8-K 1 fy02resultnov6.txt 8-K ON 3RD QTR RESULTS OF FY 02 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report(Date of earliest event reported) November 6, 2001 LANDS' END, INC. (exact name of registrant as specified in its charter) DELAWARE 1-9769 36-2512786 (State or other (Commission (I.R.S. Employer jurisdiction File Number) Identification of incorporation) Number) Lands' End Lane, Dodgeville, Wisconsin 53595 (Address of principal executive offices) (Zip Code) Registrant's telephone number 608-935-9341 including area code INFORMATION INCLUDED IN THIS REPORT Item 5. Other Events. Attached as Exhibit 99 to this report is a news release issued by Lands' End, Inc., announcing its third quarter results of fiscal year 2002 for the period ended October 26, 2001. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, its duly authorized officer and chief financial officer. LANDS' END, INC. November 14, 2001 By: /S/ DONALD R. HUGHES Donald R. Hughes Senior Vice President & Chief Financial Officer EXHIBIT 99 FOR IMMEDIATE RELEASE LANDS' END REPORTS RECORD THIRD QUARTER SALES AND EARNINGS DODGEVILLE, WI ... November 6, 2001 ... Lands' End, Inc. (LE), the direct merchant of classically styled apparel and home furnishings, today reported results for its third quarter of fiscal 2002, ended October 26, 2001. Total revenue for the third quarter was $376.1 million, up 4 percent from $362.3 million in the same quarter last year. Net income for the quarter was $12.1 million, compared with $4.4 million earned in the same quarter last year. Diluted earnings per share were $0.41, compared with $0.15 in the prior year, representing a new third quarter company record. In commenting on the quarter, company president and chief executive officer David F. Dyer said, "We're delighted with our strong third quarter results. Our performance in full-price sales, gross margin and prudent expense control propelled us to the new record. I believe these results, especially in such uncertain times, are due to our customers' response to our fresh merchandise, our improved catalog presentations and our strong quality/value proposition." For the third quarter, sales of full-price merchandise to the U.S. consumer rose 16 percent, while as previously announced, liquidation sales declined about $15 million. As a percent of total revenue, gross margin improvement of 3.7 percentage points was due to reduced liquidation and significantly better vendor sourcing. Overall selling, general and administrative expenses rose 6.1 percent, due to higher provisions for employee incentives and profit sharing. However, aside from these provisions, all other SG&A expenses declined 1.4 percentage points on a relative basis. NINE MONTH RESULTS For the nine months just ended, both revenue and operating income set records for the company. Total revenue was $973.1 million, up about 5 percent from total revenue of $923.7 million during the same period last year. Net income for the first nine months of fiscal 2002 was $21.0 million, or $0.71 per diluted share, compared with net income of $2.9 million, or $0.09 per share in the same period a year ago. Gross margin has improved 1.5 percentage points, and selling, general and administrative expenses were reduced 1.3 percentage points, as a percent of the total nine months revenue. THIRD QUARTER COMMENTS In the U.S. consumer business, women's and co-ed showed significant growth during the third quarter. In the specialty segment, Kids had strong double-digit sales increases, while Corporate Sales, the non-consumer division that is part of the specialty segment, showed a double-digit decline, mainly due to the continued slowdown in national business spending. In local currencies, the U.K. and Germany had higher merchandise sales than a year ago, while Japan's were slightly down. When measured in U.S. dollars, the international business segment was up by about 14 percent, mainly due to double-digit increases in the U.K. and Germany. Gross profit in the quarter just ended was $164.9 million, or 43.8 percent of total revenue, compared with $145.2 million, or 40.1 percent of total revenue, in the similar quarter last year. The strong improvement in gross profit margin was attributable to the $15.4 million reduction in liquidation sales and continued improvements in vendor sourcing. As expected, liquidations of excess inventory were 12 percent of net merchandise sales in the quarter just ended, compared with 17 percent in the prior year. Third quarter ending inventory was $294 million, up 13 percent from $261 million a year ago, reflecting the planned earlier receipts of fall merchandise and greater investment in key styles. Inventory is in excellent condition, significantly improved from the prior year. We shipped about 92 percent of items at the time of order placement during the quarter just ended, consistent with our high standards of customer service and an improvement over last year's 90 percent first time fulfillment rate. For the third quarter this year, selling, general and administrative expenses totaled $144.1 million, compared with $135.7 million last year. As a percentage of total revenue, SG&A was 38.3 percent, compared with 37.5 percent in the similar period last year. As stated, the change in the SG&A ratio resulted from higher employee incentives and profit-sharing expense, as well as higher depreciation and opening costs for our Stevens Point complex. When measured as a percent of total revenue, these were mostly offset by reductions in catalog circulation cost, national advertising and all other operating expenses. SEGMENT DATA Segment merchandise sales data for third quarter (in millions) Percent 3Q02 3Q01 Change Core business segment $188 $185 + 2 % Specialty segment 128 123 + 4 % International segment 32 28 +14 % Total merchandise sales $348 $336 + 4 % Internet $ 72 54 +33 % Segment merchandise sales data (full-price and liquidation sales) excludes shipping and handling revenue. Internet merchandise sales are included in the respective business segments. BUSINESS OUTLOOK For the full year, we plan capital expenditures of between $42 million to $45 million, of which about $31 million has been spent during the first 9 months of fiscal 2002. Given recent experience, we have a good opportunity to exceed last year's strong fourth quarter sales and earnings, and if our momentum continues, we will be successful in doing so. Last year's fourth quarter double-digit sales and earnings results present a challenging point of comparison, especially given the current uncertain economic environment. We are more cautious about post- Christmas performance and the general softness of consumer spending. Lands' End is a direct merchant of traditionally styled, classic products offered to customers around the world through regular mailings of its monthly and specialty catalogs and via the Internet at www.landsend.com. STATEMENT REGARDING FORWARD-LOOKING INFORMATION Statements in this release that are not historical, including, without limitation, statements regarding our plans, expectations, assumptions, and estimations for fiscal 2002 revenues, gross profit margin, and earnings, as well as anticipated sales trends and future development of our business strategy, are considered forward-looking and speak only as of today's date. As such, these statements are subject to a number of risks and uncertainties. Future results may be materially different from those expressed or implied by these statements due to a number of factors. Currently, we believe that the principal factors that create uncertainty about our future results are the following: customer response to our merchandise offerings, circulation changes and other initiatives; the mix of our sales between full price and liquidation merchandise; overall consumer confidence and general economic conditions, both domestic and foreign; effects of weather on customer purchasing behavior; effects of shifting patterns of e-commerce versus catalog purchases; costs associated with printing and mailing catalogs and fulfilling orders; dependence on consumer seasonal buying patterns; fluctuations in foreign currency exchange rates; and changes that may have different effects on the various sectors in which we operate (e.g., rather than individual consumers, the Corporate Sales Division, included in the specialty segment, sells to numerous corporations, and certain of these sales are for their corporate promotional activities). Our future results could, of course, be affected by other factors as well. More information about these risks and uncertainties may be found in the company's 10-K filings with the S.E.C. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. WEBCAST ANNOUNCEMENT The company had an audio web cast of its conference call for the general public on Wednesday, November 6, at 9:30 a.m. CT. This call covered the company's performance for the third quarter and its business outlook for the remainder of the year. Register and listen at http://www.videonewswire.com/event.asp?id=1895. A playback was available for one week. The conference call and webcast consist of copyrighted material that may not be recorded, reproduced, retransmitted, rebroadcast, stored or forwarded without Lands' End's express written permission. Your participation represents your consent to these terms and conditions. The call was recorded by Lands' End, and your participation on this call also constitutes your consent to having any comments or statements you make appear on a transcript or broadcast of this call. Contact Charlotte LaComb: 608-935-4835 PRELIMINARY AND UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS Lands' End, Inc. & Subsidiaries (Amounts in thousands, except per share data) Three months ended Nine months ended Oct. 26, Oct. 27, Oct. 26, Oct. 27, 2001 2000 2001 2000 Revenue Net merchandise sales $348,357 $336,391 $898,348 $857,981 Shipping and handling revenue 27,758 25,870 74,708 65,745 Total revenue 376,115 362,261 973,056 923,726 Cost of sales Cost of merchandise sales 185,247 190,663 477,549 468,483 Shipping and handling costs 25,952 26,389 73,790 68,998 Total cost of sales 211,199 217,052 551,339 537,481 Gross profit 164,916 145,209 421,717 386,245 Selling, general and administrative expenses 144,050 135,713 385,142 378,156 Income from operations 20,866 9,496 36,575 8,089 Other income (expense): Interest expense (658) (801) (1,141) (1,148) Interest income 59 235 984 1,454 Other (843) (1,878) (2,757) (3,865) Total other expense, net (1,442) (2,444) (2,914) (3,559) Income before income taxes 19,424 7,052 33,661 4,530 Income tax provision 7,284 2,609 12,623 1,676 Net income $ 12,140 $ 4,443 $ 21,038 $ 2,854 Basic earnings per share $ 0.41 $ 0.15 $ 0.72 $ 0.09 Diluted earnings per share $ 0.41 $ 0.15 $ 0.71 $ 0.09 Basic weighted average shares outstanding 29,335 30,290 29,376 30,261 Diluted weighted average shares outstanding 29,782 30,491 29,798 30,681 PRELIMINARY AND UNAUDITED CONSOLIDATED BALANCE SHEETS Lands' End, Inc. & Subsidiaries Oct. 26, Oct. 27, (Dollars in thousands) 2001 2000 Assets Current assets: Cash and cash equivalents $ 12,339 $ 20,031 Receivables, net 18,390 21,992 Inventory 294,344 260,503 Prepaid advertising 34,266 42,586 Other prepaid expenses 10,755 8,769 Deferred income tax benefit 11,628 10,661 Total current assets 381,722 364,542 Property, plant and equipment, at cost: Land and buildings 116,949 103,371 Fixtures and equipment 106,554 104,338 Computer hardware and software 116,744 95,740 Leasehold improvements 4,675 4,453 Construction in progress - 1,301 Total property, plant and equipment 344,922 309,203 Less - accumulated depreciation and amortization 150,517 131,581 Property, plant and equipment, net 194,405 177,622 Intangibles, net 654 670 Total assets $576,781 $ 542,834 Liabilities and shareholders' investment Current liabilities: Lines of credit $ 53,885 $ 70,239 Accounts payable 108,386 109,940 Reserve for returns 10,472 8,521 Accrued liabilities 51,763 39,722 Accrued profit sharing 3,508 184 Income taxes payable 9,025 1,136 Total current liabilities 237,039 229,742 Deferred income taxes 12,304 9,117 Shareholders' investment: Common stock, 40,221 shares issued 402 402 Donated capital 8,400 8,400 Additional paid-in capital 33,060 31,541 Deferred compensation (69) (147) Accumulated other comprehensive income 3,417 3,688 Retained earnings 510,125 457,284 Treasury stock, 11,091 and 9,977 shares at cost, respectively (227,897) (197,193) Total shareholders' investment 327,438 303,975 Total liabilities and shareholders' investment $ 576,781 $ 542,834 PRELIMINARY AND UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS Lands' End, Inc. & Subsidiaries Nine Months Ended (In thousands) Oct. 26, Oct. 27, 2001 2000 Cash flows from (used for) operating activities: Net income $ 21,038 $ 2,854 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 19,578 17,220 Deferred compensation expense 52 89 Loss on disposal of fixed assets 364 40 Deferred income taxes (2,918) - Tax benefit of stock options 1,152 1,832 Changes in current assets and liabilities: Receivables, net 1,418 (4,239) Inventory (106,133) (98,310) Prepaid advertising (16,639) (26,014) Other prepaid expenses (1,040) (2,953) Accounts payable 12,218 35,430 Reserve for returns 1,411 652 Accrued liabilities 12,536 (2,611) Accrued profit sharing 1,151 (2,576) Income taxes payable (4,188) (9,119) Other (2,557) 1,013 Net cash flows used for operating activities (62,557) (86,692) Cash flows used for investing activities: Cash paid for capital additions (30,965) (30,185) Net cash flows used for investing activities (30,965) (30,185) Cash flows from (used for) financing activities: Proceeds from short-term debt 36,945 58,515 Purchases of treasury stock (12,388) (2,249) Issuance of treasury stock 5,953 4,229 Net cash flows from financing activities 30,510 60,495 Net decrease in cash and cash equivalents (63,012) (56,382) Beginning cash and cash equivalents 75,351 76,413 Ending cash and cash equivalents $ 12,339 $ 20,031