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Ascena Retail Group, Inc. Reports Second Quarter 2013 Results

Non-GAAP Financial Results

Ascena’s financial results for its fiscal second quarter and six months ended January 26, 2013 reflect the Charming Acquisition. In connection with the Charming Acquisition, the Company has incurred certain non-recurring purchase accounting costs, certain other acquisition-related integration and restructuring costs, and certain losses on the extinguishment of debt during its first six months of Fiscal 2013. Management believes that all of such costs are not indicative of the Company’s underlying operating performance. As such, adjusted results for the second quarter and first six months of Fiscal 2013, which exclude the effect of such costs, have been presented to supplement the reported results for each period. Reference should be made to Note 2 to the unaudited consolidated financial information included elsewhere in this release for a reconciliation of adjusted, non-GAAP financial measures to the most directly comparable GAAP financial measures.

Ascena Retail Group, Inc.

Consolidated Statements of Operations (Unaudited)

(millions, except per share data)

   
         

 

Second Quarter Ended

January 26,

2013

   

% of Net

Sales

   

January 28,

2012

      % of Net

Sales

Net sales $1,237.5 100.0 %     $862.0 100.0 %
Cost of goods sold (575.4 ) (46.5 %) (384.7 ) (44.6 %)
Gross margin 662.1 53.5 % 477.3 55.4 %
Other costs and expenses:
Buying, distribution and occupancy expenses (198.1 ) (16.0 %) (129.4 ) (15.0 %)
Selling, general and administrative expenses (348.6 ) (28.2 %) (222.4 ) (25.8 %)
Acquisition-related, integration and restructuring costs (6.8 ) (0.5 %) -- --
Depreciation and amortization expense (40.3 ) (3.3 %) (25.5 ) (3.0 %)
Operating income 68.3   5.5 % 100.0   11.6 %
Interest expense (4.8 ) (0.4 %) (0.3 ) --
Interest and other income, net 0.2 -- 1.0 0.1 %
Loss on extinguishment of debt (1.4 ) (0.1 %) --   --
Income from continuing operations before income taxes 62.3 5.0 % 100.7 11.7 %
Provision for income taxes from continuing operations (24.5 ) (2.0 %) (37.0 ) (4.3 %)
Income from continuing operations 37.8 3.1 % 63.7 7.4 %
Discontinued operations, net of taxes 9.4   0.8 % --   --
Net income $47.2   3.8 % $63.7   7.4 %
 
Net income per common share - basic:
Continuing operations $0.24   $0.42  
Discontinued operations $0.06   --
Total net income per basic common share $0.30   $0.42  
 
Net income per common share - diluted:
Continuing operations $0.23   $0.40  
Discontinued operations $0.06   --
Total net income per diluted common share $0.29   $0.40  
 
Weighted average common shares outstanding:
Basic 157.2   152.6  
Diluted 162.9   157.6  
 

See accompanying notes.

 
 

Ascena Retail Group, Inc.

Consolidated Statements of Operations (Unaudited)

(millions, except per share data)

     

 

Six Months Ended

January 26,

2013

    % of Net

Sales

   

January 28,

2012

    % of Net

Sales

Net sales $2,375.0     100.0 %     $1,630.3     100.0 %
Cost of goods sold (1,056.3 ) (44.5 %) (713.2 ) (43.7 %)
Gross margin 1,318.7 55.5 % 917.1 56.3 %
Other costs and expenses:
Buying, distribution and occupancy expenses (404.9 ) (17.0 %) (255.7 ) (15.7 %)
Selling, general and administrative expenses (681.5 ) (28.7 %) (435.3 ) (26.7 %)
Acquisition-related, integration and restructuring costs (13.2 ) (0.6 %) -- --
Depreciation and amortization expense (77.9 ) (3.3 %) (49.6 ) (3.0 %)
Operating income 141.2   5.9 % 176.5   10.8 %
Interest expense (9.6 ) (0.4 %) (0.5 ) --
Interest and other income, net 0.5 -- 1.9 0.1 %
Loss on extinguishment of debt (1.4 ) (0.1 %) --   --
Income from continuing operations before income taxes 130.7 5.5 % 177.9 10.9 %
Provision for income taxes from continuing operations (46.7 ) (2.0 %) (66.7 ) (4.1 %)
Income from continuing operations 84.0 3.5 % 111.2 6.8 %
Discontinued operations, net of taxes 6.3   0.3 % --   --
Net income $90.3   3.8 % $111.2   6.8 %
 
Net income per common share - basic:
Continuing operations $0.54   $0.73  
Discontinued operations $0.04   --
Total net income per basic common share $0.58   $0.73  
 
Net income per common share - diluted:
Continuing operations $0.52   $0.70  
Discontinued operations $0.04   --
Total net income per diluted common share $0.56   $0.70  
 
Weighted average common shares outstanding:
Basic 156.2   153.3  
Diluted 162.2   158.2  
 

See accompanying notes.

 
 

Ascena Retail Group, Inc.

Consolidated Balance Sheets (Unaudited)

(millions)

         

January 26,

2013

July 28,

2012

ASSETS
Current assets:
Cash and cash equivalents $322.0 $164.3
Short-term investments 3.7 1.4
Inventories 498.6 533.4
Assets related to discontinued operations 93.4 133.6
Deferred tax assets 49.5 48.7
Prepaid expenses and other current assets 146.8 158.8
Total current assets 1,114.0 1,040.2
Non-current investments -- 3.2
Property and equipment, net 691.0 674.2
Goodwill 583.6 593.2
Other intangible assets, net 452.3 453.7
Other assets 42.1 42.6
TOTAL ASSETS $2,883.0 $2,807.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $245.5 $252.8
Accrued expenses and other current liabilities 253.2 261.2
Deferred income 72.2 42.7
Liabilities related to discontinued operations 57.2 118.6
Income taxes payable 5.4 6.1
Current portion of long-term debt -- 4.2
Total current liabilities 633.5 685.6
Long-term debt 277.4 322.4
Lease-related liabilities 237.2 240.5
Deferred income taxes 103.4 60.6
Other non-current liabilities 157.9 157.1
Total liabilities 1,409.4 1,466.2
Equity 1,473.6 1,340.9
TOTAL LIABILITIES AND EQUITY $2,883.0 $2,807.1
 

See accompanying notes.

 
 

Ascena Retail Group, Inc.

Segment Information (Unaudited)

(millions)

         

 

Second Quarter Ended Six Months Ended

January 26,

2013

   

January 28,

2012

January 26,

2013

   

January 28,

2012

Net sales:
Justice $441.9 $407.2 $800.2 $727.2
Lane Bryant 259.4 -- 489.2 --
maurices 240.7 224.6 465.3 427.5
dressbarn 221.4 230.2 473.4 475.6
Catherines 74.1   --   146.9   --
Total net sales $1,237.5   $862.0   $2,375.0   $1,630.3
 
 
Second Quarter Ended Six Months Ended

January 26,

2013

January 28,

2012

January 26,

2013

January 28,

2012

Operating income (loss):
Justice $91.0 $77.0 $147.3 $124.8
Lane Bryant (15.5 ) -- (32.5 ) --
maurices 27.7 26.4 57.3 50.1
dressbarn (25.2 ) (3.4 ) (16.2 ) 1.6
Catherines (2.9 ) --   (1.5 ) --
Subtotal 75.1 100.0 154.4 176.5

Less unallocated acquisition-related,

integration and restructuring costs

(6.8 ) --   (13.2 ) --
Total operating income $68.3   $100.0   $141.2   $176.5
 

See accompanying notes.

 
 

Ascena Retail Group, Inc.

Notes to Consolidated Financial Information (Unaudited)

Note 1. Basis of Presentation

Discontinued Operations

In connection with the Charming Acquisition, certain acquired businesses have been classified as a component of discontinued operations within the consolidated financial statements.

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