)
|
Includes trademark impairments of $7.2 million and goodwill impairment of $49.9 million in the fourth fiscal quarter of 2013.
|
|
(2)
|
Includes trademark impairments of $21.5 million and goodwill impairment of $47.6 million in the fourth fiscal quarter of 2012.
|