Liz Claiborne Inc. Agrees to Acquire prAna

NEW YORK, Nov. 3 /PRNewswire-FirstCall/ -- Liz Claiborne Inc. announced today that it has agreed to purchase all of the equity of Skylark Sport Marketing Corporation, doing business as prAna. The purchase price is currently estimated to be $34.4 million, consisting of an initial payment of approximately $32.5 million (representing 60% of prAna's initial valuation) and the retirement of debt at closing (approximately $1.9 million), plus additional payments based upon a multiple of prAna's earnings in fiscal years 2008, 2009 and 2010. Consummation of the transaction is subject to customary closing conditions. The transaction is expected to close in the fourth quarter.

Based in North San Diego County (Vista), California and established in 1993, prAna is a designer, marketer and wholesaler of climbing, yoga and outdoor / active lifestyle apparel and accessories. PrAna is rooted in serving the core customer, designing products with technical features for performance but with the style and comfort to cross over into everyday life. PrAna's product line includes a full line of men's and women's sportswear, performance tops and bottoms, and accessories. PrAna is expected to generate annual net sales of approximately $30 million in fiscal 2005.

The prAna brand is reflected in the style and performance of its products, a distribution strategy that emphasizes core specialty retailers, effective grass-roots marketing, and sustainable business practices. All have played an important role in shaping the essence of prAna among its core outdoor, climbing and yoga customer base. PrAna has successfully executed a diversified channel strategy that promotes the brand across multiple demographics and interests, while remaining true to the core outdoor and wellness customer. PrAna's collection of products are available in approximately 1,600 of the most respected outdoor and specialty retailers throughout the United States and abroad. PrAna has arrangements with international distributors in 27 countries worldwide. International business accounted for 12% of sales in 2004.

Commenting on the announcement, Paul R. Charron, Chairman and Chief Executive Officer of Liz Claiborne Inc., said: "We are very pleased to announce this acquisition. PrAna is quickly becoming one of the most influential brands in the outdoor lifestyle industry, having developed a reputation for coupling style and technical excellence with thoughtful and responsible operating practices. This acquisition allows us to partner with one of the strongest trending brands in the high-growth active, outdoor and yoga industries and provides further channel diversification into select outdoor stores and specialty retailers through the prAna brand. PrAna has significant organic growth potential through optimizing the penetration of its core retail base. We believe there are abundant growth opportunities in new apparel categories and complementary brand extension opportunities in non- apparel categories which leverage Liz's core competencies in building lifestyle brands, as well as specialty retail and international expansion opportunities that preserve prAna's core retail network."

Mr. Charron continued: "We are pleased that prAna co-owners Beaver and Pam Theodosakis and Demian Kloer will continue to drive the Company as it is their vision and leadership that created prAna. A global strategic partner like Liz brings a high level of intellectual and financial capital to the partnership that will help Beaver, Pam, Demian and their team to successfully execute prAna's diversification and growth strategies. Our strong balance sheet and cash flow provide the necessary capital to fund prAna's growth objectives, while our operational capabilities and back-end support will enhance prAna's ability to continue to offer excellent service to its customers. We look forward to working with the entire prAna management team to maximize their performance within Liz Claiborne. We expect this transaction to have no impact on fiscal 2005 earnings and to have a slightly accretive impact on fiscal 2006 earnings."

Beaver Theodosakis, co-founder of prAna, said: "We are excited to partner with Liz Claiborne and its management because of their reputation for operating responsibly and an established worldwide infrastructure that we will draw upon to further enhance our business practices and support our core retailers. One of the primary reasons we selected Liz Claiborne was because of our ability to maintain a significant economic interest and independence in running prAna, which will allow us to preserve the quality and essence of the prAna brand that our customers and retailers expect. This relationship goes far beyond the bottom line as we are highly impressed by Liz's brand-building capabilities and corporate commitment to people, fair trade and the environment. We have a great opportunity to share best practices in these areas."

PrAna co-founder Pam Theodosakis added, "PrAna is a Sanskrit word dating back 5,000 years symbolizing life, breath, energy and vitality of the soul. People who know prAna know that our clothing is an expression of our lives and a desire to create consciousness while providing stylish, practical clothing for the active person. One of the most rewarding aspects of building this business over the last 13 years has been our ability to use the brand to raise awareness and influence individual and business practices among people who connect with us. We look forward to working with Liz in the years ahead to help prAna reach its full potential."

Liz Claiborne Inc. designs and markets an extensive range of women's and men's fashion apparel and accessories appropriate to wearing occasions ranging from casual to dressy. The Company also markets fragrances for women and men. Liz Claiborne Inc.'s brands include Axcess, Belongings, Bora Bora, C&C California, Claiborne, Crazy Horse, Curve, Dana Buchman, Elisabeth, Ellen Tracy, Emma James, Enyce, First Issue, Intuitions, J.H. Collectibles, Juicy Couture, Lady Enyce, Laundry by Shelli Segal, LIZ, Liz Claiborne, Lucky Brand, Mambo, Marvella, MetroConcepts, Mexx, Monet, Monet 2, Realities, Sigrid Olsen, Soul, Spark, Tapemeasure, Tint, Trifari and Villager. In addition, Liz Claiborne Inc. holds the exclusive, long-term license to produce and sell men's and women's collections of DKNY(R) Jeans and DKNY(R) Active, as well as CITY DKNY(R) better women's sportswear in the Western Hemisphere. The Company also has the exclusive license to produce jewelry under the Kenneth Cole New York and Reaction Kenneth Cole brand names.

Statements contained herein that relate to the Company's future performance, including, without limitation, statements with respect to the Company's anticipated results of operations or level of business for 2005 or any other future period, are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations only, and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Among the factors that could cause actual results to materially differ include risks related to the continuing challenging retail and macroeconomic conditions, including the levels of consumer confidence and discretionary spending and the levels of customer traffic within department stores, malls and other shopping and selling environments, and a continuation of the deflationary trend in prices for apparel products; risks associated with the Company's dependence on sales to a limited number of large United States department store customers; the impact of consolidation among one or more of the Company's larger customers, such as the recently completed merger between Federated Department Stores, Inc. and The May Department Store Company; risks associated with providing for the succession of senior management; risks related to retailer and consumer acceptance of the Company's products; risks related to the Company's ability, especially through its sourcing, logistics and technology functions, to operate within substantial production and delivery constraints, including risks associated with the possible failure of the Company's unaffiliated manufacturers to manufacture and deliver products in a timely manner, to meet quality standards or to comply with Company policies regarding labor practices or applicable laws or regulations; risks related to the Company's ability to adapt to and compete effectively in the new quota environment, including changes in sourcing patterns resulting from the elimination of quota on apparel products, as well as lowered barriers to entry; risks associated with the Company's ability to maintain and enhance favorable brand recognition; risks associated with the operation and expansion of the Company's own retail business; risks associated with the Company's ability to correctly balance the level of its commitments with actual orders; risks associated with the Company's ability to identify appropriate acquisition candidates and negotiate favorable financial and other terms, against the background of increasing market competition (from both strategic and financial buyers) for the types of acquisitions the Company has made; risks associated with acquisitions and new product lines and markets, including risks relating to integration of acquisitions, retaining and motivating key personnel of acquired businesses and achieving projected or satisfactory levels of sales, profits and/or return on investment; risks associated with the Company's ability to attract and retain talented, highly qualified executives and other key personnel; risks associated with any significant disruptions in the Company's relationship with, and any work stoppages by, its employees, including its union employees; risks associated with changes in social, political, economic, legal and other conditions affecting foreign operations, sourcing or international trade, including the impact of foreign currency exchange rates, currency devaluations in countries in which the Company sources product; risks associated with war, the threat of war and terrorist activities; work stoppages or slowdowns by suppliers or service providers; risks relating to protecting and managing intellectual property; and such other economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices as are set forth in our 2004 Annual Report on Form 10-K, including, without limitation, those set forth under the heading "Business-Competition; Certain Risks" and under the heading "Statement Regarding Forward-Looking Statements". The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.