Q4 2005 Casual Male Retail Group, Inc. Earnings Conference Call - Part 1.

(From Fair Disclosure Wire)

OPERATOR: Good day, ladies and gentlemen, and welcome to the Casual Male fiscal year-end 2005 and fourth quarter conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (OPERATOR INSTRUCTIONS) I would now like to hand your conference over to your host, Mr. Jeff Unger. Mr. Unger, you may begin. DAVID LEVIN, PRESIDENT AND CEO, CASUAL MALE RETAIL GROUP, INC.: Jeff?

OPERATOR: Mr. Levin, his line seems to be disconnected. He got disconnected somehow. DENNIS HERNREICH, EVP, COO AND CFO, CASUAL MALE RETAIL GROUP, INC.: Okay, why don't we continue with the call, and Jeff will give us his statement towards the end of the call instead of the beginning of the call. DAVID LEVIN: Okay. DENNIS HERNREICH: So this is Dennis Hernreich, the Chief Operating Officer and Chief Financial Officer at Casual Male Retail Group, Inc. Good morning and welcome to our Company's earnings call for the fourth quarter and the year of 2005. We have a lot to go over, as the Company had a very exciting fourth quarter that not only demonstrated the depth of the Company's turnaround, but soon after the quarter end we closed on a financing transaction that solidified the health of its balance sheet. Some of the key highlights of CMRG's performance in 2005 are as follows. Ninth consecutive quarter of positive comparable sales; 4.6% increase in quarter four -- for the year, rather, for 2005, closing the year with a 7.9% fourth-quarter comp. Gross margin increase of 200 basis points for the year, and 340 basis points for the fourth quarter. Operating margin increase of 200 basis points for the year to 4.2%. Operating income increased by 37% in the fourth quarter, and a very large increase of 120% for the year. [Depth of] profitability improvements supporting a partial reversal of the Company's valuation allowance reserve against deferred tax assets. Finally, reduced year-end debt by 30%; added $12 million of cash; and expected 2006 interest reduced by 50% with the sale leaseback transaction. Needless to say, we're very pleased about the accomplishments of 2005 and enthusiastic about the prospects for 2006. Subsequent to the end of the year, the Company entered into a sale-leaseback transaction with a Phoenix Arizona based company, Spirit Finance, whereby, in the first instance, Spirit acquired the Company's own corporate headquarters and sole distribution center, a 755,000 square feet facility in Canton, Massachusetts, for $57 million; and we lease back the facility for an initial annual rent of $4.6 million per annum. As a result of this transaction, the Company reduced long-term debt by $44 million and added $12 million to cash. Realized a gain on sale after transaction costs of approximately $29 million to be amortized over the life of the lease. We will incur no tax payments associated with the gain. Entered into a 20-year lease on the building facility with rents of $4.6 million during the initial five-year term of lease, with rents escalating to no greater than 7% every five years. The transaction is accretive to earnings in 2006 by approximately $0.02 per share after-tax, while cash flow after interest savings reduced by only approximately $500,000 per year. Lastly, the sale-leaseback transaction has delevered the balance sheet to the point where the only sizable debt remaining is the Company's $95 million in convertible notes with interest at 5% per annum and no principal payment requirements. The Company's free cash flow can be utilized for further convertible note retirements or growth activities. Related to this transaction and incurred in 2005 was a net charge of $1 million with respect to early debt retirements. The Company in the first instance prepaid its then existing mortgage of approximately $9 million and incurred a prepayment penalty of $1.2 million. In the second, the Company purchased $5.3 million of its convertible notes on the open market and incurred a gain of approximately net $200,000. This approximate $1 million net charge is ...