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JNY > SEC Filings for JNY > Form 8-K on 24-Mar-2014All Recent SEC Filings

Show all filings for JONES GROUP INC

Form 8-K for JONES GROUP INC


24-Mar-2014

Regulation FD Disclosure


Item 7.01 Regulation FD Disclosure.

As previously announced, on December 19, 2013, The Jones Group Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Jasper Parent LLC ("Parent") and Jasper Merger Sub, Inc. ("Merger Sub"), a wholly owned subsidiary of Parent, providing for the merger of Merger Sub with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent (the "Surviving Corporation"). Parent and Merger Sub are beneficially owned by affiliates of Sycamore Partners, L.P. and Sycamore Partners A, L.P. (collectively, the "Sponsor").

Substantially concurrent with the closing of the Merger, Parent intends to transfer ownership of certain of the Company's business lines (including the business conducted by KG Group Holdings Limited and its subsidiaries (the "Kurt Geiger Business"), the business conducted by Stuart Weitzman Holdings, LLC and its subsidiaries (the "Stuart Weitzman Business") and the Apparel Business (as defined in the Merger Agreement, which the Company previously filed as Exhibit 2.1 to the Current Report on Form 8-K on December 23, 2013)) to separate controlled affiliates of the Sponsor (the "Carveout Transactions"). Following completion of such transfers, the remaining corporation's business will be comprised of the Nine West Business and the Jeanswear Business (each as defined in the Merger Agreement), together with certain corporate level assets and obligations to be retained by the Surviving Corporation, all of which will be held by Nine West Holdings, Inc. (as successor in interest to the Surviving Corporation) ("Nine West Holdings").

In connection with the Merger, Merger Sub is offering to eligible holders (the "Offer"), the opportunity to exchange any and all of the outstanding 6.875% Senior Notes due 2019 (the "Old Notes") of the Company, Jones Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc. and JAG Footwear, Accessories and Retail (the "Original Issuers"), for new 8.250% Senior Notes due 2019 (the "New Notes") to be issued by Nine West Holdings. The Merger, the Offer, the issuance of the New Notes, the Carveout Transactions, the change of control offer launched by the Original Issuers for the Old Notes on March 6, 2014, and the bank financings described under "Capitalization" and "Unaudited Pro Forma Consolidated Combined Financial Information" below (the "senior credit facilities") and the related transactions are hereinafter sometimes referred to as the "Transactions". Neither the Company or any of its affiliates is making any Offer or is otherwise participating in any transactions relating thereto.

The Sponsor and the Company's management have prepared certain information related to Nine West Holdings, which will be disclosed to eligible holders in connection with the Offer on the date hereof and which has been reproduced below. Such information does not represent a comprehensive statement of the financial results for the Company. Such information may vary from, and may not be directly comparable to, the historical financial information of the Company on a consolidated basis or prior to the Merger and any such differences may be material. Accordingly, investors and shareholders should not place undue reliance on such financial information.

This Current Report on Form 8-K contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission (the "SEC"). For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles. To supplement the preliminary financial information presented in accordance with GAAP, the Sponsor disclosed to eligible holders on the date hereof non-GAAP information regarding the effect on Operating Income, Gross Profit, Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), EBITDA Before Rent Expense ("EBITDAR"), Rent Expense and Capital Expenditures related to, among other things:

the impairments recorded as a result of the annual review of indefinite-lived intangible assets and goodwill;


severance, fixed asset impairment and other charges and credits related to the closure of underperforming retail locations;

the amortization of certain acquired intangible assets from the acquisition of Atwood Italia S.r.l.;

investment consulting fees, legal fees, accounting fees and other items related to the acquisitions and other business development activities;

severance and restricted stock amortization related to executive management changes; and

present value accruals and adjustments for liabilities related to leases on properties currently not in use.

These non-GAAP measures were provided by the Sponsor to enhance the user's overall understanding of the Nine West Holdings' financial results. These measures should be considered in addition to results prepared in accordance with GAAP, but are not a substitute for or superior to GAAP results. The non-GAAP measures of Adjusted Operating Income, EBITDA, Adjusted EBITDA, Adjusted EBITDAR, Adjusted Rent Expense and Adjusted Capital Expenditures included herein have been reconciled to the equivalent GAAP measure.


SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following table sets forth summary unaudited pro forma condensed combined financial data of Nine West Holdings.

The summary unaudited pro forma combined financial data set forth below was derived from the pro forma financial information included under "Unaudited Pro Forma Condensed Combined Financial Information" below. The summary unaudited pro forma condensed combined information gives effect to the Transactions as if they had occurred as of January 1, 2013 (or December 31, 2013 in the case of our balance sheet data).

Pro Forma for the Twelve Months ended December 31, 2013
(Amounts in millions, other than notes)

Financial Data(1):
Adjusted EBITDA                                                          $        198
Pro Forma Adjusted EBITDA                                                         236
Pro Forma Adjusted EBITDAR                                                        276
Adjusted Capital Expenditures                                                      22
Adjusted Rent Expense                                                              40
Adjusted Net Revenues                                                           2,223
Nine West Co.                                                                   1,394
Jeanswear Co.                                                                     829
Adjusted Gross Profit                                                             675

Selected Pro Forma Credit Statistics:

Total Debt(2)(3)                                                         $      1,460
Total Lease-Adjusted Debt(4)                                             $      1,778
Cash Interest Expense(5)                                                 $         91
Total Debt / Pro Forma Adjusted EBITDA(2)(3)(4)                                   6.2 x
Total Lease-Adjusted Debt / Pro Forma Adjusted EBITDAR(2)(5)                      6.4 x
Pro Forma Adjusted EBITDA / Cash Interest Expense(2)(6)                           2.6 x

(1) The Sponsor has presented these non-GAAP financial measures, because it believes such measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in Nine West Holdings' industry. The use of these non-GAAP financial measures has limitations as an analytical tool, including the failure to reflect changes in cash requirements, including cash requirements necessary to service principal or interest payments on debt, pay income taxes, or invest in maintenance and growth capital expenditures or in working capital needs. Other companies in Nine West Holdings' industry may calculate these measures differently than Nine West Holdings does, limiting their usefulness as a comparative measure. See below for a reconciliation of each of these non-GAAP financial measures to its most directly comparable GAAP financial measure.

(2) Total Debt as of December 31, 2013 assumes that all of the Old Notes are tendered in the Offer. See "Capitalization" for more information on Nine West Holdings' debt capital structure in event that less than all of the Old Notes are tendered in the Offer.


(3) Amounts shown for Total Debt include long-term debt and current portion of long-term debt, before any anticipated original issue discount.

(4) Total Lease-Adjusted Debt as of December 31, 2013 assumes that all of the Old Notes are tendered in the Offer and capitalizes Adjusted Rent Expense at 8.0x. See "Capitalization" for more information on Nine West Holdings' debt capital structure in the event that less than all of the Old Notes are tendered in the Offer.

(5) Cash interest expense for the twelve months ended December 31, 2013 is total cash interest expense for Nine West Holdings after giving pro forma effect to the Transactions, including the incurrence of the senior credit facilities and the New Notes. The calculation reflects twelve months of interest as if such indebtedness had been outstanding on the first day of such twelve-month period. The actual interest rates on any variable interest indebtedness over such twelve-month period may vary from those assumed in the calculation, and this financial data should not be considered indicative of actual results that would have been achieved during such twelve-month period.

Reconciliation of Non-GAAP Financial Measures to Most Comparable GAAP Measure (Totals May Not Sum Due to Rounding):

Pro Forma for the Twelve Months ended December 31, 2013
(Amounts in millions) (unaudited)

Adjusted Operating Income, Adjusted EBITDA, Pro Forma Adjusted EBITDA and Pro Forma Adjusted EBITDAR:
(Loss) income attributable to Jones Footwear and Jeanswear $ (1.0 )

Income (loss) attributable to noncontrolling interest                             (1.1 )
Net (loss) income                                                                 (2.1 )
Provision for income taxes                                                         1.9
Equity in income of unconsolidated affiliate                                      (0.6 )
Interest expense and financing costs                                             101.5
Interest income                                                                   (3.8 )
Operating income                                                                  97.0
Affiliated company transactions and transaction costs(a)                            13
Impairments and costs related to previously announced
restructurings(c)                                                                   26
Purchase accounting adjustments(d)                                                   6
Other adjustments, net(b)                                                           14
Adjusted Operating Income                                                $         157
Depreciation and amortization(e)                                                    41
Adjusted EBITDA                                                          $         198
Pro forma adjustments(f)                                                            38
Pro Forma Adjusted EBITDA                                                $         236
Adjusted Rent Expense(g)                                                            40
Pro Forma Adjusted EBITDAR                                               $         276

Adjusted Rent Expense:
Rent expense                                                             $          63
Planned store closures(h)                                                          (10 )
Rent related to brands and facilities planned to be exited(i)                       (4 )
(Loss) on unused property(j)                                                        (4 )
Other rent (sales-based, equipment, storage) (k)                                    (5 )
Adjusted Rent Expense                                                    $          40

Adjusted Capital Expenditures:
Capital expenditures                                                     $          33
SAP implementation(l)                                                               (6 )
Impact from brands planned to be sold or closed(m)                                  (5 )
Adjusted Capital Expenditures                                            $          22


(a) Relates to (i) net non-cash royalty income recognized for the intra-company licensing of certain brands which will be replaced by royalty-free agreements between Nine West Holdings and the Apparel Business going forward; (ii) certain corporate costs previously allocated to Nine West Holdings from affiliated companies, and (iii) the expense of one-time fees and expenses related to the Transactions.

(b) Relates to other costs not considered to be part of going forward operations and/or rounding.

(c) Includes (i) trademark and goodwill impairments; (ii) costs associated with retail store restructuring; (iii) costs associated with unused property; and
(iv) costs associated with non-retail store restructurings.

(d) Reverses the impact of purchase accounting on deferred rent expense and tenant allowance amortization.

(e) Represents remaining depreciation and amortization not added back to Adjusted Operating Income and includes the impact of additional depreciation and amortization expenses that result from purchase accounting. Depreciation and amortization added back to Adjusted Operating Income was $35 million in the year ended December 31, 2013.

(f) Includes savings contemplated by the Sponsor, including store and brand closures or exits and corporate cost savings initiatives.

(g) See reconciliation for Adjusted Rent Expense.

(h) Run-rate adjustment reflecting rent expense in the year ended December 31, 2013 associated with stores planned to be closed by December 31, 2014. The significant majority of these stores are expected to be closed by June 30, 2014.


(i) Run-rate adjustment reflecting rent expense in the year ended December 31, 2013 associated with planned brand exits.

(j) Includes one-time non-cash charges incurred with respect to subletting vacant real estate.

(k) Relates to other non-base rent (including sales-based percentage rent, equipment rent and storage rent).

(l) Capital expenditures associated with the implementation of SAP, completed in 2013.

(m) Capital expenditures associated with stores and brands planned to be sold or closed, the significant majority of which is expected to be completed by June 30, 2014.


CAPITALIZATION

The following table describes Nine West Holdings' cash and cash equivalents and Nine West Holdings' consolidated capitalization as of December 31, 2013 on a historical basis and on a pro forma basis giving effect to the Transactions as if they had occurred on that date and assuming that all Old Notes have been tendered and accepted in the Offer. You should read this table in conjunction with "Summary Unaudited Pro Forma Condensed Combined Financial Data," and "Unaudited Pro Forma Condensed Combined Financial Information," appearing elsewhere in this Current Report on Form 8-K and Nine West Holdings' combined financial statements included in the Company's Current Report on Form 8-K dated February 24, 2013.

                                                   As of December 31, 2013
                                                   Actual          Pro Forma
(in millions)                                            (unaudited)
Cash and cash equivalents                       $       89.2       $     70.0
Long-term debt (including current portion)(1)
Guaranteed loan notes(2)                        $       10.3       $     10.3
2014 Notes                                             250.0                -
Old Notes(3)                                           400.0                -
2034 Notes                                             250.0            250.0
Existing revolving credit facility(4)                      -                -
Revolving credit facility(3)(4)                            -             55.0
Secured term loan facility(3)                              -            445.0
Unsecured term loan facility                               -            300.0
New Notes (3)                                              -            400.0
Total debt                                             910.3          1,460.3
Total stockholders' equity(5)                           98.2            103.5
Total capitalization                            $    1,008.5       $  1,563.8

Amount of any debt presented reflects par value and does not reflect any
(1) unamortized discount or premium, as applicable, or fair value adjustments.

(2) 6.2 million of fixed rate guaranteed loan notes converted at USD/GBP exchange rate of 1.6488 as of December 31, 2013. The fixed rate guaranteed loan notes will be supported by a letter of credit issued under the senior secured asset-based revolving credit facility.

(3) If less than $300.0 million of the Old Notes are tendered in the Offer, then unless Nine West Holdings waives the condition to the Offer that requires receipt of valid tenders of Old Notes, not validly withdrawn, of at least $300.0 million of the principal amount outstanding of the Old Notes prior to 5:00 p.m., New York time, on April 4, 2014, Nine West Holdings will terminate the Offer and no New Notes will be exchanged for Old Notes. If less than all, but $300.0 million or more, of the Old Notes are tendered in the Offer and the holders of the remaining Old Notes do not tender their Old Notes in the change of control offer, then such untendered Old Notes will remain outstanding and will become the obligation of Nine West Holdings following the consummation of the Transactions. If less than all, but $300.0 million or more, of the Old Notes are tendered in the Offer and the holders of the remaining Old Notes tender their Old Notes in the change of control offer, Nine West Holdings will use up to an additional $25.0 million of drawings under the revolving credit facility, the cash proceeds from an offering of additional notes or an additional Sponsor equity contribution, or any combination of the foregoing, to fund the repurchase of such Old Notes tendered in the change of control offer. If Nine West Holdings elects to issue additional notes and the proceeds from such offering exceed the amount of cash needed to repurchase the Old Notes tendered in the change of control offer, such excess proceeds would reduce the amounts that would otherwise be drawn under the revolving credit facility and/or be used to prepay a portion of the secured term loan facility.

(4) No amounts were outstanding under the Company's existing revolving credit facility as of December 31, 2013, except for drawn letters of credit totaling $19.6 million, $2.6 million of which related directly to the Stuart Weitzman Business and the Kurt Geiger Business and $10.7 million of which related to the guaranteed loan notes. The existing revolving credit facility is being refinanced as part of the Transactions, and the $2.6 million of letters of credit with respect to the Stuart Weitzman Business and the Kurt Geiger Business are being terminated. As of December 31, 2013, on a pro forma basis giving effect to the Transactions as if they had occurred on that date and assuming that all Old Notes have been tendered and accepted in the Offer, Nine West Holdings would have had $170.0 million of borrowing capacity under the revolving credit facility, excluding $16.9 million of outstanding letters of credit ($10.7 million of which will relate to the guaranteed loan notes).


(5) Pro forma total stockholders' equity represents $120.0 million sponsor equity contribution, net of buyer transaction costs of $16.5 million relating to the Transactions, which will be recorded as an expense.


UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial statements have been derived by applying pro forma adjustments to Nine West Holdings' historical combined financial statements included in the Company's Current Report on Form 8-K dated February 24, 2014. The unaudited pro forma combined statements of operations give effect to the Transactions as if they had occurred on January 1, 2013. The unaudited pro forma condensed combined balance sheet gives effect to the Transactions as if they had occurred on December 31, 2013.

The unaudited pro forma adjustments are based upon available information and certain assumptions that Nine West Holdings believes are reasonable under the circumstances. The unaudited pro forma condensed combined financial statements are presented for informational purposes only. The unaudited pro forma condensed combined financial statements do not purport to represent what Nine West Holdings' actual combined results of operations or combined financial condition would have been had the Transactions actually occurred on the dates indicated, nor does it purport to project Nine West Holdings' results of operations or financial condition for any future period or as of any future date. The unaudited pro forma combined financial statements should be read in conjunction with the information contained in "Summary Unaudited Pro Forma Condensed Combined Financial Data," and the audited combined financial statements and the notes thereto included in the Company's Current Report on Form 8-K dated February 24, 2014. All pro forma adjustments and their underlying assumptions are described more fully in the notes to the unaudited pro forma condensed combined financial statements. In addition, in certain instances, numbers may not sum to total due to rounding.

The unaudited pro forma condensed combined statements of operations give effect to adjustments that are (i) directly attributable to the Transactions, (ii) factually supportable and (iii) expected to have a continuing impact. The unaudited pro forma combined balance sheet gives effect to adjustments that are
(x) directly attributable to the Transactions and (y) factually supportable, regardless of whether they have a continuing impact or are non-recurring.

The Merger will be accounted for using the purchase method of accounting. The pro forma information presented, including allocations of purchase price, is based on preliminary estimates of fair value of assets and liabilities, available information as of the date of this Current Report on Form 8-K and Nine West Holdings management assumptions, and will be revised as additional information becomes available. The actual adjustments to Nine West Holdings' combined financial statements upon the closing of the Transactions will depend on a number of factors, including a final independent third-party valuation of assets and liabilities and the actual balance of Nine West Holdings' net assets on the closing date. Therefore, the actual adjustments will differ from the pro forma adjustments, and the differences may be material.


Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2013

                                                  Historical                                     Pro Forma
                                                                                                December 31,
(Amounts in millions)                          December 31, 2013        Adjustments                 2013

ASSETS

Current Assets
Cash and cash equivalents                     $              89.2     $   (19.2 )   (1 )        $       70.0
Accounts receivable                                         228.6             -                        228.6
Inventories, primarily finished goods                       302.6             -                        302.6
Prepaid and refundable income taxes                           2.6             -                          2.6
Deferred taxes                                               18.6             -                         18.6
Prepaid expenses and other current assets                    31.2             -                         31.2
Total current assets                                        672.8         (19.2 )                      653.6

Property, plant and equipment, at cost,
less accumulated depreciation and
amortization                                                144.3          47.9     (2 )               192.2
Goodwill                                                        -         198.6     (2 )               198.6
Other intangibles, less accumulated
amortization                                                397.5         611.5     (2 )             1,009.0
Investments in unconsolidated affiliate                      55.9          (1.4 )   (2 )                54.5
Notes receivable                                             93.3         (93.3 )   (3 )                   -
Other assets                                                 53.2          26.9     (2 ), (4)           80.1
Total assets                                  $           1,417.0     $   771.1                 $    2,188.1

LIABILITIES AND EQUITY

Current Liabilities
Current portion of long-term debt and
capital lease obligations                     $             256.6     $  (199.4 )   (5 )        $       57.2
Accounts payable                                            162.1             -                        162.1
Income taxes payable                                            -             -                            -
Accrued employee compensation and benefits                   27.9             -                         27.9
Accrued expenses and other current
liabilities                                                  62.0          (6.9 )   (6 )                55.1
Total current liabilities                                   508.6        (206.3 )                      302.3

Long-term debt                                              673.4         694.7     (5 )             1,368.1
Obligations under capital leases                             19.1             -                         19.1
Deferred taxes                                               56.8         297.6     (2 )               354.4
Other liabilities                                            60.7         (20.3 )   (2 ), (7)           40.4
Total liabilities                             $           1,318.6     $   765.8                 $    2,084.4

Redeemable noncontrolling interest                            0.2             -                          0.2
Total equity                                                 98.2           5.3     (8 )               103.5
Total liabilities and equity                  $           1,417.0     $   771.1                 $    2,188.1

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