================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------------- SCHEDULE 14D-9 (RULE 14d-101) SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------------------------------- LANDS' END, INC. (Name of Subject Company) LANDS' END, INC. (Name of Person Filing Statement) COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title and Classes of Securities) --------------------------------------- 5115086106 (Cusip Number of Class of Securities) --------------------------------------- DONALD R. HUGHES SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER LANDS' END, INC. ONE LANDS' END LANE DODGEVILLE, WISCONSIN 53595 (608) 935-9341 (Name, Address and Telephone number of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) --------------------------------------- with copies to: KARL DAHLEN ROBERT S. OSBORNE, P.C. SENIOR LEGAL OFFICER KIRKLAND & ELLIS LANDS' END, INC. 200 EAST RANDOLPH DRIVE ONE LANDS' END LAND CHICAGO, ILLINOIS 60601 DODGEVILLE, WISCONSIN 53595 (312) 861-2368 (608) 935 9341 [x] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. ================================================================================
Thursday May 16, 8:30 am Eastern Time Press Release SOURCE: Lands' End, Inc. Lands' End Reports Sales and Earnings for First Quarter DODGEVILLE, Wis., May 16 /PRNewswire-FirstCall/ -- Lands' End, Inc. (NYSE: LE - News), the direct merchant of classically styled apparel and home furnishings, today reported results for its first quarter of fiscal year 2003, ended May 3, 2002. ... (Photo: http://www.newscom.com/cgi-bin/prnh/20020403/LELOGO ) --------------------------------------------------- Total revenue for the first quarter just ended was $341 million, up 10 percent from $311 million in the prior year's first quarter. Net income for the quarter was $16.5 million, and diluted earnings per share were $0.54, compared with net income of $5.9 million, or $0.20, for the same period last year. On May 13, 2002, Lands' End announced that it had entered into a definitive agreement with Sears, Roebuck and Co. for Sears to acquire 100 percent of the outstanding common stock of Lands' End in a cash tender offer for $62 a share or approximately $1.9 billion (the "Transaction"). LANDS' END FIRST QUARTER HIGHLIGHTS AND COMMENTS Segment merchandise sales data for first quarter (in millions) Percent 1Q03 1Q02 Change Core business segment $198 $173 + 14.4% Specialty segment 85 86 - 0.9% International segment 32 28 + 12.5% Total merchandise sales $315 $287 + 9.6% Internet $79 $ 54 + 46.3% Segment merchandise sales data (full-price and liquidation sales) excludes shipping and handling revenue. Internet merchandise sales are included in the respective business segments. In the quarter just ended, growth in the core business segment was led by strength in the women's division. The co-ed division showed modest growth, and men's showed a modest decline. In the specialty segment, the Kids and Home divisions were relatively flat; and Business Outfitters was slightly down. All international businesses had strong sales increases when measured in their local currencies, and overall international sales in U.S. dollars were improved from last year. Gross profit for the quarter just ended was $157 million, or 46.0 percent of total revenue, compared with $132 million, or 42.4 percent of total revenue in the prior year. Merchandise gross profit margin rose due to higher initial margins from improved sourcing, as well as from lower levels of liquidations and lower provisions for inventory reserves. Lower liquidations of excess inventory were due to a change in timing of our post-holiday clearance catalog that shifted revenue into the fourth quarter of last year. Liquidation of excess inventory was 8 percent of net merchandise sales for the first quarter, compared with 11 percent in the prior year. Inventory was $216 million as of May 3, 2002, up 9 percent from $198 million at the same time last year. Inventory is currently in line with the sales increase and with planned levels, and the quality of inventory is improved from the prior year. For the first quarter this year, selling, general and administrative expenses were $131 million, up 8 percent from $121 million in the prior year. As a percentage of total revenue, SG&A was 38.5 percent, compared with 39.0 percent in the prior year. Stronger customer response resulted in increased productivity per catalog page, resulting in relatively lower catalog costs. These improvements were partially offset by higher accruals for employee compensation and profit-sharing expense, both due to improved profitability. BUSINESS OUTLOOK On April 9, 2002, Lands' End updated its business outlook and filed it with the Securities and Exchange Commission on a form 8-K. Because of the Transaction, no further guidance is being provided at this time. CANCELLATION OF CONFERENCE CALL AND WEB CAST The conference call and Web cast previously scheduled for 9:30 CT, May 16, 2002, will not be held. Lands' End is a direct merchant of traditionally styled, classic products offered to customers around the world through regular mailings of its monthly and specialty catalogs and via the Internet at http://www.landsend.com.
STATEMENT REGARDING FORWARD-LOOKING INFORMATION Statements in this release that are not historical, including, without limitation, statements regarding our plans, expectations, assumptions, and estimations for the Transaction or for fiscal 2003 revenues, gross profit margin, and earnings, as well as anticipated sales trends and future development of our business strategy, are considered forward-looking and speak only as of today's date. As such, these statements are subject to a number of risks and uncertainties. Future results may be materially different from those expressed or implied by these statements due to a number of factors. Currently, we believe that the principal factors that create uncertainty about our future results are the following: customer response to our merchandise offerings, circulation changes and other initiatives; the mix of our sales between full price and liquidation merchandise; overall consumer confidence and general economic conditions, both domestic and foreign; effects of weather on customer purchasing behavior; effects of shifting patterns of e-commerce versus catalog purchases; costs associated with printing and mailing catalogs and fulfilling orders; dependence on consumer seasonal buying patterns; fluctuations in foreign currency exchange rates; and changes that may have different effects on the various sectors in which we operate (e.g., rather than individual consumers, the Business Outfitters division, included in the specialty segment, sells to numerous corporations, and certain of these sales are for their corporate promotional activities). Our future results could, of course, be affected by other factors as well. Also, the Transaction is not yet completed and is subject to a two-thirds minimum tender condition. More information about these risks and uncertainties may be found in the company's 8-K and 10-K filings with the S.E.C. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. ADDITIONAL INFORMATION This release is neither an offer to purchase nor a solicitation of an offer to sell securities of Lands' End. At the time the tender offer (referenced above) is commenced, Sears, Roebuck and Co. will file a tender offer statement with the U.S. Securities and Exchange Commission, and Lands' End will file a solicitation/recommendation statement with respect to the offer. Investors and Lands' End stockholders are strongly advised to read the tender offer statement (including an offer to purchase, letter of transmittal and related tender documents) and the related solicitation/recommendation statement because they will contain important information. These documents will be available at no charge at the SEC's Web site at http://www.sec.gov and may also be obtained by calling (800) 732-7780 and selecting option three.
Preliminary and unaudited CONSOLIDATED STATEMENTS OF OPERATIONS Lands' End, Inc., & Subsidiaries (Amounts in thousands, except per share data) Three months ended May 3, April 27, 2002 2001 Revenue Net merchandise sales $314,628 $287,117 Shipping and handling revenue 26,547 24,003 Total revenue 341,175 311,120 Cost of sales Cost of merchandise sales 157,914 154,913 Shipping and handling costs 26,325 24,263 Total cost of sales 184,239 179,176 Gross profit 156,936 131,944 Selling, general and administrative expenses 131,292 121,438 Income from operations 25,644 10,506 Other income (expense) Interest expense (281) (233) Interest income 498 636 Other 745 (1,536) Total other expense, net 962 (1,133) Income before income taxes 26,606 9,373 Income tax provision 10,110 3,515 Net income $16,496 $5,858 Basic earnings per share $0.55 $0.20 Diluted earnings per share $0.54 $0.20 Basic weighted average shares outstanding 30,004 29,380 Diluted weighted average shares outstanding 30,553 29,620
Preliminary and unaudited CONSOLIDATED BALANCE SHEETS Lands' End, Inc., & Subsidiaries (In thousands) May 3, April 27, 2002 2001 Assets Current assets: Cash and cash equivalents $114,422 $26,591 Receivables, net 17,388 17,140 Inventory 215,717 197,561 Prepaid advertising 18,742 20,801 Other prepaid expenses 9,738 7,378 Income taxes receivable -- 397 Deferred income tax benefits 15,905 10,973 Total current assets 391,912 280,841 Property, plant and equipment, at cost: Land and buildings 117,624 104,880 Fixtures and equipment 107,872 103,512 Computer hardware and software 118,366 105,334 Leasehold improvements 4,877 4,642 Construction in progress -- 7,461 Total property, plant and equipment 348,739 325,829 Less - accumulated depreciation and amortization 154,971 138,134 Property, plant and equipment, net 193,768 187,695 Other assets 2,696 2,214 Total assets $588,376 $470,750 Liabilities and shareholders' investment Current liabilities: Lines of credit $16,502 $21,573 Accounts payable 69,275 67,152 Reserve for returns 7,238 7,287 Accrued liabilities 51,727 35,626 Accrued profit sharing 2,373 755 Income taxes payable 13,944 -- Total current liabilities 161,059 132,393 Deferred income taxes 11,376 17,251 Shareholders' investment: Common stock, 40,221 shares issued 402 402 Donated capital 8,400 8,400 Additional paid-in capital 39,777 32,358 Deferred compensation (37) (103) Accumulated other comprehensive income 958 4,477 Retained earnings 572,499 494,945 Treasury stock, 10,208 and 10,834 shares at cost, respectively (206,058) (219,373) Total shareholders' investment 415,941 321,106 Total liabilities and shareholders' investment $588,376 $470,750
Preliminary and unaudited CONSOLIDATED STATEMENTS OF CASH FLOWS Lands' End, Inc., & Subsidiaries (In thousands) Three months ended May 3, April 27, 2002 2001 Cash flows from (used for) operating activities: Net income $16,496 $5,858 Adjustments to reconcile net income to net cash flows used for operating activities- Depreciation and amortization 7,258 6,235 Deferred compensation expense 19 18 Deferred income taxes (1,462) 2,684 Loss on disposal of fixed assets 276 -- Tax benefit of stock options 209 450 Changes in assets and liabilities: Receivables, net (4,091) 2,668 Inventory 11,503 (9,350) Prepaid advertising (3,032) (3,174) Other prepaid expenses (1,377) (275) Accounts payable (14,088) (29,016) Reserve for returns (2,146) (1,774) Accrued liabilities 4,128 (4,779) Accrued profit sharing (2,408) (1,602) Income taxes payable (11,013) (13,610) Other (2,416) (454) Net cash flows used for operating activities (2,144) (46,121) Cash flows used for investing activities: Cash paid for capital additions (6,742) (9,361) Net cash flows used for investing activities (6,742) (9,361) Cash flows from (used for) financing activities: Proceeds from short-term debt 333 4,633 Purchases of common stock (9) (4) Issuance of treasury stock 893 2,093 Net cash flows from financing activities 1,217 6,722 Net decrease in cash and cash equivalents (7,669) (48,760) Beginning cash and cash equivalents 122,091 75,351 Ending cash and cash equivalents $114,422 $26,591