Kenneth Cole Productions (KCP)

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Kenneth Cole Productions Reports Second Quarter 2012 Results

Aug 1, 201207:30:00 (ET)

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

Net revenues in the second quarter were $97.3 million versus the year-ago level of $102.2 million. Wholesale revenues decreased 3.3% to $50.3 million versus the year-ago period primarily from private label footwear and Reaction handbags. Consumer Direct revenues decreased6.1% to $37.2 million versus the year-ago period due to the operation of two fewer stores and a comparable store sales decline of 2.7%. Licensingrevenues in the second quarter declined 7.8% to $9.8 million versus the prior year's level due principally to the transition of the women's apparel business to an in-house operation from a licensing model and the resetting of contractual minimum royalties of a licensee.

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

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

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

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

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

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

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

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