J.Jill, Inc. Announces Fourth Quarter and Full Year Fiscal 2016 Results

QUINCY, Mass.–(BUSINESS WIRE)–J.Jill, Inc. (NYSE:JILL) today announced financial results for the
fourth quarter and fiscal year ended January 28, 2017.

Paula Bennett, President and CEO of J.Jill, Inc. stated: “We are very
pleased with our fourth quarter performance, which helped drive our
strong fiscal 2016 results. We have now delivered positive total company
comparable sales in 18 of the last 20 quarters, and year-over-year
earnings growth for 20 consecutive quarters. Our 10.8% total company
comparable sales growth for the fourth quarter of fiscal 2016
demonstrates our ability to delight our customers with the product
assortment and omni-channel shopping experience that builds loyalty for
our brand. With our proven formula of data-driven decision making, we
believe that we have the right strategies in place to grow profitably,
and we plan to continue the momentum that we achieved in 2016 into 2017
and beyond.”

For the fourth quarter ended January 28, 2017:

  • Total net sales increased by 14.8% to $166.9 million from $145.4
    million in the fourth quarter of fiscal 2015.
  • Total company comparable sales, which includes comparable store sales
    and direct to consumer comparable sales, increased by 10.8%.
  • Direct to consumer net sales represented 48.8% of total net sales, up
    from 46.1% in the fourth quarter of fiscal 2015.
  • Gross profit increased to $105.5 million from $91.4 million in the
    fourth quarter of fiscal 2015. As a percentage of total net sales,
    gross profit was 63.2% compared to 62.9% in the fourth quarter of
    fiscal 2015.
  • SG&A was $94.6 million compared to. $85.2 million in the fourth
    quarter of fiscal 2015, and as a percentage of total net sales was
    56.7% compared to 58.6% in the fourth quarter of fiscal 2015. Fourth
    quarter 2016 SG&A included $2.5 million of net non-recurring expenses.
  • Income from operations, inclusive of net non-recurring SG&A expenses,
    increased to $10.8 million, and as a percentage of total net sales was
    6.5% compared to 4.3% in the fourth quarter of fiscal 2015.
  • Adjusted EBITDA* for the fourth quarter of fiscal 2016
    increased by 45.7% to $22.5 million from $15.4 million in the fourth
    quarter of fiscal 2015.
  • Income tax expense increased to $3.7 million from $0.8 million in the
    fourth quarter of fiscal 2015, and the effective tax rate was 64.7%
    compared to 35.0% in the fourth quarter of 2015.
  • Diluted earnings per share for the fourth quarter of fiscal 2016 were
    $0.05 compared to $0.03 in the fourth quarter of fiscal 2015.
  • Adjusted diluted earnings per share* for fourth quarter of
    fiscal 2016, which excludes net non-recurring expenses, were $0.08
    compared to adjusted diluted earnings per share of $0.04 in the fourth
    quarter of fiscal 2015.

For the fiscal year ended January 28, 2017:

  • Total net sales increased by 13.7% to $639.1 million from $562.0
    million in pro forma fiscal 2015.
  • Total company comparable sales, which includes comparable store sales
    and direct to consumer comparable sales, increased by 11.2%.
  • Direct to consumer net sales represents 43.2% of fiscal 2016 net
    sales, up from 39.8% in pro forma fiscal 2015.
  • Gross profit increased to $427.9 million from $373.2 million in pro
    forma fiscal 2015. As a percentage of total net sales, gross profit
    was 67.0% compared to 66.4% in pro forma fiscal 2015.
  • SG&A was $368.5 million compared to $331.8 million in pro forma fiscal
    2015, and as a percentage of total net sales was 57.7% compared to
    59.0% in pro forma fiscal 2015. Fiscal year 2016 SG&A included $9.6
    million of net non-recurring expenses.
  • Income from operations, inclusive of net non-recurring expenses,
    increased to $59.4 million, and as a percentage of net sales was 9.3%
    compared to 7.4% of net sales in pro forma fiscal 2015.
  • Adjusted EBITDA* for fiscal 2016 increased by 29.6% to
    $106.2 million from $82.0 million in pro forma fiscal 2015.
  • Income tax expense increased to $16.7 million from $10.2 million in
    pro forma fiscal 2015, and the effective tax rate was 40.9% compared
    to 41.7% for pro forma fiscal 2015.
  • Diluted earnings per share for fiscal 2016 were $0.55.
  • Adjusted diluted earnings per share* for fiscal 2016, which
    excludes net non-recurring expenses, were $0.68.

The Company ended fiscal 2016 with $13.5 million in cash and cash
equivalents, including the impact of a voluntary pre-payment of $10.1
million (including accrued interest) on its term loan, compared to $27.5
million at the end of fiscal 2015. Inventory at the end of fiscal 2016
increased by 3.5% to $66.6 million compared to $64.4 million at the end
of fiscal 2015. The Company opened 14 net new stores in fiscal 2016 and
ended the year with 275 stores.

On May 8, 2015, JJill Holdings and JJill Topco Holdings completed the
acquisition of the Company (the “Acquisition”). Due to the change in the
basis of accounting resulting from the Acquisition, our GAAP statement
of operations for the 2015 fiscal year is split into two periods, the
Predecessor period from February 1, 2015 to May 7, 2015 and the
Successor period from May 8, 2015 to January 30, 2016, which are not
necessarily comparable. For comparability, we are also presenting
supplemental pro forma financial information for the 2015 fiscal year,
giving effect to the Acquisition as if it had occurred on February 1,
2015.

* Non-GAAP financial measures. Please see “Non-GAAP Financial
Measures” and “Reconciliation of GAAP Net Income to Adjusted EBITDA and
Adjusted Net Income” for more information.

Outlook

For the first quarter of fiscal 2017, we expect total comparable sales
to increase in the high single digits. GAAP diluted earnings per share
are expected to be in the range of $0.14 to $0.16. Adjusted diluted
earnings per share, which excludes approximately $2.2 million of
non-recurring expenses associated with the company’s initial public
offering, are expected to be in the range of $0.17 to $0.19. Both GAAP
and adjusted diluted earnings per share include approximately $0.4
million of public company costs not incurred in 2016. This guidance
assumes 43.7 million shares outstanding and a 40.0% income tax expense
rate.

For the full 2017 fiscal year, on a 52-week basis, we expect total
comparable sales to increase in the high single digits. GAAP diluted
earnings per share are expected to be in the range of $0.71 to $0.75.
Adjusted diluted earnings per share, which excludes approximately $2.8
million of non-recurring expenses associated with the company’s initial
public offering, are expected to be in the range of $0.75 to $0.79. Both
GAAP and adjusted diluted earnings per share include approximately $1.4
million of public company costs not incurred in 2016. This guidance
assumes 43.7 million shares outstanding and a 40.0% income tax expense
rate. The 53rd week of fiscal 2017 is expected to contribute
an additional $9.0 million in sales and approximately $0.01 of earnings
per share.

Conference Call Information

A conference call to discuss fourth quarter and full year fiscal 2016
results is scheduled for today, March 30, 2017, at 8:00 a.m. Eastern
Time. Those interested in participating in the call are invited to dial
(877) 201-0168 or (647) 788-4901 if calling internationally. Please dial
in approximately 10 minutes prior to the start of the call and reference
Conference ID 91491628 when prompted. A live audio webcast of the
conference call will be available online at http://investors.jjill.com/Investors-Relations/News-Events.

A taped replay of the conference call will be available approximately
two hours following the live call and can be accessed both online and by
dialing (800) 585-8367 or (416) 621-4642. The pin number to access the
telephone replay is 91491628. The telephone replay will be available
until Thursday, April 6, 2017.

About J.Jill, Inc.

J.Jill is an omni-channel premier retailer and nationally recognized
women’s apparel brand committed to delighting our customers with great
wear-now product. The J.Jill brand represents an easy, relaxed, inspired
style that reflects the confidence and comfort of a woman with a rich,
full life. J.Jill operates an omni-channel platform that delivers a
seamless experience to our customers through 275 stores nationwide and a
robust ecommerce experience. J.Jill is headquartered outside Boston. For
more information, please visit www.JJill.com.
The information included on our website is not incorporated by reference
herein.

Non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements presented
in accordance with generally accepted accounting principles (“GAAP”), we
use the following non-GAAP measures of financial performance:

  • Adjusted EBITDA, which represents net income (loss) plus interest
    expense, provision (benefit) for income taxes, depreciation and
    amortization, the amortization of the step-up to fair value of
    merchandise inventory resulting from the application of a purchase
    accounting adjustment related to the Acquisition, certain
    Acquisition-related expenses, sponsor fees, equity-based compensation
    expense, write-off of property and equipment, prior period adjustment
    for tenant allowances, and other non-recurring expenses, primarily
    consisting of outside legal and professional fees associated with
    certain non-recurring transactions and events. We present Adjusted
    EBITDA on a consolidated basis because our management uses it as a
    supplemental measure in assessing our operating performance, and we
    believe that it is helpful to investors, securities analysts and other
    interested parties as a measure of our comparative operating
    performance from period to period. We also use Adjusted EBITDA as one
    of the primary methods for planning and forecasting overall expected
    performance of our business and for evaluating on a quarterly and
    annual basis actual results against such expectations. Further, we
    recognize Adjusted EBITDA as a commonly used measure in determining
    business value and as such, use it internally to report results.
  • Adjusted Net Income, which represents net income (loss) plus prior
    period adjustment for tenant allowances and other non-recurring
    expenses, primarily consisting of outside legal and professional fees
    associated with certain non-recurring transactions and events. We
    present Adjusted Net Income on a consolidated basis because our
    management uses it as a supplemental measure in assessing our
    operating performance, and we believe that it is helpful to investors,
    securities analysts and other interested parties as a measure of our
    comparative operating performance from period to period.
  • Adjusted Earnings per Share (“Adjusted EPS”), which represents
    Adjusted Net Income divided by the number of shares outstanding.
    Adjusted EPS is presented as a supplemental measure in assessing our
    operating performance, and we believe that it is helpful to investors,
    securities analysts and other interested parties as a measure of our
    comparative operating performance from period to period.

While we believe that Adjusted EBITDA, Adjusted Net Income, and Adjusted
EPS are useful in evaluating our business, Adjusted EBITDA, Adjusted Net
Income, and Adjusted EPS are non-GAAP financial measures that have
limitations as analytical tools. Adjusted EBITDA, Adjusted Net Income,
and Adjusted EPS should not be considered alternatives to, or
substitutes for, net income (loss) or EPS, which are calculated in
accordance with GAAP. In addition, other companies, including companies
in our industry, may calculate Adjusted EBITDA, Adjusted Net Income, and
Adjusted EPS differently or not at all, which reduces the usefulness of
Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS as tools for
comparison. We recommend that you review the reconciliation and
calculation of Adjusted EBITDA , Adjusted Net Income, and Adjusted EPS
to net income (loss) and EPS, the most directly comparable GAAP
financial measures, under “Reconciliation of GAAP Net Income to Adjusted
EBITDA and Adjusted Net Income” and not rely solely on Adjusted EBITDA,
Adjusted Net Income, Adjusted EPS, or any single financial measure to
evaluate our business.

Forward-Looking Statements

This press release contains, and oral statements made from time to time
by our representatives may contain, “forward-looking statements.”
Forward-looking statements include statements under “Outlook” offering
and other statements identified by words such as “could,” “may,”
“might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,”
“believes,” “estimates,” “expects,” “continues,” “projects” and similar
references to future periods, or by the inclusion of forecasts or
projections. Forward-looking statements are based on our current
expectations and assumptions regarding capital market conditions, our
business, the economy and other future conditions. Because
forward-looking statements relate to the future, by their nature, they
are subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. As a result, our actual
results may differ materially from those contemplated by the
forward-looking statements. Important factors that could cause actual
results to differ materially from those in the forward-looking
statements include regional, national or global political, economic,
business, competitive, market and regulatory conditions, including risk
regarding, our ability to manage inventory or anticipate consumer
demand; changes in consumer confidence and spending; our competitive
environment; our failure to open new profitable stores or successfully
enter new markets and other factors set forth under “Risk Factors” in
the Form S-1. Any forward-looking statement made in this press release
speaks only as of the date on which it is made. J.Jill undertakes no
obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future developments or otherwise.

(Tables Follow)

       
J.Jill, Inc.
Consolidated Balance Sheets
As of January 28, 2017 (Successor) and January 30, 2016
(Successor)
(Unaudited)
(Amounts in thousands)
 
 
 

January 28, 2017
(Successor)

January 30, 2016
(Successor)

Assets
Current assets
Cash and cash equivalents $ 13,468 $ 27,505
Accounts receivable 3,851 3,164
Inventories, net 66,641 64,406
Receivable from related party 1,262
Prepaid expenses and other current assets   18,559   20,539
Total current assets 103,781 115,614
 
Property and equipment, net 102,322 86,810
Intangible assets, net 163,483 179,965
Goodwill 197,026 196,572
Receivable from related party 1,850
Other assets   1,033   1,221
Total assets $ 567,645 $ 582,032
 
Liabilities and Member’s Equity
Current liabilities
Accounts payable $ 38,438 $ 41,041
Accrued Expenses and other current liabilities 46,121 43,591
Current portion of long-term debt   2,799   2,500
Total current liabilities 87,358 87,132
 
Long-term debt 264,440 237,478
Deferred income taxes 74,750 78,837
Other liabilities   20,132   12,014
Total liabilities 446,680 415,461
 
Member’s equity
Contributed capital 107,878 162,265
Accumulated earnings (deficit)   13,087   4,306
Total member’s equity   120,965   166,571
Total liabilities and member’s equity $ 567,645 $ 582,032
 
Note 1: On May 8, 2015, the Company was acquired by Jill Holdings
Inc., which is controlled by TowerBrook Capital Partners. The
Company accounted for the acquisition in accordance with FASB
Accounting Standards Codification (“ASC”) Topic 805, Business
Combinations
, resulting in a presentation of a Predecessor
period (pre-sale) and Successor period (post-sale period).

 

Note 2: These financial statements are unaudited and are subject
to normal and recurring year-end adjustments, which may have a
material impact on reported balances. Additionally, statements do
not include footnotes.

 
   
J.Jill, Inc.
Consolidated Statements of Operations
For the Three Months Ended January 28, 2017 (Successor) and
January 30, 2016 (Successor)
(Unaudited)
(Amounts in thousands)
 
 

For the
Three Months Ended
January 28,
2017

(Successor)

 

For the
Three Months Ended
January 30,
2016

(Successor)

 
Net sales $ 166,917 $ 145,353
Cost of goods sold   61,445   53,906
Gross profit 105,472 91,447
Selling, general and administrative expenses   94,643   85,246
Operating income 10,829 6,201
Interest expense   5,040   3,971
Income before income taxes 5,789 2,230
Income tax expense   3,744   781
 
Net income $ 2,045 $ 1,449
 
 
Net income per share attributable to common stockholders
Basic $ 0.05 $ 0.03
Diluted $ 0.05 $ 0.03
 
Weighted average number of common shares outstanding
Basic 43,747,944 43,747,944
Diluted 43,747,944 43,747,944
 
         
J.Jill, Inc.
Consolidated Statements of Operations

For the Twelve Months Ended January 28, 2017 (Successor) and
Periods May 8, 2015 Through January 30, 2016

(Successor)
and February 1, 2015 Through May 7, 2015 (Predecessor)

(Unaudited)
(Amounts in thousands)
 
 

For the
Twelve Months Ended
January 28,
2017

(Successor)

For the
Period May 8, 2015 –
January
30, 2016

(Successor)

For the
Period February 1,
2015 – May
7, 2015

(Predecessor)

 
Net sales $ 639,056 $ 420,094 $ 141,921
Cost of goods sold   211,117  

155,091

  44,232  
Gross profit 427,939 265,003 97,689
Selling, general and administrative expenses 368,525 246,482 80,151
Acquisition-related expenses       13,341  
Operating income 59,414 18,521 4,197
Interest expense   18,670   11,893   4,599  
Income (loss) before income taxes 40,744 6,628 (402 )
Income tax expense   16,669   2,322   1,499  
 
Net income (loss) $ 24,075 $ 4,306 $ (1,901 )
 
 
Net income (loss) per share attributable to common stockholders
Basic $ 0.55 $ 0.10 $ (0.04 )
Diluted $ 0.55 $ 0.10 $ (0.04 )
 
Weighted average number of common shares outstanding
Basic 43,747,944 43,747,944 43,747,944
Diluted 43,747,944 43,747,944 43,747,944
 
 

Supplemental Unaudited Pro Forma Consolidated Financial Information

The unaudited pro forma consolidated statement of operations for the
year ended January 30, 2016 has been derived from our consolidated
audited statements of operations and represents the addition of the
Predecessor period from February 1, 2015 through May 7, 2015 and the
Successor period from May 8, 2015 through January 30, 2016, and gives
effect to the following as if they had occurred on February 1, 2015:

  • JJill Holdings’ acquisition of approximately 94% of the outstanding
    interests of Jill Intermediate LLC and JJill Topco Holdings’
    acquisition of approximately 6% of the outstanding interests of Jill
    Intermediate LLC and our election to push down the effects of the
    Acquisition to our consolidated financial statements; and
  • The related Acquisition financing as provided for under the Term Loan
    for $250.0 million and the ABL Facility for $40.0 million (the
    “Financing”).

The unaudited pro forma consolidated financial information presented is
based on available information and assumptions we believe are reasonable
and does not include the impacts of any revenue, cost, or other
operating synergies that may result from the acquisition. The unaudited
pro forma consolidated statement of operations is presented for
illustrative purposes and does not purport to represent what the results
of operations would actually have been if the Acquisition and the
Financing had occurred as of the dates indicated or what the results of
operations would be for any future periods.

             
J.Jill, Inc.
Consolidated Statements of Operations
For the Twelve Months Ended January 28, 2017 (Successor) and
January 30, 2016 (Pro Forma)
(Unaudited)
(Amounts in thousands)
 
Successor Pro Forma Historical
 

For the
Twelve Months Ended
January 28,
2017

For the
Twelve Months Ended
January 30,
2016

Pro Forma
Adjustments

 

For the
Period May 8, 2015 –
January
30, 2016

(Successor)

 

For the
Period February 1,
2015 – May
7, 2015

(Predecessor)

 
Net sales $ 639,056 $ 562,015 $ 420,094 $ 141,921
Cost of goods sold   211,117   188,852   (10,471 ) (1 )   155,091   44,232  
Gross profit 427,939 373,163 10,471 265,003 97,689
Selling, general and administrative expenses 368,525

 

331,752 2,044 (2 ) 246,482 80,151
1,943 (3 )
(250 ) (4 )
(34 ) (5 )
973 (6 )
443 (7 )
Acquisition-related expenses       (13,341 ) (8 )     13,341  
Operating income 59,414 41,411 18,693 18,521 4,197
Interest expense   18,670   16,893   401   (9 )   11,893   4,599  
Income (loss) before income taxes 40,744 24,518 18,292 6,628 (402 )
Income tax expense   16,669   10,223   6,402   (10 )   2,322   1,499  
 
Net income (loss) $ 24,075 $ 14,295 $ 11,890   $ 4,306 $ (1,901 )
 
 
Notes to Unaudited Pro Forma Consolidated Statement of Operations
Adjustments:
(1)   Represents the elimination of the increase in cost of goods sold
resulting from the amortization of the fair value step-up of
merchandise inventory reflected in the purchase price allocation at
the date of the Acquisition.
(2) Represents the incremental depreciation expense resulting from the
increase in fair value of certain fixed assets, reflected in the
purchase price allocation at the date of the Acquisition.
(3) Represents the incremental amortization expense resulting from the
increase in fair value of certain definite-lived intangible assets,
reflected in the purchase price allocation at the date of the
Acquisition.
(4) Represents the elimination of the management fee charged by our
previous equity sponsor for the period from February 1, 2015 through
May 7, 2015.
(5) Represents the net decrease in amortization expense related to
recognition of the fair value of favorable/unfavorable leases.
(6) Represents incremental pro forma deferred rent expense resulting
from the recalculation of deferred rent expense from the Acquisition.
(7) Represents the incremental compensation expense related to certain
management incentive bonuses awarded in connection with the
Acquisition.
(8) Represents the elimination of the transaction costs incurred in
connection with the Acquisition.
(9) Represents the net change in interest expense.
(10) Represents the income tax effect for the above adjustments
reflecting an estimated statutory tax rate of 35%.
 
     
J.Jill, Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA and Adjusted
Net Income
For the Three Months Ended January 28, 2017 (Successor) and
January 30, 2016 (Successor)
(Unaudited)
(Amounts in thousands)
 
 

For the
Three Months Ended
January 28,
2017

(Successor)

For the
Three Months Ended
January 30,
2016

(Successor)

 
Net income $ 2,045 $ 1,449
Adjustment: Prior period adjustment for tenant allowance(e) (376 )
Adjustment: Other non-recurring expenses(d) 2,909 390
Adjustment: Tax Provision(a)   (1,036 )   (137 )
Adjusted net income $ 3,542   $ 1,702  
 
Adjusted net income per share attributable to common stockholders
Basic $ 0.08 $ 0.04
Diluted $ 0.08 $ 0.04
 
Weighted average number of common shares outstanding
Basic 43,747,944 43,747,944
Diluted 43,747,944 43,747,944
 
 
 

For the
Three Months Ended
January 28,
2017

(Successor)

 

For the
Three Months Ended
January 30,
2016

(Successor)

 
Net income $ 2,045 $ 1,449
Interest expense 5,040 3,971
Provision for income taxes 3,744 781
Depreciation and amortization 8,939 8,586
Equity-based compensation expense(b) 165 51
Write-off of property and equipment(c) 189
Other non-recurring expenses(d) 2,909 390
Prior period adjustment for tenant allowance(e)   (376 )    
Adjusted EBITDA $ 22,466   $ 15,417  
 
 
Notes to the three months ended January 28, 2017 adjusted net income
and adjusted EBITDA adjustments:
(a)   The tax provision adjustment for adjusted net income is estimated by
applying the full year effective tax rate of 40.9% to the
adjustments.
(b) Represents expenses associated with equity incentive units granted
to our management. Prior to the Acquisition, incentive units were
accounted for as a liability-classified award and the related
compensation expense was recognized based on changes in the
intrinsic value of the award at each reporting period. Subsequent to
the Acquisition, new incentive units were granted to management and
are accounted for as equity-classified awards with the related
compensation expense recognized based on fair value at the date of
the grants.
(c) Represents net gain or loss on the disposal of fixed assets.
(d) Represents items management believes are not indicative of ongoing
operating performance. These expenses are primarily composed of
legal and professional fees associated with non-recurring events.
The pro forma fiscal year 2015 expenses are primarily due to legal,
accounting, and professional fees incurred in connection with the
initial public offering.
(e) Represents the prior period correction to recognize lease incentives
as reductions of rental expense by the lessee on a straight-line
basis over the term of the new lease, in accordance with ASC 840.
 

Contacts

J.Jill, Inc.
Investors:
ICR, Inc.
Caitlin Morahan,
203-682-8200
Joseph Teklits, 203-682-8200
investors@jjill.com
or
Media:
Dan
Clifford
media@jjill.com

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