-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dk/NJYPSFpWMjoNMYpcVo4CbcgvAsT4YF1SJVWUkZ8Vibch7IR9otxxaQgCq0tKr BLSEXzRQ3WJuz7CqUTK7Uw== 0000874016-96-000007.txt : 19961115 0000874016-96-000007.hdr.sgml : 19961115 ACCESSION NUMBER: 0000874016-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960929 FILED AS OF DATE: 19961113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JONES APPAREL GROUP INC CENTRAL INDEX KEY: 0000874016 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 060935166 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10746 FILM NUMBER: 96660721 BUSINESS ADDRESS: STREET 1: 250 RITTENHOUSE CIRCLE CITY: BRISTOL STATE: PA ZIP: 19007 BUSINESS PHONE: 2157854000 MAIL ADDRESS: STREET 1: 250 RITTENHOUSE CIRCLE CITY: BRISTOL STATE: PA ZIP: 19007 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 29, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-10746 JONES APPAREL GROUP, INC. (Exact name of registrant as specified in its charter) Pennsylvania 06-0935166 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 250 Rittenhouse Circle Bristol, Pennsylvania 19007 (Address of principal (Zip Code) executive offices) (215) 785-4000 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class of Common Stock Outstanding at November 13, 1996 $.01 par value 53,569,760 JONES APPAREL GROUP, INC. AND SUBSIDIARIES Index PART I. FINANCIAL INFORMATION Page No. Financial Statements: Consolidated Balance Sheets September 29, 1996 and December 31, 1995............ 3 Consolidated Statements of Income Thirteen and Thirty-nine Weeks ended September 29, 1996 and October 1, 1995.......................... 4 Consolidated Statements of Stockholders' Equity Thirty-nine Weeks ended September 29, 1996.......... 5 Consolidated Statements of Cash Flows Thirty-nine Weeks ended September 29, 1996 and October 1, 1995................................... 6 Notes to Consolidated Financial Statements.................. 7 - 8 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 9 - 13 PART II. OTHER INFORMATION....................................... 14 - 15 - 2 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 29, December 31, 1996 1995 ASSETS CURRENT: Cash and cash equivalents............................................................. $ 9,650 $ 16,864 Accounts receivable, net of allowance of $2,425 and $2,257............................ 172,239 92,147 Inventories........................................................................... 222,765 176,626 Receivable from and advances to contractors........................................... 21,227 21,083 Deferred taxes........................................................................ 6,792 12,265 Prepaid expenses and other current assets............................................. 10,771 12,480 ------- ------- TOTAL CURRENT ASSETS................................................................ 443,444 331,465 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation and amortization of $20,926 and $16,991.................................. 28,564 21,293 PROPERTY UNDER CAPITAL LEASES, net of accumulated amortization of $9,748 and $8,394..... 22,574 15,364 INTANGIBLES, less accumulated amortization of $5,461 and $4,107......................... 26,750 26,585 DEFERRED TAXES.......................................................................... 1,392 120 OTHER ASSETS............................................................................ 8,221 6,132 ------- ------- $530,945 $400,959 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings................................................................. $ 37,507 $ - Current portion of long-term debt and capital lease obligations....................... 2,888 2,327 Accounts payable...................................................................... 78,721 59,077 Income taxes payable.................................................................. 12,116 2,427 Accrued expenses and other current liabilities........................................ 11,900 6,781 ------- ------- TOTAL CURRENT LIABILITIES........................................................... 143,132 70,612 ------- ------- NONCURRENT LIABILITIES: Obligations under capital leases...................................................... 12,665 10,102 Long-term debt........................................................................ 10 49 ------- ------- TOTAL NONCURRENT LIABILITIES........................................................ 12,675 10,151 ------- ------- TOTAL LIABILITIES................................................................... 155,807 80,763 ------- ------- EXCESS OF NET ASSETS ACQUIRED OVER COST................................................. 3,839 5,221 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value - shares authorized 1,000; none issued................ - - Common stock, $.01 par value - shares authorized 100,000; issued 53,489 and 52,564............................................................. 267 263 Additional paid in capital............................................................ 97,356 84,172 Retained earnings..................................................................... 300,874 236,318 Cumulative foreign currency translation adjustments................................... (1,084) (1,140) ------- ------- 397,413 319,613 Less treasury stock, 1,193 and 261 shares, at cost.................................... (26,114) (4,638) ------- ------- TOTAL STOCKHOLDERS' EQUITY.......................................................... 371,299 314,975 ------- ------- $530,945 $400,959 ======= ======= All amounts in thousands except per share data See notes to consolidated financial statements
- 3 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Thirteen weeks ended Thirty-nine weeks ended September 29, October 1, September 29, October 1, 1996 1995 1996 1995 Net sales................................................. $309,019 $243,505 $762,645 $591,795 Cost of goods sold........................................ 213,522 174,129 533,322 414,388 ------- ------- ------- ------- Gross profit.............................................. 95,497 69,376 229,323 177,407 Selling, general and administrative expenses.............. 49,918 34,241 134,792 102,017 Net licensing income...................................... (4,209) (3,024) (9,444) (7,226) ------- ------- ------- ------- Income from operations.................................... 49,788 38,159 103,975 82,616 Net interest expense...................................... 1,007 694 1,991 1,219 ------- ------- ------- ------- Income before provision for income taxes.................. 48,781 37,465 101,984 81,397 Provision for income taxes................................ 17,903 13,487 37,428 29,971 ------- ------- ------- ------- Net income................................................ $30,878 $23,978 $64,556 $51,426 ======= ======= ======= ======= Earnings per share - primary.............................. $0.58 $0.45 $1.20 $0.97 Earnings per share - fully diluted........................ $0.58 $0.45 $1.20 $0.97 Weighted average common shares and share equivalents outstanding Primary................................................. 53,474 53,436 53,634 52,876 Fully diluted........................................... 53,634 53,521 53,817 53,202 All amounts in thousands except per share data See notes to consolidated financial statements
- 4 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Cumulative foreign Total Additional currency stock- Common paid-in Retained translation Treasury holders' stock capital earnings adjustments stock equity ------- ----------- ----------- ----------- ---------- ----------- Balance, January 1, 1996.............................. $263 $84,172 $236,318 ($1,140) $(4,638) $314,975 Thirty-nine weeks ended September 29, 1996: Executive stock options issued........................ - 274 - - - 274 Recognition of deferred compensation in connection with executive stock options........................ - (274) - - - (274) Amortization of deferred compensation of executive stock options outstanding................. - 219 - - - 219 Net income............................................ - - 64,556 - - 64,556 Exercise of stock options............................. 4 8,573 - - - 8,577 Tax benefit derived from exercise of stock options.... - 4,429 - - - 4,429 Stock tendered as payment for options exercised....... - - - - (763) (763) Acquisition of treasury stock......................... - - - - (20,713) (20,713) Registration of 1996 Stock Option Plan................ - (37) - - - (37) Foreign currency translation adjustments.............. - - - 56 - 56 ------- ---------- ---------- ---------- --------- ---------- Balance, September 29, 1996........................... $267 $97,356 $300,874 ($1,084) $(26,114) $371,299 ======= ========== ========== ========== ========= ========== All amounts in thousands See notes to consolidated financial statements
- 5 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Thirty-nine weeks ended September 29, October 1, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income.................................................................................. $64,556 $51,426 ------- ------- Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization............................................................. 6,385 4,960 Provision for losses on accounts receivable............................................... 683 (652) Deferred taxes............................................................................ 6,828 7,804 Other..................................................................................... 529 (50) Decrease (increase) in: Trade receivables....................................................................... (80,765) (78,479) Inventories............................................................................. (46,089) (44,527) Prepaid expenses and other current assets............................................... 1,563 (1,730) Other assets............................................................................ (2,089) (3,986) Increase in: Accounts payable........................................................................ 19,645 14,436 Taxes payable........................................................................... 11,490 7,011 Accrued expenses and other current liabilities.......................................... 5,119 2,395 ------- ------- Total adjustments..................................................................... (76,701) (92,818) ------- ------- Net cash used in operating activities....................................................... (12,145) (41,392) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................................................... (21,308) (9,373) Trademark costs........................................................................... (1,519) (28) Other..................................................................................... 109 611 ------- ------- Net cash used in investing activities....................................................... (22,718) (8,790) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in short-term borrowings......................................................... 37,507 33,558 Proceeds from capital lease............................................................... 5,000 5,000 Repayment of capital leases and long-term debt............................................ (1,915) (2,049) Acquisition of treasury stock............................................................. (20,713) - Net proceeds from issuance of common stock................................................ 7,814 3,755 Other..................................................................................... (37) - ------- ------- Net cash provided by financing activities................................................... 27,656 40,264 ------- ------- EFFECT OF EXCHANGE RATES ON CASH............................................................ (7) (283) ------- ------- NET DECREASE IN CASH........................................................................ (7,214) (10,201) CASH AND CASH EQUIVALENTS, beginning of period.............................................. 16,864 21,126 ------- ------- CASH AND CASH EQUIVALENTS, end of period.................................................... $9,650 $10,925 ======= ======= All amounts in thousands See notes to consolidated financial statements
- 6 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The consolidated financial statements include the accounts of Jones Apparel Group, Inc. and its wholly-owned subsidiaries (collectively, the "Company"). The financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally made in an annual Form 10-K filing. Accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements and the footnotes therein included within the Company's Annual Report on Form 10-K. The financial information has been prepared in accordance with the Company's customary accounting practices and has not been audited. All significant intercompany balances and transactions have been eliminated. In the opinion of management, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature. The foregoing interim results are not necessarily indicative of the results of operations for the full year ending December 31, 1996. The Company reports interim results in 13 week quarters; however, the annual reporting period is the calendar year. 2. Inventories Inventories are summarized as follows (amounts in thousands): September 29, December 31, 1996 1995 Raw materials..................... $34,838 $36,908 Work in process................... 33,533 30,872 Finished goods.................... 154,394 108,846 ------- ------- $222,765 $176,626 ======= ======= - 7 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. Earnings Per Share The computation of earnings per share is based on the weighted average number of common shares outstanding during the period plus, in periods in which they have a dilutive effect, the effect of common shares contingently issuable upon exercise of stock options. Fully diluted earnings per share also reflect additional dilution related to stock options due to the use of the market price at the end of the period when this price is higher than the average price for the period. 4. Statement of Cash Flows Cash payments made for interest for the thirty-nine weeks ended September 29, 1996 and October 1, 1995 were $2,369,000 and $1,511,000, respectively. Cash payments made for income taxes for the thirty-nine weeks ended September 29, 1996 and October 1, 1995 were $18,295,000 and $13,919,000, respectively. Under the provisions of the Company's 1991 Stock Option Plan, employees exercising stock options during the thirty-nine weeks ended September 29, 1996 exchanged 28,000 shares of the Company's Common Stock (valued at $763,000) for 67,430 newly issued shares and during the thirty-nine weeks ended October 1, 1995 exchanged 11,536 shares of the Company's Common Stock (valued at $168,000) for 24,000 newly issued shares. 5. New Accounting Standards. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation," which allows a choice of either the intrinsic value method or the fair value method of accounting for employee stock options effective for fiscal years beginning after December 15, 1995. The Company has selected the option to continue the use of the current intrinsic value method. 6. Capital Stock On July 30, 1996, the Company's Board of Directors approved a two-for-one stock split of the Company's Common Stock in the form of a 100% stock dividend for shareholders of record as of September 12, 1996. Concurrently, the number of authorized shares of Common Stock was increased to 100,000,000. On October 2, 1996, a total of 26,744,580 shares of Common Stock were issued in connection with the split. The stated par value of each share was not changed from $0.01. All share and per share amounts have been restated to retroactively reflect the stock split. - 8 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following discussion provides information and analysis of the Company's results of operations for the thirteen and thirty-nine week periods ended September 29, 1996 and October 1, 1995 and its liquidity and capital resources. The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements included elsewhere herein. Results of Operations Quarter Ended September 29, 1996 Compared to Quarter Ended October 1, 1995 Net Sales. Net sales in the thirteen weeks ended September 29, 1996 (hereinafter referred to as the "third quarter of 1996") increased by 26.9%, or $65.5 million, to $309.0 million as compared to $243.5 million in the thirteen weeks ended October 1, 1995 (hereinafter referred to as the "third quarter of 1995"). The increase was due primarily to an increase in the number of units shipped, as well as the impact of a higher average price per unit shipped resulting from the mix of products shipped. Career sportswear sales increased by 37.0% or $50.7 million, to $187.6 million in the third quarter of 1996 as compared to $136.9 million in the third quarter of 1995. Casual sportswear sales for the third quarter of 1996 increased by 18.6%, or $13.0 million, to $82.9 million as compared to $69.9 million in the third quarter of 1995. Net sales for the Company's suit, dress and other category increased by 4.9%, or $1.8 million, to $38.5 million in the third quarter of 1996 as compared to $36.7 million in the third quarter of 1995. Looking forward, the Company believes that continued sales growth is achievable in its three product categories. Career sportswear sales will continue to increase, aided by the introduction of the new Lauren Ralph Lauren label, which shipped its initial product to customers in the third quarter of 1996. Casual sportswear sales should continue to increase strongly, although not at the growth rates achieved in 1995 and 1994. The Company has rapidly expanded its penetration of this category into the Company's existing customer distribution. Further growth will come primarily from additional sales into existing retail distribution doors (although further distribution expansion opportunities remain) and potentially from growth in the less developed casual label Jones & Co. Casual sportswear sales will also benefit in 1996 from the addition of two new labels, Jones Studio and Jones Jeans, into the existing customer base. The Company's suit and dress category should also continue to show steady growth for the remainder of 1996. While the Company believes the current promotional retail climate will continue, it believes its initiatives with new product lines and the potential for growth under its existing labels should provide for continued sales growth. Gross Profit. The gross profit margin was 30.9% in the third quarter of 1996 as compared to 28.5% in the third quarter of 1995. The increase was primarily attributable to the impact of higher gross profit margins from the Company's major product lines as well as the introduction of the new Lauren Ralph Lauren label, which carries higher margins than the corporate average. - 9 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SG&A Expenses. Selling, general and administrative expenses ("SG&A" expenses) of $49.9 million in the third quarter of 1996 represented an increase of $15.7 million over the third quarter of 1995. As a percentage of sales, SG&A expenses increased to 16.2% in the third quarter of 1996 from 14.1% for the comparable period in 1995. Expenses associated with the Lauren Ralph Lauren product launch and associated operating costs added significant expenses to the quarter. Retail store operating expenses increased by $2.7 million, reflecting the added cost of 18 more stores in operation at the end of the third quarter of 1996 compared to the end of the third quarter of 1995. Net Licensing Income. Net licensing income increased by $1.2 million to $4.2 million in the third quarter of 1996 as compared to $3.0 million in the third quarter of 1995. Licensees under the Jones New York label accounted for $0.4 million of the increase while income from licenses under the Evan-Picone label rose by $0.8 million. Operating Income. The resulting third quarter 1996 operating profit of $49.8 million increased by 30.5%, or $11.6 million, as compared to $38.2 million during the third quarter of 1995. The operating profit margin increased to 16.1% for the third quarter of 1996 from the 15.7% achieved during the third quarter of 1995. Net Interest Expense. Net interest expense was $1.0 million in the third quarter of 1996 compared to $0.7 million in the comparable period of 1995. The primary reasons for the change were higher average overall borrowings and interest on capital leases for additional warehouse facilities during the third quarter of 1996. Provision for Income Taxes. The effective income tax rate was 36.7% for the third quarter of 1996 as compared to 36.0% for the third quarter of 1995. The decrease was primarily due to higher state income tax provisions for the third quarter of 1996. Net Income. Net income increased by 28.8% to $30.9 million in the third quarter of 1996, an increase of $6.9 million over the net income of $24.0 million earned in the third quarter of 1995. Net income as a percentage of sales was 10.0% in the third quarter of 1996 and 9.8% in the third quarter of 1995. Nine Months Ended September 29, 1996 Compared to Nine Months Ended October 1, 1995 Net Sales. Net sales in the thirty-nine weeks ended September 29, 1996 (hereinafter referred to as the "first nine months of 1996") increased by 28.9%, or $170.8 million, to $762.6 million as compared to $591.8 million in the thirty-nine weeks ended October 1, 1995 (hereinafter referred to as the "first nine months of 1995") due primarily to an increase in the number of units shipped as well as the impact of a higher average price per unit shipped resulting primarily from the mix of products shipped. Career sportswear sales increased by 29.6%, or $100.2 million, to $438.8 million in the first nine months of 1996 as compared to $338.6 million in the first nine months of 1995. Casual sportswear sales for the first nine months of 1996 increased by 35.6%, or $56.5 million, to $215.0 million as compared to $158.5 million in the first nine months of 1995. Net sales for the Company's suit, dress and other category increased by 14.9%, or $14.1 million, to $108.8 million in the first nine months of 1996 as compared to $94.7 million in the first nine months of 1995. - 10 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Gross Profit. The gross profit margin was 30.1% in the first nine months of 1996 as compared to 30.0% in the first nine months of 1995. The increase was primarily attributable to the impact of higher gross profit margins from the Company's major product lines, including the impact of the Lauren Ralph Lauren label, offset by increased buying agent commissions on foreign-sourced production due to the outsourcing to an independent agent in Hong Kong functions which were performed by the Company's own staff in 1995. SG&A Expenses. Selling, general and administrative expenses ("SG&A" expenses) of $134.8 million in the first nine months of 1996 represented an increase of $32.8 million over the first nine months of 1995. As a percentage of sales, SG&A expenses increased to 17.7% in the first nine months of 1996 from 17.2% for the comparable period in 1995. Expenses associated with the Lauren Ralph Lauren product launch and associated operating costs added significant expenses during the third quarter of 1996. Retail store operating expenses increased by $7.1 million, reflecting the added cost of 18 more stores in operation at the end of the first nine months of 1996 compared to the end of the first nine months of 1995. Net Licensing Income. Net licensing income increased by $2.2 million to $9.4 million in the first nine months of 1996 as compared to $7.2 million in the first nine months of 1995. Income from licenses under the Jones New York label increased by $0.9 million while income from licenses under the Evan- Picone label rose by $1.3 million. Operating Income. The resulting first nine months 1996 operating profit of $104.0 million increased by 25.9%, or $21.4 million, as compared to $82.6 million during the first nine months of 1995. The operating profit margin decreased to 13.6% in the first nine months of 1996 from 14.0% in 1995 as a result of the higher percentage of SG&A expenses to sales in the first nine months of 1996. Net Interest Expense. Net interest expense was $2.0 million in the first nine months of 1996 compared to $1.2 million in the comparable period of 1995. The primary reasons for the change were higher average overall borrowings and interest on capital leases for additional warehouse facilities during the first nine months of 1996. Provision for Income Taxes. The effective income tax rate was 36.7% for the first nine months of 1996 as compared to 36.8% for the first nine months of 1995. The decrease was primarily due to reduced state income tax provisions for the first nine months of 1996. Net Income. Net income increased by 25.5% to $64.6 million in the first nine months of 1996, an increase of $13.2 million over the net income of $51.4 million earned in the first nine months of 1995. Net income as a percentage of sales was 8.5% in the first nine months of 1996, compared to the 8.7% earned in the first nine months of 1995. Liquidity and Capital Resources The Company's principal capital requirements have been to fund working capital needs, capital expenditures and, beginning in 1995, to repurchase the Company's Common Stock on the open market. The Company has historically relied primarily on internally generated funds, trade credit and bank borrowings to finance its operations and expansion. - 11 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Net cash used in operations was $12.1 million in the first nine months of 1996, compared to $41.4 million in the first nine months of 1995, reflecting the effects of a higher net income for the first nine months of 1996 (before depreciation and amortization charges) and a larger increase in accounts payable, taxes payable and accrued expenses ($36.3 million in total in 1996 compared to $23.8 million in 1995), offset by larger increases in inventories ($46.1 million in 1996 compared to $44.5 million in 1995) and accounts receivable ($80.8 million in 1996 compared to $78.5 million in 1995). The inventory increase was primarily the result of the inventory levels required to meet anticipated wholesale shipments for the fourth quarter of 1996. Net cash used in investing activities was $13.9 million higher in the first nine months of 1996 than in the first nine months of 1995, primarily due to amounts expended to complete construction of an additional warehouse facility to support anticipated growth in the number of units shipped in 1996. Expenditures for capital improvements, replacements and property under capital lease for the full year 1996 are expected to approximate $25 million, of which $6 million represents the estimated cost of an additional warehouse facility under construction to support anticipated growth. Net cash provided by financing activities was $27.7 million in the first nine months of 1996 as compared to $40.3 million in the first nine months of 1995. The principal reasons for the changes were increases in the amounts of short-term borrowings to fund working capital requirements and transactions involving the Company's Common Stock. In the first nine months of 1996, the Company repurchased $20.7 million of its Common Stock on the open market under an announced program under which the Company is authorized to acquire up to $100.0 million of such shares through the end of 1997. As of September 29, 1996, an aggregate of $25.4 million had been expended pursuant to the stock repurchase program. Proceeds from the issuance of common stock to employees exercising stock options amounted to $7.8 million and $3.8 million in the first nine months of 1996 and 1995, respectively. As of September 29, 1996, the Company had credit arrangements with five United States financial institutions which totaled $310.0 million. These lines, which may be used for unsecured borrowings and letters of credit (issued primarily to finance foreign inventory purchases), contain an aggregate sub- limit of $170.0 million for unsecured borrowings with rates depending on the borrowing vehicle utilized. At September 29, 1996, $86.9 million was utilized for letters of credit and there were $37.1 million of short-term borrowings outstanding, leaving $186.0 million available for additional borrowings and letters of credit at that date. The Company also has a line of credit with a Canadian institution for C$3.0 million to be used for unsecured borrowings under which C$0.5 million (US$0.4 million) was outstanding at September 29, 1996. The Company believes that funds generated by operations and the bank credit arrangements will provide the financial resources sufficient to meet its foreseeable working capital, letter of credit, capital expenditure and stock repurchase requirements. In recent years, certain retail customers have undergone financial restructurings or have been involved in highly leveraged financial transactions. Further, some of the retail customers with whom the Company conducts business are operating under, or have recently emerged from, the protection of federal bankruptcy laws. The Company attempts to minimize its credit risk in these situations by closely monitoring its accounts receivable balances and shipping levels to these customers and by monitoring their ongoing financial performance and credit status. To date, developments within these companies have not had a material effect on the Company's financial position or results of operations. - 12 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) However, in light of the significant portion of the Company's net sales which are made to these customers, any material financial difficulties encountered, or financial restructurings or reorganization of such customers, could have an adverse effect on the Company's financial position or results of operations. Inflation The Company does not believe that the relatively moderate rates of inflation which have been experienced in the United States and Canada, where it competes, have had a significant effect on its net sales or profitability. - 13 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES OTHER INFORMATION Part II. CAUTIONARY STATEMENT FOR THE PURPOSES OF "SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995." Under the new safe-harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to forward-looking statements, the Company is providing the following cautionary statements. The Company wishes to caution readers that the following important factors, among others, could cause the Company's actual consolidated results for the balance of 1996, and beyond, to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company, including, without limitation, forward-looking statements made under the caption "Net Sales" in Management's Discussion and Analysis of Financial Condition and Results of Operations above. These factors include the overall level of consumer spending, the performance of the Company's products within the prevailing retail environment, customer acceptance of both new designs and newly-introduced product lines, and financial difficulties encountered by customers as described under "Liquidity and Capital Resources" in Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.(i). Amended and Restated Articles of Incorporation of the Corporation. (b) There were no reports on Form 8-K filed during the quarter ended September 29, 1996. - 14 - JONES APPAREL GROUP, INC. AND SUBSIDIARIES OTHER INFORMATION (CONTINUED) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. JONES APPAREL GROUP, INC. (Registrant) Date: November 13, 1996 By /s/ Sidney Kimmel ---------------------------- SIDNEY KIMMEL Chief Executive Officer By /s/ Wesley R. Card ---------------------------- WESLEY R. CARD Chief Financial Officer - 15 - EX-3.(I) 2 Exhibit 3.(i). Amended and Restated Articles of incorporation of the Corporation. 1. The name of the corporation is Jones Apparel Group, Inc. 2. The location and post office address of the initial registered office of the corporation in this Commonwealth is 220 Rittenhouse Circle, Keystone Industrial Park, Bristol, Pennsylvania, 19007. 3. The corporation is incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania for the following purpose or purposes: the corporation shall have unlimited power to engage in and do any lawful act concerning any or all lawful business for which corporations may be incorporated under the Pennsylvania Business Corporation Law, including to power to engage in manufacturing, this corporation being incorporated under the said Business Corporation Law. 4. The term for which the corporation is to exist is perpetual. 5. The aggregate number of shares which the corporation shall have authority to issue is: ONE HUNDRED ONE MILLION (101,000,000) consisting of (i) One Hundred Million (100,000,000) shares of Common Stock of the par value of $.01 per share and (ii) One Million (1,000,000) shares of Preferred Stock of the par value of $.01 per share. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof of the Preferred Stock, and of the Common Stock are as follows: A. Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article 5, to file an amendment to the corporation's Articles of Incorporation pursuant to 15 Pa.C.S. Section 1914(c) to provide for the issuance of the Preferred Stock in series and to establish the number of shares to be included in each such series. The Preferred Stock may be issued either as a class without series, or as so determined from time to time by the Board of Directors, either in whole or in part in one or more series, each series to be appropriately designated by a distinguishing number, letter or title prior to the issue of any shares thereof. Whenever the term "Preferred Stock" is used in this Article 5, it shall be deemed to mean and include Preferred Stock issued as a class without series, or one or more series thereof, or both, unless the context shall otherwise require. Threr is hereby expressly granted to the Board of Directors of the corporation authority, subject to the limitations provided by law, to fix the voting power, the designations, and the relative preferences, powers, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of each series of said Preferred Stock and the variations in the relative powers, rights, preferences and limitations as between series, and to increase the number of shares constituting each series, and to decrease such number of shares (but not less than the number of outstanding shares of the series), in the resolution or resolutions adopted by the Board of Directors providing for the issue of said Preferred Stock. The authority of the Board of Directors of the corporation with respect to each series shall include, but shall not be limited to, the authority to determine the following: 1. The designation of the series; 2. The number of shares initially constituting such series; 3. The increase, and the decrease to a number not less than the number of the outstanding shares of such series, of the number of shares constituting such series theretofore fixed; 4. The rate or rates and the times and conditions under which dividends on the shares of such series shall be paid, and, (i) if such dividends are payable in preference to, or in relation to, the dividends payable on any other class or classes of stock, the terms and conditions of such payment, and (ii) if such dividends shall be cumulative, the date or dates from and after which they shall accumulate; 5. Whether or not the shares of such series shall be redeemable, and, if such shares shall be redeemable, the terms and conditions of such redemption, including, but not limited to, the date or dates upon or after which such shares shall be redeemable and the amount per share which shall be payable upon such redemption, which amount may vary under conditions and at different redemption dates; 6. The amount payable on the shares of such series in the event of a dissolution of, or upon any distribution of the assets of, the corporation; 7. Whether or not the shares of such series may be convertible into, or exchangeable for, shares of any other class or series and the price or prices and the rates of exchange and the terms of any adjustments to be made in connection with such conversion or exchange; 8. Whether or not the shares of such series shall have voting rights in addition to the voting rights provided by law, and, if such shares shall have such voting rights, the terms and conditions thereof, including but not limited to, the right of the holders of such shares to vote as a separate class either alone or with the holders of shares of one or more other series of Preferred Stock and the right to have more or less than one vote per share; 9. Whether or not a purchase fund shall be provided for the shares of such series, and, if such a purchase fund shall be provided, the terms and conditions thereof; 10. Whether or not a sinking fund shall be provided for the redemption of the shares of such series and if such a sinking fund shall be provided, the terms and conditions thereof; and 11. Any other powers, preferences and relative, participating, optional, or other special rights, and qualifications, limitations or restrictions thereof, as shall not be inconsistent with the provisions of this Article 5 or the limitations provided by law. B. Common Stock. 1. Subject to the rights of the Preferred shareholders, the holders of the Common Stock shall be entitled to receive such dividends as may be declared thereon by the Board of Directors of the Corporation in its discretion, from time to time, out of any funds or assets of the corporation lawfully available for the payment of such dividends. 2. In the event of any liquidation, dissolution or winding up of the corporation, or any reduction of its capital, resulting in a distribution of its assets to its shareholders, whether voluntary or involuntary, then, after there shall have been paid or set apart for the holders of the Preferred Stock the full preferential amounts to which they are entitled, the holders of the Common Stock shall be entitled to receive, as a class, pro rata, the remaining assets of the corporation available for distribution to its shareholders. 3. For any and all purposes of these Articles of Incorporation, neither the merger or consolidation of the Corporation into or with any other corporation, nor the merger or consolidation of any other corporation into or with the corporation, nor a sale, transfer or lease of all or substantially all of the assets of the corporation, or any other transaction or series of transactions having the effect of a reorganization shall be deemed to be a liquidation, dissolution or winding-up of the corporation. 4. Except as otherwise expressly provided by law or in a resolution of the Board of Directors providing voting rights to the holders of the Preferred Stock, the holders of the Common Stock shall possess exclusive voting power for the election of directors and for all other purposes and each holder thereof shall be entitled to one vote for each share thereof. 6. The name(s) and post office address(es) of each incorporator(s) and the number and class of shares subscribed by such incorporator(s) is (are): Name Address Number and class of shares Frances Kuzinar 1510 The Fidelity Building One (1) Common Philadelphia, PA 19109 7. In all elections for Directors, each shareholder entitled to vote shall be entitled to only one vote for each share held, it being intended hereby to deny shareholders the right of cumulative voting in the election of Directors. 8. Except as otherwise provided by law, and subject to the provisions of, applicable law, any action which may be taken at a meeting of the shareholders or of a class of shareholders of the corporation may be taken without a meeting, provided a consent or consents in writing to such action, setting forth the action so taken, shall be (1) signed by the shareholders entitled to cast a majority (or such larger percentage as may be required by law) of the number of votes which all such shareholders are entitled to cast thereon, and (2) filed with the Secretary of the corporation. EX-27 3
5 1,000 9-MOS DEC-31-1996 SEP-29-1996 9,650 0 174,664 2,425 222,765 443,444 81,812 30,674 530,945 143,132 0 0 0 267 371,032 530,945 762,645 762,645 533,322 533,322 134,792 683 1,991 101,984 37,428 64,556 0 0 0 64,556 1.20 1.20
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