SEGMENT REPORTING

9 Months Ended

Sep. 28, 2013

SEGMENT REPORTING

SEGMENT REPORTING

15.    SEGMENT REPORTING

The Company’s segment reporting structure reflects a brand-focused approach, designed to optimize the operational coordination and resource allocation of the Company’s businesses across multiple functional areas including specialty retail, retail outlets, concessions, wholesale apparel, wholesale non-apparel, e-commerce and licensing. The four reportable segments described below represent the Company’s brand-based activities for which separate financial information is available and which is utilized on a regular basis by the Company’s CODM to evaluate performance and allocate resources. In identifying the Company’s reportable segments, the Company considers economic characteristics, as well as products, customers, sales growth potential and long-term profitability. As such, the Company configured its operations into the following four reportable segments, each reflecting the different financial missions, cultural profiles and focal points appropriate for these four reportable segments:

· JUICY COUTURE segment – consists of the specialty retail, outlet, concession, wholesale apparel, wholesale non-apparel (including accessories, jewelry and handbags), e-commerce and licensing operations of the JUICY COUTURE brand.

· KATE SPADE segment – consists of the specialty retail, outlet, concession, wholesale apparel, wholesale non-apparel, e-commerce and licensing operations of the KATE SPADE, KATE SPADE SATURDAY and JACK SPADE brands.

· LUCKY BRAND segment – consists of the specialty retail, outlet, wholesale apparel, wholesale non-apparel, e-commerce and licensing operations of LUCKY BRAND.

· Adelington Design Group segment (*) – consists of: (i) exclusive arrangements to supply jewelry for the LIZ  CLAIBORNE and MONET brands; (ii) the wholesale non-apparel operations of the TRIFARI brand and licensed KENSIE brand; (iii) the wholesale apparel and wholesale non-apparel operations of the licensed LIZWEAR brand and other brands; and (iv) the licensed LIZ CLAIBORNE NEW YORK brand.

(*) The Company’s agreement to supply DANA BUCHMAN branded jewelry to Kohl’s expired on October 11, 2013.

The Company’s Chief Executive Officer has been identified as the CODM. During the fourth quarter of 2012, the Company determined that its measure of segment profitability is Adjusted EBITDA of each reportable segment. Accordingly, the CODM evaluates performance and allocates resources based primarily on Segment Adjusted EBITDA. Segment Adjusted EBITDA is also a key metric utilized in the Company’s annual bonus and long-term incentive plans. Segment Adjusted EBITDA excludes: (i) depreciation and amortization; (ii) charges due to streamlining initiatives, brand-exiting activities and acquisition related costs; and (iii) losses on asset disposals and impairments. Unallocated Corporate costs also exclude non-cash share-based compensation expense. In addition, Segment Adjusted EBITDA does not include Corporate expenses associated with the following functions: corporate finance, investor relations, communications, legal, human resources and information technology shared services and costs of executive offices and corporate facilities, which are included in Unallocated Corporate costs. The Company does not allocate amounts reported below Operating loss to its reportable segments, other than equity income (loss) in equity method investees. The Company’s definition of Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The accounting policies of the Company’s reportable segments are the same as those described in Note 1 – Basis of Presentation. There are no inter-segment sales or transfers. The Company also presents its results on a geographic basis based on selling location, between Domestic (wholesale customers, Company-owned specialty retail and outlet stores located in the United States and e-commerce sites) and International (wholesale customers and Company-owned specialty retail, outlet and concession stores located outside of the United States and e-commerce sites). The Company, as licensor, also licenses to third parties the right to produce and market products bearing certain Company-owned trademarks; the resulting royalty income is included within the results of the associated segment.

Dollars in thousands	Net Sales		% to Total	Adjusted EBITDA			% of Sales
Nine Months Ended September 28, 2013 (39 weeks)
Reportable Segments:
JUICY COUTURE	$	310,049	26.2 %	$	(5,351	)	(1.7)	%
LUCKY BRAND	346,376		29.2 %	14,252			4.1	%
KATE SPADE	487,485		41.2 %	66,350			13.6	%
Adelington Design Group	40,457		3.4 %	9,691			24.0	%
Corporate	--		-- %	(49,516		)	--	%
Totals	$	1,184,367	100.0 %
Nine Months Ended September 29, 2012 (39 weeks)
Reportable Segments:
JUICY COUTURE	$	344,984	33.9 %	$	12,604		3.7	%
LUCKY BRAND	324,245		31.8 %	13,488			4.2	%
KATE SPADE	289,216		28.4 %	51,578			17.8	%
Adelington Design Group	60,116		5.9 %	14,032			23.3	%
Corporate	--		-- %	(56,573		)	--	%
Totals	$	1,018,561	100.0 %

Dollars in thousands	Net Sales		% to Total	Adjusted EBITDA			% of Sales
Three Months Ended September 28, 2013 (13 weeks)
Reportable Segments:
JUICY COUTURE	$	117,991	27.4 %	$	6,924		5.9	%
LUCKY BRAND	120,001		27.9 %	4,907			4.1	%
KATE SPADE	179,727		41.7 %	23,510			13.1	%
Adelington Design Group	12,885		3.0 %	3,947			30.6	%
Corporate	--		-- %	(14,859		)	--	%
Totals	$	430,604	100.0 %
Three Months Ended September 29, 2012 (13 weeks)
Reportable Segments:
JUICY COUTURE	$	129,837	35.6 %	$	6,511		5.0	%
LUCKY BRAND	111,797		30.7 %	6,736			6.0	%
KATE SPADE	101,880		27.9 %	15,721			15.4	%
Adelington Design Group	21,042		5.8 %	7,308			34.7	%
Corporate	--		-- %	(15,521		)	--	%
Totals	$	364,556	100.0 %

The following tables provide a reconciliation to Loss from continuing operations:

	Nine Months Ended							Three Months Ended
		September 28, 2013 (39 Weeks)			September 29, 2012 (39 Weeks)				September 28, 2013 (13 Weeks)			September 29, 2012 (13 Weeks)
In thousands
Reportable Segments Adjusted EBITDA:
JUICY COUTURE		$	(5,351	)	$	12,604			$	6,924		$	6,511
LUCKY BRAND		14,252			13,488				4,907			6,736
KATE SPADE (a)		66,350			51,578				23,510			15,721
Adelington Design Group		9,691			14,032				3,947			7,308
Total Reportable Segments Adjusted EBITDA		84,942			91,702				39,288			36,276
Unallocated Corporate Costs		(49,516		)	(56,573		)		(14,859		)	(15,521		)
Depreciation and amortization, net (b)		(49,482		)	(46,796		)		(16,533		)	(14,282		)
Impairment of intangible asset		(3,300		)	--				(3,300		)	--
Charges due to streamlining initiatives, brand-exiting activities, acquisition related costs and loss on asset disposals and impairments, net (c)		(20,000		)	(52,416		)		(5,635		)	(6,721		)
Share-based compensation		(5,206		)	(7,157		)		(1,705		)	(1,561		)
Equity loss included in Reportable Segments Adjusted EBITDA		983			474				421			1,528
Operating Loss		(41,579		)	(70,766		)		(2,323		)	(281		)
Other (expense) income, net(a)		(1,462		)	1,479				1,361			(1,038		)
Impairment of cost investment		(6,109		)	--				--			--
Loss on extinguishment of debt		(1,707		)	(8,669		)		(599		)	(3,023		)
Interest expense, net		(36,062		)	(37,836		)		(12,087		)	(13,228		)
Provision for income taxes		3,862			4,882				1,253			1,823
Loss from Continuing Operations		$	(90,781	)	$	(120,674	)		$	(14,901	)	$	(19,393	)

(a) Amounts include equity in the losses of equity method investees of $1.0 million and $0.5 million for the nine months ended September 28, 2013 and September 29, 2012, respectively and $0.4 million and $1.5 million for the three months ended September 28, 2013 and September 29, 2012, respectively.

(b) Excludes amortization included in Interest expense, net.

(c) See Note 10 – Fair Value Measurements for a discussion of impairment charges and Note 12 – Streamlining Initiatives for a discussion of streamlining charges.

GEOGRAPHIC DATA:

Dollars in thousands	Net Sales		% to Total
Nine Months Ended September 28, 2013 (39 weeks)
Domestic	$	1,051,365	88.8	%
International	133,002		11.2	%
Totals	$	1,184,367	100.0	%
Nine Months Ended September 29, 2012 (39 weeks)
Domestic	$	972,921	95.5	%
International	45,640		4.5	%
Totals	$	1,018,561	100.0	%
Dollars in thousands	Net Sales		% to Total
Three Months Ended September 28, 2013 (13 weeks)
Domestic	$	380,799	88.4	%
International	49,805		11.6	%
Totals	$	430,604	100.0	%
Three Months Ended September 29, 2012 (13 weeks)
Domestic	$	344,147	94.4	%
International	20,409		5.6	%
Totals	$	364,556	100.0	%

There were no significant changes in segment assets during the nine months ended September 28, 2013.