XNYS:JNY Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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 June 30, 2012

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 1-10746

THE JONES GROUP INC.
(Exact name of registrant as specified in its charter)
 
Pennsylvania
(State or other jurisdiction of
incorporation or organization)
 
06-0935166
(I.R.S. Employer
Identification No.)
1411 Broadway
New York, New York
(Address of principal executive offices)
 
10018
(Zip Code)
(212) 642-3860
(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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  x   Accelerated filer  o   Non-accelerated filer  o   Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   o   No   x

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
$.01 par value
Outstanding at July 26, 2012
80,284,435


THE JONES GROUP INC.

Index
 
 
Page No.
 
PART I.FINANCIAL INFORMATION
 
 
 
 
 
 
 
June 30, 2012, July 2, 2011 and December 31, 2011
   
3
 
       
Fiscal Quarters and Six Months ended June 30, 2012 and July 2, 2011
   
4
 
       
Fiscal Quarters and Six Months ended June 30, 2012 and July 2, 2011
   
5
 
       
Fiscal Six Months ended June 30, 2012 and July 2, 2011
   
6
 
       
Fiscal Six Months ended June 30, 2012 and July 2, 2011
   
7
 
 
   
8
 
 
   
26
 
 
   
37
 
 
   
38
 
PART II.  OTHER INFORMATION
 
   
 
 
 
   
38
 
 
   
38
 
 
   
39
 
 
   
39
 
 
   
40
 
   
41
 





DEFINITIONS

As used in this Report, unless the context requires otherwise, "Jones," "our," "us" and "we" means The Jones Group Inc. and consolidated subsidiaries, "GRI" means GRI Group Limited, "FASB" means the Financial Accounting Standards Board, "ASC" means the "FASB Accounting Standards Codification", "ASU" means "Accounting Standards Update" and "SEC" means the United States Securities and Exchange Commission.

- 2 -

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

THE JONES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)

 
 
June 30, 2012
 
 
July 2, 2011
 
December 31, 2011
 
ASSETS
 
(Unaudited)
 
 
(Unaudited)
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
277.1
 
$
146.4
 
$
238.8
 
Accounts receivable
 
327.2
 
 
378.3
 
 
339.6
 
Inventories, primarily finished goods
 
467.5
 
 
523.2
 
 
491.1
 
Prepaid and refundable income taxes
 
1.4
 
 
11.5
 
 
11.9
 
Deferred taxes
 
27.7
 
 
26.2
 
 
26.4
 
Loan to unconsolidated affiliate
 
-
 
 
-
 
 
10.0
 
Prepaid expenses and other current assets
 
59.1
 
 
44.3
 
 
37.7
 
Total current assets
 
1,160.0
 
 
1,129.9
 
 
1,155.5
 
Property, plant and equipment, at cost, less accumulated depreciation and amortization of $590.2, $579.6 and $605.4
 
271.4
 
 
270.2
 
 
271.4
 
Goodwill
 
256.3
 
 
258.9
 
 
255.3
 
Other intangibles, at cost, less accumulated amortization
 
891.8
 
 
947.3
 
 
897.4
 
Investment in and loan to unconsolidated affiliate
 
38.4
 
 
43.6
 
 
35.6
 
Other assets
 
91.0
 
 
109.1
 
 
100.1
 
Total assets
$
2,708.9
 
$
2,759.0
 
$
2,715.3
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt and capital lease obligations
$
2.1
 
$
1.9
 
$
2.0
 
Current portion of acquisition consideration payable
 
216.7
 
 
23.0
 
 
194.1
 
Accounts payable
 
232.7
 
 
230.2
 
 
236.2
 
Income taxes payable
 
4.6
 
 
0.4
 
 
1.4
 
Accrued employee compensation and benefits
 
36.4
 
 
39.2
 
 
45.3
 
Accrued expenses and other current liabilities
 
98.7
 
 
103.3
 
 
101.0
 
Total current liabilities
 
591.2
 
 
398.0
 
 
580.0
 
Long-term debt
 
834.2
 
 
825.4
 
 
831.4
 
Obligations under capital leases
 
22.3
 
 
24.3
 
 
23.3
 
Deferred taxes
 
69.6
 
 
74.9
 
 
73.4
 
Income taxes payable
 
0.5
 
 
8.7
 
 
6.7
 
Acquisition consideration payable
 
4.8
 
 
206.7
 
 
17.7
 
Other noncurrent liabilities
 
112.4
 
 
79.1
 
 
93.4
 
Total liabilities
 
1,635.0
 
 
1,617.1
 
 
1,625.9
 
 
Commitments and contingencies
 
-
 
 
-
 
 
-
 
 
Equity:
 
 
 
 
 
 
 
 
 
Preferred stock, $.01 par value - shares authorized 1.0; none issued
 
-
 
 
-
 
 
-
 
Common stock, $.01 par value - shares authorized 200.0; issued 80.2, 85.9 and 81.0
 
0.8
 
 
0.9
 
 
0.8
 
Additional paid-in capital
 
521.3
 
 
539.4
 
 
521.8
 
Retained earnings
 
579.8
 
 
611.3
 
 
596.2
 
Accumulated other comprehensive loss
 
(28.3
)
 
(9.9
)
 
(29.6
)
Total Jones stockholders' equity
 
1,073.6
 
 
1,141.7
 
 
1,089.2
 
Noncontrolling interest
 
0.3
 
 
0.2
 
 
0.2
 
Total equity
 
1,073.9
 
 
1,141.9
 
 
1,089.4
 
Total liabilities and equity
$
2,708.9
 
$
2,759.0
 
$
2,715.3
 

See accompanying notes to consolidated financial statements
- 3 -

THE JONES GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(ALL AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)


 
Fiscal Quarter Ended
 
Fiscal Six Months Ended
 
 
 
June 30,
2012
 
 
July 2,
2011
 
 
June 30,
2012
 
 
July 2,
2011
 
 
Net sales
$
844.3
 
$
876.7
 
$
1,767.7
 
$
1,825.7
 
Licensing income
 
10.2
 
 
10.4
 
 
22.5
 
 
22.5
 
Other revenues
 
0.3
 
 
0.3
 
 
0.5
 
 
0.5
 
 
Total revenues
 
854.8
 
 
887.4
 
 
1,790.7
 
 
1,848.7
 
Cost of goods sold
 
528.6
 
 
564.3
 
 
1,121.1
 
 
1,194.9
 
 
Gross profit
 
326.2
 
 
323.1
 
 
669.6
 
 
653.8
 
Selling, general and administrative expenses
 
304.5
 
 
278.2
 
 
607.7
 
 
547.7
 
 
Operating income
 
21.7
 
 
44.9
 
 
61.9
 
 
106.1
 
Interest income
 
0.2
 
 
0.3
 
 
0.4
 
 
0.4
 
Interest expense and financing costs
 
9.0
 
 
37.3
 
 
51.9
 
 
58.6
 
Equity in income of unconsolidated affiliate
 
0.4
 
 
0.7
 
 
1.3
 
 
2.0
 
 
Income before provision for income taxes
 
13.3
 
 
8.6
 
 
11.7
 
 
49.9
 
Provision for income taxes
 
4.9
 
 
3.2
 
 
4.3
 
 
18.7
 
Net income
 
8.4
 
 
5.4
 
 
7.4
 
 
31.2
 
Less: income attributable to noncontrolling interest
 
0.3
 
 
0.2
 
 
0.5
 
 
0.4
 
Income attributable to Jones
$
8.1
 
$
5.2
 
$
6.9
 
$
30.8
 
 
Earnings per common share attributable to Jones
 
 
 
 
 
 
 
 
 
 
Basic
$
0.11
 
$
0.06
 
$
0.09
 
$
0.37
 
Diluted
 
0.10
 
 
0.06
 
 
0.09
 
 
0.36
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
75.2
 
 
81.7
 
 
75.7
 
 
81.9
 
Diluted
 
76.0
 
 
83.2
 
 
77.5
 
 
83.3
 
 
Dividends declared per share
$
0.05
 
$
0.05
 
$
0.10
 
$
0.10
 



See accompanying notes to consolidated financial statements
- 4 -

THE JONES GROUP INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(ALL AMOUNTS IN MILLIONS)


 
 
Fiscal Quarter Ended
   
Fiscal Six Months Ended
 
 
 
June 30,
2012
   
July 2,
2011
   
June 30,
2012
   
July 2,
2011
 
 
Net income
 
$
8.4
   
$
5.4
   
$
7.4
   
$
31.2
 
Other comprehensive income (loss):
                               
Change in fair value of cash flow hedges, net of $(0.1), $0.0, $(0.1) and $0.2 tax (provision) benefit
   
0.2
     
(0.1
)
   
0.1
     
(0.4
)
Reclassification adjustment for hedge gains and losses included in net income, net of  $0.1, $0.0 and $0.1 tax benefit
   
-
     
0.2
     
0.1
     
0.3
 
Foreign currency translation adjustments
   
(8.2
)
   
(4.6
)
   
1.1
     
(1.4
)
Total other comprehensive (loss) income
   
(8.0
)
   
(4.5
)
   
1.3
     
(1.5
)
Comprehensive income
 
$
0.4
   
$
0.9
   
$
8.7
   
$
29.7
 



See accompanying notes to consolidated financial statements
- 5 -

THE JONES GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(ALL AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)

 
Number of common shares outstanding
 
Total equity
 
Common stock
 
Additional paid-in capital
 
Retained earnings
 
Accumulated other comp-rehensive loss
 
 
Non-controlling interest
 
 
 
 
Balance,  January 1, 2011
86.4
$
1,138.3
 
$
0.9
 
$
541.9
 
$
603.8
 
$
(8.4
)
 
$
0.1
 
Comprehensive income
-
 
29.7
 
 
-
 
 
-
 
 
30.8
 
 
(1.5
)
 
 
0.4
 
Issuance of restricted stock to employees, net of forfeitures
1.7
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
 
-
 
Amortization of restricted stock
-
 
11.1
 
 
-
 
 
11.1
 
 
-
 
 
-
 
 
 
-
 
Distributions to noncontrolling interest
-
 
(0.3
)
 
-
 
 
-
 
 
-
 
 
-
 
 
 
(0.3
)
Tax effects from vesting of restricted stock
-
 
0.9
 
 
-
 
 
0.9
 
 
-
 
 
-
 
 
 
-
 
Tax effects of expired employee stock options
-
 
(1.2
)
 
-
 
 
(1.2
)
 
-
 
 
-
 
 
 
-
 
Repurchase of common shares
(2.2
)
(28.0
)
 
-
 
 
(13.3
)
 
(14.7
)
 
-
 
 
 
-
 
Dividends on common stock ($0.10 per share)
-
 
(8.7
)
 
-
 
 
-
 
 
(8.7
)
 
-
 
 
 
-
 
Other
-
 
0.1
 
 
-
 
 
-
 
 
0.1
 
 
-
 
 
 
-
 
 
Balance, July 2, 2011
85.9
$
1,141.9
 
$
0.9
 
$
539.4
 
$
611.3
 
$
(9.9
)
 
$
0.2
 
 
 
 
Balance,  January 1, 2012
81.0
$
1,089.4
 
$
0.8
 
$
521.8
 
$
596.2
 
$
(29.6
)
 
$
0.2
 
Comprehensive income
-
 
8.7
 
 
-
 
 
-
 
 
6.9
 
 
1.3
 
 
 
0.5
 
Issuance of restricted stock to employees, net of forfeitures
2.2
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
 
-
 
Amortization of restricted stock
-
 
13.3
 
 
-
 
 
13.3
 
 
-
 
 
-
 
 
 
-
 
Distributions to noncontrolling interest
-
 
(0.4
)
 
-
 
 
-
 
 
-
 
 
-
 
 
 
(0.4
)
Tax effects from vesting of restricted stock
-
 
1.5
 
 
-
 
 
1.5
 
 
-
 
 
-
 
 
 
-
 
Tax effects of expired employee stock options
-
 
(1.5
)
 
-
 
 
(1.5
)
 
-
 
 
-
 
 
 
-
 
Repurchase of common shares
(3.0
)
(29.2
)
 
-
 
 
(13.8
)
 
(15.4
)
 
-
 
 
 
-
 
Dividends on common stock ($0.10 per share)
-
 
(8.1
)
 
-
 
 
-
 
 
(8.1
)
 
-
 
 
 
-
 
Other
-
 
0.2
 
 
-
 
 
-
 
 
0.2
 
 
-
 
 
 
-
 
 
Balance, June 30, 2012
80.2
$
1,073.9
 
$
0.8
 
$
521.3
 
$
579.8
 
$
(28.3
)
 
$
0.3
 


See accompanying notes to consolidated financial statements
- 6 -

THE JONES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(ALL AMOUNTS IN MILLIONS)

 
 
Fiscal Six Months Ended
 
 
 
June 30,
2012
   
July 2,
2011
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
   
 
Net income
 
$
7.4
   
$
31.2
 
 
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisitions:
               
Amortization of restricted stock
   
13.3
     
11.1
 
Depreciation and other amortization
   
44.5
     
38.5
 
Impairment losses
   
0.4
     
2.9
 
Adjustments to acquisition consideration payable
   
19.4
     
25.3
 
Equity in income of unconsolidated affiliate
   
(1.3
)
   
(2.0
)
Deferred taxes
   
(7.4
)
   
13.5
 
Fair value adjustments related to interest rate swaps and cap
   
1.4
     
1.9
 
Write-off of deferred financing fees
   
-
     
1.9
 
Other items, net
   
2.4
     
3.2
 
Changes in operating assets and liabilities:
               
Accounts receivable
   
22.2
     
(12.4
)
Inventories
   
24.1
     
(2.8
)
Prepaid expenses and other current assets
   
(21.1
)
   
(5.0
)
Other assets
   
8.1
     
(4.4
)
Accounts payable
   
(3.8
)
   
(13.3
)
Income taxes payable/prepaid income taxes
   
6.7
     
9.9
 
Accrued expenses and other current liabilities
   
(10.6
)
   
(29.2
)
Acquisition consideration payable
   
(0.8
)
   
(4.8
)
Other liabilities
   
19.1
     
0.1
 
Total adjustments
   
116.6
     
34.4
 
Net cash provided by operating activities
   
124.0
     
65.6
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Capital expenditures
   
(38.2
)
   
(49.5
)
Contingent consideration paid related to investment in GRI
   
(3.5
)
   
-
 
Acquisition of KG Group Holdings Limited, net of cash acquired
   
-
     
(143.1
)
Other
   
(0.1
)
   
-
 
Net cash used in investing activities
   
(41.8
)
   
(192.6
)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Issuance of 6.875% Senior Notes due 2019
   
-
     
300.0
 
Debt issuance costs
   
-
     
(6.8
)
Costs related to secured revolving credit agreement
   
(0.3
)
   
(2.9
)
Repayment of acquired debt of KG Group Holdings Limited
   
-
     
(174.1
)
Dividends paid
   
(7.9
)
   
(8.5
)
Repurchases of common stock
   
(29.0
)
   
(28.0
)
Payments of acquisition consideration payable
   
(7.5
)
   
(6.2
)
Other items, net
   
1.0
     
0.3
 
Net cash (used in) provided by financing activities
   
(43.7
)
   
73.8
 
 
EFFECT OF EXCHANGE RATES ON CASH
   
(0.2
)
   
(1.2
)
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
   
38.3
     
(54.4
)
 
CASH AND CASH EQUIVALENTS, BEGINNING
   
238.8
     
200.8
 
 
CASH AND CASH EQUIVALENTS, ENDING
 
$
277.1
   
$
146.4
 


See accompanying notes to consolidated financial statements
- 7 -

THE JONES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


BASIS OF PRESENTATION

The consolidated financial statements include the accounts of The Jones Group Inc. and its subsidiaries.  The financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the requirements of Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  The consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the footnotes thereto included within our Annual Report on Form 10-K.

In our opinion, 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, 2012.

Distribution costs.  Our cost of sales may not be comparable to those of other entities, since some entities include all of the costs associated with their distribution functions in cost of sales while we include these costs in selling, general and administrative ("SG&A") expenses.  Distribution costs included in SG&A expenses for the fiscal quarters ended June 30, 2012 and July 2, 2011 were $21.1 million and $21.9 million, respectively.  Distribution costs included in SG&A expenses for the fiscal six months ended June 30, 2012 and July 2, 2011 were $44.7 million and $47.0 million, respectively.



EARNINGS PER SHARE

The computation of basic and diluted earnings per share is as follows:

(In millions, except per share amounts)
 
Fiscal Quarter Ended
   
Fiscal Six Months Ended
 
 
 
June 30,
2012
   
July 2,
2011
   
June 30,
2012
   
July 2,
2011
 
 
Net income
 
$
8.4
   
$
5.4
   
$
7.4
   
$
31.2
 
Less: income attributable to noncontrolling interest
   
0.3
     
0.2
     
0.5
     
0.4
 
Income attributable to Jones
   
8.1
     
5.2
     
6.9
     
30.8
 
Less: income allocated to participating securities
   
0.2
     
0.2
     
-
     
0.8
 
Income available to common stockholders of Jones
 
$
7.9
   
$
5.0
   
$
6.9
   
$
30.0
 
 
Weighted-average shares outstanding - basic
   
75.2
     
81.7
     
75.7
     
81.9
 
Effect of dilutive employee restricted stock
   
0.8
     
1.5
     
1.8
     
1.4
 
Weighted-average shares outstanding - diluted
   
76.0
     
83.2
     
77.5
     
83.3
 
Earnings per common share attributable to Jones
                         
Basic
 
$
0.11
   
$
0.06
   
$
0.09
   
$
0.37
 
Diluted
   
0.10
     
0.06
     
0.09
     
0.36
 

 
- 8 -

ACQUISITIONS

KG Group Holdings Limited
On June 2, 2011, we acquired 100% of the equity interests in KG Group Holdings Limited ("Kurt Geiger"), a privately-held wholesaler and retailer of luxury footwear and accessories, for $150.0 million in cash and the assumption of $174.1 million of debt, which was immediately repaid following the transaction.  Kurt Geiger markets products under four of its own brands - Kurt Geiger, KG by Kurt Geiger, Carvela and Miss KG - and over 100 other luxury brands in more than 200 retail locations, including concessions in Europe's leading department stores, including Harrods, Selfridges, Liberty, House of Fraser, Fenwick John Lewis and Brown Thomas, as well as company-operated stores.

Approximately $10.2 million of the purchase price payable to certain selling shareholders who are senior managers of Kurt Geiger has been rolled over into 5% Loan Notes (the "Loan Notes"), which are payable in approximately four years and are subject to forfeiture in the event of termination of employment under certain circumstances.  This amount is recorded as compensation expense over the term of the Loan Notes and is not reported as a component of the cost of the acquisition.

We pursued the acquisition of Kurt Geiger to increase our international presence and further extend our reach into the designer footwear business.  Kurt Geiger will serve as our hub in Europe.  Kurt Geiger's wholesale footwear business is reported in our international wholesale segment and its retail business is reported in our international retail segment.

The following table summarizes the fair values of the assets acquired and liabilities assumed from Kurt Geiger on June 2, 2011.

(In millions)
 
Weighted-average amortization life (in months)
   
Fair
Value
 
 
Cash
 
   
$
6.9
 
Accounts receivable
 
     
19.7
 
Inventories
 
     
55.1
 
Other current assets
 
     
9.5
 
Property, plant and equipment
 
     
27.0
 
Intangible assets:
 
         
   Trademarks - nonamortized
 
     
95.1
 
   Trademarks - amortized
   
120
     
0.1
 
   Goodwill
           
99.3
 
   Customer relationships
   
232
     
125.7
 
   Order backlog
   
9
     
2.8
 
   Favorable lease agreements
   
99
     
6.8
 
Total assets acquired
           
448.0
 
Accounts payable
           
30.6
 
Other current  liabilities
           
28.5
 
Long-term debt
           
174.1
 
Unfavorable lease agreements
   
100
     
0.2
 
Deferred taxes
           
64.6
 
Total liabilities assumed
           
298.0
 
Total purchase price
         
$
150.0
 

The gross contractual accounts receivable acquired from Kurt Geiger was $19.8 million.

The acquisition resulted in the recognition of $99.3 million of goodwill, which is not expected to be deductible for tax purposes.  Goodwill largely consists of expected synergies resulting from the leveraging of the combined networks of partners, infrastructure and strong department store relationships to expand product distribution worldwide, as well as the acquired assembled workforce, which does not qualify as an amortizable intangible asset, and the potential for product extensions, such as apparel.
- 9 -

The following table provides pro forma total revenues and results of operations for the fiscal quarter ended July 2, 2011 as if Kurt Geiger had been acquired on January 1, 2010.  The unaudited pro forma results reflect certain adjustments related to the acquisitions, such as amortization expense on intangible assets acquired from Kurt Geiger resulting from the fair valuation of assets acquired.  The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of Kurt Geiger.  Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on January 1, 2010, nor are they indicative of the future operating results of the combined companies.

(In millions, except per share amounts)
 
Fiscal Quarter Ended
July 2, 2011
   
Fiscal Six Months Ended July 2, 2011
 
Total revenues
 
$
942.6
   
$
1,978.9
 
Net income
   
8.9
     
28.1
 
 
Earnings per share attributable to Jones
               
     Basic
 
$
0.10
   
$
0.33
 
     Diluted
   
0.10
     
0.32
 

The pro forma earnings for the fiscal quarter and six months ended July 2, 2011 were adjusted to exclude $4.7 million of acquisition-related expenses incurred related to the acquisition of Kurt Geiger and $0.5 million of nonrecurring expense related to the fair value of Kurt Geiger acquisition-date order backlogs.
 
 
EQUITY METHOD INVESTMENTS

On June 20, 2008, we acquired a 10% equity interest in GRI, an international accessories and apparel brand management and retail-distribution network, for $20.2 million.  On June 24, 2009, we increased our equity interest to 25% for an additional $15.2 million.  The selling shareholders of GRI were entitled to receive an additional cash payment equaling 60% of the amount of GRI's fiscal year 2011 net income that exceeded a certain threshold, and on June 21, 2012, we made a cash payment to them of $3.5 million in satisfaction of the obligation.  GRI is the exclusive licensee of several of our brands in Asia, including Nine West, Anne Klein New York, AK Anne Klein, Easy Spirit, Enzo Angiolini and Joan & David.  GRI also distributes other women's apparel, shoes and accessory brands.  See "Accounts Receivable" for additional information regarding GRI.
 

ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

 
 
June 30,
2012
   
July 2,
2011
   
December 31, 2011
 
(In millions)
 
   
   
 
 
Trade accounts receivable
 
$
352.6
   
$
409.2
   
$
367.9
 
Allowances for doubtful accounts, returns, discounts and co-op advertising
   
(25.4
)
   
(30.9
)
   
(28.3
)
 
 
$
327.2
   
$
378.3
   
$
339.6
 

Due to our 25% ownership interest in GRI, GRI is deemed to be a related party.  Included in accounts receivable are amounts due from GRI in the amount of $17.1 million, $14.6 million and $19.7 million at June 30, 2012, July 2, 2011 and December 31, 2011, respectively.  Net revenues from GRI amounted to $29.4 million and $26.5 million for the fiscal six months ended June 30, 2012 and July 2, 2011, respectively.  On April 23, 2009, we converted $10.0 million of the outstanding GRI accounts receivable to a three-year interest-bearing convertible note.  This note was repaid on April 20, 2012.
 
- 10 -

ACCRUED RESTRUCTURING COSTS

Jewelry
During 2009, we decided to discontinue the domestic manufacturing, product development and sourcing activities of our jewelry business, and also announced the closing of our jewelry distribution center during 2010.  We accrued $0.1 million and $0.2 million of lease termination costs in the fiscal six months ended July 2, 2011 and June 30, 2012, respectively.  These costs are reported as SG&A expenses in the domestic wholesale footwear and accessories segment.

The details of the jewelry restructuring accruals are as follows:

(In millions)
 
One-time
termination
benefits
   
Lease
obligations
   
Total jewelry restructuring
 
Balance, January 1, 2011
 
$
1.3
   
$
2.3
   
$
3.6
 
Additions
   
-
     
0.1
     
0.1
 
Payments and reductions
   
(1.3
)
   
(0.6
)
   
(1.9
)
Balance, July 2, 2011
 
$
-
   
$
1.8
   
$
1.8
 
Balance, January 1, 2012
 
$
-
   
$
1.5
   
$
1.5
 
Additions
   
-
     
0.2
     
0.2
 
Payments and reductions
   
-
     
(0.2
)
   
(0.2
)
Balance, June 30, 2012
 
$
-
   
$
1.5
   
$
1.5
 

The net accrual of $1.8 million at July 2, 2011 is reported as $0.4 million of accrued expenses and other current liabilities and $1.4 million of other noncurrent liabilities.  The net accrual of $1.5 million at June 30, 2012 is reported as $0.4 million of accrued expenses and other current liabilities and $1.1 million of other noncurrent liabilities.

Texas Warehouse
On December 1, 2009, we announced the closing of warehouse facilities in Socorro, Texas.  We accrued $3.4 million of termination benefits and associated employee costs for 220 employees.  We also recorded $7.4 million of lease obligation costs relating to the warehouse.  These costs are reported as SG&A expenses in the domestic wholesale jeanswear segment.  The closing was substantially completed by the end of July 2010.

The details of the Texas warehouse restructuring accruals are as follows:

(In millions)
 
Lease obligations
 
Balance, January 1, 2011
 
$
4.1
 
Additions
   
0.1
 
Payments and reductions
   
(2.3
)
Balance, July 2, 2011
 
$
1.9
 
Balance, January 1, 2012
 
$
0.9
 
Payments and reductions
   
(0.1
)
Balance, June 30, 2012
 
$
0.8
 

The net accruals of $1.9 million at July 2, 2011 and $0.8 million at June 30, 2012 are reported as accrued expenses and other current liabilities.

Retail Stores
We continue to review our domestic retail operations for underperforming locations.  As a result of this review, we have decided to close retail locations that no longer provide strategic benefits.  During the first fiscal six months of 2011 and 2012, we closed 61 and 70 locations, respectively, and we anticipate closing additional locations in 2012.  Total termination benefits and associated employee costs are
- 11 -

expected to be $11.1 million for approximately 2,167 employees, including both store employees and administrative support personnel.  We recorded $0.5 million and $1.9 million of employee termination costs in the fiscal six months ended July 2, 2011 and June 30, 2012, respectively.  In connection with our decision to close these stores, we reviewed the associated long-term assets for impairments.  As a result of this review, we recorded $2.5 million and $0.4 million of impairment losses during the fiscal six months ended July 2, 2011 and June 30, 2012, respectively, on leasehold improvements and furniture and fixtures located in the stores to be closed.  These costs are reported as SG&A expenses in our domestic retail segment.

The details of the retail store restructuring accruals are as follows:
(In millions)
 
One-time termination benefits
 
 
Balance, January 1, 2011
 
$
2.2
 
Additions
   
0.5
 
Payments and reductions
   
(1.9
)
Balance, July 2, 2011
 
$
0.8
 
 
Balance, January 1, 2012
 
$
1.3
 
Additions
   
1.9
 
Payments and reductions
   
(1.3
)
Balance, June 30, 2012
 
$
1.9
 

The net accrual of $0.8 million at July 2, 2011 is reported as accrued expenses and other current liabilities.  The net accrual of $1.9 million at June 30, 2012 is reported as $1.7 million of accrued expenses and other current liabilities and $0.2 million of other noncurrent liabilities.


GOODWILL

The following table presents, by segment and in total, the carrying amount of goodwill for the fiscal quarters ended July 2, 2011 and June 30, 2012.


(In millions)
 
Domestic Wholesale Sportswear
   
Domestic Wholesale Jeanswear
   
Domestic Wholesale Footwear & Accessories
   
Domestic Retail
   
International Wholesale
   
International Retail
   
Total
 
 
Balance, December 31, 2010
 
   
   
   
   
   
   
 
Goodwill
 
$
46.7
   
$
519.2
   
$
873.0
   
$
120.6
   
$
55.3
   
$
-
   
$
1,614.8
 
Accumulated impairment losses
   
-
     
(519.2
)
   
(813.2
)
   
(120.6
)
   
-
     
-
     
(1,453.0
)
Net goodwill
   
46.7
     
-
     
59.8
     
-
     
55.3
     
-
     
161.8
 
Acquisition of Kurt Geiger
   
-
     
-
     
-
     
-
     
45.8
     
53.5
     
99.3
 
Foreign currency translation effects
   
-
     
-
     
-
     
-
     
(1.0
)
   
(1.2
)
   
(2.2
)
 
Balance, July 2, 2011
                                                       
Goodwill
   
46.7
     
519.2
     
873.0
     
120.6
     
100.1
     
52.3
     
1,711.9
 
Accumulated impairment losses
   
-
     
(519.2
)
   
(813.2
)
   
(120.6
)
   
-
     
-
     
(1,453.0
)
Net goodwill
 
$
46.7
   
$
-
   
$
59.8
   
$
-
   
$
100.1
   
$
52.3
   
$
258.9
 
 
Balance, December 31, 2011
                                                       
Goodwill
 
$
46.7
   
$
519.2
   
$
859.8
   
$
120.6
   
$
111.6
   
$
50.4
   
$
1,708.3
 
Accumulated impairment losses
   
-
     
(519.2
)
   
(813.2
)
   
(120.6
)
   
-
     
-
     
(1,453.0
)
Net goodwill
   
46.7
     
-
     
46.6
     
-
     
111.6
     
50.4
     
255.3
 
Foreign currency translation effects
   
-
     
-
     
-
     
-
     
0.5
     
0.5
     
1.0
 
 
Balance, June 30, 2012
                                                       
Goodwill
   
46.7
     
519.2
     
859.8
     
120.6
     
112.1
     
50.9
     
1,709.3
 
Accumulated impairment losses
   
-
     
(519.2
)
   
(813.2
)
   
(120.6
)
   
-
     
-
     
(1,453.0
)
Net goodwill
 
$
46.7
   
$
-
   
$
46.6
   
$
-
   
$
112.1
   
$
50.9
   
$
256.3
 


- 12 -

FAIR VALUES

  ASC Subtopic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  ASC Subtopic 820-10 outlines a valuation framework, creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements, and details the disclosures that are required for items measured at fair value.  We are permitted to choose to measure many financial instruments and certain other items at fair value, although we did not elect the fair value measurement option for any of our financial assets or liabilities.  Our financial assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows:

·
Level 1 - inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;

·
Level 2 - inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); and

·
Level 3 - unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing assets or liabilities based on the best information available.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We have or had certain financial assets and liabilities that are required to be measured at fair value.  These include:

·
the assets and liabilities of The Jones Group Inc. Deferred Compensation Plan (the "Rabbi Trust"), which represent deferred employee compensation invested in mutual funds and which fall within Level 1 of the fair value hierarchy;
·
deferred director fees, which represent phantom units of our common stock that have a fair value based on the market price of our common stock and which fall within Level 1 of the fair value hierarchy;
·
foreign currency forward contracts, which have fair values calculated by comparing foreign exchange forward rates to the contract rates discounted at our incremental borrowing rate,   which fall within Level 2 of the fair value hierarchy;
·
interest rate swap and cap contracts, which have or had fair values calculated by comparing current yield curves and LIBOR rates to the stated contract rates adjusted for estimated risk of counterparty nonperformance,  which fall within Level 2 of the fair value hierarchy;
·
long-term debt that was hedged by interest rate swaps as a fair-value hedge, calculated by comparing current yield curves and LIBOR rates to the stated contract rates of the associated interest rate swaps, which falls within Level 2 of the fair value hierarchy; and
·
consideration liabilities recorded as a result of the acquisition of Moda Nicola International, LLC ("Moda") and Stuart Weitzman Holdings, LLC ("SWH"), which have fair values based on our projections of financial results and cash flows for the acquired business and a discount factor based on our weighted average cost of capital, and which fall within Level 3 of the fair value hierarchy.

In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis at July 2, 2011, December 31, 2011 and June 30, 2012.
- 13 -


(In millions)
 
 
 
Description
Classification
 
Total Value
   
Quoted prices in active markets for identical assets (Level 1)
   
Significant other observable inputs (Level 2)
   
Significant unobserv-able inputs (Level 3)
 
 
July 2, 2011:
 
 
   
   
   
 
Rabbi Trust assets
Prepaid expenses and other current assets
 
$
9.5
   
$
9.5
   
$
-
   
$
-
 
British Pound - Euro forward contracts
Prepaid expenses and other current assets
   
0.1
     
-
     
0.1
     
-
 
Interest rate swaps
Other long-term assets
   
5.1
     
-
     
5.1
     
-
 
Interest rate cap
Other long-term assets
   
0.6
     
-
     
0.6
     
-
 
Total assets
 
$
15.3
   
$
9.5
   
$
5.8
   
$
-
 
Rabbi Trust liabilities
 
Accrued employee compensation and benefits
 
$
9.5
   
$
9.5
   
$
-
   
$
-
 
Canadian Dollar - U.S. Dollar forward contracts
Accrued expenses and other current liabilities
   
0.6
     
-
     
0.6
     
-
 
Acquisition consideration
Current portion of acquisition consideration payable
   
21.5
     
-
     
-
     
21.5
 
5.125% Senior Notes  due 2014
Long-term debt
   
261.2
     
-
     
261.2
     
-
 
Hedged portion of 6.875% Senior Notes due 2019
Long-term debt
   
154.4
     
-
     
154.4
     
-
 
Acquisition consideration
Acquisition consideration payable, net of current portion
   
206.7
     
-
     
-
     
206.7
 
Total liabilities
 
$
653.9
   
$
9.5
   
$
416.2
   
$
228.2
 
December 31, 2011:
 
                               
Rabbi Trust assets
Prepaid expenses and other current assets
 
$
7.5
   
$
7.5
   
$
-
   
$
-
 
Interest rate swaps
Other long-term assets
   
5.5
     
-
     
5.5
     
-
 
Interest rate cap
Other long-term assets
   
0.2
     
-
     
0.2
     
-
 
Canadian Dollar - U.S. Dollar forward contracts
Prepaid expenses and other current assets
   
0.1
     
-
     
0.1
     
-
 
Total assets
 
$
13.3
   
$
7.5
   
$
5.8
   
$
-
 
Rabbi Trust liabilities
 
Accrued employee compensation and benefits
 
$
7.5
   
$
7.5
   
$
-
   
$
-
 
Deferred director fees
 
Accrued expenses and other current liabilities
   
0.2
     
0.2
     
-
     
-
 
Acquisition consideration
Current portion of acquisition consideration payable
   
192.7
     
-
     
-
     
192.7
 
5.125% Senior Notes  due 2014
Long-term debt
   
263.0
     
-
     
263.0
     
-
 
Acquisition consideration
Acquisition consideration payable, net of current portion
   
17.7
     
-
     
-
     
17.7
 
Total liabilities
 
$
481.1
   
$
7.7
   
$
263.0
   
$
210.4
 
June 30, 2012:
 
                               
Rabbi Trust assets
Prepaid expenses and other current assets
 
$
8.0
   
$
8.0
   
$
-
   
$
-
 
British Pound- U.S. Dollar forward contracts
Prepaid expenses and other current assets
   
0.1
     
-
     
0.1
     
-
 
Canadian Dollar - U.S. Dollar forward contracts
Prepaid expenses and other current assets
   
0.1
     
-
     
0.1
     
-
 
Total assets
 
$
8.2
   
$
8.0
   
$
0.2
   
$
-
 
Rabbi Trust liabilities
 
Accrued employee compensation and benefits
 
$
8.0
   
$
8.0
   
$
-
   
$
-
 
Deferred director fees
 
Accrued expenses and other current liabilities
   
0.2
     
0.2
     
-
     
-
 
Acquisition consideration
Current portion of acquisition consideration payable
   
216.7
     
-
     
-
     
216.7
 
Acquisition consideration
Acquisition consideration payable, net of current portion
   
4.8
     
-
     
-
     
4.8
 
Total liabilities
 
$
229.7
   
$
8.2
   
$
-
   
$
221.5
 


The following table presents the changes in Level 3 contingent consideration liability for the fiscal six months ended July 2, 2011 and June 30, 2012.
- 14 -

 
(In millions)
 
Acquisition of Moda
   
Acquisition of SWH
   
Total Acquisition Consideration Payable
 
 
Beginning balance, January 1, 2011
 
$
22.9
   
$
191.0
   
$
213.9
 
Payments
   
-
     
(11.0
)
   
(11.0
)
Total adjustments included in earnings
   
(6.5
)
   
31.8
     
25.3
 
Balance, July 2, 2011
 
$
16.4
   
$
211.8
   
$
228.2
 
 
Beginning balance, January 1, 2012
 
$
14.8
   
$
195.6
   
$
210.4
 
Payments
   
(3.5
)
   
(4.8
)
   
(8.3
)
Total adjustments included in earnings
   
(4.1
)
   
23.5
     
19.4
 
Balance, June 30, 2012
 
$
7.2
   
$
214.3
   
$
221.5
 

The following table represents quantitative information about the Level 3 contingent consideration liability measurements at June 30, 2012.

(In millions)
 
Fair Value at June 30, 2012
 
Valuation
technique
Unobservable
inputs
 
Range
(Weighted Average)
Acquisition of Moda
 
 
$
7.2
 
Discounted projection of financial results
Net sales growth
Gross margin multiplier
Discount rate
 
-32% - +10% (-3.0%)
1.63 - 1.70 (1.68)
11.7%
Acquisition of SWH
 
$
214.3
 
Discounted projection of financial results and future cash flow
EBITDA (1) growth
EBITDA (1) multiplier
Discount rate
 
-18% - +22% (2.1%)
8.0 - 9.0 (8.3)
11.7%

(1) - Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") as defined in the acquisition agreement.

The valuation processes for the contingent consideration liabilities are based on the associated acquisition agreements.  Our inputs include probability-weighted projections of financial results and cash flows for the acquired business and a discount rate based on our weighted average cost of capital.  We internally calculate the estimated liability using projected financial information provided by the operating divisions.

The significant unobservable inputs used in the fair value measurement of the Moda contingent consideration liability are net sales growth, a gross margin multiplier (as defined in the acquisition agreement) and a discount factor.  An increase in the net sales or gross margin multiplier inputs would increase the fair value of the liability, while an increase in the discount rate would decrease the fair value of the liability.  There is no interrelationship between the unobservable inputs.  Changes in the fair value of the Moda contingent consideration liability are reported as adjustments to SG&A expenses in the domestic wholesale sportswear segment.

The significant unobservable inputs used in the fair value measurement of the SWH contingent consideration liability are probability-weighted projected EBITDA growth, the EBITDA multiplier (as defined in the acquisition agreement) and a discount rate.  An increase to the EBITDA growth or multiplier would increase the fair value of the liability, while an increase in the discount rate would decrease the fair value of the liability.  The EBITDA multiplier is based on the achieved level of EBITDA.  There is no interrelationship between the discount rate to the other unobservable inputs.  Changes in the fair value of the contingent consideration liability for SWH are reported as adjustments to interest expense.

- 15 -


Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

In accordance with the fair value hierarchy described above, the following table shows the fair value of our non-financial assets and liabilities that were required to be measured at fair value on a nonrecurring basis at July 2, 2011 and June 30, 2012, and the total losses recorded as a result of the remeasurement process.

(In millions)
 
   
Fair Value Measurements Using
   
 
 
 
 
 
 
Description
 
Carrying Value
   
Quoted prices in active markets for identical assets (Level 1)
   
Significant other observable inputs (Level 2)
   
Significant unobserv-able inputs (Level 3)
   
Total
losses recorded for the fiscal six months
 
At July 2, 2011:
 
   
   
   
   
 
   Property and equipment
 
$
-
   
$
-
   
$
-
   
$
-
   
$
2.5
 
   Transportation equipment
   
0.6
     
0.6
     
-
     
-
     
0.4
 
At June 30, 2012:
                                       
   Property and equipment
   
-
     
-
     
-
     
-
     
0.4
 

During the fiscal six months ended July 2, 2011 and June 30, 2012, property and equipment utilized in our retail operations with a carrying amount of $2.5 million and $0.4 million, respectively, were written down to a fair value of zero, primarily as a result of our decision to close underperforming retail locations.  These losses were recorded as SG&A expenses in the domestic retail segment.  We consider long-term assets utilized in a retail location to be impaired when a pattern of operating losses at the location indicate that future operating losses are probable and that the resulting cash flows will not be sufficient to recover the carrying value of the associated long-term assets.  During the fiscal quarter ended July 2, 2011, we determined that certain transportation equipment with a carrying value of $1.0 million had a fair value of $0.6 million based on quoted market prices.  The loss of $0.4 million was recorded as SG&A expenses in the licensing, other and eliminations segment.

Financial Instruments

As a result of our global operating and financing activities, we are exposed to changes in interest rates and foreign currency exchange rates which may adversely affect results of operations and financial condition.  In seeking to minimize the risks and/or costs associated with such activities, we manage exposure to changes in interest rates and foreign currency exchange rates through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments.  The instruments eligible for utilization include forward, option and swap agreements.  We do not use financial instruments for trading or other speculative purposes.  At June 30, 2012, we had outstanding foreign exchange contracts to exchange Canadian Dollars for a total notional value of US$10.2 million at a weighted-average exchange rate of 1.00 maturing through November 2012 and to exchange £3 million for U.S. Dollars at an exchange rate of 1.61 maturing in December 2012.

At June 30, 2012, July 2, 2011 and December 31, 2011, the fair values of cash and cash equivalents, receivables and accounts payable approximated their carrying values due to the short-term nature of these instruments.  The estimated fair values of other financial instruments subject to fair value disclosures were valued using market comparable inputs.  These inputs include broker quotes, quoted market prices, interest rates and exchange rates for the same or similar instruments.  The fair value and related carrying amounts for items not disclosed elsewhere are as follows:
- 16 -


(In millions)
 
June 30, 2012
   
July 2, 2011
   
December 31, 2011
 
 
 
Fair Value Level
   
Carrying Amount
   
Fair
Value
   
Carrying Amount
   
Fair
Value
   
Carrying Amount
   
Fair
Value
 
Senior Notes, including hedged items recorded at fair value
   
1
   
$
824.4
   
$
732.5
   
$
815.3
   
$
740.5
   
$
821.7
   
$
692.6
 
Other long-term debt, including current portion
   
2
     
9.9
     
8.7
     
10.3
     
9.1
     
9.8
     
8.2
 
Note receivable from GRI
   
2
     
-
     
-
     
10.0
     
10.0
     
10.0
     
10.0
 
Other notes receivable
   
2
     
2.8
     
1.7
     
-
     
-
     
-
     
-
 

Financial instruments expose us to counterparty credit risk for nonperformance and to market risk for changes in interest and currency rates.  We manage exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor the amount of credit exposure.  Our financial instrument counterparties are substantial investment or commercial banks with significant experience with such instruments.


CREDIT FACILITIES

We have a secured revolving credit agreement expiring on April 28, 2016 (the "Credit Facility") with several lending institutions to borrow an aggregate principal amount of up to $650 million.  The terms and conditions of our Credit Facility provide for, among other things: (1) a $350 million U.S. commitment which may be drawn by the U.S. borrowers as revolving loans in U.S. Dollars or letters of credit in Canadian Dollars, U.S. Dollars, or an "LC Alternative Currency" (namely Euros, sterling, or any other currency acceptable to the lenders); and (2) a $300 million international commitment which may be drawn by the U.S. borrowers or by any Canadian or European borrowers as revolving loans or letters of credit in Canadian Dollars, U.S. Dollars, or an LC Alternative Currency.  Up to the entire amount of the Credit Facility is available for cash borrowings, with an overall sublimit of up to $350 million for all letters of credit.  All of the overall $350 million sublimit may be used for trade letters of credit; and within that overall sublimit, there are additional sublimits, including (but not limited to) $50 million for standby letters of credit and $150 million for letters of credit under the U.S. commitment denominated in an LC Alternative Currency.

        Borrowings under the Credit Facility may be used to refinance certain existing indebtedness, to make certain investments (including acquisitions), and for general corporate purposes in the ordinary course of business.  Such borrowings bear interest either based on the alternate base rate, as defined in the Credit Facility, or based on Eurocurrency rates, each with a margin that depends on the availability remaining under the Credit Facility.  The Credit Facility contains customary events of default.

        Availability under the Credit Facility is determined with reference to a borrowing base consisting of a percentage of eligible inventory, accounts receivable, credit card receivables and licensee receivables, minus reserves determined by the joint collateral agents.  At June 30, 2012, we had no cash borrowings and $16.3 million of letters of credit outstanding, and our remaining availability was $381.6 million.  If availability under the Credit Facility falls below a stated level, we will be required to comply with a minimum fixed charge coverage ratio.  The Credit Facility also contains affirmative and negative covenants that, among other things, will limit or restrict our ability to (1) incur indebtedness, (2) create liens, (3) merge, consolidate, liquidate or dissolve, (4) make investments (including acquisitions), loans or advances, (5) sell assets, (6) enter into sale and leaseback transactions, (7) enter into swap agreements, (8) make certain restricted payments (including dividends and other payments in respect of capital stock), (9) enter into transactions with affiliates, (10) enter into restrictive agreements, and (11) amend material documents.  The Credit Facility is secured by a first priority lien on substantially all of our personal property.

SWH has a $1.5 million unsecured borrowing facility with a lending institution that expires on October 1, 2012 and is renewable on an annual basis, under which no cash borrowings and $1.1 million in letters of credit were outstanding at June 30, 2012.  Cash borrowings under this facility bear interest based
- 17 -

on either the prevailing prime rate or the prevailing LIBOR rate plus 300 basis points.  SWH also has a €0.3 million variable-rate unsecured borrowing facility with a European lending institution that expires in March 2013 and is renewable on an annual basis, under which no amounts were outstanding at June 30, 2012.
 
LONG-TERM DEBT

In March 2011, we issued $300.0 million of 6.875% Senior Notes due 2019 (the "2019 Notes").  Net proceeds were $293.3 million, of which $45.0 million was used to repay amounts then outstanding under the Credit Facility.  In connection with the issuance of the 2019 Notes, we had three outstanding interest rate swap transactions to effectively convert $150 million of the 2019 Notes to variable-rate debt.  For more information, see "Derivatives."


DERIVATIVES

We recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value.  Additionally, the fair value adjustments will affect either equity or net income, depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity.

Interest Rate Swaps and Cap
On December 14, 2010, we entered into three interest rate swap transactions to effectively convert the entire amount of our $250 million fixed-rate 5.125% Senior Notes due 2014 (the "2014 Notes") to variable-rate debt.  Under the terms of the transactions, we were required to make semiannual variable-rate payments to the counterparties calculated based on three-month LIBOR rates (which are reset on the 15th day of each calendar quarter) plus 3.46%, and the counterparties were obligated to make semiannual fixed-rate payments to us of 5.125%.  The swap transactions had an effective date of December 17, 2010 and a termination date of November 15, 2014, the date the 2014 Notes mature.  On June 8, 2012, we de-designated the hedging relationship between the swaps and the 2014 Notes and received $5.7 million upon termination of the swaps.  The related fair market valuation adjustment to the 2014 Notes is being amortized as a reduction of interest expense over the remaining life of the 2014 notes.

On March 3, 2011, we entered into three interest rate swap transactions to effectively convert $150 million of our 2019 Notes to variable-rate debt.  Under the terms of the transactions, we were required to make semiannual variable-rate payments to the counterparties calculated based on three-month LIBOR rates (which are reset on the 15th day of each calendar quarter) plus 3.73%, and the counterparties were obligated to make semiannual fixed-rate payments to us of 6.875%.  The swap transactions had an effective date of March 7, 2011 and a termination date of March 15, 2019, the date the 2019 Notes mature.  On August 3, 2011 we de-designated the hedging relationship between the swaps and the 2019 Notes and received $8.1 million upon termination of the swaps.  The related fair market valuation adjustment to the 2019 Notes will be amortized as a reduction of interest expense over the remaining life of the 2019 Notes.

On March 19, 2012, we entered into three interest rate swap transactions to effectively convert $150 million of our 2019 Notes to variable-rate debt.  Under the terms of the transactions, we were required to make semiannual variable-rate payments to the counterparties calculated based on one-month LIBOR rates (which were reset on the 15th day of each calendar quarter) plus 5.195%, and the counterparties were obligated to make semiannual fixed-rate payments to us of 6.875%.  The swap transactions had an effective date of March 21, 2012 and a termination date of March 15, 2019, the date the 2019 Notes mature.  On May 31, 2012, we de-designated the hedging relationship between the swaps and the 2019 Notes and received $3.5 million upon termination of the swaps.  The related fair market valuation adjustment to the 2019 Notes is being amortized as a reduction of interest expense over the remaining life of the 2019 Notes.

We also have outstanding an interest rate cap that was used in conjunction with the interest rate swaps on the 2014 Notes to limit our floating rate exposure.  The cap limits our three-month LIBOR rate exposure to 5.0%.  The cap has a termination date of November 15, 2014.
- 18 -

The swap transactions were designated as hedges of the fair value of the related notes.  The fair values of the swaps were recorded either as an asset or a liability, with changes in their fair values recorded through interest expense.  The changes in fair value of the notes related to the hedged portion of the notes were also recorded through interest expense.  As these changes in fair value did not exactly offset each other, the net effect on earnings represented the ineffectiveness of the hedging instruments.  We evaluate effectiveness under the "long haul" method of accounting.  The interest rate cap has not been designated as a hedging instrument; as a result, all changes in the fair value of the cap are recorded through interest expense.

We recorded net (decreases) increases in interest expense related to the ineffectiveness of the swaps and the changes in the fair value of the cap as follows.

(In millions)
 
Fiscal Quarter Ended
   
Fiscal Six Months Ended
 
 
 
June 30,
2012
   
July 2,
2011
   
June 30,
2012
   
July 2,
2011
 
Interest rate swaps
 
$
(0.2
)
 
$
(0.9
)
 
$
1.3
   
$
1.2
 
Interest rate cap
   
-
     
0.5
     
0.2
     
0.7
 
Net (decrease) increase in interest expense
 
$
(0.2
)
 
$
(0.4
)
 
$
1.5
   
$
1.9
 

Foreign Currency Forward Contracts
We use foreign currency forward contracts for the specific purpose of hedging the exposure to variability in forecasted cash flows associated primarily with inventory purchases.  Fair values of foreign currency forward contracts are calculated by comparing each agreement's contractual exchange rate with the currency exchange forward rate at the reporting date.

We currently have outstanding forward contracts to exchange Canadian Dollars for U.S. Dollars.  These contracts are designated as cash flow hedges, as the principal terms of the contracts are the same as the underlying forecasted foreign currency cash flows.  Therefore, changes in the fair value of these forward contracts should be highly effective in offsetting changes in the expected foreign currency cash flows.  Changes in the fair value of these contracts are recorded in accumulated other comprehensive income, net of related tax effects, with the corresponding asset or liability recorded in the balance sheet.  Amounts recorded in accumulated other comprehensive income are reflected in current-period earnings when the hedged transaction affects earnings.

Since the foreign currency derivatives we use in our risk management strategies are highly effective hedges because all the critical terms of the derivative instruments match those of the hedged item, we record no ineffectiveness related to our cash flow hedges.  If foreign currency exchange rates do not change from their June 30, 2012 amounts, we estimate that any reclassifications from other comprehensive income to earnings within the next 12 months will not be material.

The notional amounts of our foreign exchange contracts outstanding at June 30, 2012, July 2, 2011 and December 31, 2011 are as follows.

(In millions)
Notional Amounts
 
June 30,
2012
July 2,
2011
December 31,
2011
Canadian Dollar - U.S. Dollar forward exchange contracts
US$10.2
US$10.3
US$5.3
British Pound - Euro forward exchange contracts
-
 
€2.4
-
British Pound - U.S. Dollar exchange options
-
US$2.5
-
British Pound - U.S. Dollar forward exchange contracts
 
£3.0
-
-


- 19 -

Fair Values of Derivative Instruments

(In millions)
June 30, 2012
 
July 2, 2011
 
December 31, 2011
 
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
 
$
-
 
Other long-term assets
 
$
5.1
 
Other long-term assets
 
$
5.5
 
Foreign exchange contracts
Prepaid expenses and other current assets
   
0.1
 
 
   
-
 
Prepaid expenses and other current assets
   
0.1
 
     Total derivative assets
 
 
$
0.1
 
 
 
$
5.1
 
 
 
$
5.6
 
Foreign exchange contracts
 
       
Accrued expenses and other current liabilities
 
$
0.6
 
 
       
     Total derivative liabilities
 
       
    
 
$
0.6
 
 
       
 
Derivatives not designated as hedging instruments
       
 
       
 
       
Foreign exchange contracts
Prepaid expenses and other current assets
 
$
0.1
 
Prepaid expenses and other current assets
 
$
0.1
 
 
 
$
-
 
Interest rate cap contract
 
   
-
 
Other long-term assets
   
0.6
 
Other long-term assets
   
0.2
 
     Total derivative assets
 
 
$
0.1
 
 
 
$
0.7
 
 
 
$
0.2
 


Effect of Derivatives on the Statement of Operations - Derivatives Designated as Hedging Instruments

(In millions)
 
Amount of Pretax (Loss) due to Ineffectiveness Recognized in Income
 
Derivative type
Location of Pretax (Loss)
due to Ineffectiveness
Recognized in Income
Fiscal Six
Months Ended
June 30, 2012
 
Fiscal Six
Months Ended
July 2, 2011
 
Interest rate swap contracts
Interest expense
 
$
(1.3
)
 
$
(1.2
)


(In millions)
Amount of Pretax Gain (Loss) Recognized in Other Comprehensive Income
 
Amount of Pretax (Loss) Reclassified from Other Comprehensive Income
into Income
 
Derivative type
Fiscal Six Months Ended
June 30,
2012
 
Fiscal Six Months Ended
July 2,
2011
 
Location of Pretax
(Loss) Reclassified
from Other Comprehensive
Income into Income
Fiscal Six Months Ended
June 30,
2012
 
Fiscal Six Months Ended
July 2,
2011
 
Canadian Dollar - U.S. Dollar forward contracts
 
$
0.2
   
$
(0.6
)
Cost of sales
 
$
(0.1
)
 
$
(0.4
)


Effect of Derivatives on the Statement of Operations - Derivatives Not Designated as Hedging Instruments

(In millions)
 
Amount of Pretax Gain (Loss)
Recognized in Income
 
Derivative type
Location of Pretax (Loss)
Recognized in Income
Fiscal Six
Months Ended
June 30, 2012
 
Fiscal Six
Months Ended
July 2, 2011
 
British Pound - Euro forward contracts
Selling, general and administrative expenses
 
$
-
   
$
0.1
 
Interest rate cap contract
Interest expense
   
(0.2
)
   
(0.7
)


- 20 -


STATEMENT OF CASH FLOWS

Fiscal Six Months Ended
 
June 30,
2012
   
July 2,
2011
 
(In millions)
 
   
 
 
Supplemental disclosures of cash flow information:
 
   
 
Cash paid (received) during the period for:
 
   
 
Interest
 
$
26.0
   
$
21.0
 
Net income tax payments (refunds)
   
1.1
     
(7.4
)
 
Supplemental disclosures of non-cash investing and financing activities:
               
Restricted stock issued to employees
   
20.8
     
26.2
 
Note payable and deferred compensation recorded related to acquisition of Kurt Geiger
   
-
     
10.2
 


 

PENSION PLANS

Components of Net Periodic Benefit Cost

(In millions)
 
Fiscal Quarter Ended
   
Fiscal Six Months Ended
 
 
 
June 30,
2012
   
July 2,
2011
   
June 30,
2012
   
July 2,
2011
 
 
Interest cost
 
$
0.6
   
$
0.7
   
$
1.2
   
$
1.3
 
Expected return on plan assets
   
(0.7
)
   
(0.7
)
   
(1.3
)
   
(1.3
)
Amortization of net loss
   
0.6
     
0.4
     
1.1
     
0.9
 
Net periodic benefit cost
 
$
0.5
   
$
0.4
   
$
1.0
   
$
0.9
 

Employer Contributions

During the fiscal six months ended June 30, 2012, we contributed $1.1 million to our defined benefit pension plan.  We anticipate contributing a total of $6.5 million during 2012.


SEGMENT INFORMATION

We identify operating segments based on, among other things, differences in products sold and the way our management organizes the components of our business for purposes of allocating resources and assessing performance.  Our operations are comprised of six reportable segments: domestic wholesale sportswear, domestic wholesale jeanswear, domestic wholesale footwear and accessories, domestic retail, international wholesale and international retail.  Segment revenues are generated from the sale of apparel, footwear and accessories through wholesale channels and our own retail locations.  The wholesale segments include wholesale operations with third party department and other retail stores, the retail segments include operations by our own stores, concession locations and e-commerce web sites, and income and expenses related to trademarks, licenses and general corporate functions are reported under "licensing, other and eliminations."
 
We define segment income as operating income before net interest expense, goodwill impairment charges, gains or losses on sales of subsidiaries, equity in earnings of unconsolidated affiliates and income taxes.  Sales and transfers between segments generally are recorded at cost and treated as transfers of inventory, which are not reviewed when evaluating segment performance.  The wholesale segments allocate to the retail segments a portion of their SG&A costs related to the inventory transferred to those divisions where the retail operations benefit from those costs.
- 21 -

Summarized below are our revenues and income by reportable segment for the fiscal quarters and six months ended June 30, 2012 and July 2, 2011.  We are an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets.  Therefore, we do not represent that these segments, if operated independently, would report the operating profit and other financial information shown below.


(In millions)
 
Domestic Wholesale Sportswear
   
Domestic Wholesale Jeanswear
   
Domestic Wholesale Footwear & Access-ories
   
Domestic Retail
   
International Wholesale
   
International Retail
   
Licensing, Other & Eliminations
   
Consolidated
 
For the fiscal quarter ended June 30, 2012
   
   
   
   
   
   
 
Revenues
 
$
174.8
   
$
151.0
   
$
195.5
   
$
150.6
   
$
75.4
   
$
97.3
   
$
10.2
   
$
854.8
 
 
Segment income (loss)
 
$
8.9
   
$
7.0
   
$
(1.6
)
 
$
(3.0
)
 
$
9.7
   
$
3.7
   
$
(3.0
)
   
21.7
 
 
Net interest expense
                                                           
(8.8
)
Equity in income of unconsolidated affiliate
                                             
0.4
 
Income before provision for income taxes
                                           
$
13.3
 
For the fiscal quarter ended July 2, 2011
                                                 
Revenues
 
$
203.0
   
$
189.1
   
$
188.4
   
$
166.5
   
$
76.6
   
$
53.4
   
$
10.4
   
$
887.4
 
 
Segment income (loss)
 
$
22.3
   
$
11.9
   
$
(2.4
)
 
$
4.9
   
$
9.5
   
$
3.5
   
$
(4.8
)
   
44.9
 
 
Net interest expense
                                                           
(37.0
)
Equity in income of unconsolidated affiliate
                                             
0.7
 
Income before provision for income taxes
                                           
$
8.6
 
For the fiscal six months ended June 30, 2012
                                                 
Revenues
 
$
408.4
   
$
335.8
   
$
421.3
   
$
278.7
   
$
148.8
   
$
175.2
   
$
22.5
   
$
1,790.7
 
 
Segment income (loss)
 
$
32.2
   
$
23.6
   
$
16.7
   
$
(25.4
)
 
$
19.6
   
$
(1.3
)
 
$
(3.5
)
   
61.9
 
 
Net interest expense
                                                           
(51.5
)
Equity in income of unconsolidated affiliate
                                             
1.3
 
Income before provision for income taxes
                                           
$
11.7
 
For the fiscal six months ended July 2, 2011
                                                 
Revenues
 
$
471.7
   
$
424.6
   
$
409.0
   
$
301.7
   
$
155.7
   
$
63.6
   
$
22.4
   
$
1,848.7
 
 
Segment income (loss)
 
$
53.1
   
$
39.9
   
$
15.6
   
$
(18.0
)
 
$
18.8
   
$
1.9
   
$
(5.2
)
   
106.1
 
 
Net interest expense
                                                           
(58.2
)
Equity in income of unconsolidated affiliate
                                             
2.0
 
Income before provision for income taxes
                                           
$
49.9
 


- 22 -

SUPPLEMENTAL CONDENSED FINANCIAL INFORMATION

Certain of our subsidiaries function as co-issuers (fully and unconditionally guaranteed on a joint and several basis) of the outstanding debt of The Jones Group Inc. ("Jones"), including Jones Apparel Group, USA, Inc. ("Jones USA"), Jones Apparel Group Holdings, Inc. ("Jones Holdings") and JAG Footwear, Accessories and Retail Corporation ("JAG Footwear").

The following condensed consolidating balance sheets, statements of operations, statements of consolidated comprehensive income and statements of cash flows for the "Issuers" (consisting of Jones and Jones USA, Jones Holdings, JAG Footwear, which are all our subsidiaries that act as co-issuers and co-obligors) and the "Others" (consisting of all of our other subsidiaries, excluding all obligor subsidiaries) have been prepared using the equity method of accounting in accordance with the requirements for presentation of such information.  Separate financial statements and other disclosures concerning Jones are not presented as Jones has no independent operations or assets.  There are no contractual restrictions on distributions from Jones USA, Jones Holdings or JAG Footwear to Jones.

Condensed Consolidating Balance Sheets
(In millions)
 
 
June 30, 2012
   
December 31, 2011
 
 
 
Issuers
   
Others
   
Elim-
inations
   
Cons-
olidated
   
Issuers
   
Others
   
Elim-
inations
   
Cons-
olidated
 
ASSETS
 
   
   
   
   
   
   
   
 
Current assets:
 
   
   
   
   
   
   
   
 
Cash and cash equivalents
 
$
210.6
   
$
66.5
   
$
-
   
$
277.1
   
$
195.8
   
$
43.0
   
$
-
   
$
238.8
 
Accounts receivable
   
173.0
     
154.2
     
-
     
327.2
     
182.9
     
156.7
     
-
     
339.6
 
Inventories
   
258.7
     
210.1
     
(1.3
)
   
467.5
     
270.5
     
220.9
     
(0.3
)
   
491.1
 
Prepaid and refundable income taxes
   
16.8
     
3.9
     
(19.3
)
   
1.4
     
5.3
     
4.9
     
1.7
     
11.9
 
Deferred taxes
   
14.5
     
13.2
     
-
     
27.7
     
13.2
     
13.2
     
-
     
26.4
 
Prepaid expenses and other current assets
   
37.5
     
21.6
     
-
     
59.1
     
21.5
     
26.2
     
-
     
47.7
 
Total current assets
   
711.1
     
469.5
     
(20.6
)
   
1,160.0
     
689.2
     
464.9
     
1.4
     
1,155.5
 
Property, plant and equipment
   
60.0
     
211.4
     
-
     
271.4
     
64.9
     
206.5
     
-
     
271.4
 
Due from affiliates
   
-
     
288.3
     
(288.3
)
   
-
     
-
     
1,604.4
     
(1,604.4
)
   
-
 
Goodwill
   
46.7
     
209.6
     
-
     
256.3
     
46.7
     
208.6
     
-
     
255.3
 
Other intangibles
   
6.4
     
885.4
     
-
     
891.8
     
6.9
     
890.5
     
-
     
897.4
 
Deferred taxes
   
92.3
     
-
     
(92.3
)
   
-
     
80.6
     
-
     
(80.6
)
   
-
 
Investments in and loan to subsidiaries
   
1,713.9
     
38.4
     
(1,713.9
)
   
38.4
     
3,047.9
     
35.6
     
(3,047.9
)
   
35.6
 
Other assets
   
70.2
     
20.8
     
-
     
91.0
     
79.3
     
20.8
     
-
     
100.1
 
Total assets
 
$
2,700.6
   
$
2,123.4
   
$
(2,115.1
)
 
$
2,708.9
   
$
4,015.5
   
$
3,431.3
   
$
(4,731.5
)
 
$
2,715.3
 
 
LIABILITIES AND EQUITY
                                                               
Current liabilities:
                                                               
Current portion of long-term debt and capital lease obligations
 
$
-
   
$
2.1
   
$
-
   
$
2.1
   
$
-
   
$
2.0
   
$
-
   
$
2.0
 
Current portion of acquisition consideration payable
   
216.7
     
-
     
-
     
216.7
     
192.7
     
1.4
     
-
     
194.1
 
Accounts payable
   
130.2
     
102.5
     
-
     
232.7
     
139.7
     
96.5
     
-
     
236.2
 
Income taxes payable
   
16.6
     
27.6
     
(39.6
)
   
4.6
     
11.2
     
8.3
     
(18.1
)
   
1.4
 
Accrued expenses and other current liabilities
   
71.3
     
63.8
     
-
     
135.1
     
79.0
     
67.3
     
-
     
146.3
 
Total current liabilities
   
434.8
     
196.0
     
(39.6
)
   
591.2
     
422.6
     
175.5
     
(18.1
)
   
580.0
 
Long-term debt
   
834.1
     
0.1
     
-
     
834.2
     
831.3
     
0.1
     
-
     
831.4
 
Obligations under capital leases
   
-
     
22.3
     
-
     
22.3
     
-
     
23.3
     
-
     
23.3
 
Income taxes payable
   
0.5
     
-
     
-
     
0.5
     
6.7
     
-
     
-
     
6.7
 
Deferred taxes
   
-
     
167.9
     
(98.3
)
   
69.6
     
-
     
160.0
     
(86.6
)
   
73.4
 
Acquisition consideration payable
   
4.8
     
-
     
-
     
4.8
     
17.7
     
-
     
-
     
17.7
 
Due to affiliates
   
288.3
     
-
     
(288.3
)
   
-
     
1,604.4
     
-
     
(1,604.4
)
   
-
 
Other
   
87.8
     
24.6
     
-
     
112.4
     
67.7
     
25.7
     
-
     
93.4
 
Total liabilities
   
1,650.3
     
410.9
     
(426.2
)
   
1,635.0
     
2,950.4
     
384.6
     
(1,709.1
)
   
1,625.9
 
Equity:
                                                               
Common stock and additional paid-in capital
   
522.1
     
947.8
     
(947.8
)
   
522.1
     
522.6
     
2,352.4
     
(2,352.4
)
   
522.6
 
Retained earnings
   
556.5
     
771.7
     
(748.4
)
   
579.8
     
572.1
     
704.3
     
(680.2
)
   
596.2
 
Accumulated other comprehensive (loss) income
   
(28.3
)
   
(7.3
)
   
7.3
     
(28.3
)
   
(29.6
)
   
(10.2
)
   
10.2
     
(29.6
)
Total Jones stockholders' equity
   
1,050.3
     
1,712.2
     
(1,688.9
)
   
1,073.6
     
1,065.1
     
3,046.5
     
(3,022.4
)
   
1,089.2
 
Noncontrolling interest
   
-
     
0.3
     
-
     
0.3
     
-
     
0.2
     
-
     
0.2
 
Total equity
   
1,050.3
     
1,712.5
     
(1,688.9
)
   
1,073.9
     
1,065.1
     
3,046.7
     
(3,022.4
)
   
1,089.4
 
Total liabilities and equity
 
$
2,700.6
   
$
2,123.4
   
$
(2,115.1
)
 
$
2,708.9
   
$
4,015.5
   
$
3,431.3
   
$
(4,731.5
)
 
$
2,715.3
 


- 23 -

Condensed Consolidating Statements of Operations
(In millions)

 
Fiscal Quarter Ended June 30, 2012
Fiscal Quarter Ended July 2, 2011
 
Issuers
Others
Elim-
inations
Cons-
olidated
Issuers
Others
Elim-
inations
Cons-
olidated
 
Net sales
$
516.6
$
333.7
$
(6.0
)
$
844.3
$
557.3
$
324.1
$
(4.7
)
$
876.7
Licensing income
-
10.2
-
10.2
0.1
10.3
-
10.4
Other revenues
0.3
-
-
0.3
0.3
-
-
0.3
Total revenues
516.9
343.9
(6.0
)
854.8
557.7
334.4
(4.7
)
887.4
Cost of goods sold
333.8
198.6
(3.8
)
528.6
356.3
210.2
(2.2
)
564.3
Gross profit
183.1
145.3
(2.2
)
326.2
201.4
124.2
(2.5
)
323.1
Selling, general and administrative expenses
216.2
90.3
(2.0
)
304.5
227.2
53.3
(2.3
)
278.2
Operating (loss) income
(33.1
)
55.0
(0.2
)
21.7
(25.8
)
70.9
(0.2
)
44.9
Net interest expense (income) and financing costs
9.2
(0.4
)
-
8.8
38.0
(1.0
)
-
37.0
Equity in income of unconsolidated affiliate
-
0.4
-
0.4
-
0.7
-
0.7
(Loss) income before (benefit) provision for income taxes and equity in earnings of subsidiaries
(42.3
)
55.8
(0.2
)
13.3
(63.8
)
72.6
(0.2
)
8.6
(Benefit) provision for income taxes
(12.2
)
17.1
-
4.9
(17.5
)
20.7
-
3.2
Equity in earnings of subsidiaries
38.4
-
(38.4
)
-
51.5
-
(51.5
)