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This prospectus supplement relates to an effective registration statement under the Securities Act of 1933, but it is not complete and may be changed. This prospectus supplement and the accompanying prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
Per Note | Total | |||||||
Public Offering Price | % | $ | ||||||
Underwriting Discount | % | $ | ||||||
Proceeds to Phillips-Van Heusen Corporation (before expenses) | % | $ |
Barclays Capital | Deutsche Bank Securities |
BofA Merrill Lynch | Credit Suisse | RBC Capital Markets |
BBVA Securities | Credit Agricole CIB | Fortis Bank Nederland | HSBC |
Scotia Capital | SunTrust Robinson Humphrey | US Bancorp |
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• | our Annual Report onForm 10-K for the year ended January 31, 2010; | |
• | our Current Reports onForm 8-K filed with the SEC on March 16, 2010, April 5, 2010, April 8, 2010, April 13, 2010 and April 16, 2010; and | |
• | the portions of our Definitive Proxy Statement on Schedule 14A filed with the SEC on May 6, 2009 and Definitive Additional Materials on Schedule 14A filed with the SEC on May 11, 2009 that are incorporated by reference in our Annual Report on Form10-K for the year ended February 1, 2009. |
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• | our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; | |
• | our acquisition of Tommy Hilfiger is subject to conditions, which may not be satisfied, in which event the transaction may not close; | |
• | in connection with the acquisition of Tommy Hilfiger, we intend to borrow significant amounts, which may be considered to be highly leveraged, and will have to use a significant portion of our cash flows to service such indebtedness, as a result of which we might not have sufficient funds to operate our businesses in the manner we intend or have operated in the past; | |
• | the levels of sales of our apparel, footwear and related products, both to our wholesale customers and in our retail stores, the levels of sales of our licensees at wholesale and retail, and the extent of discounts and promotional pricing in which we and our licensees and other business partners are required to engage, all of which can be affected by weather conditions, economic conditions, fuel prices, reductions in travel, consumer behavior, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, repositionings of brands by our licensors and other factors; | |
• | our plans and results of operations will be affected by our ability to manage our growth and inventory, including our ability to continue to develop and grow the Calvin Klein businesses in terms of revenue and profitability, and our ability to realize benefits from Tommy Hilfiger, if the acquisition is consummated; |
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• | our operations and results could be affected by quota restrictions and the imposition of safeguard controls (which, among other things, could limit our ability to produce products in cost-effective countries that have the labor and technical expertise needed), a disruption in our supply chain, the availability and cost of raw materials, our ability to adjust timely to changes in trade regulations and the migration and development of manufacturers (which can affect where our products can best be produced), and civil conflict, war or terrorist acts, the threat of any of the foregoing, or political and labor instability in any of the countries where our or our licensees’ or other business partners’ products are sold, produced or are planned to be sold or produced; | |
• | disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, as well as reduced consumer traffic and purchasing, as consumers limit or cease shopping in order to avoid exposure or become ill; | |
• | acquisitions and issues arising with acquisitions and proposed transactions, including without limitation, the ability to integrate an acquired entity, such as Tommy Hilfiger, into us with no substantial adverse affect on the acquired entity’s or our existing operations, employee relationships, vendor relationships, customer relationships or financial performance; | |
• | the failure of our licensees to market successfully licensed products or to preserve the value of our brands, or their misuse of our brands; and |
• | other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission. We have discussed some of these factors in more detail under “Risk Factors” of this prospectus supplement. These factors are not necessarily all of the important factors that could affect us. |
United States Dollars per €1.00 | ||||||||||||||||
Period | High | Low | Average(1) | End | ||||||||||||
Year ended March 31, 2007 | $ | 1.3352 | $ | 1.2063 | $ | 1.2831 | $ | 1.3318 | ||||||||
Year ended March 31, 2008 | 1.5812 | 1.3287 | 1.4168 | 1.5812 | ||||||||||||
Year ended March 31, 2009 | 1.5990 | 1.2460 | 1.4231 | 1.3308 | ||||||||||||
Nine months ended December 31, 2008 | 1.5990 | 1.2460 | 1.4622 | 1.3917 | ||||||||||||
Nine months ended December 31, 2009 | 1.5120 | 1.2932 | 1.4248 | 1.4406 |
(1) | The average of the exchange rates at the end of each business day during the relevant period. |
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• | interest expense, and because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and ability to generate revenue; | |
• | income tax expense, and because the payment of taxes is part of our operations, tax expense is a necessary element of our costs and ability to operate; and |
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• | depreciation and amortization expense, and, because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate revenue. |
• | they do not reflect cash outlays for capital expenditures or future contractual commitments; | |
• | they do not reflect changes in, or cash requirements for, working capital needs; | |
• | they do not reflect principal payments on indebtedness, nor do they reflect interest expense related to this offering; | |
• | they do not reflect available liquidity; and | |
• | other companies, including companies in our industry, may not use such measures or may calculate such measures differently than as presented in this prospectus supplement, limiting their usefulness as comparative measures. |
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• | We intend to grow the business in product categories that we believe are currently underdeveloped in Europe, such as pants, outerwear, underwear and accessories, as well as the womenswear collection; | |
• | We will seek to increase theTommy Hilfigerbrand’s presence in under-penetrated markets where we believe there is growth potential, such as Italy, France, the United Kingdom, Scandinavia and Central and Eastern Europe, through both our own retail expansion and increased wholesale sales, which will be supported with increased advertising and marketing activities; and |
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• | We will continue to increase Tommy Hilfiger’s overall presence in Europe through the expansion of specialty and outlet retail stores. |
• | Expanding the strategic alliance with Macy’s by leveraging our logistics capabilities and “preferred vendor” relationship with Macy’s and adding product categories to the merchandise assortments, increasing and enhancing the locations of“shop-in-shop” stores in high-volume Macy’s stores and featuringTommy Hilfiger products in Macy’s marketing campaigns; | |
• | Continuing to develop the retail businesses by increasing the overall number of stores in the United States and Canada; and | |
• | Expanding product offerings by Tommy Hilfiger and its licensees in both the retail and wholesale channels. |
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• | Calvin Klein Collection. The principal growth opportunity for our “halo” brand is to broaden the current distribution through the continued opening of freestanding stores operated throughout the world by our experienced retail partners, as well as through expanded distribution by our wholesale collection business within premier department stores and specialty stores in both the United States and overseas. We acquired CMI, the licensee of the men’s and women’s high-end collection apparel and accessories businesses, in January 2008. We believe this acquisition gives us greater control over the Calvin Klein Collection businesses and, thereby, enhances our ability to maximize the halo benefit provided by this brand. | |
• | ck Calvin Klein. Our “bridge” brand, ck Calvin Klein, provides significant growth opportunities, particularly in Europe and Asia, where apparel and accessories are more traditionally sold in theupper-moderate to upper “bridge” price range. We have entered into several licenses since we acquired Calvin Klein, adding to the pre-existing licensed apparel and accessories lines. Specific growth opportunities include: |
• | Broadening distribution of apparel and accessories through continued expansion in key markets such as Southeast Asia, China and Japan, as well as Europe and the Middle East.ck Calvin Kleinapparel and accessories were available in Europe, Asia and Japan, as well as in approximately 60 freestandingck Calvin Klein stores in Asia-Pacific (excluding Japan), Europe and the Middle East at the end of 2009. We currently expect that additional freestandingck Calvin Kleinstores will be opened by licensees by the end of 2010; | |
• | Expansion of the watch and jewelry lines worldwide; and | |
• | Introduction of additionalck Calvin Kleinfragrances, which have contributed to the growth of theck Calvin Kleinbrand globally. |
• | Calvin Klein. We believe that theCalvin Kleinwhite label “better” brand presents the largest growth opportunity, particularly in the United States, Canada and Mexico. Growth opportunities for this brand include: |
• | Continued expansion of our men’s sportswear business, which was first launched for Fall 2004 in the United States; | |
• | Continued development of the licensed lines of men’s and women’s footwear, handbags, women’s sportswear, women’s suits, dresses, women’s swimwear and men’s outerwear; | |
• | Introduction and growth of new fragrance offerings and brand extensions, such as the men’s and women’sckIN2U(Spring 2007),Calvin Klein MAN (Fall 2007),Secret Obsession(Fall 2008) andckFree(Fall 2009) fragrances; | |
• | Introduction and growth of new underwear brand extensions, such as the men’s and women’sSteel(Fall 2007), men’s and women’sBlack & White(Spring 2009), and the women’sSeductive Comfort(Fall 2008) lines; | |
• | Introduction and growth of new jeanswear extensions, such as the men’s and women’sBody(Fall 2009) lines; and |
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• | Pursuit of additional licensing opportunities for new product lines, such as the introduction of a women’s performance line (Spring 2008) and two furniture lines,Calvin Klein Home(January 2009) andThe Curator Collection By Calvin Klein Home(Fall 2009). |
• | Continue to grow sportswear. We have a leading position in the United States in men’s sportswear and have continued to penetrate the sportswear market with additional products and product lines. We have builtIZODinto a year-round lifestyle brand from its traditional knit sport shirt origins by adding new product offerings, such as pants, sweaters and outerwear, and new lines of apparel, including golf and jeanswear. As a result,IZODhas become a leader on the main floor of department stores in the United States. In 2007, we expanded our wholesale sportswear offerings through our assumption of theIZODwomen’s sportswear collection, which was previously a licensed business. We offered our first collection of men’sTimberlandsportswear for Fall 2008, assuming the line from our licensor, The Timberland Company, and since then have grown distribution in department and specialty store doors in the United States from 330 to 1,300 in 2009. | |
• | Continue to strengthen the competitive position and image of our current brand portfolio. We intend for each of our brands to be a leader in its respective market segment, with strong consumer awareness and loyalty. We believe that our brands are successful because we have positioned each one to target distinct consumer demographics and tastes. We will continue to design and market our branded products to complement each other, satisfy lifestyle needs, emphasize product features important to our target consumers and increase consumer loyalty. We will seek to increase our market share in our businesses by expanding our presence through product extensions and increased floor space. We are also committed to investing in our brands through advertising and other means to maintain strong customer recognition of our brands. | |
• | Continue to build our brand portfolio through acquisition and licensing opportunities. While we believe we have an attractive and diverse portfolio of brands with growth potential, we will also continue to explore acquisitions of companies or trademarks and licensing opportunities that we believe are additive to our overall business, such as is the case with the acquisition of Tommy Hilfiger. New license opportunities allow us to fill new product and brand portfolio needs. We take a disciplined approach to acquisitions, seeking brands with broad consumer recognition that we can grow profitably and expand by leveraging our infrastructure and core competencies and, where appropriate, by extending the brand through licensing. | |
• | Pursue international growth. We intend to expand the international distribution of our brands. To date, we have done so principally through licensing. Following the Tommy Hilfiger acquisition, we also intend to do so through exploring opportunities to develop larger European businesses for our heritage brands under the leadership of the Tommy Hilfiger European management team. As of March 31, 2010, we had approximately 50 license agreements, covering approximately 150 territories outside of the United States to use our heritage brands in numerous product categories, including apparel, accessories, footwear, soft home goods and fragrances. We also conduct international business directly. We expanded our wholesale operations in 2007 and again in 2008 to include sales of certain dress furnishings and sportswear products to department and specialty stores throughout Canada and dress shirts in parts of Europe. We believe that our strong brand portfolio and broad product offerings enable us to seek additional growth opportunities in geographic areas where we believe we are underpenetrated, such as Europe and Asia. |
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Sources | Uses | |||||||||
($ in millions) | ||||||||||
Available cash (1) | $ | 326 | Tommy Hilfiger consideration (6) | $ | 3,147 | |||||
New senior secured credit facility (2) | 2,000 | Repurchase or redemption of existing notes | 300 | |||||||
Notes offered hereby | 525 | Integration and other costs (7) | 90 | |||||||
Stock issued to Apax and selling | Estimated acquisition fees and expenses (8) | 163 | ||||||||
shareholders (3) | 374 | |||||||||
Preferred stock issued (4) | 200 | |||||||||
Common stock offering (5) | 275 | |||||||||
Total | $ | 3,700 | Total | $ | 3,700 |
(1) | Reflects excess cash to be used to fund the acquisition of Tommy Hilfiger after giving effect to proceeds from this offering of notes, as well as the other proposed financings to fund the acquisition. | |
(2) | We will enter into a new a senior secured credit facility in aggregate principal amount of $2.45 billion (including an undrawn revolving credit facility with a total commitment of $450 million), consisting of a |
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United States Dollar-denominated facility and a Euro-denominated facility. See “Description of Other Indebtedness.” | ||
(3) | Pursuant to the Tommy Hilfiger purchase agreement, we will issue €276 million of our common stock directly to Apax and the other selling shareholders of Tommy Hilfiger. Assuming a United StatesDollar-Euro exchange rate of $1.3535 to one Euro and in accordance with the formula in the purchase agreement, this issuance would constitute approximately 8.5 million shares of our common stock, or approximately 13% of our pro forma outstanding shares. | |
(4) | We will sell $200 million of Series A preferred stock to LNK and MSD, which is convertible into approximately 4.2 million shares, or approximately 6% of our pro forma outstanding shares. | |
(5) | Excludes an additional 675,000 shares of common stock to cover over-allotments. | |
(6) | Consists of €1.924 billion in cash and €276 million in shares of our common stock and the assumption of approximately €100 million of Tommy Hilfiger’s liabilities. Assumes €650 million of the cash consideration is converted at the exchange rate of $1.4057 to one Euro to reflect hedges in place, assuming the acquisition closes during the week of May 3, 2010, and €1,550 million is converted at the exchange rate on April 16, 2010 of $1.3535 to one Euro. | |
(7) | Includes cash integration costs relating to severance, real estate related costs, IT and equipment, as well as other costs and expenses associated with the acquisition. | |
(8) | Reflects our estimate of fees and expenses associated with the acquisition, including financing fees, transaction fees and other transaction costs and professional fees. |
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2009 | 2010 | |||||||
First Quarter Earnings Per Share | (Actual) | (Estimated) | ||||||
GAAP earnings per share | $ | 0.48 | $ | 0.11 | ||||
Estimated per share impact of costs related to our acquisition of Tommy Hilfiger that will be incurred regardless of whether the acquisition is consummated (pre-tax costs of $60.0 million, or $37.2 million after taxes of $22.8 million) | $ | 0.69 | ||||||
Per share impact of restructuring initiatives (pre-tax charges of $4.7 million, or $2.9 million after taxes of $1.8 million) | $ | 0.05 | ||||||
Earnings per share excluding the impact of above items | $ | 0.53 | $ | 0.80 |
2009 | 2010 | |||||||
Full Year Earnings Per Share | (Actual) | (Estimated) | ||||||
GAAP earnings per share | $ | 3.08 | $ | 2.56 - $2.64 | ||||
Estimated per share impact of costs related to our acquisition of Tommy Hilfiger that will be incurred regardless of whether the acquisition is consummated (pre-tax costs of $60.0 million, or $37.2 million after taxes of $22.8 million) | $0.69 | |||||||
Per share impact of (i) restructuring initiatives (pre-tax charges of $25.9 million, or $16.1 million after taxes of $9.8 million) and (ii) the net tax benefit of $29.6 million related principally to the lapse of the statute of limitations with respect to certain previously unrecognized tax positions (total net income of $13.5 million after-tax) | $ | (0.25 | ) | |||||
Earnings per share excluding the impact of above items | $ | 2.83 | $ | 3.25 - $3.33 |
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Issuer | Phillips-Van Heusen Corporation. | |
Securities Offered | $525,000,000 aggregate principal amount of senior notes due 2020. | |
Maturity Date | , 2020. | |
Interest Rate | Interest on the notes will accrue at the rate of % per annum, payable semi-annually in arrears. | |
Interest Payment Dates | We will pay interest on the notes semi-annually on and of each year, commencing on , 2010. | |
Optional Redemption | We may redeem any of the notes prior to , 2015 by paying a redemption price equal to 100% of the principal amount of the notes to be redeemed plus the Applicable Premium (as defined below), plus accrued and unpaid interest, if any, to but not including the redemption date. On or after , 2015, we may redeem any of the notes at an initial redemption price of % of their principal amount, plus accrued and unpaid interest, if any, to but not including the redemption date. The redemption price will decline each year after 2015 and will be 100% of their principal amount, plus accrued and unpaid interest, if any, to but not including the redemption date, beginning on , 2018. | |
In addition, before , 2013, we may redeem up to 35% of the aggregate principal amount of the notes with the proceeds of one or more of certain equity offerings at a redemption price of % of their principal amount plus accrued and unpaid interest, if any, to but not including the redemption date. See “Description of the Notes — Optional Redemption.” | ||
Ranking | The notes will be our unsecured unsubordinated obligations and will rank equally with all of our other existing and future senior unsecured indebtedness and will rank senior in right of payment to any of our existing or future obligations that are by their terms expressly subordinated or junior in right of payment to the notes. The notes will not be guaranteed by any of our subsidiaries on the closing date and may not be guaranteed by any of our subsidiaries for their tenor. As a result, the notes will be structurally subordinated to all existing and future obligations, including trade payables, of our subsidiaries. The notes will be effectively junior to all of our existing and future secured obligations to the extent of the value of the assets securing such obligations. | |
As of January 31, 2010, as adjusted for our new senior secured credit facility, this offering and our offering of common stock and sale of perpetual convertible preferred stock and the use of proceeds therefrom, we would have had approximately $2.6 billion of outstanding indebtedness (excluding approximately $201 million of outstanding letters of credit, $5 million in guarantees and $22 million in capital lease obligations), including $2.1 billion of secured indebtedness (excluding $249 million of available under our undrawn revolving credit facility under our new senior secured |
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credit facility) and including the notes offered hereby. See “Description of the Notes — Ranking.” | ||
Change of Control | Upon the occurrence of certain change of control events, each holder may require us to repurchase all or a portion of the notes at a purchase price of 101% of their principal amount plus accrued and unpaid interest, if any, to but not including the date of purchase. See “Description of the Notes — Change of Control.” | |
Covenants | The indenture governing the notes will contain covenants that limit, among other things, the Company’s ability to: | |
• incur or guarantee additional indebtedness; | ||
• (a) pay dividends or make distributions on the Company’s capital stock, (b) purchase, redeem or otherwise acquire or retire for value, the Company’s capital stock or any capital stock of a restricted subsidiary of the Company held by an affiliate of the Company (other than a restricted subsidiary of the Company), (c) purchase, repurchase, redeem, defease or otherwise acquire or retire for value prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, the Company’s subordinated indebtedness and (d) make certain investments (other than permitted investments); | ||
• create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any of its restricted subsidiaries to (a) pay dividends or make distributions on its capital stock to the Company or a restricted subsidiary of the Company, (b) pay any indebtedness owed to the Company, (c) make any loans or advances to the Company or (d) transfer any of its property or assets to the Company; | ||
• sell or otherwise dispose of certain assets, including capital stock of the Company’s restricted subsidiaries; | ||
• enter into transactions with affiliates; | ||
• create certain liens; | ||
• enter into sale and leaseback transactions; | ||
• consolidate or merge or convey, transfer, lease or otherwise dispose of all or substantially all of the Company’s assets; and | ||
• permit any subsidiary guarantor to consolidate or merge or convey, transfer, lease or otherwise dispose of all or substantially all of such subsidiary guarantor’s assets. | ||
In addition, we will be obligated to offer to repurchase the notes at a price of 100% of their principal amount plus accrued and unpaid interest, if any, in connection with certain asset dispositions. | ||
These restrictions and prohibitions are subject to a number of important qualifications and exceptions. See “Description of the Notes — Certain Covenants.” | ||
Form of Notes | The notes will be issued initially in the form of a global note which will represent the aggregate principal amount of notes being offered under this prospectus supplement and the accompanying |
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prospectus and will be in fully registered form without coupons. The notes will be deposited with the custodian for the book-entry depositary. | ||
No Prior Market | The notes will be new securities for which there is currently no market. Although the underwriters have informed us that they intend to make a market in the notes, they are not obligated to do so and they may discontinue market making activities at any time without notice. We cannot assure you that a liquid market for the notes will develop or be maintained. | |
Governing Law | The indenture and the notes will be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to applicable principles of conflicts of laws to the extent that the application of the law of another jurisdiction would be required thereby. | |
Trustee | U.S. Bank National Association. | |
Use of Proceeds | We intend to use the net proceeds of this offering (together with cash on hand, borrowings under our new senior secured credit facility and proceeds from the sales of our common and preferred stock) to fund our acquisition of Tommy Hilfiger, repurchase or redeem our 71/4% senior notes due 2011 and our 81/8% senior notes due 2013 and pay related fees and expenses. | |
Condition to the Offering | Closing of this offering will occur concurrently with, and is conditioned upon, the closing of our acquisition of Tommy Hilfiger. See “Description of the Tommy Hilfiger Acquisition.” | |
Risk Factors | Investing in the notes involves substantial risks. You should carefully consider the risk factors set forth under the caption “Risk Factors” and the other information in this prospectus supplement and the documents incorporated by reference prior to making an investment decision. |
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Fiscal Year | Pro Forma | |||||||||||||||||||||||
2005(1) | 2006(2) | 2007 | 2008(3) | 2009(4) | 2009 | |||||||||||||||||||
($ in thousands, except per share data and ratios) | (Unaudited) | |||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
Total revenue | $ | 1,908,848 | $ | 2,090,648 | $ | 2,425,175 | $ | 2,491,935 | $ | 2,398,731 | $ | 4,680,832 | ||||||||||||
Cost of goods sold | 1,017,793 | 1,060,784 | 1,234,188 | 1,291,267 | 1,216,128 | 2,299,430 | ||||||||||||||||||
Gross profit | 891,055 | 1,029,864 | 1,190,987 | 1,200,668 | 1,182,603 | 2,381,402 | ||||||||||||||||||
Selling, general and administrative expenses | 684,209 | 796,601 | 882,492 | 1,028,784 | 938,791 | 2,061,318 | ||||||||||||||||||
Gain on sale of investments, net | — | 32,043 | 3,335 | 1,864 | — | — | ||||||||||||||||||
Income before interest and taxes | 206,846 | 265,306 | 311,830 | 173,748 | 243,812 | 320,084 | ||||||||||||||||||
Interest expense | 34,390 | 34,272 | 33,753 | 33,639 | 33,524 | 167,967 | ||||||||||||||||||
Interest income | (5,813 | ) | (17,399 | ) | (16,744 | ) | (6,195 | ) | (1,295 | ) | (2,243 | ) | ||||||||||||
Income tax expense | 66,581 | 93,204 | 111,502 | 54,533 | 49,673 | 42,707 | ||||||||||||||||||
Net income | $ | 111,688 | $ | 155,229 | $ | 183,319 | $ | 91,771 | $ | 161,910 | $ | 111,653 | ||||||||||||
Preferred stock dividends on convertible stock | 12,918 | — | — | — | — | — | ||||||||||||||||||
Preferred stock dividends on converted stock | 2,051 | 3,230 | — | — | — | — | ||||||||||||||||||
Inducement payments and offering costs | 14,205 | 10,948 | — | — | — | — | ||||||||||||||||||
Net income available to common stockholders | $ | 82,514 | $ | 141,051 | $ | 183,319 | $ | 91,771 | $ | 161,910 | $ | 111,653 | ||||||||||||
Net income per common share — basic | $ | 2.15 | $ | 2.71 | $ | 3.29 | $ | 1.78 | $ | 3.14 | $ | 1.63 | ||||||||||||
Net income per common share — diluted | $ | 1.85 | $ | 2.64 | $ | 3.21 | $ | 1.76 | $ | 3.08 | $ | 1.61 | ||||||||||||
Balance Sheet Data (end of period): | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 267,357 | $ | 366,099 | $ | 269,914 | $ | 328,167 | $ | 480,882 | $ | 341,505 | ||||||||||||
Working capital(5) | 439,032 | 501,837 | 476,071 | 515,191 | 632,002 | 679,391 | ||||||||||||||||||
Total assets | 1,765,048 | 2,013,345 | 2,172,394 | 2,200,184 | 2,339,679 | 6,774,441 | ||||||||||||||||||
Total debt | 399,525 | 399,538 | 399,552 | 399,567 | 399,584 | 2,601,709 | ||||||||||||||||||
Convertible redeemable preferred stock | 161,926 | — | — | — | — | — | ||||||||||||||||||
Preferred stock | — | — | — | — | — | 200,000 | ||||||||||||||||||
Stockholders’ equity | 610,662 | 942,157 | 956,283 | 998,795 | 1,168,553 | 1,954,181 | ||||||||||||||||||
Cash Flow and Other Data: | ||||||||||||||||||||||||
Depreciation and amortization | $ | 35,481 | $ | 37,902 | $ | 46,590 | $ | 55,366 | $ | 49,889 | ||||||||||||||
EBITDA(6) | 242,327 | 303,208 | 358,420 | 229,114 | 293,701 | |||||||||||||||||||
Adjusted EBITDA(6) | 242,327 | 292,994 | 358,420 | 328,441 | 319,598 | |||||||||||||||||||
Capital expenditures | 37,443 | 46,161 | 94,749 | 88,141 | 23,856 | |||||||||||||||||||
Cash flows provided by operating activities | 189,385 | 251,259 | 219,335 | 238,747 | 214,452 | |||||||||||||||||||
Cash flows used in investing activities | (63,886 | ) | (154,177 | ) | (125,599 | ) | (176,684 | ) | (62,873 | ) | ||||||||||||||
Cash flows (used in) provided by financing activities | 17,744 | 1,660 | (189,921 | ) | (3,810 | ) | 1,136 | |||||||||||||||||
Cash dividends declared per common share | 0.15 | 0.15 | 0.15 | 0.15 | 0.15 | |||||||||||||||||||
Ratio of earnings to fixed charges(7) | 3.6 | x | 4.6 | x | 4.9 | x | 2.8 | x | 3.6 | x | 1.6 | x |
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(1) | 2005 includes an inducement payment of $12,853 and offering costs totaling $1,352 incurred by us in connection with the voluntary conversion by the holders of our Series B convertible preferred stock of a portion of such stock into shares of our common stock and the subsequent sale of such common shares by the holders. The inducement payment and offering costs resulted in a reduction of net income available to common stockholders for purposes of calculating diluted net income per common share. | |
(2) | 2006 includes (a) a pre-tax gain of $32,043 associated with the sale by one of our subsidiaries on January 31, 2006 of minority interests in certain entities that operate various licensedCalvin Kleinjeans and sportswear businesses in Europe and Asia; (b) pre-tax costs of $10,535 resulting from the departure in February 2006 of our former chief executive officer; (c) pre-tax costs of $11,294 associated with closing our apparel manufacturing facility in Ozark, Alabama in May 2006; and (d) an inducement payment of $10,178 and offering costs totaling $770 incurred by us in connection with the voluntary conversion by the holders of our Series B convertible preferred stock of a portion of such stock into shares of our common stock and the subsequent sale of a portion of such shares by the holders. The inducement payment and offering costs resulted in a reduction of net income available to common stockholders for purposes of calculating diluted net income per common share. 2006 includes 53 weeks of operations. | |
(3) | 2008 includes (a) fixed asset impairment charges of $60,082 for approximately 200 of our retail stores; (b) pre-tax costs of $21,578 associated with our restructuring initiatives announced in the fourth quarter of 2008, including the shutdown of domestic production of machine-made neckwear, a realignment of our global sourcing organization, reductions in warehousing capacity and other initiatives to reduce corporate and administrative expenses; and (c) pre-tax costs of $17,667 associated with the operations and closing of our Geoffrey Beene outlet retail division. | |
(4) | 2009 includes (a) pre-tax costs of $25,897 associated with our restructuring initiatives announced in the fourth quarter of 2008, including the shutdown of domestic production of machine-made neckwear, a realignment of our global sourcing organization, reductions in warehousing capacity, lease termination fees for the majority of ourCalvin Kleinspecialty retail stores and other initiatives to reduce corporate and administrative expenses, and (b) a net tax benefit of $29,619 related principally to the lapse of the statute of limitations with respect to certain previously unrecognized tax positions. | |
(5) | Working capital is defined as current assets less current liabilities. | |
(6) | Adjusted EBITDA is defined as EBITDA, as further adjusted to exclude certain restructuring and other items as referenced in footnotes 2 through 4 above. We present EBITDA and adjusted EBITDA because, when considered in conjunction with related GAAP financial measures, we believe they are useful to investors since they (a) provide investors with a financial measure on which management bases financial, operational, compensation and planning decisions, (b) are measures that will be important with respect to our compliance with the covenants in our new debt facilities into which we anticipate entering in connection with the acquisition and (c) assist investors and analysts in evaluating our performance, including evaluation across reporting periods on a consistent basis, by excluding items that we do not believe are indicative of our core operating performance. EBITDA and adjusted EBITDA, however, are not measures of financial performance under GAAP, have not been audited and should not be considered alternatives to, or equally or more meaningful than, net income as a measure of operating performance or cash flow as a measure of liquidity. Since EBITDA and adjusted EBITDA are not measures determined in accordance with GAAP and thus are susceptible to varying interpretations and calculations, EBITDA and adjusted EBITDA may not be comparable to similarly titled measures used by other companies. EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation from, or as a substitute for analysis of, financial information prepared in accordance with GAAP. Net income in accordance with GAAP is reconciled to EBITDA and adjusted EBITDA as follows (notes (1) through (4) above apply to the applicable periods in the following table): |
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Fiscal Year | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Net income | $ | 111,688 | $ | 155,229 | $ | 183,319 | $ | 91,771 | $ | 161,910 | ||||||||||
Income tax expense | 66,581 | 93,204 | 111,502 | 54,533 | 49,673 | |||||||||||||||
Interest expense | 34,390 | 34,272 | 33,753 | 33,639 | 33,524 | |||||||||||||||
Interest income | (5,813 | ) | (17,399 | ) | (16,744 | ) | (6,195 | ) | (1,295 | ) | ||||||||||
Depreciation and amortization | 35,481 | 37,902 | 46,590 | 55,366 | 49,889 | |||||||||||||||
EBITDA | $ | 242,327 | $ | 303,208 | $ | 358,420 | $ | 229,114 | $ | 293,701 | ||||||||||
Restructuring and other items(notes 2-4) | — | (10,214 | ) | — | 99,327 | 25,897 | ||||||||||||||
Adjusted EBITDA | $ | 242,327 | $ | 292,994 | $ | 358,420 | $ | 328,441 | $ | 319,598 | ||||||||||
(7) | The ratio of earnings to fixed charges is computed by dividing fixed charges into earnings before income taxes plus fixed charges. Fixed charges consist of interest expense and the estimated interest component of rent expense. The pro forma ratio reflects the acquisition of Tommy Hilfiger and the incurrence and repayment of debt in connection therewith. |
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Fiscal Year | Nine Months | |||||||||||||||||||
Ended March 31, | Ended December 31, | |||||||||||||||||||
2007(1) | 2008 | 2009 | 2008 | 2009 | ||||||||||||||||
(€ in thousands) | (Unaudited) | (Unaudited) | ||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenue | € | 1,197,247 | € | 1,369,377 | € | 1,612,304 | € | 1,149,838 | € | 1,178,937 | ||||||||||
Cost of goods sold | 570,322 | 558,461 | 710,913 | 490,775 | 521,225 | |||||||||||||||
Gross margin | 626,925 | 810,916 | 901,391 | 659,063 | 657,712 | |||||||||||||||
Distribution and selling costs | 238,955 | 315,552 | 362,296 | 326,474 | 333,207 | |||||||||||||||
Administrative expenses | 188,746 | 236,629 | 300,308 | 137,110 | 145,248 | |||||||||||||||
Other expenses | 78,014 | 29,083 | 14,457 | 23,291 | 12,311 | |||||||||||||||
Depreciation, amortization and impairment expenses | 90,214 | 59,941 | 105,497 | 50,186 | 75,928 | |||||||||||||||
Operating result | 30,996 | 169,711 | 118,833 | 122,002 | 91,018 | |||||||||||||||
Finance costs, net | 157,270 | 153,085 | 80,096 | 56,810 | 78,916 | |||||||||||||||
Result before tax | (126,274 | ) | 16,626 | 38,737 | 65,192 | 12,102 | ||||||||||||||
Income tax | (57,204 | ) | 26,978 | 14,419 | 24,264 | 4,249 | ||||||||||||||
Result for period (net income) | € | (69,070 | ) | € | (10,352 | ) | € | 24,318 | € | 40,928 | € | 7,853 | ||||||||
Balance Sheet Data (at end of period): | ||||||||||||||||||||
Cash, cash equivalents and bank overdrafts | € | 136,627 | € | 74,752 | € | 139,845 | € | 144,520 | € | 236,559 | ||||||||||
Working capital(2) | 211,866 | 159,840 | 202,758 | 183,932 | 244,702 | |||||||||||||||
Total assets | 1,418,846 | 1,494,735 | 1,725,423 | 1,624,960 | 1,599,522 | |||||||||||||||
Total debt | 694,267 | 576,116 | 625,764 | 606,734 | 549,851 | |||||||||||||||
Total equity, including shareholder loan | 333,191 | 393,381 | 473,888 | 462,544 | 528,711 | |||||||||||||||
Cash Flow and Other Data: | ||||||||||||||||||||
Depreciation, amortization and impairment expenses | € | 90,214 | € | 59,941 | € | 105,497 | € | 50,186 | € | 75,928 | ||||||||||
EBITDA(3, 4) | 121,210 | 229,652 | 224,330 | 172,188 | 166,946 | |||||||||||||||
Adjusted EBITDA(3, 4) | 222,592 | 283,132 | 265,303 | 195,024 | 188,388 | |||||||||||||||
Capital expenditures | 76,952 | 63,628 | 103,641 | 76,294 | 42,293 | |||||||||||||||
Net cash from/(used in) operating activities | 69,217 | 199,207 | 252,476 | 226,671 | 254,583 | |||||||||||||||
Net cash from/(used in) investing activities | (580,720 | ) | (100,148 | ) | (158,740 | ) | (126,841 | ) | (56,576 | ) | ||||||||||
Net cash from/(used in) financing activities | 642,835 | (141,272 | ) | (34,924 | ) | (23,950 | ) | (97,045 | ) |
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(1) | Tommy Hilfiger was acquired by management and Apax in 2006 and, as a consequence, the fiscal year ended March 31, 2007 consists of only 46 weeks and includes significant non-recurring expenses, as discussed below. | |
(2) | Working capital is defined as current assets less current liabilities. | |
(3) | Adjusted EBITDA is defined as EBITDA, as further adjusted to exclude certain restructuring and other items as referenced in notes (4)-(8) below. EBITDA and adjusted EBITDA are presented because, when considered in conjunction with related IFRS financial measures, we believe they are useful to investors since they (a) provide investors with a financial measure on which Tommy Hilfiger management bases financial, operational, compensation and planning decisions, (b) are measures that will be important with respect to our compliance with the covenants in our new debt facilities into which we anticipate entering in connection with the acquisition and (c) assist investors and analysts in evaluating Tommy Hilfiger’s performance, including evaluation across reporting periods on a consistent basis, by excluding items that Tommy Hilfiger does not believe are indicative of its core operating performance. EBITDA and adjusted EBITDA, however, are not measures of financial performance under IFRS, have not been audited and should not be considered alternatives to, or equally or more meaningful than, net income as a measure of operating performance or cash flow as a measure of liquidity. Since EBITDA and adjusted EBITDA are not measures determined in accordance with IFRS and thus are susceptible to varying interpretations and calculations, EBITDA and adjusted EBITDA may not be comparable to similarly titled measures used by other companies. EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation from, or as a substitute for analysis of, financial information prepared in accordance with IFRS. |
Net income in accordance with IFRS is reconciled to EBITDA and adjusted EBITDA as follows (notes (1) and (3) above also apply to the applicable periods in the following table): |
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||
2007(4) | 2008(5) | 2009(6) | 2008(7) | 2009(8) | ||||||||||||||||
(€ in thousands) | (Unaudited) | (Unaudited) | ||||||||||||||||||
Result for period (net income) | € | (69,070 | )(9) | € | (10,352 | ) | € | 24,318 | € | 40,928 | € | 7,853 | ||||||||
Income tax | (57,204 | ) | 26,978 | 14,419 | 24,264 | 4,249 | ||||||||||||||
Finance costs, net | 157,270 | 153,085 | 80,096 | 56,810 | 78,916 | |||||||||||||||
Depreciation, amortization and impairment expenses | 90,214 | 59,941 | 105,497 | 50,186 | 75,928 | |||||||||||||||
EBITDA | 121,210 | 229,652 | 224,330 | 172,188 | 166,946 | |||||||||||||||
Karl Lagerfeld(10) | 5,298 | 10,401 | 7,160 | 4,704 | 4,379 | |||||||||||||||
Restructuring and other items (4)-(8) | 96,084 | 43,079 | 33,813 | 18,132 | 17,063 | |||||||||||||||
Adjusted EBITDA | € | 222,592 | € | 283,132 | € | 265,303 | € | 195,024 | € | 188,388 | ||||||||||
(4) | 2007 includes (a) costs associated with actions taken after the purchase of Tommy Hilfiger by management and Apax: (i) €53,000 of restructuring costs for the United States operations consisting of severance payments retention bonuses and closure costs for distribution center and head office leases; (ii) €28,200 fair value adjustments of inventory as prescribed by purchase price accounting guidance; and (iii) €10,033 closure costs of certain divisions in the United States wholesale business; and (b) €4,851 termination costs for certain licenses. | |
(5) | 2008 includes (a) €24,935 employee costs for bonus plans specifically related to a potential change in ownership of Tommy Hilfiger, which plans are not part of Tommy Hilfiger’s normal compensation scheme, (b) €11,082 of costs related to an abandoned refinancing transaction; and (c) €7,062 of expenses related to restructuring, acquisitions and divestments, primarily for the acquisition by Tommy Hilfiger of its European footwear licensed business. |
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(6) | 2009 includes (a) €12,376 of costs for the expected losses on the sublease of retail stores and write down of key money not able to be recovered due to the economic downturn; (b) €10,565 of employee costs for bonus plans specifically related to a potential change in ownership of the company, which plans are not part of Tommy Hilfiger’s normal compensation scheme; (c) €8,131 of pre-opening expenses for Tommy Hilfiger’s only global anchor store on Fifth Avenue in New York; and (d) €2,741 of expenses related to the restructuring of Tommy Hilfiger’s Canadian operations and Tommy Hilfiger’s termination of its United States footwear and handbag licensed businesses (including termination fees and certain other fees and costs). | |
(7) | The nine-month period ended December 31, 2008 includes (a) €11,120 of employee costs for bonus plans specifically related to a potential change in ownership of Tommy Hilfiger which plans are not part of Tommy Hilfiger’s normal compensation scheme; (b) €5,438 of pre-opening expenses for Tommy Hilfiger’s only global anchor store on Fifth Avenue in New York; and (c) €1,574 of expenses related to the termination of our United States footwear and handbag licensed businesses (including termination fees and certain other fees and costs). | |
(8) | The nine-month period ended December 31, 2009 includes (a) €5,223 of pre-opening expenses for Tommy Hilfiger’s only global anchor store on Fifth Avenue in New York; (b) €4,498 of expenses related to the restructuring of Tommy Hilfiger’s Canadian operations; (c) €3,992 of employee costs for bonus plans specifically related to a potential change in ownership of Tommy Hilfiger which plans are not part of Tommy Hilfiger’s normal compensation scheme; and (d) €3,350 of expenses related to the termination of our United States footwear and handbag licensed businesses (including termination fees and certain other fees and costs). | |
(9) | Excludes €8,943 from discontinued operations related to the sale of the sourcing operation to Li & Fung. | |
(10) | Excludes the Karl Lagerfeld business, owned by Tommy Hilfiger, which we are not acquiring. |
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• | continue to maintain and enhance the distinctive brand identity of theCalvin Klein brands; | |
• | continue to maintain good working relationships with Calvin Klein’s licensees; and | |
• | continue to enter into new licensing agreements for theCalvin Kleinbrands, both domestically and internationally. |
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• | political or labor instability in countries where contractors and suppliers are located; | |
• | political or military conflict involving the United States, which could cause a delay in the transportation of our products and raw materials to us and an increase in transportation costs; | |
• | heightened terrorism security concerns, which could subject imported or exported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods or could result in decreased scrutiny by customs officials for counterfeit goods, leading to lost sales, increased costs for our anti-counterfeiting measures and damage to the reputation of our brands; | |
• | a significant decrease in availability or increase in cost of raw materials or the inability to use raw materials produced in a country that is a major provider due to political, human rights, labor, environmental, animal cruelty or other concerns; | |
• | disease epidemics and health-related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas; | |
• | the migration and development of manufacturers, which could affect where our products are or are planned to be produced; | |
• | imposition of regulations, quotas and safeguards relating to imports and our ability to adjust timely to changes in trade regulations, which, among other things, could limit our ability to produce products in cost-effective countries that have the labor and expertise needed; | |
• | imposition of duties, taxes and other charges on imports; | |
• | significant fluctuation of the value of the United States Dollar against foreign currencies; and | |
• | restrictions on transfers of funds out of countries where our foreign licensees are located. |
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• | the location of the mall or the location of a particular store within the mall; | |
• | the other tenants occupying space at the mall; | |
• | increased competition in areas where the outlet malls are located; and | |
• | the amount of advertising and promotional dollars spent on attracting consumers to the malls. |
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• | anticipating and responding to changing consumer tastes and demands in a timely manner and developing attractive, quality products; | |
• | maintaining favorable brand recognition; | |
• | appropriately pricing products and creating an acceptable value proposition for customers; | |
• | providing strong and effective marketing support; |
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• | ensuring product availability and optimizing supply chain efficiencies with third-party manufacturers and retailers; and | |
• | obtaining sufficient retail floor space and effective presentation of our products at retail. |
• | delays or difficulties in completing the integration of acquired companies or assets; | |
• | higher than expected costs, lower than expected cost savingsand/or a need to allocate resources to manage unexpected operating difficulties; | |
• | diversion of the attention and resources of management; | |
• | consumers’ failure to accept product offerings by us or our licensees; | |
• | inability to retain key employees in acquired companies; and | |
• | assumption of liabilities unrecognized in due diligence. |
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• | requiring a substantial portion of our cash flows from operations be used for the payment of interest on our debt, thereby reducing the funds available to us for our operations or other capital needs; | |
• | limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate because our available cash flow after paying principal and interest on our debt may not be sufficient to make the capital and other expenditures necessary to address these changes; | |
• | increasing our vulnerability to general adverse economic and industry conditions because, during periods in which we experience lower earnings and cash flow, we will be required to devote a proportionally greater amount of our cash flow to paying principal and interest on our debt; |
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• | limiting our ability to obtain additional financing in the future to fund working capital, capital expenditures, acquisitions, contributions to our pension plans and general corporate requirements; | |
• | placing us at a competitive disadvantage to other relatively less leveraged competitors that have more cash flow available to fund working capital, capital expenditures, contributions to pension plans and general corporate requirements; and | |
• | with respect to any borrowings we make at variable interest rates, including our newly committed $450 million revolving credit facility, leaving us vulnerable to increases in interest rates generally. |
• | incur or guarantee additional debt or extend credit; |
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• | pay dividends or make distributions on, or redeem or repurchase, our capital stock or certain other debt; | |
• | make other restricted payments, including investments; | |
• | dispose of assets; | |
• | engage in transactions with affiliates; | |
• | enter into agreements restricting our subsidiaries’ ability to pay dividends; | |
• | create liens on our assets or engage in sale/leaseback transactions; and | |
• | effect a consolidation or merger, or sell, transfer, lease all or substantially all of our assets. |
• | all secured claims against the affected entity have been fully paid; and | |
• | if the affected entity is a subsidiary, all other claims against that subsidiary, including trade payables, have been fully paid. |
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• | the liquidity of any trading market that may develop; | |
• | the ability of holders to sell their notes; or | |
• | the price at which the holders will be able to sell their notes. |
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• | expiration or termination of any applicable waiting period under the United States federalHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the so-called “HSR Act”), and the procuring of any applicable approvals pursuant to competition laws of Germany and Austria; and | |
• | the absence of any statute, rule, regulation, judgment, decree, injunction or other order by certain governmental authorities that precludes completion of the acquisition. |
• | the accuracy of our representations and warranties in the purchase agreement, subject to customary materiality and material adverse effect qualifications; and | |
• | our performance, in all material respects, of all of our obligations under the purchase agreement. |
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• | the accuracy of the representations and warranties of Tommy Hilfiger and its shareholders in the purchase agreement, subject to customary materiality and material adverse effect qualifications; | |
• | the performance by Tommy Hilfiger and its shareholders, in all material respects, of all of their obligations under the purchase agreement; | |
• | our receipt of financing in an amount sufficient to fund the acquisition; and | |
• | effectiveness of all governmental approvals, except as would not reasonably be expected to have a material adverse effect on Tommy Hilfiger. |
• | the closing has not occurred by August 16, 2010, which date may be extended in certain limited circumstances; | |
• | either party fails to perform its representations, warranties, covenants or other obligations such that the conditions to closing (as described above in “— Conditions to Completion of the Acquisition”) are incapable of being satisfied prior to August 16, 2010; or | |
• | any governmental entity of competent jurisdiction issues a final and non-appealable order, decree, injunction or ruling or takes other action permanently enjoining, restraining or otherwise prohibiting the acquisition. |
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Actual | Pro Forma | |||||||
($ in millions) | ||||||||
Cash | $ | 481 | $ | 342 | (1) | |||
Debt: (2) | ||||||||
New senior secured credit facility | ||||||||
Revolver | — | — | ||||||
Term loan A | — | 500 | ||||||
Term loan B | — | 1,500 | (3) | |||||
73/4% debentures due 2023 | 100 | 100 | ||||||
71/4% senior notes due 2011 | 150 | — | ||||||
81/8% senior notes due 2013 | 150 | — | ||||||
Notes offered hereby | — | 525 | (3) | |||||
Total debt | 400 | 2,625 | ||||||
Preferred stock | — | 200 | ||||||
Other stockholders’ equity (including common stock) | 1,169 | 1,754 | (4) | |||||
Total stockholders’ equity | 1,169 | 1,954 | ||||||
Total capitalization | $ | 1,569 | $ | 4,579 | ||||
(1) | As presented in the unaudited pro forma consolidated financial information and differs from the cash anticipated to remain on our balance sheet after the consummation of the acquisition due to, among other things, certain integration and transaction expenses, differences in exchange rates and the impact of hedging not reflected in the unaudited pro forma financial information. | |
(2) | Excludes capital leases of approximately $22 million assumed in connection with the acquisition (calculated at the exchange rate of $1.3535 to one Euro). | |
(3) | Excludes any applicable original issue discount, if any. | |
(4) | As presented in the unaudited pro forma consolidated financial information and differs from the actual amounts incurred due to, among other things, certain integration and transaction costs, differences in exchange rates and the impact of hedging not reflected in the unaudited pro forma financial information. Includes common stock, additional capital, retained earnings/accumulated deficit, accumulated other comprehensive (loss)/income, less: shares of common stock held in treasury, at cost. |
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• | Our proposed acquisition of Tommy Hilfiger, which is currently controlled by funds affiliated with Apax, for total consideration of €2.2 billion (approximately $3 billion) plus the assumption of €100 million in liabilities; | |
• | The issuance of common stock, Series A preferred stock and debt, as well as the use of existing cash, to fund the acquisition; and | |
• | The extinguishment of a portion of our existing debt. |
• | does not purport to represent what the consolidated results of operations actually would have been if our acquisition of Tommy Hilfiger had occurred on February 2, 2009 or what those results will be for any future periods or what the consolidated balance sheet would have been if our acquisition of Tommy Hilfiger had occurred on January 31, 2010. The pro forma adjustments are based on information current as of the time of this filing or as otherwise indicated; and | |
• | has not been adjusted to reflect any matters not directly attributable to implementing our acquisition of Tommy Hilfiger. No adjustment, therefore, has been made for actions which may be taken once the offer is complete, such as any of our integration plans related to Tommy Hilfiger. As a result, the actual amounts recorded in our future consolidated financial statements will differ from the amounts reflected in the unaudited pro forma consolidated financial information, and the differences may be material. |
• | our financial information, as prepared in accordance with GAAP, has been extracted without adjustment from our audited consolidated income statement for the year ended January 31, 2010 and audited consolidated balance sheet as at January 31, 2010 contained in our Annual Report onForm 10-K filed with the SEC on March 31, 2010. | |
• | financial information of Tommy Hilfiger, as prepared in accordance with IFRS, has been extracted without adjustment from Tommy Hilfiger’s unaudited consolidated income statement for the 12 months ended December 31, 2009 and unaudited consolidated balance sheet as at December 31, 2009 and translated from Euros to United States Dollars as described below. Tommy Hilfiger’s year end was March 31, 2009, which differs from our January 31, 2010 year end by more than 93 days. As such, Tommy Hilfiger’s income statement was brought up to within 93 days of our most recently completed year end by adding the unaudited consolidated interim income statement of Tommy Hilfiger for the nine months ended December 31, 2009 to the audited consolidated income statement of Tommy Hilfiger for the year ended March 31, 2009 and deducting the unaudited consolidated interim income statement of Tommy Hilfiger for the nine months ended December 31, 2008. No unusual events entered into the determination of the resulting unaudited consolidated income statement for the 12 months |
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ended December 31, 2009 and therefore such period was deemed to be a reasonable representation of the normal operations of Tommy Hilfiger. |
• | Unaudited adjustments have been made to align the Tommy Hilfiger IFRS financial information with GAAP. The basis for these adjustments is explained in the section entitled “— Notes to Unaudited Pro forma Consolidated Financial Information.” | |
• | Tommy Hilfiger translated its historical financial information to its functional currency, the Euro, based on the requirements of IFRS. Based on our review of Tommy Hilfiger’s historical financial statements and understanding of the differences between GAAP and IFRS, we are not aware of any further adjustment that we would need to make to Tommy Hilfiger’s historical financial statements relating to foreign currency translation in respect of this pro forma financial presentation. The pro forma adjustments in this unaudited pro forma consolidated financial information have been translated from Euros to United States Dollars using the applicable exchange rates. The average exchange rate applicable during the period presented for the unaudited pro forma consolidated income statement and the period end exchange rate for the unaudited pro forma consolidated balance sheet are: |
$/€1 | ||||||||
For the year ended January 31, 2010 | Average Spot Rate | 1.3977 | ||||||
As at January 31, 2010 | Period End Rate | 1.4002 |
• | the accompanying section “— Notes to Unaudited Pro Forma Consolidated Financial Information;” | |
• | our audited consolidated financial statements for the year ended January 31, 2010 and the notes relating thereto; | |
• | the audited special purpose consolidated financial statements of Tommy Hilfiger for the year ended March 31, 2009 and the notes relating thereto, contained in our Current Report onForm 8-K filed with the SEC on April 13, 2010; and | |
• | the unaudited special purpose consolidated interim financial statements of Tommy Hilfiger for the nine months ended December 31, 2009 and the notes relating thereto, contained in our Current Report onForm 8-K filed with the SEC on April 13, 2010. |
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For the Year Ended January 31, 2010
Tommy | ||||||||||||||||||||||||||||||||
Hilfiger | Tommy | |||||||||||||||||||||||||||||||
PVH | Tommy | Tommy | Pro Forma | Hilfiger | Pro Forma | Pro Forma | ||||||||||||||||||||||||||
(in $, | Hilfiger | Hilfiger | GAAP | Pro Forma | Transaction | PVH | ||||||||||||||||||||||||||
except | IFRS | IFRS | Adjustments | GAAP | Adjustments | (in $, except | ||||||||||||||||||||||||||
Shares) | (in €) | (in $) | (in $) | Notes | (in $) | (in $) | Notes | Shares) | ||||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
Net sales | 2,070,754 | — | — | 2,246,670 | 3(g) | 2,246,670 | (12,088 | ) | 4(l) | 4,305,336 | ||||||||||||||||||||||
Royalty revenue | 245,879 | — | — | 47,519 | 3(g) | 47,519 | — | 293,398 | ||||||||||||||||||||||||
Advertising and other revenue | 82,098 | — | — | — | — | — | 82,098 | |||||||||||||||||||||||||
Total revenue | 2,398,731 | 1,641,403 | 2,294,189 | — | 2,294,189 | (12,088 | ) | 4,680,832 | ||||||||||||||||||||||||
Cost of goods sold | 1,216,128 | 741,363 | 1,036,203 | 1,462 | 3(b),3(g) | 1,037,665 | 45,637 | 4(k),4(l) | 2,299,430 | |||||||||||||||||||||||
Gross profit | 1,182,603 | 900,040 | 1,257,986 | (1,462 | ) | 1,256,524 | (57,725 | ) | 2,381,402 | |||||||||||||||||||||||
Selling, general and administrative expenses | 938,791 | 812,192 | 1,135,201 | (18,154 | ) | 3(a),3(c),3(d),3(e) | 1,117,047 | 5,480 | 4(f),4(l),4(m) | 2,061,318 | ||||||||||||||||||||||
Income before interest and taxes | 243,812 | 87,848 | 122,785 | 16,692 | 139,477 | (63,205 | ) | 320,084 | ||||||||||||||||||||||||
Interest expense | 33,524 | 110,555 | 154,523 | 8,514 | 3(b),3(d),3(g) | 163,037 | (28,594 | ) | 4(g) | 167,967 | ||||||||||||||||||||||
Interest income | 1,295 | 8,353 | 11,675 | — | 11,675 | (10,727 | ) | 4(h) | 2,243 | |||||||||||||||||||||||
Income/(loss) before taxes | 211,583 | (14,354 | ) | (20,063 | ) | 8,178 | (11,885 | ) | (45,338 | ) | 154,360 | |||||||||||||||||||||
Income tax expense/(benefit) | 49,673 | (5,597 | ) | (7,823 | ) | 617 | 3(f) | (7,206 | ) | 240 | 4(o) | 42,707 | ||||||||||||||||||||
Net income/(loss) | 161,910 | (8,757 | ) | (12,240 | ) | 7,561 | (4,679 | ) | (45,578 | ) | 111,653 | |||||||||||||||||||||
Basic net income per common share | 3.14 | 1.63 | ||||||||||||||||||||||||||||||
Diluted net income per common share | 3.08 | 1.61 | ||||||||||||||||||||||||||||||
Weighted average common shares used to calculate net income per common share: | ||||||||||||||||||||||||||||||||
Basic | 51,639 | 64,215 | ||||||||||||||||||||||||||||||
Diluted | 52,506 | 69,317 |
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As at January 31, 2010
Tommy | ||||||||||||||||||||||||||||||||
Hilfiger | Tommy | |||||||||||||||||||||||||||||||
Tommy | Tommy | Pro Forma | Hilfiger | Pro Forma | ||||||||||||||||||||||||||||
Hilfiger | Hilfiger | GAAP | Pro Forma | Transaction | Pro Forma | |||||||||||||||||||||||||||
PVH | IFRS | IFRS | Adjustments | GAAP | Adjustments | PVH | ||||||||||||||||||||||||||
(in $) | (in €) | (in $) | (in $) | Notes | (in $) | (in $) | Notes | (in $) | ||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | 480,882 | 236,559 | 331,230 | — | 331,230 | (470,607 | ) | 4(a)i,4(b)ii,4(c), 4(d),4(e),4(i),4(j) | 341,505 | |||||||||||||||||||||||
Trade receivables, net of allowances for doubtful accounts | 188,844 | 154,070 | 215,729 | (65,277 | ) | 3(g) | 150,452 | — | 339,296 | |||||||||||||||||||||||
Other receivables | 7,759 | — | — | — | — | — | 7,759 | |||||||||||||||||||||||||
Inventories, net | 263,788 | 198,790 | 278,345 | — | 278,345 | 50,885 | 4(b)iv | 593,018 | ||||||||||||||||||||||||
Prepaid expenses | 41,038 | — | — | — | — | 8,423 | 4(i),4(j) | 49,461 | ||||||||||||||||||||||||
Other current assets | 12,572 | 2,851 | 3,992 | 62,052 | 3(f),3(g) | 66,044 | — | 78,616 | ||||||||||||||||||||||||
Total Current Assets | 994,883 | 592,270 | 829,296 | (3,225 | ) | 826,071 | (411,299 | ) | 1,409,655 | |||||||||||||||||||||||
Property, Plant and Equipment, net | 167,474 | 161,325 | 225,887 | 13,829 | 3(d),3(g) | 239,716 | (13,671 | ) | 4(q) | 393,519 | ||||||||||||||||||||||
Goodwill | 419,179 | — | — | 322,621 | 3(g) | 322,621 | 1,317,884 | 4(b)vi | 2,059,684 | |||||||||||||||||||||||
Tradenames | 621,135 | — | — | — | — | 1,725,046 | 4(b)iii,4(q) | 2,346,181 | ||||||||||||||||||||||||
Perpetual License Rights | 86,000 | — | — | — | — | — | 86,000 | |||||||||||||||||||||||||
Other Intangibles, net | 32,056 | 791,322 | 1,108,009 | (337,905 | ) | 3(e),3(g) | 770,104 | (591,868 | ) | 4(b)iii,4(q) | 210,292 | |||||||||||||||||||||
Other Noncurrent Assets | 18,952 | 54,606 | 76,460 | 111,854 | 3(f),3(g) | 188,314 | 61,844 | 4(b)ii,4(i),4(j), | 269,110 | |||||||||||||||||||||||
4(q) | ||||||||||||||||||||||||||||||||
Total Assets | 2,339,679 | 1,599,523 | 2,239,652 | 107,174 | 2,346,826 | 2,087,936 | 6,774,441 | |||||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||||||||||
Current portion of long-term debt | — | 35,610 | 49,861 | 4,342 | 3(g) | 54,203 | (54,203 | ) | 4(b)ii,4(q) | — | ||||||||||||||||||||||
Accounts payable | 108,494 | 257,546 | 360,616 | — | 360,616 | — | 469,110 | |||||||||||||||||||||||||
Accrued expenses | 215,413 | 50,591 | 70,838 | (65,258 | ) | 3(f),3(g) | 5,580 | (12,398 | ) | 4(o) | 208,595 | |||||||||||||||||||||
Deferred revenue | 38,974 | — | — | — | — | — | 38,974 | |||||||||||||||||||||||||
Other current liabilities | — | 3,819 | 5,347 | 409 | 3(g) | 5,756 | 7,829 | 4(q) | 13,585 | |||||||||||||||||||||||
Total Current Liabilities | 362,881 | 347,566 | 486,662 | (60,507 | ) | 426,155 | (58,772 | ) | 730,264 | |||||||||||||||||||||||
Long-Term Debt | 399,584 | 514,241 | 720,040 | 18,329 | 3(g) | 738,369 | 1,463,756 | 4(b)ii,4(c),4(q) | 2,601,709 | |||||||||||||||||||||||
Other Noncurrent Liabilities | 408,661 | 209,004 | 292,648 | 124,438 | 3(a),3(c),3(g) | 417,086 | 662,540 | 4(b)v,4(q) | 1,488,287 | |||||||||||||||||||||||
Subordinated Shareholder Loan | — | 516,890 | 723,749 | — | 723,749 | (723,749 | ) | 4(b)ii | — | |||||||||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||||||||||||||||||
Preferred stock, Series A, par value $100 per share | — | — | — | — | — | 200,000 | 4(d) | 200,000 | ||||||||||||||||||||||||
Common stock | 57,139 | 50,574 | 70,814 | (63,813 | ) | 3(g) | 7,001 | 5,575 | 4(a)ii,4(e),4(n) | 69,715 | ||||||||||||||||||||||
Additional capital | 596,344 | — | — | 42,196 | 3(c),3(g) | 42,196 | 551,259 | 4(a)ii,4(e),4(i),4(n) | 1,189,799 | |||||||||||||||||||||||
Retained earnings/ (Accumulated deficit) | 796,282 | (40,860 | ) | (57,212 | ) | 44,547 | 3(a),3(b),3(c), 3(d),3(e) | (12,665 | ) | (7,738 | ) | 4(i),4(j),4(n) | 775,879 | |||||||||||||||||||
Accumulated other comprehensive (loss)/income | (80,448 | ) | 2,108 | 2,951 | 1,984 | 3(a),3(b),3(c),3(e) | 4,935 | (4,935 | ) | 4(n) | (80,448 | ) | ||||||||||||||||||||
Less: shares of common stock held in treasury, at cost | (200,764 | ) | — | — | — | — | — | (200,764 | ) | |||||||||||||||||||||||
Total Stockholders’ Equity | 1,168,553 | 11,822 | 16,553 | 24,914 | 41,467 | 744,161 | 1,954,181 | |||||||||||||||||||||||||
Total Liabilities and Stockholders’ Equity | 2,339,679 | 1,599,523 | 2,239,652 | 107,174 | 2,346,826 | 2,087,936 | 6,774,441 | |||||||||||||||||||||||||
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(In thousands, except per share amounts and as indicated)
1. | BASIS OF PRESENTATION |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3. | PRO FORMA GAAP ADJUSTMENTS |
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(a) | Onerous Lease Contract |
(b) | Derivatives |
(c) | Share-based and Incentive Compensation |
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(d) | Interest Capitalization |
(e) | Reacquired License Rights |
(f) | Taxation |
(g) | Reclassifications |
Net sales | $ | 2,246,670 | ||
Royalty revenue | 47,519 |
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Cost of goods sold | $ | (1,244 | ) | |
Interest expense | 1,244 |
Trade receivables, net of allowances for doubtful accounts | $ | (65,277 | ) | |
Accrued expenses | (65,277 | ) |
Other current assets | $ | 72,090 | ||
Property, plant and equipment, net | 13,671 | |||
Goodwill | 322,621 | |||
Other intangibles, net | (336,293 | ) | ||
Other noncurrent assets | 112,548 | |||
Current portion of long-term debt | 4,342 | |||
Accrued expenses | (122 | ) | ||
Other current liabilities | 409 | |||
Long-term debt | 18,329 | |||
Other noncurrent liabilities | 161,679 | |||
Common stock | (63,813 | ) | ||
Additional capital | 63,813 |
4. | PRO FORMA TRANSACTION ADJUSTMENTS |
(a) | Estimated Purchase Consideration |
Total cash consideration | $ | 2,704,874 | (i) | |
Total value of stock consideration | $ | 353,262 | (ii) | |
Our share price | $ | 43.74 | (ii) | |
Our total shares to be issued, par value $1 per share | 8,076 | (ii) | ||
Total purchase price | $ | 3,058,136 | (iii) | |
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(i) | For purposes of preparing this unaudited pro forma consolidated financial information, we have assumed that funding will come from the net proceeds from the issuance of common stock, Series A preferred stock and debt, as well as the use of existing cash. The cash portion of the estimated purchase consideration, payable in Euros, which includes a €1,924,000 component plus the assumption of €100,000 in liabilities, was translated based on an exchange rate of €1 : $1.3364 on April 8, 2010. We have entered into a forward foreign exchange contract with respect to €1,300,000 of the purchase price to hedge against exposure to changes in the exchange rate for the Euro. Our obligations under this contract are contingent upon the consummation of our acquisition of Tommy Hilfiger. | |
(ii) | The value of the stock portion of the estimated purchase consideration is $353,262, which excludes the value of the restricted stock component as discussed in Note 4(m) below. The value of the stock portion of the estimated purchase consideration was translated based on an exchange rate of €1 : $1.3364 on April 8, 2010. The number of shares of our common stock to be issued is obtained by dividing the value of the ordinary share portion of the estimated purchase consideration by the stock value and rounding to the nearest whole number. The stock value is an amount equal to the lower of (1) $43.74 per share or (2) the minimum stock value, calculated as the greater of the average of the per share daily closing prices of a share of our common stock on the New York Stock Exchange (“NYSE”) for 20 consecutive trading days ending on and including the second trading day prior to the closing date or $39.37 per share, whichever is higher. For purposes of this unaudited pro forma consolidated financial information, we calculated the minimum stock value to be $55.77 per share based on the average of the per share daily closing prices of a share of our common stock on the NYSE for 20 consecutive trading days ending on April 8, 2010. As such, the number of shares of our common stock assumed to be issued of 8,076 was calculated based on a per share price of $43.74. The number of shares of our common stock to be issued is subject to change due to fluctuations in exchange rates and the computed stock value and could differ materially from the number of shares set forth above. Based on the maximum stock value of $43.74 per share, a 10% change in exchange rates compared to the exchange rate of €1 : $1.3364 on April 8, 2010 would change the number of shares issued by 808. Assuming the floor stock value of $39.37 per share and an exchange rate of €1 : $1.3364 on April 8, 2010, the number of shares issued would increase by 897 to 8,973 compared to the 8,076 presented in the table above. Further, assuming the floor stock value of $39.37 per share, a 10% change in exchange rates compared to the exchange rate of €1 : $1.3364 on April 8, 2010 would further change the number of shares issued of 8,973 by 897. | |
(iii) | The estimated consideration expected to be transferred reflected in this unaudited pro forma consolidated financial information does not purport to represent what the actual consideration transferred will be when the merger is consummated due to exchange rate fluctuations and other factors. Further, the number of shares issued as part of the consideration transferred will be calculated on the closing date of the acquisition and could differ materially from the number of shares set forth above. |
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(b) | Preliminary Allocation of Purchase Consideration to Net Assets Acquired |
Book value of net assets acquired as at December 31, 2009 | $ | 41,467 | (i) | |
Adjusted for: | ||||
Elimination of cash | (331,230 | )(ii) | ||
Elimination of debt | 1,471,090 | (ii) | ||
Adjusted book value of net assets acquired | 1,181,327 | |||
Fair value adjustments to net assets: | ||||
Identifiable intangible assets | 1,155,849 | (iii) | ||
Inventories, net | 50,885 | (iv) | ||
Other noncurrent liabilities | (647,809 | )(v) | ||
Goodwill | 1,317,884 | (vi) | ||
Total fair value adjustments to net assets | 1,876,809 | (vii) | ||
Total purchase price to be allocated | $ | 3,058,136 | ||
(i) | The unaudited pro forma consolidated financial information has been prepared using Tommy Hilfiger’s available financial statements and disclosures. Therefore, except as noted below, the carrying value of assets and liabilities in Tommy Hilfiger’s financial statements are considered to be a proxy for fair value of those assets and liabilities. In addition, certain pro forma adjustments, such as recording fair value of assets and liabilities and potential adjustments for consistency of accounting policy, except for the adjustments to reflect Tommy Hilfiger under GAAP and adjustments specifically described below, are not reflected in this unaudited pro forma consolidated financial information. | |
(ii) | The net assets of Tommy Hilfiger that we are expected to acquire exclude cash, debt and other debt-related balances. As such, cash and cash equivalents was reduced by $331,230, other noncurrent assets was reduced by $22,671, current portion of long-term debt was reduced by $46,374, long-term debt was reduced by $723,638 and subordinated shareholder loan was reduced by $723,749. | |
(iii) | For purposes of the pro forma analysis, the historical intangible assets of Tommy Hilfiger have been increased $1,155,849 to reflect our preliminary estimate of the total fair value of intangible assets acquired of $1,903,282. Included in this adjustment is a $1,090,687 increase to tradenames to reflect the total fair value of tradenames of $1,725,046. Also included in this adjustment is a $65,162 increase to other intangibles, net, to reflect the total fair value of other intangibles, net of $178,236. These other intangibles represent customer relationships and order backlog. | |
(iv) | Inventory, net was increased $50,885 to reflect our preliminary estimate of the fair value of inventory based on the net realizable value method, less the portion of the profit attributable to the seller. | |
(v) | Other noncurrent liabilities was increased $647,809 to reflect our preliminary estimate of the deferred tax liability to be recorded in connection with these fair value adjustments. | |
(vi) | Goodwill was increased $1,317,884 to reflect the total excess of the purchase consideration over the fair value of the assets acquired of $1,640,505. | |
(vii) | No other adjustments were made to the assets and liabilities of Tommy Hilfiger to reflect their fair values. At this time there is insufficient information as to the specific nature, age, condition and location of Tommy Hilfiger’s property, plant and equipment to make a reasonable estimation of fair value or the corresponding adjustment to depreciation and amortization. For each $10,000 fair value adjustment to property, plant and equipment, assuming a weighted-average useful life of 10 years, depreciation expense would change by approximately $1,000. Once we have complete information as to the specifics of Tommy Hilfiger’s assets, the estimated values assigned to the assets and/or the associated estimated weighted-average useful life of the assets will likely be different than that reflected in this unaudited pro forma consolidated financial information and the differences could be material. |
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Following completion of the offer, we anticipate that the purchase price allocation may differ materially from the preliminary assessment outlined above. Any change to the initial estimates of the fair value of the assets and liabilities will be recorded as an increase or decrease to goodwill. |
(c) | Long-Term Debt |
Assumed carrying amount of debt issued: | ||||
Term Loan A, Term Loan B and senior unsecured notes | $ | 2,502,125 | ||
Less: | ||||
Carrying amount of debt extinguished: | ||||
71/4% Senior Notes due 2011 | (150,000 | ) | ||
81/8% Senior Notes due 2013 | (150,000 | ) | ||
Net adjustment to long-term debt | $ | 2,202,125 | ||
(d) | Preferred Stock |
(e) | Common Stock |
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(f) | Amortization Expense |
(g) | Interest Expense |
Interest expense on debt issued: | ||||
Term Loan A, Term Loan B and senior unsecured notes | $ | 146,616 | ||
Amortization of capitalized debt issuance costs | 10,043 | |||
Less: | ||||
Interest expense on debt extinguished: | ||||
71/4% Senior Notes due 2011 | (10,875 | ) | ||
81/8% Senior Notes due 2013 | (12,188 | ) | ||
Amortization of capitalized debt issuance costs (extinguished debt) | (1,621 | ) | ||
Interest expense on historical Tommy Hilfiger debt | (155,097 | ) | ||
Amortization of capitalized debt issuance costs (Tommy Hilfiger’s historical debt) | (5,472 | ) | ||
Net adjustment to interest expense | $ | (28,594 | ) | |
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(h) | Interest Income |
(i) | Transaction Costs |
(j) | Debt Extinguishment Costs |
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(k) | Cost of Sales |
(l) | Elimination of Results of Operations for Karl Lagerfeld Business |
Net sales | $ | (12,088 | ) | |
Cost of goods sold | (5,157 | ) | ||
Selling, general and administrative expenses | (25,306 | ) |
(m) | Management Retention for Key Employees |
(n) | Elimination of Tommy Hilfiger’s Stockholders’ Equity |
(o) | Taxation |
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(p) | Net Income per Common Share |
Pro forma net income | $ | 111,653 | ||
Less: | ||||
Pro forma net income allocated to participating securities | 6,838 | |||
Pro forma net income available to common stockholders for basic pro forma net income per common share | 104,815 | |||
Add back: | ||||
Pro forma net income allocated to participating securities | 6,838 | |||
Pro forma net income available to common stockholders for diluted pro forma net income per common share | $ | 111,653 | ||
Weighted average common shares outstanding for basic pro forma net income per common share | 64,215 | |||
Pro forma impact of dilutive securities | 913 | |||
Pro forma impact of assumed participating convertible preferred stock conversion | 4,189 | |||
Total shares for diluted pro forma net income per common share | 69,317 | |||
Basic pro forma net income per common share | $ | 1.63 | ||
Diluted pro forma net income per common share | $ | 1.61 |
(q) | Reclassifications |
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Property, plant and equipment, net | $ | (13,671 | ) | |
Tradenames | 634,359 | |||
Other intangibles, net | (657,030 | ) | ||
Other noncurrent assets | 36,342 | |||
Current portion of long-term debt | (7,829 | ) | ||
Other current liabilities | 7,829 | |||
Long-term debt | (14,731 | ) | ||
Other noncurrent liabilities | 14,731 |
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Licensing Partner | Product Category | |
CK Watch and Jewelry Co., Ltd. (Swatch SA) | Men’s and women’s watches (worldwide) and women’s jewelry (worldwide, excluding Japan) | |
CK21 Holdings Pte, Ltd. | Men’s and women’s bridge apparel, shoes and accessories (Asia, excluding Japan) | |
Coty, Inc. | Men’s and women’s fragrance and bath products (worldwide) | |
DWI Holdings, Inc./Himatsingka Seide, Ltd. | Soft home bed and bath furnishings (United States, Canada, Mexico, Central America and South America) | |
G-III Apparel Group, Ltd. | Men’s and women’s coats; women’s better suits, dresses and sportswear; women’s active performance wear (United States, Canada and Mexico) | |
Jimlar Corporation | Men’s and women’s footwear: better (United States, Canada and Mexico); bridge (North America, Europe and Middle East); collection (worldwide) | |
Marchon Eyewear, Inc. | Men’s and women’s optical frames and sunglasses (worldwide) | |
McGregor Industries, Inc./ American Essentials, Inc. | Men’s and women’s socks and women’s tights (United States, Canada, Mexico, South America, Europe, Middle East and Asia, excluding Japan) | |
Onward Kashiyama Co. Ltd. | Men’s and women’s bridge apparel and women’s accessories (Japan) | |
Peerless Delaware, Inc. | Men’s better and bridge tailored clothing (United States, Canada and Mexico; South America (non-exclusive)) | |
Warnaco | Men’s, women’s and children’s jeanswear (nearly worldwide); men’s and boy’s underwear and sleepwear (worldwide); women’s and girl’s intimate apparel and sleepwear (worldwide); women’s swimwear (worldwide); men’s better swimwear (worldwide); men’s and women’s bridge apparel and accessories (Europe, Africa and Middle East) |
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Licensing Partner | Product Category | |
Arvind Mills, Ltd. | ARROWmen’s and women’s dresswear, sportswear and accessories (India, Middle East, Sri Lanka, Bangladesh, Maldives and Nepal);IZODmen’s sportswear and accessories (India) | |
Clearvision Optical Company, Inc. | IZODmen’s and children’s optical eyewear and related accessories (United States) | |
E.C.C.E. | ARROWmen’s and women’s dresswear, sportswear and accessories (France, Switzerland, Andorra and Morocco) | |
Fishman & Tobin, Inc. | Van HeusenandARROWboys’ dresswear and sportswear;IZODboys’ sportswear;IZODandARROWboys’ and girls’ school uniforms;ARROWmen’s tailored clothing;IZODboys’ tailored clothing (United States) | |
Gazal Apparel Pty Limited | Van Heusenmen’s dresswear and accessories (Australia and New Zealand) | |
Gemini Cosmetics, Inc. | IZODmen’s fragrances (United States) | |
Harbor Wholesale, Ltd. | BassandG.H. Bass & Co.wholesale footwear (worldwide) | |
Industrias Jatu S.A. | ARROWmen’s dresswear and sportswear (Venezuela) | |
Knothe Corp. | IZODmen’s and boys’ sleepwear and loungewear (United States) | |
Manufacturas Interamericana S.A. | ARROWmen’s and women’s dresswear, sportswear and accessories (Chile and Uruguay) | |
Peerless Delaware, Inc. | Van HeusenandIZODmen’s tailored clothing (United States and Mexico) | |
Humphrey’s Accessories LLC/Randa Corp. d/b/a Randa Accessories | ARROWmen’s and boys’ small leather goods, belts and accessories (United States and Canada);Van Heusenmen’s and boys’ neckwear (United States) | |
Thanulux Public Company, Ltd. | ARROWmen’s dresswear, sportswear and accessories;ARROWwomen’s dresswear and sportswear (Thailand and Vietnam) |
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Licensing Partner | Product Category | |
Wear Me Apparel Corp. d/b/a Kids Headquarters | IZODchildrenswear (United States) | |
WestPoint Home, Inc. | IZODhome products (United States) |
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• | Wholesale— Tommy Hilfiger’s wholesale business consists of the distribution and sale of its products under theTommy Hilfigerbrands to approximately 500 stores operated by franchisees and distributors and through approximately 7,400 doors, as of March 31, 2010, operated by approximately 4,600 retail customers. The European retail customers range from large department stores to small independent stores. Tommy Hilfiger has, since the Fall of 2008, conducted the majority of its North American wholesale operations through Macy’s, which is currently the exclusive department store retailer of most ofTommy Hilfigermen’s, women’s, women’s plus-size and childrens sportswear in the United States. In 2009, Tommy Hilfiger discontinued its unprofitable Canadian wholesale business. | |
• | Retail— Tommy Hilfiger’s retail business principally consists of the distribution and sale of its products through company-operated specialty stores (anchor stores and satellite stores), company stores and outlet stores in Europe, the United States and Canada, as well asmulti-jurisdictionale-commerce sites. Tommy Hilfiger’s anchor stores are generally larger stores situated in high-profile locations in major cities and are intended to enhance local exposure of the brand. Satellite stores are regular street and mall stores, which are located in secondary cities and are based on a model that provides incremental revenue and profitability. Company stores in North America are primarily located in outlet centers and carry specially designed merchandise that is sold at a lower price point than merchandise |
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sold in our specialty stores. Company stores operated by Tommy Hilfiger in Europe and Japan are used primarily to clear excess inventory from previous seasons at discounted prices. As of March 31, 2010, Tommy Hilfiger had 244 specialty stores (including its only global anchor store on Fifth Avenue in New York City) and 249 company (outlet) stores worldwide. Tommy Hilfiger re-launched itse-commerce business in September 2009 using a new platform in select European countries, Canada and the United States. |
• | Licensing— Tommy Hilfiger licenses theTommy Hilfigerbrands to third parties both for specific product categories (such as fragrances, watches and eyewear) and in certain geographic regions. Tommy Hilfiger currently has 17 separate product license agreements, three global product license agreements, 11 product license agreements in the United States and three product license agreements in Europe. In addition, Tommy Hilfiger currently has six geographic license agreements covering Asia-Pacific (China, Hong Kong, Malaysia, Taiwan and Singapore), India, South Korea, Australia, Mexico, and Central and South America and the Caribbean. Tommy Hilfiger recently announced it had entered into an agreement to assume control over its licensee’s business in China. We have agreed with Apax to license the China business to a company jointly owned by us and Apax, but largely controlled by Apax, and to potentially bring on a joint venture partner in China to operate the business in China. |
• | Continued expansion of specialty stores in Europe —Tommy Hilfiger has opened approximately 80 stores in additional and existing markets since 2006 that it operates. | |
• | Strengthened brand in the United States— Tommy Hilfiger has sought to refocus its United States marketing and advertising brand development on its core global premium lifestyle image, placing particular emphasis on developing the image of its iconic flag logo, eliminating product lines and distribution in retail channels that diluted theTommy Hilfigerbrand’s premium image and opening the |
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brand’s first global anchor store in New York City in September 2009 and the brand’s return to the New York runway in 2007. |
• | Establishment and growth of strategic alliance with Macy’s— Prior to the management buyout, Tommy Hilfiger’s North American wholesale business involved selling its products to a large number of retail customers, including small businesses, in the United States and Canada. Tommy Hilfiger entered into a strategic alliance agreement with Macy’s in 2007 under which Macy’s became its exclusive department store retailer of most ofTommy Hilfiger men’s, women’s, women’s plus-size and children’s sportswear in the United States, beginning with the Fall 2008 collections. In 2009, Tommy Hilfiger discontinued its unprofitable Canadian wholesale business. | |
• | Acquisition of licensees, distributors and franchisees on commercially attractive terms— Tommy Hilfiger has pursued a focused acquisition strategy with respect to select licensees, distributors and franchisees where management believes it can achieve greater scale and success compared to its partners. Examples of these are the acquisitions of its licensee’s businesses in Japan and Turkey and of its licensees’ United States handbag and footwear businesses. | |
• | Revitalization of North American corporate culture— The United States management structure was reorganized to conform to Tommy Hilfiger’s European model, replacing a hierarchical centralized organization with a more simplified organization. This was followed by the integration of United States and Canadian operations into Tommy Hilfiger North America. | |
• | Sale of buying office activities— Tommy Hilfiger sold its sourcing operations in Asia to Li & Fung Limited and entered into a nonexclusive agreement with Li & Fung to carry out most of its sourcing work in March 2007. |
• | Tommy Hilfiger: TheTommy Hilfigercollection consists of sportswear for men, women and children, footwear, athletic apparel (for fitness/training, golfing, skiing, swimming and sailing), bodywear (underwear, robes and sleepwear), eyewear, sunwear, watches, socks, handbags, men’s tailored clothing, dress shirts, ties, suits, belts, wallets, small leather goods, fragrances, home and bedding products, bathroom accessories and luggage, emphasizing “classic American cool” styling and characterized as “preppy with a twist.” The label is targeted at the 25 to 45 year old consumer and is sold around the world. | |
• | Hilfiger Denim: TheHilfiger Denimlabel was launched in the year ended March 31, 2002 and consists of denim apparel for men, women and children, footwear, bags, accessories, eyewear and fragrance, targeted at the 20 to 35 year-old consumer, and positioned as being more “fashion forward” than theTommy Hilfigerlabel. Designs are inspired by American classics and finished with a modern edge and fresh spirit, characterized as “the jeanswear lifestyle.” The label is sold primarily outside the United States. |
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• | build the business and improve the brand positioning of the merchandise covered by the agreement; | |
• | support the launch of newTommy Hilfigermerchandise in Macy’s stores and on www.macys.com; | |
• | increase and enhance the prominence and position ofTommy Hilfiger“shop-in-shop” stores in high-volume Macy’s stores; | |
• | renovate and upgrade existingTommy Hilfigershops; and | |
• | featureTommy Hilfigercollections in Macy’s marketing campaigns. |
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• | be unsecured unsubordinated obligations of Phillips-Van Heusen; | |
• | be senior in right of payment to any existing and future obligations of Phillips-Van Heusen that are by their terms expressly subordinated or junior in right of payment to the notes; | |
• | not be guaranteed by any Subsidiary of Phillips-Van Heusen on the Issue Date and may not be guaranteed by any Subsidiary of Phillips-Van Heusen for their tenor; | |
• | be effectively junior to any of Phillips-Van Heusen’s existing and future secured obligations to the extent of the value of the assets securing such obligations; and | |
• | be structurally subordinated to all existing and future obligations, including trade payables, ofPhillips-Van Heusen’s Subsidiaries. |
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Redemption price of | ||||
Period | notes | |||
2015 | % | |||
2016 | % | |||
2017 | % | |||
2018 and thereafter | 100 | % |
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• | theNon-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all of our stock; | |
• | theNon-U.S. Holder is not a “controlled foreign corporation” with respect to which we are a “related person” within the meaning of the Code; and | |
• | theNon-U.S. Holder is not a bank receiving the interest pursuant to a loan agreement entered into in the ordinary course of its trade or business. |
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• | the gain is not effectively connected with the conduct of a trade or business within the U.S. (or in the case of an income tax treaty resident, is not attributable to a U.S. permanent establishment (or, in the case of an individual, a fixed base) maintained by theNon-U.S. Holder in the U.S.; and | |
• | if theNon-U.S. Holder is an individual, suchNon-U.S. Holder is not present in the U.S. for a period of 183 days or more during the taxable year of the disposition and certain other conditions are met. |
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Principal | ||||
Underwriters | Amount | |||
Barclays Capital Inc. | $ | |||
Banc of America Securities LLC | $ | |||
Deutsche Bank Securities Inc. | $ | |||
Credit Suisse Securities (USA) LLC | $ | |||
RBC Capital Markets Corporation | $ | |||
BBVA Securities Inc. | $ | |||
Credit Agricole Securities (USA) Inc. | $ | |||
Fortis Bank (Nederland) N.V. | $ | |||
HSBC Securities (USA) Inc. | $ | |||
Scotia Capital (USA) Inc. | $ | |||
SunTrust Robinson Humphrey, Inc. | $ | |||
U.S. Bancorp Investments, Inc. | $ | |||
Total | $ | |||
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• | Over-allotment involves sales in excess of the offering size, which creates a short position for the underwriters. | |
• | Stabilizing transactions involve bids to purchase the notes in the open market for the purpose of pegging, fixing or maintaining the price of the notes. | |
• | Syndicate covering transactions involve purchases of the notes in the open market after the distribution has been completed in order to cover short positions. | |
• | Penalty bids permit the underwriters to reclaim a selling concession from a broker/dealer when the notes originally sold by such broker/dealer are purchased in a stabilizing or syndicate covering transaction to cover short positions. |
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• | to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
• | to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43 million and (3) an annual net turnover of more than €50 million, as shown in its last annual or consolidated accounts; | |
• | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the underwriters; or | |
• | in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive, |
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• | our annual report onForm 10-K for the fiscal year ended January 31, 2010; and | |
• | our current reports onForm 8-K filed with the SEC on March 16, 2010, April 5, 2010, April 8, 2010, April 13, 2010 and April 16, 2010. |
200 Madison Avenue
New York, New York 10016
Attention: Secretary
Telephone:(212) 381-3500
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Fiscal Year | Pro Forma | |||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009(1) | |||||||||||||||||||
Ratio of earnings to fixed charges | 3.6x | 4.6x | 4.9x | 2.8x | 3.6x | 1.6x | ||||||||||||||||||
Ratio of earnings to fixed charges and preference security dividends | 2.2x | 3.5x | 4.9x | 2.8x | 3.6x | 1.6x |
(1) | Reflects the proposed acquisition of Tommy Hilfiger B.V. and the incurrence and repayment of debt in connection therewith. |
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• | the title of the debt securities; | |
• | the total principal amount of the debt securities; | |
• | whether the debt securities are senior debt securities or subordinated debt securities and, if subordinated debt securities, the subordination provisions and the applicable definition of “senior indebtedness”; | |
• | whether the debt securities will be secured or unsecured; | |
• | whether the debt securities will be guaranteed; |
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• | any limit on the total principal amount of the debt securities and the ability to issue additional debt securities of the same series; | |
• | the date or dates on which the principal of and any premium on the debt securities will be payable; | |
• | any interest rate, the date from which interest will accrue, interest payment dates and record dates for interest payments; | |
• | any covenants or restrictions on us or our subsidiaries; | |
• | the place or places where payments on the debt securities will be payable; | |
• | any provisions for redemption or early repayment; | |
• | any sinking fund or other provisions that would obligate us to redeem, purchase or repay the debt securities prior to maturity; | |
• | the denominations in which we may issue the debt securities; | |
• | whether payments on the debt securities will be payable in foreign currency or currency units or another form, and whether payments on the debt securities will be payable by reference to any index or formula; | |
• | the portion of the principal amount of the debt securities that will be payable if the maturity is accelerated, if other than the entire principal amount; | |
• | provisions relating to discharge and covenant defeasance and legal defeasance and any additional means of defeasance of the debt securities, any additional conditions or limitations to defeasance of the debt securities or any changes to those conditions or limitations; | |
• | the events of default applicable to the debt securities; | |
• | any restrictions or other provisions relating to the transfer or exchange of the debt securities; | |
• | securities exchange(s) on which the securities will be listed, if any; | |
• | whether any underwriter(s) will act as market maker(s) for the securities; | |
• | the extent to which a secondary market for the securities is expected to develop; | |
• | provisions relating to satisfaction and discharge of the indenture; | |
• | provisions relating to form, registration, exchange and transfer; | |
• | the designation of agents with respect to the debt securities; | |
• | modification, waiver and amendment provisions; | |
• | any terms for the conversion or exchange of the debt securities for other securities issued by us; and | |
• | any other terms of the debt securities, whether in addition to, or by modification or deletion of, the terms described herein. |
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• | restricting dividends on the common stock; | |
• | diluting the voting power of the common stock; | |
• | impairing the liquidation rights of the common stock; or | |
• | delaying or preventing a change in control of us without further action by the stockholders; |
• | the series designation of the preferred stock; | |
• | the maximum number of shares of the series; | |
• | the dividend rate or the method of calculating the dividend, the date from which dividends will accrue and whether dividends will be cumulative; | |
• | any liquidation preference; | |
• | any optional redemption provisions; | |
• | any sinking fund or other provisions that would obligate us to redeem or repurchase the preferred stock; | |
• | any terms for the conversion or exchange of the preferred stock for any other securities; | |
• | any voting rights; and |
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• | any other powers, preferences and relative, participating, optional or other special rights or any qualifications, limitations or restrictions on the rights of the shares. |
• | for any breach of the member’s duty of loyalty to us or our stockholders; | |
• | for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; | |
• | under section 174 of the Delaware General Corporation Law (for unlawful payments of dividends or unlawful stock repurchases or redemptions); and | |
• | for any transaction from which the member derived an improper personal benefit. |
• | the acquisition of us by means of a tender offer; | |
• | the acquisition of us by means of a proxy contest or otherwise; or | |
• | the removal of our incumbent officers and directors. |
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• | to or through underwriters, brokers or dealers; | |
• | directly to one or more other purchasers; | |
• | through a block trade in which the broker or dealer engaged to handle the block trade will attempt to sell the securities as agent, but may position and resell a portion of the block as principal to facilitate the transaction; | |
• | through agents on a best-efforts basis; or | |
• | otherwise through a combination of any of the above methods of sale. |
• | enter into transactions involving short sales of the shares of common stock by underwriters, brokers or dealers; | |
• | sell shares of common stock short and deliver the shares to close out short positions; | |
• | enter into option or other types of transactions that require us to deliver shares of common stock to an underwriter, broker or dealer, who will then resell or transfer the shares of common stock under this prospectus; or | |
• | loan or pledge the shares of common stock to an underwriter, broker or dealer, who may sell the loaned shares or, in the event of default, sell the pledged shares. |
• | the offering terms, including the name or names of any underwriters, dealers or agents; | |
• | the purchase price of the securities and the net proceeds to be received by us from the sale; | |
• | any underwriting discounts or agency fees and other items constituting underwriters’ or agents’ compensation; | |
• | any public offering price; | |
• | any discounts or concessions allowed or reallowed or paid to dealers; and | |
• | any securities exchange on which the securities may be listed. |
• | at a fixed price or prices, which may be changed; |
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• | at market prices prevailing at the time of sale; | |
• | at prices related to such prevailing market prices; | |
• | at varying prices determined at the time of sale; or | |
• | at negotiated prices. |
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