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SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 95-4032739 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
New York, New York 10018
(Address of principal executive offices)
Title of each class | Name of each exchange on which registered | |
Common Stock, par value $0.01 per share | New York Stock Exchange, Inc. |
Large accelerated filerþ | Accelerated filero | Non-accelerated filero | Smaller Reporting Companyo |
2011 ANNUAL REPORT ON FORM 10-K
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Item 1. | Business. |
Trademarks Licensed in Perpetuity | ||
Trademark | Territory | |
Speedo(a) | United States, Canada, Mexico, Caribbean Islands | |
Fastskin®(secondary Speedo mark) | United States, Canada, Mexico, Caribbean Islands |
Trademarks Licensed for a Term | ||||
Trademark | Territory | Expires(h) | ||
Calvin Klein Jeans and CK/Calvin Klein Jeans (for men’s/women’s/children’s/juniors’/infants’/toddlers’ jeans and certain jeans-related products)(b) | North, South and Central America | 12/31/2044 | ||
Calvin Klein Jeans and CK/Calvin Klein Jeans (for retail stores selling men’s/women’s/juniors’/children’s/infants’/toddlers’jeans and certain jeans-related products and ancillary products bearing the Calvin Klein marks)(b) | Canada, Mexico and Central and South America | 12/31/2044 | ||
CK/Calvin Klein (for men’s and women’s bridge apparel) (c) | All countries constituting European Union, Norway, Switzerland Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, Middle East, Africa, India, Central and South America | 12/31/2046 | ||
CK/Calvin Klein (for retail stores selling men’s and women’s bridge Apparel and bridge accessories, together with other ancillary Merchandise bearing the Calvin Klein marks) | All countries constituting European Union, Norway, Switzerland Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, Middle East, Africa, India, Central and South America | 12/31/2046 | ||
CK/Calvin Klein (for men’s and women’s bridge accessories) (c) | All countries constituting European Union, Norway, Switzerland Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, Middle East, Africa, India, Central and South America | 12/31/2046 | ||
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Trademarks Licensed in Perpetuity | ||||
Trademark | Territory | |||
CK/Calvin Klein (for retail stores selling bridge accessories) (c) | Central and South America | 12/31/2044 | ||
And other ancillary merchandise bearing the Calvin Klein name) (c) | All countries constituting European Union, Norway, Switzerland Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, Middle East, Africa, India | 12/31/2046 | ||
Calvin Klein Jeans and CK/Calvin Klein Jeans (for men’s/women’s/children’s jeans and other jeans related apparel)(d) | Western Europe including Ireland, Great Britain, France, Monte Carlo, Germany, Spain, Portugal, Andorra, Italy, San Marino, Vatican City, Benelux, Denmark,Sweden, Norway, Finland, Austria, Switzerland,Lichtenstein, Greece, Cyprus, Turkey and Malta and parts of Eastern Europe namely, Hungary, Czech Republic, Poland, Bosnia Herzegovina, Croatia, Serbia, Slovenia, Romania, Bulgaria, Slovak Republic, Macedonia, Moldavia, Lithuania, Latvia, Estonia, Ukraine, Belorussia, Russia, (C.I.S.), Georgia, Armenia, Azerbaijan, Kazakhstan, Uzbekistan, the Middle East (including Egypt, Lebanon, Israel, Palestine, Jordan, Syria, Saudi Arabia, Yemen, Qatar, Kuwait, Bahrain, Oman, UAE), South Africa, Tunisia, Botswana, Mozambique, Namibia, Swaziland, Zimbabwe | 12/31/2046 | ||
Calvin Klein Jeans and CK/Calvin Klein Jeans (for men’s/women’s /children’s jeans and other jeans related apparel)(d) | Asia, including Japan, People’s Republic of China (or “China”), South Korea and “Rest of Asia” (Hong Kong, Thailand, Australia, New Zealand, Philippines, Taiwan, Singapore, Malaysia, Indonesia, New Guinea,Vietnam, Cambodia, Laos, Myanmar, Burma, Macau and the Federated State of Micronesia, Mongolia), India | 12/31/2046 | ||
Calvin Klein Jeans and CK/Calvin Klein Jeans (for retail stores Selling men’s/women’s/children’s jeans and jeans related Products and ancillary products bearing the Calvin Klein marks) (d) | Western Europe including Ireland, Great Britain, France, Monte Carlo, Germany, Spain, Portugal, Andorra, Italy, San Marino, Vatican City, Benelux, Denmark, Sweden, Norway, Finland, Austria, Switzerland, Lichtenstein, Greece, Cyprus, Turkey and Malta and parts of Eastern Europe namely, Hungary, Czech Republic, Poland, Bosnia Herzegovina, Croatia, Serbia, Slovenia, Romania, Bulgaria, Slovak Republic, Macedonia, Moldavia, Lithuania, Latvia, Estonia, Ukraine, Belorussia, Russia, (C.I.S.), Georgia, Armenia, Azerbaijan, Kazakhstan, Uzbekistan, the Middle East (including Egypt, Lebanon, Israel, Palestine, Jordan, Syria, Saudi Arabia, Yemen, Qatar, Kuwait, Bahrain, Oman, UAE), South Africa, Tunisia, Botswana, Mozambique, Namibia, Swaziland, Zimbabwe; Asia, including Japan, People’s Republic of China (or “China”), South Korea and “Rest of Asia” (Hong Kong, Thailand, Australia, New Zealand, Philippines, Taiwan, Singapore, Malaysia, Indonesia, New Guinea,Vietnam, Cambodia, Laos, Myanmar, Burma, Macau and the Federated State of Micronesia, Mongolia), India | 12/31/2046 |
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Trademarks Licensed for a Term | ||||
Trademark | Territory | Expires(h) | ||
CK/Calvin Klein (for independent or common internet sites for the sale of jeanswear apparel and/or jeanswear accessories) (d) | Europe and Asia | 12/31/2046 | ||
CK/Calvin Klein (for independent or common internet sites for the sale of jeanswear apparel)(e) | North America Central and South America | 12/31/2044 | ||
CK/Calvin Klein (for independent or common internet sites for the sale of jeanswear accessories)(d) | Central and South America (excluding Mexico) | 12/31/2046 | ||
Calvin Klein Jeans for men’s and women’s jeans accessories(d) | All countries constituting European Union, Norway, Switzerland, Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, Middle East, Africa, Asia, India, Central America and South America (excluding Mexico) | 12/31/2046 | ||
Calvin Klein Jeans (for retail stores selling jeans Accessories and certain ancillary products bearing the Calvin Klein marks)(d) | All countries constituting European Union, Norway, Switzerland, Monte Carlo, Vatican City, Liechtenstein, Iceland and parts of Eastern Europe, Russia, Middle East, Africa, Asia, India, Central America and South America (excluding Mexico) | 12/31/2046 | ||
Chaps (for men’s sportswear, jeanswear,activewear, sport shirts and men’s swimwear)(f) | United States, Canada, Mexico, Puerto Rico and Caribbean Islands | 12/31/2018 | ||
Calvin Klein and CK/Calvin Klein (for women’s and juniors’ swimwear) | Worldwide with respect toCalvin Klein; Worldwide in approved forms with respect toCK/Calvin Klein | 12/31/2014 | ||
Calvin Klein (for men’s swimwear) | Worldwide | 12/31/2014 | ||
Lifeguard® (for wearing apparel excluding underwear and loungewear)(g) | Worldwide (United States, Canada, Mexico, Caribbean Islands and all other countries where trademark filings are or will be made) | 6/30/2012 |
(a) | Licensed in perpetuity from Speedo International, Ltd. (“SIL”). | |
(b) | Expiration date reflects a renewal option, which permits the Company to extend for an additional ten-year term through 12/31/2044 (subject to compliance with certain terms and conditions). | |
(c) | During Fiscal 2010 and Fiscal 2011, the Company did not achieve the minimum sales thresholds required under its license agreement to operate theCK/Calvin Klein“bridge” apparel business in Europe (the “CK/Calvin Klein“bridge” Apparel License”). As a result, the Company and Calvin Klein Inc. (“CKI”) no longer intend for the Company to continue to operate all or part of the “bridge” business. The Company has begun discussions with CKI regarding the terms and conditions of the transition of all or part of the Company’s “bridge” business to CKI. SeeNote 4ofNotes to Consolidated Financial Statements. | |
(d) | Expiration date reflects a renewal option, which permits the Company to extend for an additional ten-year term through 12/31/2046 (subject to compliance with certain terms and conditions). | |
(e) | Expiration date reflects a renewal option, which permits the Company to extend for an additional ten-year term through 12/31/2044 (subject to compliance with certain terms and conditions). |
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(f) | Expiration date reflects a renewal option, which permits the Company to extend its license for theChapsmark and logo for an additional five-year term beyond the current expiration date of December 31, 2013 (subject to compliance with certain terms and conditions and meeting certain minimum net sales and earned royalties). See “Trademarks and Licensing Agreements” andItem 1A. Risk Factorsfor an additional discussion regarding the renewal of theChaps license. | |
(g) | Expiration date reflects the Company’s decision not to exercise its renewal option. | |
(h) | As described inItem 1A. Risk Factors, certain of the Company’s license agreements, including the license agreements with SIL (the licensor of theSpeedotrademark), CKI (the licensor of theCalvin Klein, CK/Calvin Kleinand Calvin Klein Jeans trademarks) and Polo Ralph Lauren, Inc. (the licensor of theChapstrademark) require the Company to make minimum royalty payments and/or royalty payments based on a percentage of net sales, meet certain minimum sales thresholds, comply with restrictive covenants, and provide certain services (such as design services). Those license agreements may be terminated or the Company may lose its ability to exercise renewal rights if certain of these requirements and obligations are not satisfied. In addition, certain of such license agreements contain “cross default” provisions, which may result in the early termination of related wholesale and retail license agreements upon termination of such license agreements. |
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||||||
% of Total | % of Total | % of Total | ||||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||
Sportswear Group | $ | 1,305,769 | 52.0 | % | $ | 1,204,065 | 52.5 | % | $ | 1,044,892 | 51.7 | % | ||||||||||||
Intimate Apparel Group | 932,131 | 37.0 | % | 834,010 | 36.3 | % | 723,222 | 35.8 | % | |||||||||||||||
Swimwear Group | 275,488 | 11.0 | % | 257,676 | 11.2 | % | 251,511 | 12.5 | % | |||||||||||||||
Net revenues (a), (b), (c) | $ | 2,513,388 | 100.0 | % | $ | 2,295,751 | 100.0 | % | $ | 2,019,625 | 100.0 | % | ||||||||||||
(a) | International operations accounted for 59.7%, 56.1%,and 54.6% of net revenues in Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively. | |
(b) | Direct to consumer businesses accounted for 28.9%, 24.7%, and 22.5% of net revenues in Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively. | |
(c) | Sales of products bearing theCalvin Kleinbrand name accounted for 75.6%, 73.9% and 73.5% of net revenues in Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively. |
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% of Total Net | % of Total Net | % of Total Net | ||||||||||||||||||||||
Fiscal 2011 | Revenues | Fiscal 2010 | Revenues | Fiscal 2009 | Revenues | |||||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||
Sportswear Group (c) | $ | 80,641 | $ | 143,260 | $ | 118,477 | ||||||||||||||||||
Intimate Apparel Group (c) | 133,755 | 134,928 | 116,269 | |||||||||||||||||||||
Swimwear Group (c) | 28,067 | 18,698 | 16,168 | |||||||||||||||||||||
Unallocated corporate expenses (a) (c) | (60,918 | ) | (49,075 | ) | (57,379 | ) | ||||||||||||||||||
Operating income (b) | $ | 181,545 | 7.2 | % | $ | 247,811 | 10.8 | % | $ | 193,535 | 9.6 | % | ||||||||||||
(a) | Includes $26.1 million, $2.9 million and $20.4 million of pension expense for Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively. | |
(b) | Includes (i) $45.9 million, $6.5 million, $7.5 million and $1.0 million of restructuring expenses for Fiscal 2011 in the Sportswear Group, Intimate Apparel Group, Swimwear Group and Unallocated corporate expenses, respectively; (ii) $1.8 million, $3.6 million, $3.6 million and $0.8 million of restructuring expenses for Fiscal 2010 in the Sportswear Group, Intimate Apparel Group, Swimwear Group and Unallocated corporate expenses, respectively; and (iii) $3.2 million, $4.3 million, $3.0 million and $1.5 million of restructuring expenses for Fiscal 2009 in the Sportswear Group, Intimate Apparel Group, Swimwear Group and Unallocated corporate expenses, respectively. | |
(c) | Reflects the allocation of a total of $9.9 million of corporate expenses to the Sportswear Group ($6.9 million), the Intimate Apparel Group ($3.8 million) and the Swimwear Group (($0.8 million)), respectively, during Fiscal 2010 and the allocation of a total of $6.7 million of corporate expenses to the Sportswear Group ($4.7 million), the Intimate Apparel Group ($2.6 million) and the Swimwear Group (($0.6 million)), respectively, during Fiscal 2009, in each case, to conform to the presentation for Fiscal 2011. SeeNote 5ofNotes to Consolidated Financial Statements. |
December 31, 2011 | % of Total | January 1, 2011 | % of Total | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Total assets: | ||||||||||||||||
Sportswear Group | $ | 994,425 | 56.9 | % | $ | 995,475 | 60.2 | % | ||||||||
Intimate Apparel Group | 486,636 | 27.9 | % | 381,371 | 23.0 | % | ||||||||||
Swimwear Group | 148,982 | 8.5 | % | 154,831 | 9.4 | % | ||||||||||
Corporate/Other | 117,807 | 6.7 | % | 121,595 | 7.4 | % | ||||||||||
Total assets | $ | 1,747,850 | 100.0 | % | $ | 1,653,272 | 100.0 | % | ||||||||
Brand Name | Price Range | Type of Apparel | ||
Calvin Klein | Better to premium | Men’s, women’s and children’s (a) designer jeanswear (bottoms and tops), bridge apparel, jeans accessories and bridge accessories. | ||
Chaps | Moderate | Men’s sportswear, jeanswear, activewear, knit and woven sports shirts and swimwear (b) |
(a) | The Sportswear Group sub-licenses the rights to produce children’s designer jeanswear to a third party. | |
(b) | The Sportswear Group sub-licenses the rights to produce men’s leather outerwear to a third party. |
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Channels of Distribution | Customers | Brands | ||
United States | ||||
Department Stores | Macy’s Inc. Stage Stores /Carson’s | Calvin Klein Jeans Calvin Klein Jeans andChaps | ||
Independent Retailers | Lord & Taylor Belk | Calvin KleinJeans Calvin Klein Jeans andChaps | ||
Chain Stores | Kohl’s | Chaps | ||
Membership Clubs | Sam’s Club and BJ’s Costco | Calvin Klein Jeans andChaps Calvin Klein Jeans | ||
Off-price and Other | TJ Maxx, Ross Stores, Specialty and Military | Calvin Klein Jeans andChaps | ||
Europe | Company operated retail stores, stores operated under shop-in-shop and concession agreements El Corte Ingles | Calvin Klein Jeans | ||
Canada | Hudson Bay Company and Sears, Costco and Winners | Calvin Klein Jeans andChaps | ||
Mexico, Central and South America | Company operated retail stores, stores operated under shop-in-shop and concession agreements Liverpool, Palacio de Hierro and Sears Sam’s Clubs, Costco, Walmart Stores operated under distributor agreements | Calvin KleinJeans Calvin KleinJeans andChaps Calvin Klein Jeans andChaps Calvin KleinJeans | ||
Asia | Company operated retail stores, shop-in-shop/concession locations/stores under retail licenses or distributor agreements/direct wholesale distributors | Calvin Klein Jeans |
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Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||||||||||||||
Net | % of | Net | % of | Net | % of | |||||||||||||||||||
Revenues | Total | Revenues | Total | Revenues | Total | |||||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||
United States | $ | 426,029 | 32.6 | % | $ | 460,421 | 38.2 | % | $ | 412,087 | 39.4 | % | ||||||||||||
International | 879,744 | 67.4 | % | 743,644 | 61.8 | % | 632,805 | 60.6 | % | |||||||||||||||
$ | 1,305,773 | 100.0 | % | $ | 1,204,065 | 100.0 | % | $ | 1,044,892 | 100.0 | % | |||||||||||||
Brand Name | Price Range | Type of Apparel | ||
Calvin KleinUnderwear | Better to premium | Women’s intimate apparel and sleepwear and men’s underwear and loungewear | ||
Warner’s | Moderate to better | Women’s intimate apparel | ||
Olga | Moderate to better | Women’s intimate apparel | ||
Olga’s Christina | Better | Women’s intimate apparel | ||
Body Nancy Ganz/Bodyslimmers | Better to premium | Women’s intimate apparel |
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Channels of Distribution | Customers | Brands | ||
United States | ||||
Department Stores | Macy’s Inc. Carson’s/Bon-Ton | Warner’s, Olga’s Christina,Olga and Calvin KleinUnderwear | ||
Independent Retailers | Nordstrom, Dillard’s, Lord & Taylor and Bloomingdale’s | Calvin KleinUnderwear and Warner’s | ||
Chain Stores | Kohl’s, JCPenney and Sears | Warner’s, Olga, and private label | ||
Membership Clubs | Costco and Sam’s Club | Warner’s and Calvin KleinUnderwear | ||
Off-price | TJ Maxx/ Marshall’s Century 21 and Ross Stores | Warner’s, Olga and Calvin KleinUnderwear | ||
Mass Merchandisers | Target, Kmart | Warner’s and Olga | ||
Canada | Hudson Bay Company, Zellers, Sears and Wal-Mart Costco and Winners Company operated retail stores | Warner’s, Olga, Body Nancy Ganz/Bodyslimmers and Calvin Klein UnderwearCalvin Klein UnderwearCalvin KleinUnderwear | ||
Mexico, Central and South America | Liverpool, Palacio de Hierro, Suburbia, Sears | Warner’s, Olga, Body Nancy Ganz/Bodyslimmers and Calvin KleinUnderwear | ||
Sam’s Clubs Costco | Warner’s Calvin KleinUnderwear | |||
Company operated retail stores, stores operated under shop-in-shop and concession agreements | Calvin KleinUnderwear | |||
Europe | Harrods, House of Fraser, Galeries Lafayette, Selfridges Debenhams, Au Printemps, Karstadt, Kaufhof and El Corte Ingles | Calvin KleinUnderwear | ||
Company operated retail stores, shop-in-shop/concession locations and stores under retail licenses or distributor agreements | Calvin KleinUnderwear | |||
Asia | Company operated retail stores, shop-in-shop/concession locations and stores under retail licenses or distributor agreements/direct wholesale distributors | Calvin KleinUnderwear |
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Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||||||||||||||
Net | % of | Net | % of | Net | % of | |||||||||||||||||||
Revenues | Total | Revenues | Total | Revenues | Total | |||||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||
United States | $ | 366,345 | 39.3 | % | $ | 337,985 | 40.5 | % | $ | 295,285 | 40.8 | % | ||||||||||||
International | 565,783 | 60.7 | % | 496,025 | 59.5 | % | 427,937 | 59.2 | % | |||||||||||||||
$ | 932,128 | 100.0 | % | $ | 834,010 | 100.0 | % | $ | 723,222 | 100.0 | % | |||||||||||||
Brand Name | Price Range | Type of Apparel | ||
Speedo | Moderate to premium | Men’s and women’s competitive swimwear, competitive and non- competitive swim accessories, men’s swimwear and coordinating T-shirts, women’s fitness swimwear, fashion swimwear, footwear and children’s swimwear | ||
Calvin Klein | Better to premium | Men’s and women’s swimwear | ||
Lifeguard | Upper moderate to better | Men’s and women’s swimwear and related products |
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Channels of Distribution | Customers | Brands | ||
United States | ||||
Department Stores | Macy’s Inc. | Speedoswimwear and accessories,Calvin Klein swimwear | ||
Independent Retailers | Dillard’s and Belk | Speedoswimwear, Calvin Kleinswimwear | ||
Chain Stores | JCPenney and Kohl’s | Speedo swimwear and accessories, | ||
Membership Clubs | Costco and Sam’s Club | Speedo swimwear, active apparel and accessories | ||
Mass Merchandisers | Target | Speedo accessories | ||
Other | Military, The Sports Authority, Dick’s Sporting Goods, Amazon and team dealers | Speedo swimwear and accessories,Lifeguard, Calvin Klein swimwear | ||
Off-price | TJ Maxx, Ross Stores | Speedo swimwear and accessories,Calvin Klein swimwear | ||
Canada | Hudson Bay Company, Sears and Winners Costco | Speedo swimwear and accessories,Calvin Klein Speedo swimwear and accessories | ||
Mexico, Central and South America | Liverpool, Palacio de Hierro, Marti, Wal-Mart and Costco | Speedoswimwear and accessories,Calvin Klein Speedo swimwear and accessories | ||
Europe | El Corte Ingles, House of Fraser, La Rinascente and Company-owned stores/stores operated under distributor agreements | Calvin Kleinswimwear |
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Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||||||||||||||
Net | % of | Net | % of | Net | % of | |||||||||||||||||||
Revenues | Total | Revenues | Total | Revenues | Total | |||||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||
United States | $ | 220,865 | 80.2 | % | $ | 209,761 | 81.4 | % | $ | 209,319 | 83.2 | % | ||||||||||||
International | 54,622 | 19.8 | % | 47,915 | 18.6 | % | 42,192 | 16.8 | % | |||||||||||||||
$ | 275,487 | 100.0 | % | $ | 257,676 | 100.0 | % | $ | 251,511 | 100.0 | % | |||||||||||||
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Name | Age | Position | ||
Helen McCluskey | 56 | Director, President and Chief Executive Officer | ||
Lawrence R. Rutkowski | 53 | Executive Vice President and Chief Financial Officer | ||
Martha Olson | 56 | President — Intimate Apparel and Swimwear Groups | ||
Dwight Meyer | 59 | President — Global Sourcing, Distribution and Logistics | ||
Frank Tworecke | 65 | President — Sportswear Group | ||
Stanley P. Silverstein | 59 | Executive Vice President — International Strategy and Business Development | ||
Elizabeth Wood | 50 | Executive Vice President — Human Resources | ||
Jay L. Dubiner | 48 | Senior Vice President, General Counsel and Secretary |
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• | product quality; | ||
• | brand recognition; | ||
• | price; | ||
• | product differentiation (including product innovation); | ||
• | sourcing and distribution expertise and efficiency; | ||
• | marketing and advertising; and | ||
• | customer service. |
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• | currency fluctuations; | ||
• | import and export license requirements; | ||
• | trade restrictions; | ||
• | changes in quotas, tariffs, taxes and duties; | ||
• | restrictions on repatriating foreign profits back to the U.S.; | ||
• | foreign laws and regulations; | ||
• | international trade agreements; | ||
• | difficulties in staffing and managing international operations; | ||
• | economic conditions overseas; | ||
• | political or social unrest; and | ||
• | disruptions or delays in shipments. |
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Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
Item 3. | Legal Proceedings. |
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Item 4. | Mine Safety Disclosures |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
High | Low | |||||||
2010 | ||||||||
First Quarter | $ | 48.63 | $ | 37.86 | ||||
Second Quarter | $ | 52.11 | $ | 34.97 | ||||
Third Quarter | $ | 52.11 | $ | 34.59 | ||||
Fourth Quarter | $ | 58.95 | $ | 48.76 | ||||
2011 | ||||||||
First Quarter | $ | 59.15 | $ | 48.21 | ||||
Second Quarter | $ | 65.01 | $ | 47.14 | ||||
Third Quarter | $ | 57.91 | $ | 44.39 | ||||
Fourth Quarter | $ | 53.95 | $ | 40.08 | ||||
2012 | ||||||||
First Quarter (through February 15, 2012) | $ | 60.50 | $ | 50.87 |
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Total Number | Maximum Number (or | |||||||||||||||
of Shares | Approximate Dollar Value) | |||||||||||||||
Total Number | Average | Purchased as | of Shares that May Yet Be | |||||||||||||
of Shares | Price Paid | Part of Publicly | Repurchased Under | |||||||||||||
Period | Repurchased | per Share | Announced Plan | the Announced Program | ||||||||||||
October 2, 2011 - October 29, 2011 | 86 | $ | 45.32 | |||||||||||||
October 30, 2011 - November 26, 2011 | 4,917 | $ | 49.38 | |||||||||||||
November 27, 2011 - December 31, 2011 | 131,554 | $ | 48.49 | 130,600 | $ | 188,674,026 |
Item 6. | Selected Financial Data. |
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Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | Fiscal 2008 | Fiscal 2007 | ||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||
Statement of operations data: | ||||||||||||||||||||
Net revenues | $ | 2,513.4 | $ | 2,295.8 | $ | 2,019.6 | $ | 2,062.8 | $ | 1,819.6 | ||||||||||
Gross profit | 1,100.9 | 1,020.0 | 864.3 | 920.8 | 749.7 | |||||||||||||||
Selling, general and administrative expenses | 844.7 | 758.1 | 638.9 | 738.2 | 601.7 | |||||||||||||||
Amortization of intangible assets | 48.0 | 11.5 | 11.0 | 9.4 | 13.2 | |||||||||||||||
Pension expense (income) | 26.7 | 2.6 | 20.9 | 31.6 | (8.8 | ) | ||||||||||||||
Operating income | 181.5 | 247.8 | 193.5 | 141.4 | 143.7 | |||||||||||||||
Other (income) loss | 0.6 | 6.2 | 1.9 | 1.9 | (7.1 | ) | ||||||||||||||
Interest expense | 16.3 | 14.5 | 23.9 | 29.5 | 37.7 | |||||||||||||||
Interest income | (3.4 | ) | (2.8 | ) | (1.2 | ) | (3.1 | ) | (3.8 | ) | ||||||||||
Income from continuing operations | 132.3 | 147.8 | 102.2 | 51.0 | 86.9 | |||||||||||||||
Loss from discontinued operations, net of taxes | (4.8 | ) | (9.2 | ) | (6.2 | ) | (3.8 | ) | (7.8 | ) | ||||||||||
Net income attributable to Warnaco Group common shareholders | 127.5 | 138.6 | 96.0 | 47.3 | 79.1 | |||||||||||||||
Dividends on Common Stock | — | — | — | — | — | |||||||||||||||
Per share data: | ||||||||||||||||||||
Income from continuing operations | ||||||||||||||||||||
Basic | $ | 3.07 | $ | 3.26 | $ | 2.22 | $ | 1.11 | $ | 1.90 | ||||||||||
Diluted | 3.01 | 3.19 | 2.19 | 1.08 | 1.84 | |||||||||||||||
Loss from discontinued operations, net of taxes | ||||||||||||||||||||
Basic | (0.11 | ) | (0.20 | ) | (0.13 | ) | (0.08 | ) | (0.17 | ) | ||||||||||
Diluted | (0.11 | ) | (0.20 | ) | (0.14 | ) | (0.08 | ) | (0.17 | ) | ||||||||||
Net income | ||||||||||||||||||||
Basic | 2.96 | 3.06 | 2.09 | 1.03 | 1.73 | |||||||||||||||
Diluted | 2.90 | 2.99 | 2.05 | 1.00 | 1.67 | |||||||||||||||
Dividends declared | — | — | — | — | — | |||||||||||||||
Shares used in computing earnings per share | ||||||||||||||||||||
Basic | 42,425,750 | 44,701,643 | 45,433,874 | 45,351,336 | 44,908,028 | |||||||||||||||
Diluted | 43,299,849 | 45,755,935 | 46,196,397 | 46,595,038 | 46,618,307 |
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Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | Fiscal 2008 | Fiscal 2007 | ||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||
Other data: | ||||||||||||||||||||
Cash flows from operating activities | $ | 128.9 | $ | 224.2 | $ | 264.9 | $ | 125.9 | $ | 160.4 | ||||||||||
Cash flows from investing activities | (80.4 | ) | (72.6 | ) | (52.6 | ) | (44.3 | ) | (20.8 | ) | ||||||||||
Cash flows from financing activities | (6.2 | ) | (283.1 | ) | (40.9 | ) | (120.7 | ) | (121.7 | ) | ||||||||||
Depreciation and amortization | 97.9 | 55.4 | 46.8 | 46.2 | 65.3 | |||||||||||||||
Capital expenditures | 55.4 | 50.3 | 42.8 | 41.0 | 41.8 |
December 31, | January 1, | January 2, | January 3, | December 29, | ||||||||||||||||
2011 | 2011 | 2010 | 2009 | 2007 | ||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||
Balance sheet data: | ||||||||||||||||||||
Working capital | $ | 612.6 | $ | 509.2 | $ | 560.2 | $ | 474.6 | $ | 588.0 | ||||||||||
Total assets | 1,747.9 | 1,653.3 | 1,659.8 | 1,496.1 | 1,606.5 | |||||||||||||||
Long-term debt (a) | 208.5 | — | 112.8 | 163.8 | 310.5 | |||||||||||||||
Stockholders’ equity | 897.2 | 972.6 | 916.1 | 787.7 | 772.9 |
(a) | Does not include current maturities of long-term debt. SeeNote 12 of Notes to Consolidated Financial Statements. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Build and maintain powerful global brands. The Company believes that one of its strengths is its portfolio of highly recognized brand names. The Company strives to enhance its brand image through superior design, product innovation, focused marketing and high quality product construction. The Company’s major brand isCalvin Klein,which generated 75.6% and 73.9% of the Company’s net revenues for Fiscal 2011 and Fiscal 2010, respectively. | ||
• | Grow the Company’s retail business through a combination of new store openings and the selective acquisition of stores operated by distributors of the Company’s products. During Fiscal 2011, the Company increased the number ofCalvin Kleinretail stores in Europe, Asia and South America by 400 retail stores (consisting of 74 free-standing full price stores and 326 shop-in-shop/concession stores). As of December 31, 2011, the Company operated (i) 1,759Calvin Kleinretail stores worldwide (consisting of 381 free-standing stores (including 263 full price and 118 outlet stores), 1,376 shop-in-shop/concession stores, oneCalvin KleinUnderwear on-line store and oneCalvin KleinJeans on-line store) and (ii) oneSpeedo®on-line store. |
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• | Retail net revenues represented 28.9% of the Company’s net revenues for Fiscal 2011 compared to 24.7% of the Company’s net revenues for Fiscal 2010. | ||
• | On July 8, 2011, the Company acquired a controlling interest (51%) in the business of a distributor of itsCalvin Kleinproducts in India for cash consideration of approximately $20.4 million (seeNote 2ofNotes to Consolidated Financial Statements). |
• | The Company expects to continue to expand its retail business, particularly in Northern Europe, Asia and South America. |
• | Leverage the Company’s international platform. The Company’s global design, sourcing, sales and distribution network allows it to reach consumers around the world. The Company works to effectively utilize its international presence to enhance and expand the worldwide reach of its branded apparel products. Net revenues from international operations represented 59.7% of the Company’s net revenues for Fiscal 2011 compared to 56.1% of the Company’s net revenues for Fiscal 2010. The Company believes that there are opportunities for continued growth in Europe, Asia and South America. |
• | Manage heritage businesses for profitability. The Company’s heritage businesses includeChaps®, Warner’s, Olga(Core Intimates)and Speedo®brands. During Fiscal 2011 compared to Fiscal 2010, net revenues of heritage businesses, in total, increased $14.8 million, comprising increases in the Core Intimates ($12.6 million) andSpeedo($10.8 million) businesses and a decrease in net revenue in theChapsbusiness ($8.6 million). Operating income ofSpeedoand Core Intimates businesses increased $7.4 million and $1.5 million from Fiscal 2010 to Fiscal 2011, respectively, while operating income ofChaps products declined $8.8 million from Fiscal 2010 to Fiscal 2011. Operating income of heritage businesses includes an increase of $5.6 million of restructuring expense for Fiscal 2011 compared to Fiscal 2010. |
(i) | the favorable effect of foreign currency fluctuations, which resulted in an increase in net revenues of $59.0 million for Fiscal 2011 compared to Fiscal 2010; | ||
(ii) | the launch of theck oneproduct line of men’s and women’s jeanswear and underwear during the first and second quarters of Fiscal 2011, which benefited both the Sportswear Group and Intimate Apparel Group, and new product launches ofWarner’sandOlgaproducts during the second quarter of Fiscal 2011, which benefited the Intimate Apparel Group; | ||
(iii) | the addition of 232,000 net square feet of retail space, bringing the total of the Company's retail space to 1,087,000 square feet worldwide (including space for both the Sportswear Group and the Intimate Apparel Group) through the opening of additionalCalvin Kleininternational retail stores during Fiscal 2011 and the acquisition of retail stores in Taiwan during the first quarter of Fiscal 2011 and in India during the third quarter of Fiscal 2011; | ||
(iv) | the results of operations of the business of the Company’s distributor ofCalvin Kleinproducts in Italy that was acquired during the fourth quarter of Fiscal 2010; and | ||
(v) | an increase of 4.1% from comparable store sales during Fiscal 2011 ($450.4 million) compared to Fiscal 2010 ($432.6 million). |
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Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||
Operating income, as reported (GAAP) | $ | 181,545 | $ | 247,811 | $ | 193,535 | ||||||
Restructuring and other exit costs (a) | 60,939 | 9,809 | 12,126 | |||||||||
Pension (b) | 26,744 | 2,550 | 20,873 | |||||||||
Brazil acquisition adjustment (c) | — | 1,521 | — | |||||||||
State franchise taxes and other (d) | — | 1,000 | 1,095 | |||||||||
Operating income, as adjusted (non-GAAP) | $ | 269,228 | $ | 262,691 | $ | 227,629 | ||||||
Income from continuing operations attributable to Warnaco Group common shareholders, as reported (GAAP) | $ | 132,252 | $ | 147,798 | $ | 102,225 | ||||||
Restructuring and other exit costs, net of income tax (a) | 44,524 | 7,273 | 8,620 | |||||||||
Pension, net of income tax (b) | 16,358 | 1,572 | 12,524 | |||||||||
Brazil acquisition adjustment, net of income tax (c) | — | 1,004 | — | |||||||||
State franchise taxes and other, net of income tax (d) | — | 630 | 657 | |||||||||
Costs related to the redemption of debt, net of taxation (e) | — | 2,368 | — | |||||||||
Taxation (f) | (19,012 | ) | 4,877 | 7,717 | ||||||||
Income from continuing operations attributable to Warnaco Group common shareholders, as adjusted (non-GAAP) | $ | 174,122 | $ | 165,522 | $ | 131,743 | ||||||
Diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders, as reported (GAAP) | $ | 3.01 | $ | 3.19 | $ | 2.19 | ||||||
Restructuring and other exit costs, net of income tax (a) | 1.01 | 0.16 | 0.18 | |||||||||
Pension, net of income tax (b) | 0.37 | 0.03 | 0.27 | |||||||||
Brazil acquisition adjustment, net of income tax (c) | — | 0.02 | — | |||||||||
State franchise taxes and other, net of income tax (d) | — | 0.01 | 0.01 | |||||||||
Costs related to the redemption of debt, net of taxation (e) | — | 0.05 | — | |||||||||
Taxation (f) | (0.43 | ) | 0.11 | 0.17 | ||||||||
Diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders, as adjusted (non-GAAP) | $ | 3.96 | $ | 3.57 | $ | 2.82 | ||||||
a) | For all periods presented, this adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of restructuring charges and other exit costs. Restructuring charges include, among other items, non-cash charges of $40,020 and $1,621 for Fiscal 2011 and Fiscal 2010, respectively. (See Note 4 of Notes to Consolidated Financial Statements). The income tax rates used to compute the income tax effect related to this adjustment correspond to the local statutory tax rates of the reporting entities that incurred restructuring charges or other exit costs. | |
b) | For all periods presented, this adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of pension expense. The income tax rates used to compute the income tax effect related to this adjustment correspond to the local statutory tax rates of the reporting entities that incurred the pension expense. | |
c) | This adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders, without the effects of an additional charge related to an adjustment to the contingent consideration to be paid for the business acquired in Brazil in 2009 as shown in the table above for Fiscal 2010. The income tax rate used to compute the income tax effect related to this adjustment corresponds to the local statutory tax rate in Brazil. | |
d) | This adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders, excluding a charge as shown in the table above for certain franchise taxes recorded during Fiscal 2010 related to the correction of amounts recorded in prior periods. The amount was not material to any prior period. The income tax rates used to compute the income tax effect related to the above-mentioned charge for franchise taxes correspond to the statutory tax rates in the United States. |
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e) | This adjustment seeks to present income from continuing operations attributable to Warnaco Group common shareholders and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effect of a charge of $3,747 ($2,368 after tax) as shown in the table above related to the repurchase of a portion of its Senior Notes during Fiscal 2010. The income tax rates used to compute the income tax effect related to this adjustment correspond to the statutory tax rates in the United States. | |
f) | For Fiscal 2011, this adjustment seeks to present income from continuing operations attributable to Warnaco Group common shareholders and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of certain discrete items or changes in estimates in prior period tax provisions as follows: |
• | a $10,900 tax benefit recorded during the Fiscal 2011 associated with the recognition of pre-2004 net operating losses in a foreign jurisdiction as result of receiving a favorable ruling from that country’s taxing authority during the second quarter of 2011; | ||
• | a $7,300 tax benefit recorded during Fiscal 2011 related to the reduction in the reserve for uncertain tax positions in certain foreign tax jurisdictions; and |
• | an $812 net tax benefit, recorded during Fiscal 2011 comprised of changes in various domestic and foreign tax provision estimates for Fiscal 2010 following the filing of certain of the Company’s tax returns during 2011 and adjustments for other discrete items. The adjustments for other discrete items reflect the federal, state and foreign tax effects related to: 1) direct and indirect income taxes associated with legal entity reorganizations and restructurings; 2) tax provision or benefit resulting from statute expirations or the finalization of income tax examinations; and 3) other adjustments not considered part of the Company’s core business activities. |
For Fiscal 2010, this adjustment seeks to present income from continuing operations and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without effects of certain tax adjustments related to errors or changes in estimates in prior period tax provisions (approximately $2,300) and adjustments for certain other discrete tax items (approximately $2,600). The adjustment related to prior period errors or estimate changes includes, among other items, a charge of approximately $2,300 recorded during Fiscal 2010 associated with the correction of an error in the 2006 through 2009 income tax provisions as a consequence of the loss of a credit related to prior year tax overpayments caused by the delayed filing of tax returns in a U.S. state taxing jurisdiction. This error was not material to any prior period. The adjustments for other discrete items reflect the federal, state and foreign tax effects related to: 1) direct and indirect income taxes associated with legal entity reorganizations and restructurings; 2) tax provision or benefit resulting from statute expirations or the finalization of income tax examinations, and 3) other adjustments not considered part of the Company’s core business activities. |
For Fiscal 2009, this adjustment seeks to present income from continuing operations and diluted earnings per share from continuing operations without the effects of certain tax adjustments related to changes in estimates or errors in prior period tax provisions (approximately $2,300), adjustments for certain other discrete tax items (approximately $1,700) and an adjustment for the amount recorded to correct for an error in the Company’s 2006 income tax provision associated with the recapture of cancellation of indebtedness income which had been deferred in connection with the Company’s bankruptcy proceedings in 2003 (approximately $3,600). The adjustments for other discrete items reflect the federal, state and foreign tax effects related to: 1) the effect of changes in tax laws (in 2009) related to the opening balances for deferred tax assets and liabilities; 2) direct and indirect income taxes associated with legal entity reorganizations and restructurings; 3) tax provision or benefit resulting from statute expirations or the finalization of income tax examinations: and 4) other adjustments not considered part of the Company’s core business activities |
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Fiscal 2011 | ||||||||||||
GAAP | Impact of Foreign | Non-GAAP | ||||||||||
As Reported | Currency Exchange | Constant Currency | ||||||||||
By Segment: | ||||||||||||
Sportswear Group | $ | 1,305,769 | $ | 34,796 | $ | 1,270,973 | ||||||
Intimate Apparel Group | 932,131 | 21,228 | 910,903 | |||||||||
Swimwear Group | 275,488 | 2,999 | 272,489 | |||||||||
Net revenues | $ | 2,513,388 | $ | 59,023 | $ | 2,454,365 | ||||||
By Region: | ||||||||||||
United States | $ | 1,013,239 | $ | — | $ | 1,013,239 | ||||||
Europe | 628,094 | 28,248 | 599,846 | |||||||||
Asia | 499,499 | 18,197 | 481,302 | |||||||||
Mexico, Central and South America | 240,262 | 7,132 | 233,130 | |||||||||
Canada | 132,294 | 5,446 | 126,848 | |||||||||
Total | $ | 2,513,388 | $ | 59,023 | $ | 2,454,365 | ||||||
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• | In determining the stock price volatility assumption used, the Company considers the historical volatility of its stock price, based upon daily quoted market prices of Common Stock on the New York Stock Exchange and, prior to May 15, 2008, on the NASDAQ Stock Market LLC, over a period equal to the expected term of the related equity instruments. The Company relies only on historical volatility since it provides the most reliable indication of future volatility. Future volatility is expected to be consistent with historical; historical volatility is calculated using a simple average calculation method; historical data is available for the length of the option’s expected term and a sufficient number of price observations are used consistently. Since the Company’s stock options are not traded on a public market, the Company does not use implied volatility. A higher volatility input to the Black-Scholes-Merton model increases the resulting compensation expense. | ||
• | Expected option life is the period of time from the grant date to the date on which an option is expected to be exercised. The Company used historical data to calculate expected option life (which yielded an expected life of 4.1 years, 4.2 years and 3.72 years for options granted in Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively). A shorter expected term would result in a lower compensation expense. | ||
• | The Company’s risk-free rate of return assumption for options granted in Fiscal 2011, Fiscal 2010 and Fiscal 2009 was equal to the quoted yield for U.S. treasury bonds as of the date of grant. |
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Fiscal | % of Net | Fiscal | % of Net | Fiscal | % of Net | |||||||||||||||||||
2011 | Revenues | 2010 | Revenues | 2009 | Revenues | |||||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||||||
Net revenues | $ | 2,513,388 | 100.0 | % | $ | 2,295,751 | 100.0 | % | $ | 2,019,625 | 100.0 | % | ||||||||||||
Cost of goods sold | 1,412,446 | 56.2 | % | 1,275,788 | 55.6 | % | 1,155,278 | 57.2 | % | |||||||||||||||
Gross profit | 1,100,942 | 43.8 | % | 1,019,963 | 44.4 | % | 864,347 | 42.8 | % | |||||||||||||||
Selling, general and administrative expenses | 844,696 | 33.6 | % | 758,053 | 33.0 | % | 638,907 | 31.6 | % | |||||||||||||||
Amortization of intangible assets | 47,957 | 1.9 | % | 11,549 | 0.5 | % | 11,032 | 0.5 | % | |||||||||||||||
Pension expense | 26,744 | 1.1 | % | 2,550 | 0.1 | % | 20,873 | 1.0 | % | |||||||||||||||
Operating income | 181,545 | 7.2 | % | 247,811 | 10.8 | % | 193,535 | 9.6 | % | |||||||||||||||
Other loss | 631 | 6,238 | 1,889 | |||||||||||||||||||||
Interest expense | 16,274 | 14,483 | 23,897 | |||||||||||||||||||||
Interest income | (3,361 | ) | (2,815 | ) | (1,248 | ) | ||||||||||||||||||
Income from continuing operations before provision for income taxes and noncontrolling interest | 168,001 | 229,905 | 168,997 | |||||||||||||||||||||
Provision for income taxes | 36,006 | 82,107 | 64,272 | |||||||||||||||||||||
Income from continuing operations before noncontrolling interest | 131,995 | 147,798 | 104,725 | |||||||||||||||||||||
Loss from discontinued operations, net of taxes | (4,802 | ) | (9,217 | ) | (6,227 | ) | ||||||||||||||||||
Net income | 127,193 | 138,581 | 98,498 | |||||||||||||||||||||
Less: Net income (loss) attributable to the noncontrolling interest | (257 | ) | — | 2,500 | ||||||||||||||||||||
Net income attributable to Warnaco Group, Inc. | $ | 127,450 | $ | 138,581 | $ | 95,998 | ||||||||||||||||||
Amounts attributable to Warnaco Group Inc.: | ||||||||||||||||||||||||
Net income from continuing operations, net of tax | $ | 132,252 | $ | 147,798 | $ | 102,225 | ||||||||||||||||||
Discontinued operations, net of tax | (4,802 | ) | (9,217 | ) | (6,227 | ) | ||||||||||||||||||
Net income | $ | 127,450 | $ | 138,581 | $ | 95,998 | ||||||||||||||||||
Constant | ||||||||||||||||||||
Increase | % | $ % | ||||||||||||||||||
Fiscal 2011 | Fiscal 2010 | (Decrease) | Change | Change | ||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||
Sportswear Group | $ | 1,305,769 | $ | 1,204,065 | $ | 101,704 | 8.4 | % | 5.6 | % | ||||||||||
Intimate Apparel Group | 932,131 | 834,010 | 98,121 | 11.8 | % | 9.2 | % | |||||||||||||
Swimwear Group | 275,488 | 257,676 | 17,812 | 6.9 | % | 5.7 | % | |||||||||||||
Net revenues | $ | 2,513,388 | $ | 2,295,751 | $ | 217,637 | 9.5 | % | 6.9 | % | ||||||||||
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Fiscal 2011 | Fiscal 2010 | |||||||
United States — wholesale | ||||||||
Department stores and independent retailers | 8 | % | 10 | % | ||||
Specialty stores | 7 | % | 7 | % | ||||
Chain stores | 7 | % | 7 | % | ||||
Mass merchandisers | 2 | % | 2 | % | ||||
Membership clubs | 5 | % | 6 | % | ||||
Off price and other | 11 | % | 11 | % | ||||
Total United States — wholesale | 40 | % | 43 | % | ||||
International — wholesale | 31 | % | 32 | % | ||||
Retail (a) | 29 | % | 25 | % | ||||
Net revenues — consolidated | 100 | % | 100 | % | ||||
(a) | for Fiscal 2011 and Fiscal 2010, 98.3% and 97.5%, respectively, of retail net revenues were derived from the Company’s international operations. |
Net Revenues | ||||||||||||||||||||
Constant $ | ||||||||||||||||||||
Increase / | % Change | |||||||||||||||||||
Fiscal 2011 | Fiscal 2010 | (Decrease) | % Change | (a) | ||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||
United States | $ | 1,013,239 | $ | 1,008,167 | $ | 5,072 | 0.5 | % | 0.5 | % | ||||||||||
Europe | 628,094 | 576,644 | 51,450 | 8.9 | % | 4.0 | % | |||||||||||||
Asia | 499,499 | 391,264 | 108,235 | 27.7 | % | 23.0 | % | |||||||||||||
Mexico, Central and South America | 240,262 | 188,217 | 52,045 | 27.7 | % | 23.9 | % | |||||||||||||
Canada | 132,294 | 131,459 | 835 | 0.6 | % | -3.5 | % | |||||||||||||
$ | 2,513,388 | $ | 2,295,751 | $ | 217,637 | 9.5 | % | 6.9 | % | |||||||||||
(a) | constant dollar percentage change is a non-GAAP measure. SeeNon-GAAP Measures, above. |
Net Revenues | ||||||||||||||||
Increase / | ||||||||||||||||
Fiscal 2011 | Fiscal 2010 | (Decrease) | % Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Wholesale | $ | 1,786,942 | $ | 1,729,077 | $ | 57,865 | 3.3 | % | ||||||||
Retail | 726,446 | 566,674 | 159,772 | 28.2 | % | |||||||||||
Total | $ | 2,513,388 | $ | 2,295,751 | $ | 217,637 | 9.5 | % | ||||||||
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December 31, 2011 | January 1, 2011 | |||||||||||||||||||||||||||||||
Segments / Brands | Asia | Europe | Americas | Total | Asia | Europe | Americas | Total | ||||||||||||||||||||||||
Sportswear-Calvin Klein Jeans | ||||||||||||||||||||||||||||||||
Number of Owned Full Price Stores | 80 | 54 | 20 | 154 | 46 | 41 | 16 | 103 | ||||||||||||||||||||||||
Number of Owned Outlet Stores | 11 | 45 | 1 | 57 | 10 | 42 | 1 | 53 | ||||||||||||||||||||||||
Number of Concession / Shop-in-shop Stores | 281 | 117 | — | 398 | 219 | 87 | — | 306 | ||||||||||||||||||||||||
Total Number of Stores | 372 | 216 | 21 | 609 | 275 | 170 | 17 | 462 | ||||||||||||||||||||||||
Intimate Apparel-Calvin Klein Underwear | ||||||||||||||||||||||||||||||||
Number of Owned Full Price Stores | 50 | 26 | 33 | 109 | 39 | 16 | 31 | 86 | ||||||||||||||||||||||||
Number of Owned Outlet Stores | 8 | 41 | 12 | 61 | 6 | 41 | 18 | 65 | ||||||||||||||||||||||||
Number of Concession / Shop-in-shop Stores | 258 | 467 | 62 | 787 | 176 | 390 | — | 566 | ||||||||||||||||||||||||
Total Number of Stores | 316 | 534 | 107 | 957 | 221 | 447 | 49 | 717 | ||||||||||||||||||||||||
Swimwear-Calvin Klein Swimwear | ||||||||||||||||||||||||||||||||
Number of Owned Full Price Stores | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Number of Owned Outlet Stores | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Number of Concession / Shop-in-shop Stores | — | 191 | — | 191 | — | 178 | — | 178 | ||||||||||||||||||||||||
Total Number of Stores | — | 191 | — | 191 | — | 178 | — | 178 | ||||||||||||||||||||||||
Total Company* | ||||||||||||||||||||||||||||||||
Number of Owned Full Price Stores | 130 | 80 | 53 | 263 | 85 | 57 | 47 | 189 | ||||||||||||||||||||||||
Number of Owned Outlet Stores | 19 | 86 | 13 | 118 | 16 | 83 | 19 | 118 | ||||||||||||||||||||||||
Number of Concession / Shop-in-shop Stores | 539 | 775 | 62 | 1,376 | 395 | 655 | — | 1,050 | ||||||||||||||||||||||||
Total Number of Stores | 688 | 941 | 128 | 1,757 | 496 | 795 | 66 | 1,357 | ||||||||||||||||||||||||
Total Square Footage (thousands) | 449.2 | 516.4 | 121.4 | 1087.0 | 281.4 | 450.8 | 123.1 | 855.3 |
* | In addition to the stores above, the Company operated oneCalvin KleinJeans on-line store, oneCalvin KleinUnderwear on- line store and oneSpeedoon-line store as of December 31, 2011 and January 1, 2011. |
Increase | % | |||||||||||||||
Fiscal 2011 | Fiscal 2010 | (Decrease) | Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Calvin KleinJeans | $ | 684,009 | $ | 684,036 | $ | (27 | ) | 0.0 | % | |||||||
Chaps | 199,536 | 208,132 | (8,596 | ) | -4.1 | % | ||||||||||
Sportswear wholesale | 883,545 | 892,168 | (8,623 | ) | -1.0 | % | ||||||||||
Sportswear retail | 422,224 | 311,897 | 110,327 | 35.4 | % | |||||||||||
Sportswear Group (a) | $ | 1,305,769 | $ | 1,204,065 | $ | 101,704 | 8.4 | % | ||||||||
(a) | Includes net revenues of $151.8 million and $131.5 million for Fiscal 2011 and Fiscal 2010, respectively, related to theCalvin Kleinaccessories business in Europe, Asia, Canada and in Mexico and Central and South America. Those amounts include net revenues ofCalvin Klein“bridge” accessories in Europe of $59.1 million and $49.0 million for Fiscal 2011 and Fiscal 2010, respectively. SeeNote 4ofNotes to Consolidated Financial Statements — Restructuring and Other Exit Costsfor a discussion of the Company’s and CKI’s intention for the Company to discontinue operation of the “bridge” business. |
Fiscal 2011 compared to Fiscal 2010 |
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(i) | an increase in sales in Mexico and Central and South America to department and specialty stores, including new customers, an increase in new product offerings and increased sales among existing customers; and |
(ii) | a net increase in Asia primarily due to (a) the expansion of the distribution network in the People’s Republic of China, partially offset by (b) a decline in sales in other regions of Asia and (c) the conversion of the Company’s wholesale businesses in the People’s Republic of China and Singapore (in the second quarter of Fiscal 2010), Taiwan (January 2011) and India (July 2011) to retail businesses as a result of the acquisition of distributors’ businesses in those regions. |
Those increases were partially offset by: |
(iii) | a decrease in Europe primarily due to decreased sales ofCalvin Klein Jeans and accessories to department, specialty and independent stores and distributors and to the off-price channel, due in part to the conversion of a portion of the Company’s wholesale businesses in Italy to retail businesses, as a result of the acquisition of the Company’s Italian distributor ofCalvin Kleinproducts in the fourth quarter of Fiscal 2010. In addition, the Company believes that deteriorating macro-economic conditions, particularly in southern Europe combined with a less than favorable reception of the Company’s product offerings at retail negatively impacted net revenues. |
Increase | % | |||||||||||||||
Fiscal 2011 | Fiscal 2010 | (Decrease) | Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Calvin KleinUnderwear | $ | 469,413 | $ | 431,706 | $ | 37,707 | 8.7 | % | ||||||||
Core Intimates | 176,860 | 164,212 | 12,648 | 7.7 | % | |||||||||||
Intimate Apparel wholesale | 646,273 | 595,918 | 50,355 | 8.4 | % | |||||||||||
Calvin KleinUnderwear retail | 285,858 | 238,092 | 47,766 | 20.1 | % | |||||||||||
Intimate Apparel Group | $ | 932,131 | $ | 834,010 | $ | 98,121 | 11.8 | % | ||||||||
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(i) | in Europe, primarily due to increased sales to customers in department stores and independent stores, including new launches of women’s products, partially offset by an increase in customer allowances. In addition, the Company believes that deteriorating macro-economic conditions in southern Europe negatively impacted net revenues; |
(ii) | in Mexico and Central and South America, primarily due to increased sales to department stores and specialty stores, including an increase in new product offerings and increased sales among existing customers, and an increase in sales to distributors; and |
(iii) | in Asia primarily due to (a) the expansion of the distribution network in the People’s Republic of China and other regions of Asia, partially offset by (b) the conversion of the Company’s wholesale businesses in the People’s Republic of China and Singapore (in the second quarter of Fiscal 2010), Taiwan (January 2011) and India (July 2011) to retail businesses as a result of the acquisition of distributors’ businesses in those regions. |
Increase | % | |||||||||||||||
Fiscal 2011 | Fiscal 2010 | (Decrease) | Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Speedo | $ | 229,270 | $ | 217,499 | $ | 11,771 | 5.4 | % | ||||||||
Calvin Klein | 27,854 | 23,492 | 4,362 | 18.6 | % | |||||||||||
Swimwear wholesale | 257,124 | 240,991 | 16,133 | 6.7 | % | |||||||||||
Swimwear retail (a) | 18,364 | 16,685 | 1,679 | 10.1 | % | |||||||||||
Swimwear Group | $ | 275,488 | $ | 257,676 | $ | 17,812 | 6.9 | % | ||||||||
(a) | includes $10.0 million and $7.4 million for Fiscal 2011 and Fiscal 2010, respectively, related toCalvin Kleinretail swimwear. |
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% of Brand | % of Brand | |||||||||||||||
Fiscal 2011 | Net Revenues | Fiscal 2010 | Net Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Sportswear Group | $ | 557,284 | 42.7 | % | $ | 516,080 | 42.9 | % | ||||||||
Intimate Apparel Group | 443,305 | 47.6 | % | 416,700 | 50.0 | % | ||||||||||
Swimwear Group | 100,353 | 36.4 | % | 87,183 | 33.8 | % | ||||||||||
Total gross profit | $ | 1,100,942 | 43.8 | % | $ | 1,019,963 | 44.4 | % | ||||||||
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% of Brand | % of Brand | |||||||||||||||
Fiscal 2011 | Net Revenues | Fiscal 2010 | Net Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Sportswear Group | $ | 430,173 | 32.9 | % | $ | 362,464 | 30.1 | % | ||||||||
Intimate Apparel Group | 307,394 | 33.0 | % | 280,897 | 33.7 | % | ||||||||||
Swimwear Group | 72,280 | 26.2 | % | 68,483 | 26.6 | % | ||||||||||
Corporate | 34,849 | na | 46,209 | na | ||||||||||||
Total SG&A | $ | 844,696 | 33.6 | % | $ | 758,053 | 33.0 | % | ||||||||
(i) | an increase of $56.1 million in selling and distribution expenses primarily associated with the opening and acquisition of additional retail stores in Europe, Asia and in Mexico and Central and South America, partially offset by the elimination of duplicative costs in Fiscal 2011 through the consolidation of the distribution centers in Europe during Fiscal 2010; |
(ii) | an increase of $2.6 million in marketing expenses, primarily related to a contractual increase in advertising costs due to increased sales; and |
(iii) | an increase in administrative expenses of $9.0 million, primarily related to an increase in restructuring charges of $8.0 million (seeNote 4ofNotes to Consolidated Financial Statements), additional expense due to foreign exchange losses ($4.3 million) and other general administrative expenses ($1.9 million), partially offset by decreases in employee compensation ($3.3 million) and acquisition expense ($1.9 million). |
(i) | an increase of $27.5 million in selling and distribution expenses primarily associated with the opening and acquisition of additional retail stores in Europe, Asia and in Mexico and Central and South America, partially offset by the elimination of duplicative costs in Fiscal 2011 through the consolidation of the distribution centers in Europe during Fiscal 2010; |
(ii) | a decrease of $5.1 million in marketing expenses, primarily related to the global launch of theck oneproduct line of men’s and women’s underwear during the first quarter of Fiscal 2011, compared to higher expenditures related to the Company’sCalvin KleinX product line of men’s underwear, which was launched during the second and third quarters of Fiscal 2010, and theCalvin KleinEnvy product line of women’s underwear, which was launched during the third and fourth quarters of Fiscal 2010; and |
(iii) | an increase in administrative expenses of $4.1 million, primarily related to increases in restructuring charges of $2.5 million (seeNote 4ofNotes to Consolidated Financial Statements) and other general administrative expenses ($2.8 million) and additional expense due to foreign exchange losses ($1.6 million), partially offset by a gain of $2.0 million on the sale of the Company’s Nancy Ganz trademarks in Australia and New Zealand during Fiscal 2011 (seeNote 5ofNotes to Consolidated Financial Statements) and a decrease in employee compensation ($0.8 million). |
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(i) | an increase of $0.7 million in selling and distribution expenses primarily associated with the opening and acquisition of additional retail stores in Europe, Asia and in Mexico and Central and South America; |
(ii) | an increase of $1.8 million in marketing expenses, primarily related to increased advertising in the U.S.; and |
(iii) | an increase in administrative expenses of $1.3 million, primarily related to an increase in restructuring charges of $3.7 million (seeNote 4ofNotes to Consolidated Financial Statements), partially offset by decreases in employee compensation ($1.6 million) and other general administrative expenses ($0.8 million). |
% of | % of | |||||||||||||||
Group Net | Group Net | |||||||||||||||
Fiscal 2011 | Revenues | Fiscal 2010 | Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Sportswear Group (a) (b) | $ | 80,641 | 6.2 | % | $ | 143,260 | 11.9 | % | ||||||||
Intimate Apparel Group (b) | 133,755 | 14.3 | % | 134,928 | 16.2 | % | ||||||||||
Swimwear Group (b) | 28,067 | 10.2 | % | 18,698 | 7.3 | % | ||||||||||
Unallocated corporate expenses (b)(c) | (60,918 | ) | na | (49,075 | ) | na | ||||||||||
Operating income (d) (e) (f) | $ | 181,545 | na | $ | 247,811 | na | ||||||||||
Operating income as a percentage of net revenue | 7.2 | % | 10.8 | % |
(a) | includes a non-cash impairment charge of $35.2 million related to the Company’sCK/Calvin Klein “bridge” licenses (seeNote 4ofNotes to Consolidated Financial Statements). | |
(b) | reflects the allocation of $9,892 of corporate expenses to the Sportswear Group ($6,924), Intimate Apparel Group ($3,796) and Swimwear Group (($828)), respectively, during Fiscal 2010 to conform to the presentation for Fiscal 2011 (seeOverview, above). | |
(c) | includes $26.1 million and $2.9 million related to pension expense. | |
(d) | includes approximately $60.9 million and $9.8 million for Fiscal 2011 and Fiscal 2010, respectively, related to restructuring expenses. SeeNote.4ofNotes to Consolidated Financial Statements. | |
(e) | includes a gain of $2.0 million for Fiscal 2011 related to the sale and assignment of the Company’sNancy Ganz trademarks in Australia and New Zealand to the Company’s former licensee for cash consideration of $2.0 million. | |
(f) | includes a gain of $1.6 million for Fiscal 2011 related to recovery of an insurance claim related to a fire in a warehouse in Peru. |
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% of Brand | % of | |||||||||||||||
Net | Brand Net | |||||||||||||||
Fiscal 2011 (b) | Revenues | Fiscal 2010 (b) | Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Calvin KleinJeans | $ | 43,169 | 6.3 | % | $ | 100,343 | 14.7 | % | ||||||||
Chaps | 15,104 | 7.6 | % | 23,925 | 11.5 | % | ||||||||||
Sportswear wholesale | 58,273 | 6.6 | % | 124,268 | 13.9 | % | ||||||||||
Sportswear retail | 22,368 | 5.3 | % | 18,992 | 6.1 | % | ||||||||||
Sportswear Group (a) | $ | 80,641 | 6.2 | % | $ | 143,260 | 11.9 | % | ||||||||
(a) | includes restructuring charges of $45.9 million and $1.8 million for Fiscal 2011 and Fiscal 2010, respectively. | |
(b) | includes an allocation of shared services expenses by brand as detailed below: |
Fiscal 2011 | Fiscal 2010 | |||||||
(in thousands of dollars) | ||||||||
Calvin KleinJeans | $ | 17,628 | $ | 18,039 | ||||
Chaps | 7,888 | 8,128 | ||||||
Sportswear wholesale | 25,516 | 26,167 | ||||||
Sportswear retail | 2,319 | 1,568 | ||||||
Sportswear Group | $ | 27,835 | $ | 27,735 | ||||
% of Brand | % of | |||||||||||||||
Net | Brand Net | |||||||||||||||
Fiscal 2011 (b) | Revenues | Fiscal 2010 (b) | Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Calvin KleinUnderwear | $ | 80,242 | 17.1 | % | $ | 82,915 | 19.2 | % | ||||||||
Core Intimates | 18,729 | 10.6 | % | 17,226 | 10.5 | % | ||||||||||
Intimate Apparel wholesale | 98,971 | 15.3 | % | 100,141 | 16.8 | % | ||||||||||
Calvin KleinUnderwear retail | 34,784 | 12.2 | % | 34,787 | 14.6 | % | ||||||||||
Intimate Apparel Group (a) | $ | 133,755 | 14.3 | % | $ | 134,928 | 16.2 | % | ||||||||
(a) | includes restructuring charges of $6.5 million and $3.6 million for Fiscal 2011 and Fiscal 2010, respectively. | |
(b) | includes an allocation of shared services expenses by brand as detailed below: |
Fiscal 2011 | Fiscal 2010 | |||||||
(in thousands of dollars) | ||||||||
Calvin KleinUnderwear | $ | 12,294 | $ | 12,499 | ||||
Core Intimates | 6,062 | 5,931 | ||||||
Intimate Apparel wholesale | 18,356 | 18,430 | ||||||
Calvin KleinUnderwear retail | 1,451 | 1,082 | ||||||
Intimate Apparel Group | $ | 19,807 | $ | 19,512 | ||||
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% of Brand | % of | |||||||||||||||
Net | Brand Net | |||||||||||||||
Fiscal 2011 (c) | Revenues | Fiscal 2010 (c) | Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Speedo | $ | 26,465 | 11.5 | % | $ | 19,028 | 8.7 | % | ||||||||
Calvin Klein | (1,801 | ) | -6.5 | % | (2,826 | ) | -12.0 | % | ||||||||
Swimwear wholesale | 24,664 | 9.6 | % | 16,202 | 6.7 | % | ||||||||||
Swimwear retail (a) | 3,403 | 18.5 | % | 2,496 | 15.0 | % | ||||||||||
Swimwear Group (b) | $ | 28,067 | 10.2 | % | $ | 18,698 | 7.3 | % | ||||||||
(a) | includes $2.2 million and $1.3 million for Fiscal 2011 and Fiscal 2010, respectively related toCalvin Kleinretail swimwear. | |
(b) | includes restructuring charges of $7.5 million and $3.6 million for Fiscal 2011 and Fiscal 2010, respectively. | |
(c) | Includes an allocation of shared services expenses by brand in the following table: |
Fiscal 2011 | Fiscal 2010 | |||||||
(in thousands of dollars) | ||||||||
Speedo | $ | 8,717 | $ | 8,241 | ||||
Calvin Klein | 800 | 608 | ||||||
Swimwear wholesale | 9,517 | 8,849 | ||||||
Swimwear retail | 401 | 564 | ||||||
Swimwear Group | $ | 9,918 | $ | 9,413 | ||||
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Constant | ||||||||||||||||||||
Increase | % | $ % | ||||||||||||||||||
Fiscal 2010 | Fiscal 2009 | (Decrease) | Change | Change | ||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||
Sportswear Group | $ | 1,204,065 | $ | 1,044,892 | $ | 159,173 | 15.2 | % | 13.8 | % | ||||||||||
Intimate Apparel Group | 834,010 | 723,222 | 110,788 | 15.3 | % | 14.9 | % | |||||||||||||
Swimwear Group | 257,676 | 251,511 | 6,165 | 2.5 | % | 1.7 | % | |||||||||||||
Net revenues | $ | 2,295,751 | $ | 2,019,625 | $ | 276,126 | 13.7 | % | 12.7 | % | ||||||||||
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Fiscal 2010 | Fiscal 2009 | |||||||
United States — wholesale | ||||||||
Department stores and independent retailers | 10 | % | 10 | % | ||||
Specialty stores | 7 | % | 8 | % | ||||
Chain stores | 7 | % | 8 | % | ||||
Mass merchandisers | 2 | % | 1 | % | ||||
Membership clubs | 6 | % | 7 | % | ||||
Off price and other | 11 | % | 10 | % | ||||
Total United States — wholesale | 43 | % | 44 | % | ||||
International — wholesale | 32 | % | 33 | % | ||||
Retail (a) | 25 | % | 23 | % | ||||
Net revenues — consolidated | 100 | % | 100 | % | ||||
(a) | for Fiscal 2010 and Fiscal 2009, 97.5% and 97.0%, respectively, of retail net revenues were derived from the Company’s international operations. |
Net Revenues | ||||||||||||||||||||
Increase / | Constant $ % | |||||||||||||||||||
Fiscal 2010 | Fiscal 2009 | (Decrease) | % Change | Change (a) | ||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||
United States | $ | 1,008,167 | $ | 916,691 | $ | 91,476 | 10.0 | % | 10.0 | % | ||||||||||
Europe | 576,644 | 551,595 | 25,049 | 4.5 | % | 8.9 | % | |||||||||||||
Asia | 391,264 | 322,890 | 68,374 | 21.2 | % | 15.7 | % | |||||||||||||
Mexico, Central and South America | 188,217 | 119,149 | 69,068 | 58.0 | % | 45.0 | % | |||||||||||||
Canada | 131,459 | 109,300 | 22,159 | 20.3 | % | 10.5 | % | |||||||||||||
$ | 2,295,751 | $ | 2,019,625 | $ | 276,126 | 13.7 | % | 12.7 | % | |||||||||||
(a) | Constant dollar percent change is a non-GAAP measure. See Non-GAAP Measures, above. |
Net Revenues | ||||||||||||||||
Increase / | ||||||||||||||||
Fiscal 2010 | Fiscal 2009 | (Decrease) | % Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Wholesale | $ | 1,729,077 | $ | 1,564,452 | $ | 164,625 | 10.5 | % | ||||||||
Retail | 566,674 | 455,173 | 111,501 | 24.5 | % | |||||||||||
Total | $ | 2,295,751 | $ | 2,019,625 | $ | 276,126 | 13.7 | % | ||||||||
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Increase | % | |||||||||||||||
Fiscal 2010 | Fiscal 2009 | (Decrease) | Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Calvin KleinJeans | $ | 684,036 | $ | 645,020 | $ | 39,016 | 6.0 | % | ||||||||
Chaps | 208,132 | 168,083 | 40,049 | 23.8 | % | |||||||||||
Sportswear wholesale | 892,168 | 813,103 | 79,065 | 9.7 | % | |||||||||||
Sportswear retail | 311,897 | 231,789 | 80,108 | 34.6 | % | |||||||||||
Sportswear Group (a) (b) | $ | 1,204,065 | $ | 1,044,892 | $ | 159,173 | 15.2 | % | ||||||||
(a) | Includes net revenues of $131.5 million and $104.4 million related to theCalvin Klein accessories business in Europe, Asia, Canada and Mexico and Central and South America for Fiscal 2010 and Fiscal 2009, respectively. | |
(b) | In order to conform to the Company’s presentation for Fiscal 2010, approximately $45.9 million ofCalvin Kleinunderwear net revenues for Fiscal 2009, which had previously been included in the Sportswear Group, were reclassified to the Intimate Apparel Group. |
(i) | an increase in sales in Mexico and Central and South America to department stores, membership clubs (primarily due to the introduction of new styles) and specialty stores, including an increase in new customers and an expansion of locations of existing customers; |
(ii) | an increase in the U.S. primarily due to increased sales to the off-price channel, due primarily to additional product offerings, partially offset by a decrease in sales to department stores and clubs; |
(iii) | an increase in Asia primarily due to (a) the expansion of the distribution network in the People’s Republic of China and other regions of Asia, partially offset by the conversion of a portion of the Company’s wholesale businesses in the People’s Republic of China and Singapore to retail businesses, as a result of the acquisition of distributors’ businesses in those regions in the second quarter of 2010, and (b) a decrease in sales to the off-price channel primarily due to lower levels of excess inventory; |
(iv) | in Canada, an increase in net revenues from sales to department stores and independent retailers, which was partially offset by a decline in net revenues from sales in the off-price channel; partially offset by |
(v) | a decrease in wholesale net revenue in Europe primarily due to decreased sales ofCalvin KleinJeans to department, specialty and independent stores, due in part to the acquisition of the Company’s Italian distributor ofCalvin Klein products in the fourth quarter of Fiscal 2010, partially offset by an increase in sales of accessories. |
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Increase | % | |||||||||||||||
Fiscal 2010 | Fiscal 2009 | (Decrease) | Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Calvin KleinUnderwear | $ | 431,706 | $ | 373,620 | $ | 58,086 | 15.5 | % | ||||||||
Core Intimates | 164,212 | 143,006 | 21,206 | 14.8 | % | |||||||||||
Intimate Apparel wholesale | 595,918 | 516,626 | 79,292 | 15.3 | % | |||||||||||
Calvin KleinUnderwear retail | 238,092 | 206,596 | 31,496 | 15.2 | % | |||||||||||
Intimate Apparel Group (a) | $ | 834,010 | $ | 723,222 | $ | 110,788 | 15.3 | % | ||||||||
(a) | Includes approximately $45.9 million for Fiscal 2009, related to certain sales ofCalvin Kleinunderwear, previously included in the Sportswear Group, in order to conform to the Fiscal 2010 presentation. |
(i) | increases in all geographies in the department store channel, which benefitted from the launch of theCalvin KleinX men’s product line and theCalvin KleinEnvy women’s product line, primarily in Europe and Asia; |
(ii) | an increase in the U.S., which primarily resulted from an increase in sales to the off-price channel due primarily to additional product offerings; |
(iii) | an increase in Mexico, Central and South America, primarily due to increased sales to membership clubs (primarily due to the introduction of new styles) and specialty stores, including an increase in new customers and an expansion of locations of existing customers; |
(iv) | in Asia, an increase primarily due to (a) the expansion of the Company’s distribution networks in the People’s Republic of China and other regions of Asia, partially offset by the conversion of a portion of the Company’s wholesale businesses in the People’s Republic of China and Singapore to retail businesses, as a result of the acquisition of distributors’ businesses in those regions in the second quarter of 2010 and (b) a decrease in sales to the off-price channel primarily due to lower levels of excess inventory; and |
(v) | in Canada, an increase primarily in the department store and membership club channels of distribution. |
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Increase | % | |||||||||||||||
Fiscal 2010 | Fiscal 2009 | (Decrease) | Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Speedo | $ | 217,499 | $ | 215,135 | $ | 2,364 | 1.1 | % | ||||||||
Calvin Klein | 23,492 | 19,588 | 3,904 | 19.9 | % | |||||||||||
Swimwear wholesale | 240,991 | 234,723 | 6,268 | 2.7 | % | |||||||||||
Swimwear retail (a) | 16,685 | 16,788 | (103 | ) | -0.6 | % | ||||||||||
Swimwear Group | $ | 257,676 | $ | 251,511 | $ | 6,165 | 2.5 | % | ||||||||
(a) | Includes $7.4 million and $7.6 million for Fiscal 2010 and Fiscal 2009, respectively, related toCalvin Kleinretail swimwear. |
% of Brand | % of Brand | |||||||||||||||
Fiscal 2010 | Net Revenues | Fiscal 2009 | Net Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Sportswear Group (a) | $ | 516,080 | 42.9 | % | $ | 432,714 | 41.4 | % | ||||||||
Intimate Apparel Group (a) | 416,700 | 50.0 | % | 350,457 | 48.5 | % | ||||||||||
Swimwear Group (b) | 87,183 | 33.8 | % | 81,176 | 32.3 | % | ||||||||||
Total gross profit | $ | 1,019,963 | 44.4 | % | $ | 864,347 | 42.8 | % | ||||||||
(a) | reflects the reclassification of approximately $27.8 million of gross profit related to certain sales ofCalvin Kleinunderwear, previously reported in the Sportswear Group, to the Intimate Apparel Group for Fiscal 2009 in order to conform to the Fiscal 2010 presentation. | |
(b) | Reflects a charge of $3.6 million during Fiscal 2009 related to the write down of inventory associated with the Company’s LZR Racer and other similar racing swimsuits. The Company recorded the write down as a result of FINA’s ruling during Fiscal 2009 which banned the use of these types of suits in competitive swim events. |
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(i) | an increase of $72.1 million in selling and distribution expenses primarily associated with the opening and acquisition of additional retail stores in Europe, Asia, Canada and Mexico and Central and South America and duplicative costs associated with consolidation of the distribution centers in Europe, partially offset by decreases due to cost savings resulting from restructuring activities which occurred in Fiscal 2009; | ||
(ii) | an increase of $26.3 million in marketing expenses, including the launch of theCalvin KleinX product line of men’s underwear and the launch ofCalvin KleinEnvy product line of women’s underwear; and | ||
(iii) | an increase in administrative expenses of $21.6 million, primarily including an increase due to amounts accrued for performance-based employee compensation as well as an increase in stock-based compensation expense primarily as a result in the change in terms of equity awards granted to employees in March 2010 (seeDiscussion of Critical Accounting Policies —Stock-Based Compensation ExpenseandNote 13 of Notes to Consolidated Financial Statements) and also including increases in acquisition expenses of $2.4 million (related to the acquisition of certain of the Company’s distributors ofCalvin Kleinproducts in Italy, Singapore and the People’s Republic of China) (seeNote 2 of Notes to Consolidated Financial Statements) and franchise taxes. |
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% of | % of | |||||||||||||||
Group Net | Group Net | |||||||||||||||
Fiscal 2010 | Revenues | Fiscal 2009 | Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Sportswear Group (a) | $ | 143,260 | 11.9 | % | $ | 118,477 | 11.3 | % | ||||||||
Intimate Apparel Group (a) | 134,928 | 16.2 | % | 116,269 | 16.1 | % | ||||||||||
Swimwear Group (a) (b) | 18,698 | 7.3 | % | 16,168 | 6.4 | % | ||||||||||
Unallocated corporate expenses (a) (c) | (49,075 | ) | na | (57,379 | ) | na | ||||||||||
Operating income (d) | $ | 247,811 | na | $ | 193,535 | na | ||||||||||
Operating income as a percentage of net revenue | 10.8 | % | 9.6 | % |
(a) | reflects the allocation of $9,892 of corporate expenses to the Sportswear Group ($6,924), the Intimate Apparel Group ($3,796) and the Swimwear Group (($828)), respectively, during Fiscal 2010 to conform to the presentation for Fiscal 2011. Also reflects the allocation of $6,664 of corporate expenses to the Sportswear Group ($4,698), the Intimate Apparel Group ($2,638) and the Swimwear Group (($672)), respectively, during Fiscal 2009 to conform to the presentation for Fiscal 2011. | |
(b) | reflects a charge of $3.6 million during Fiscal 2009 related to the write down of inventory associated with the Company’s LZR Racer and other similar racing swimsuits. The Company recorded the write down as a result of FINA’s ruling during Fiscal 2009 which banned the use of these types of suits in competitive swim events. | |
(c) | the decrease in unallocated corporate expenses for Fiscal 2010 compared to Fiscal 2009 was primarily related to a reduction in pension expense (seeNote 7 of Notes to Consolidated Financial Statements) and foreign currency exchange-related losses, partially offset by an increase in amounts accrued for performance-based employee compensation and other employee compensation and benefits and an increase in share-based compensation expense due primarily to the addition of Retirement Eligibility provisions in the Fiscal 2010 awards (seeNote13 of Notes to Consolidated Financial Statements). | |
(d) | includes approximately $9.8 million and $12.1 million for Fiscal 2010 and Fiscal 2009, respectively, related to restructuring expenses. SeeNote 4ofNotes to Consolidated Financial Statements. |
Increase / | % | |||||||||||||||
Fiscal 2010 | Fiscal 2009 | (Decrease) | Change | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
By Region: | ||||||||||||||||
Domestic | $ | 125,826 | $ | 125,800 | $ | 26 | 0.0 | % | ||||||||
International | 171,060 | 125,114 | 45,946 | 36.7 | % | |||||||||||
Unallocated corporate expenses | (49,075 | ) | (57,379 | ) | 8,304 | -14.5 | % | |||||||||
Total (a) | $ | 247,811 | $ | 193,535 | $ | 54,276 | 28.0 | % | ||||||||
By Channel: | ||||||||||||||||
Wholesale | $ | 240,611 | $ | 202,869 | $ | 37,742 | 18.6 | % | ||||||||
Retail | 56,275 | 48,045 | 8,230 | 17.1 | % | |||||||||||
Unallocated corporate expenses | (49,075 | ) | (57,379 | ) | 8,304 | -14.5 | % | |||||||||
Total (a) | $ | 247,811 | $ | 193,535 | $ | 54,276 | 28.0 | % | ||||||||
(a) | includes operating income fromCalvin Kleinbusinesses of $235.5 million and $201.2 million for Fiscal 2010 and Fiscal 2009, respectively, (an increase of 17.0%). |
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% of Brand | % of | |||||||||||||||
Net | Brand Net | |||||||||||||||
Fiscal 2010 (c) | Revenues | Fiscal 2009 (c) | Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Calvin KleinJeans | $ | 100,343 | 14.7 | % | $ | 85,155 | 12.4 | % | ||||||||
Chaps | 23,925 | 11.5 | % | 19,501 | 9.4 | % | ||||||||||
Sportswear wholesale | 124,268 | 13.9 | % | 104,656 | 11.7 | % | ||||||||||
Sportswear retail | 18,992 | 6.1 | % | 13,821 | 4.4 | % | ||||||||||
Sportswear Group (a) (b) | $ | 143,260 | 11.9 | % | $ | 118,477 | 9.8 | % | ||||||||
(a) | includes restructuring charges of $1.8 million for Fiscal 2010 and $3.2 million for Fiscal 2009. | |
(b) | reflects the allocation of $6,924 of corporate expenses toCalvin KleinJeans ($5,505), Chaps (($108)) and Sportswear retail ($1,527), respectively, during Fiscal 2010 to conform to the presentation for Fiscal 2011. Also reflects the allocation of $4,698 of corporate expenses toCalvin KleinJeans ($4,040), Chaps (($321)) and Sportswear retail ($979), respectively, during Fiscal 2009 to conform to the presentation for Fiscal 2011. | |
(c) | includes an allocation of shared services expenses by brand as detailed below: |
Fiscal 2010 | Fiscal 2009 | |||||||
(in thousands of dollars) | ||||||||
Calvin KleinJeans | $ | 18,039 | $ | 16,581 | ||||
Chaps | 8,128 | 6,927 | ||||||
Sportswear wholesale | 26,167 | 23,508 | ||||||
Sportswear retail | 1,568 | 1,419 | ||||||
Sportswear Group | $ | 27,735 | $ | 24,927 | ||||
% of Brand | % of | |||||||||||||||
Net | Brand Net | |||||||||||||||
Fiscal 2010 (c) | Revenues | Fiscal 2009 (c) | Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Calvin KleinUnderwear | $ | 82,915 | 19.2 | % | $ | 73,123 | 16.9 | % | ||||||||
Core Intimates | 17,226 | 10.5 | % | 11,396 | 6.9 | % | ||||||||||
Intimate Apparel wholesale | 100,141 | 16.8 | % | 84,519 | 14.2 | % | ||||||||||
Calvin KleinUnderwear retail | 34,787 | 14.6 | % | 31,750 | 13.3 | % | ||||||||||
Intimate Apparel Group (a) (b) | $ | 134,928 | 16.2 | % | $ | 116,269 | 13.9 | % | ||||||||
(a) | includes restructuring charges of $3.6 million for Fiscal 2010 and $4.3 million for Fiscal 2009. | |
(b) | reflects the allocation of $3,796 of corporate expenses toCalvin KleinUnderwear ($2,955), Core Intimates ($27) andCalvin KleinUnderwear retail ($814), respectively, during Fiscal 2010 to conform to the presentation for Fiscal 2011. Also reflects the allocation of $2,638 of corporate expenses toCalvin KleinUnderwear ($1,814), Core Intimates ($229) andCalvin KleinUnderwear retail ($595), respectively, during Fiscal 2009 to conform to the presentation for Fiscal 2011. | |
(c) | includes an allocation of shared services expenses by brand as detailed below: |
Fiscal 2010 | Fiscal 2009 | |||||||
(in thousands of dollars) | ||||||||
Calvin KleinUnderwear | $ | 12,499 | $ | 11,050 | ||||
Core Intimates | 5,931 | 5,748 | ||||||
Intimate Apparel wholesale | 18,430 | 16,798 | ||||||
Calvin KleinUnderwear retail | 1,082 | 942 | ||||||
Intimate Apparel Group | $ | 19,512 | $ | 17,740 | ||||
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% of Brand | % of | |||||||||||||||
Net | Brand Net | |||||||||||||||
Fiscal 2010 (e) | Revenues | Fiscal 2009 (e) | Revenues | |||||||||||||
(in thousands of dollars) | ||||||||||||||||
Speedo | $ | 19,028 | 8.7 | % | $ | 17,784 | 8.3 | % | ||||||||
Calvin Klein | (2,826 | ) | -12.0 | % | (4,090 | ) | -20.9 | % | ||||||||
Swimwear wholesale | 16,202 | 6.7 | % | 13,694 | 5.8 | % | ||||||||||
Swimwear retail (a) | 2,496 | 15.0 | % | 2,474 | 14.7 | % | ||||||||||
Swimwear Group (b) (c) (d) | $ | 18,698 | 7.3 | % | $ | 16,168 | 6.4 | % | ||||||||
(a) | includes $1.3 million and $1.4 million for Fiscal 2010 and Fiscal 2009, respectively, related toCalvin Kleinretail swimwear. | |
(b) | reflects a charge of $3.6 million during Fiscal 2009 related to the write down of inventory associated with the Company’s LZR Racer and other similar racing swimsuits. The Company recorded the write down as a result of FINA’s ruling during Fiscal 2010 which banned the use of these types of suits in competitive swim events. | |
(c) | includes restructuring charges of $3.6 million for Fiscal 2010 and $3.0 million for Fiscal 2009. | |
(d) | reflects the allocation of ($828) of corporate expenses toSpeedo(($1,139)), Calvin Klein Swimwear wholesale ($311) andSwimwearretail ($0), respectively, during Fiscal 2010 to conform to the presentation for Fiscal 2011. Also reflects the allocation of( $672) of corporate expenses toSpeedo(($834)), Calvin Klein Swimwear wholesale ($162) andSwimwear retail ($0), respectively, during Fiscal 2009 to conform to the presentation for Fiscal 2011. | |
(e) | Includes an allocation of shared services expenses by brand in the following table: |
Fiscal 2010 | Fiscal 2009 | |||||||
(in thousands of dollars) | ||||||||
Speedo | $ | 8,241 | $ | 8,848 | ||||
Calvin Klein | 608 | 392 | ||||||
Swimwear wholesale | 8,849 | 9,240 | ||||||
Swimwear retail | 564 | 600 | ||||||
Swimwear Group | $ | 9,413 | $ | 9,840 | ||||
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Borrowings from banks | December 31, 2011 | Fiscal 2011 | ||||||||||||||||||||
Maximum | ||||||||||||||||||||||
Average Amount | Amount | |||||||||||||||||||||
Amount | Weighted | Weighted | ||||||||||||||||||||
Outstanding | Average | Outstanding | Average | Outstanding | ||||||||||||||||||
(U.S. Dollar | Interest | (U.S. Dollar | Interest | (U.S. Dollar | ||||||||||||||||||
Currency | Instrument | Equivalent) | Rate | Equivalent) | Rate | Equivalent) | ||||||||||||||||
U.S. Dollars | 2008 Credit Agreement | — | 31,184 | 3.75 | % | 96,707 | ||||||||||||||||
Euro | CKJEA Notes | 36,648 | 4.00 | % | 27,192 | 2.82 | % | 52,885 | ||||||||||||||
Canadian Dollars | 2008 Credit Agreement | — | 505 | 3.50 | % | 3,066 | ||||||||||||||||
Brazilian Real | Lines of credit | 6,373 | 12.50 | % | 5,624 | 12.70 | % | 10,579 |
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Rating | Corporate/Family | |||
Agency | Rating (a) | Outlook | ||
Standard & Poor’s | BBB- | stable | ||
Moody’s | Ba1 | stable |
(a) | ratings on individual debt instruments can be different from the Company’s corporate or family credit ratings depending on the priority position of creditors holding such debt, collateral related to such debt and other factors. Standard & Poor’s has assigned a rating of BBB- and Moody’s has assigned a rating of Ba1 to the 2011 Term Loan. |
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Level 1 — | Inputs are quoted prices in active markets for identical assets or liabilities. | ||
Level 2 — | Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. | ||
Level 3 — | Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. |
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Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
(in thousands of dollars) | ||||||||||||
Net cash provided by (used in) operating activities: | ||||||||||||
Continuing operations | $ | 145,425 | $ | 225,362 | $ | 263,881 | ||||||
Discontinued operations | (16,523 | ) | (1,205 | ) | 1,033 | |||||||
Net cash used in investing activities: | ||||||||||||
Continuing operations | (80,365 | ) | (72,643 | ) | (52,581 | ) | ||||||
Discontinued operations | — | — | — | |||||||||
Net cash used in financing activities: | ||||||||||||
Continuing operations | (6,246 | ) | (283,051 | ) | (40,908 | ) | ||||||
Discontinued operations | — | — | — | |||||||||
Translation adjustments | (987 | ) | 2,010 | 1,702 | ||||||||
(Decrease) increase in cash and cash equivalents | $ | 41,304 | $ | (129,527 | ) | $ | 173,127 | |||||
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Payments Due By Year | ||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | Thereafter | Total | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
2011 Term Loan (a) | $ | 2,000 | $ | 2,000 | $ | 2,000 | $ | 2,000 | $ | 2,000 | $ | 189,000 | $ | 199,000 | ||||||||||||||
Interest rate cap (b) | 2,376 | 2,370 | 2,370 | 2,363 | 2,382 | 3,544 | 15,405 | |||||||||||||||||||||
2008 Credit Agreements (c) | — | — | — | — | — | — | — | |||||||||||||||||||||
Severance | 84 | — | — | — | — | — | 84 | |||||||||||||||||||||
CKJEA and other short term notes payable (d) | 43,021 | — | — | — | — | — | 43,021 | |||||||||||||||||||||
Minimum royalties (e) | 65,784 | 63,205 | 49,209 | 54,483 | 55,172 | 807,763 | 1,095,616 | |||||||||||||||||||||
Operating leases (e) | 96,164 | 81,347 | 63,050 | 50,096 | 37,205 | 92,052 | 419,914 | |||||||||||||||||||||
Interest payments (f) | 8,456 | 8,381 | 8,306 | 8,231 | 8,070 | 10,255 | 51,699 | |||||||||||||||||||||
Pension plan funding (g) | 22,525 | 9,651 | 8,551 | 5,551 | 1,551 | 605 | 48,434 | |||||||||||||||||||||
Post-retirement plan funding (g) | 380 | 360 | 330 | 320 | 320 | 1,590 | 3,300 | |||||||||||||||||||||
Employment contracts | 6,853 | 888 | 393 | 335 | 33 | 79 | 8,581 | |||||||||||||||||||||
Purchase obligations (h) | 1,217 | — | — | — | — | — | 1,217 | |||||||||||||||||||||
IT license and maintenance contracts | 3,673 | 804 | 652 | 169 | 11 | — | 5,309 | |||||||||||||||||||||
Liabilities for uncertain tax positions | 14,514 | 4,870 | 7,146 | 3,353 | 2,165 | 9,501 | 41,549 | |||||||||||||||||||||
Other long-term obligations (i) | 16,616 | 4,122 | 1,961 | 1,015 | 196 | 200 | 24,110 | |||||||||||||||||||||
Total | $ | 283,663 | $ | 177,998 | $ | 143,968 | $ | 127,916 | $ | 109,105 | $ | 1,114,589 | $ | 1,957,239 | ||||||||||||||
(a) | The 2011 Term Loan matures on June 17, 2018. SeeNote 12 of Notes to Consolidated Financial Statements | |
(b) | The interest rate cap limits the LIBOR portion of interest expense on $120.0 million of the 2011 Term Loan to 1.00%. Payments under the interest rate cap will be made through April 30, 2018 (seeNote 12 of Notes to Consolidated Financial Statements). | |
(c) | The 2008 Credit Agreements, as amended, mature on November 8, 2016. SeeNote 12 of Notes to Consolidated Financial Statements. | |
(d) | Includes the CKJEA Notes, the Brazilian lines of credit and the Asian Credit Facility. All of the CKJEA Notes were renewed for additional terms of less than one year during Fiscal 2011. | |
(e) | See Note 15 of Notes to Consolidated Financial Statements. | |
(f) | Reflects expected interest obligations after considering required minimum repayments of the related debt. Interest on variable rate debt instruments is estimated based upon rates in effect at December 31, 2011. SeeItem 7A. Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk. | |
(g) | Reflects expected minimum contributions to the Company’s U.S. and foreign pension plans in accordance with the PPA and to the Company’s post-retirement plan in the U.S. SeeCapital Resources and Liquidity — Liquidity and Note 7 of Notes to Consolidated Financial Statements. | |
(h) | Represents contractual commitments for goods or services not received or recorded on the Company’s Consolidated Balance Sheet. SeeNote 15 of Notes to Consolidated Financial Statements. | |
(i) | Includes contracts with athletes and models, the final payment of approximately $9.9 million (based on the exchange rate on December 31, 2011) related to the Brazilian Acquisitions, which is expected to be paid by March 31, 2012 (seeNote 2 of Notes to Consolidated Financial Statements) and other miscellaneous contractual obligations. |
For the Three Months Ended | For the Three Months Ended | |||||||||||||||||||||||||||||||
April 2, | July 2, | October 1, | December 31, | April 3, | July 3, | October 2, | January 1, | |||||||||||||||||||||||||
2011 | 2011 | 2011 | 2011 | 2010 | 2010 | 2010 | 2011 | |||||||||||||||||||||||||
(in millions of dollars) | ||||||||||||||||||||||||||||||||
Net revenues | $ | 662.2 | $ | 591.4 | $ | 645.1 | $ | 614.7 | $ | 588.2 | $ | 519.3 | $ | 596.8 | $ | 591.5 | ||||||||||||||||
Operating income | 69.7 | 52.6 | 64.8 | $ | (5.6 | ) | 79.5 | 55.3 | 67.9 | $ | 45.1 | |||||||||||||||||||||
Cash flow provided by (used in) operating activities | (83.8 | ) | 127.2 | 16.8 | $ | 68.7 | (30.1 | ) | 125.1 | 53.3 | $ | 75.9 | ||||||||||||||||||||
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
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Weighted | Effect of Hypothetical | ||||||||||||
Average | 10% Adverse Change in Foreign | ||||||||||||
Foreign | Contractual | Currency Exchange Rates | |||||||||||
Currency (a) | Amount | Exchange Rate | on Earnings | ||||||||||
Derivative Instrument | Hedged Transaction | Sell/Buy | Hedged | or Strike Price | Gain (loss) (b) | ||||||||
USD (thousands) | USD (thousands) | ||||||||||||
Foreign exchange contracts | Minimum royalty and advertising costs | Euro/USD | 20,811 | 1.3888 | (1,942 | ) | |||||||
Foreign exchange contracts | Purchases of inventory | KRW/USD | 15,100 | 1,155 | (1,504 | ) | |||||||
Foreign exchange contracts | Purchases of inventory | CAD/USD | 18,500 | 0.9902 | (1,830 | ) | |||||||
Foreign exchange contracts | Purchases of inventory | MXN/USD | 11,900 | 13.69 | (1,168 | ) | |||||||
Foreign exchange contracts | Intercompany purchases of inventory | GBP/Euro | 3,264 | 0.8548 | (318 | ) | |||||||
Foreign exchange contracts | Intercompany payables | Euro/USD | 30,000 | 1.3810 | (2,815 | ) | |||||||
Foreign exchange contracts | Intercompany loan | Euro/USD | 34,500 | 1.3683 | (3,268 | ) | |||||||
Foreign exchange contracts | Loan to non-controlling shareholder | SGD/USD | 6,000 | 0.8933 | (698 | ) | |||||||
(13,543 | ) | ||||||||||||
(a) | USD = U.S. dollar, KRW = Korean won, CAD = Canadian dollar, MXN = Mexican peso, GBP = British pound, SGD = Singapore Dollar | |
(b) | The Company expects that these hypothetical gains and losses would be offset by gains and losses on the related underlying transactions. |
Item 8. | Financial Statements and Supplementary Data. |
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
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• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; | ||
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and | ||
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. |
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The Warnaco Group, Inc.
New York, New York
February 29, 2012
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Item 10. | Directors, Executive Officers and Corporate Governance. |
Item 11. | Executive Compensation. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Item 13. | Certain Relationships and Related Transactions and Director Independence. |
Item 14. | Principal Accountant Fees and Services. |
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Item 15. | Exhibits, Financial Statement Schedules. |
PAGE | ||
(a) 1. The Consolidated Financial Statements of The Warnaco Group, Inc. | ||
F-1 | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 – F-6 | ||
F-7 – F-59 | ||
2. Financial Statement Schedule | ||
A-1 |
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• | were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; | ||
• | may have been qualified in such agreements by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; | ||
• | may apply contract standards of “materiality” that are different from “materiality” under the applicable security laws; and | ||
• | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement. |
Exhibit No. | Description of Exhibit | |
2.1 | First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and its Affiliated Debtors in Possession Under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 99.2 to The Warnaco Group, Inc.’s Form 10-Q filed on November 18, 2002).* | |
2.2 | Disclosure Statement with respect to the First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and its Affiliated Debtors and Debtors in Possession Under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 99.3 to The Warnaco Group, Inc.’s Form 10-Q filed November 18, 2002).* | |
2.3 | Stock Purchase Agreement, dated as of August 3, 2004, by and among Warnaco Inc., Ocean Pacific Apparel Corp. and Doyle & Boissiere Fund I, LLC, Anders Brag, Leo Isotolo and Richard A. Baker (incorporated by reference to Exhibit 2.1 to The Warnaco Group, Inc.’s Form 10-Q filed November 10, 2004).* ## ** | |
2.4 | Stock Purchase Agreement, dated as of December 20, 2005, by and among Warnaco Inc., Fingen Apparel N.V., Fingen S.p.A., Euro Cormar S.p.A., and Calvin Klein, Inc. (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 8-K filed December 23, 2005).* ** | |
2.5 | Amendment, dated as of January 30, 2006, to the Stock Purchase Agreement, dated as of December 20, 2005, by and among Warnaco Inc., Fingen Apparel N.V., Fingen S.p.A., Euro Cormar S.p.A., and Calvin Klein, Inc. (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 8-K filed February 3, 2006).* | |
2.6 | Asset Purchase Agreement, dated as of October 31, 2006, by and among The Warnaco Group, Inc., Ocean Pacific Apparel Corp. and Iconix Brand Group, Inc. (incorporated by reference to Exhibit 2.1 to The Warnaco Group, Inc.’s Form 8-K filed November 6, 2006).* ** | |
2.7 | Stock and Asset Purchase Agreement, dated as of February 14, 2008, between Warnaco Netherlands BV and Palmers Textil AG (incorporated by reference to Exhibit 2.1 to The Warnaco Group, Inc.’s Form 8-K filed February 19, 2008).* ** | |
3.1 | Amended and Restated Certificate of Incorporation of The Warnaco Group, Inc. (incorporated by reference to Exhibit 1 to the Form 8-A/A filed by The Warnaco Group, Inc. on February 4, 2003).* | |
3.2 | Third Amended and Restated Bylaws of The Warnaco Group, Inc. (incorporated by reference to Exhibit 3.2 to the Form 8-K filed by The Warnaco Group, Inc. on July 13, 2010).* | |
4.1 | Registration Rights Agreement, dated as of June 12, 2003, among Warnaco Inc., the Guarantors (as defined therein) and the Initial Purchasers (as defined therein) (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 (File No. 333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries on August 8, 2003).* | |
4.2 | Indenture, dated as of June 12, 2003, among Warnaco Inc., the Guarantors (as defined therein) and the Trustee (as defined therein) (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-4 (File No. 333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries on August 8, 2003).* | |
4.3 | Registration Rights Agreement, dated as of February 4, 2003, among The Warnaco Group, Inc. and certain creditors thereof (as described in the Registration Rights Agreement) (incorporated by reference to Exhibit 4.5 to The Warnaco Group, Inc.’s Form 8-K filed February 10, 2003).* |
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Exhibit No. | Description of Exhibit | |
10.1 | Credit Agreement, dated as of August 26, 2008, among Warnaco Inc., The Warnaco Group, Inc., the Lenders (as defined therein) and Issuers (as defined therein) party thereto, Bank of America, N.A., as administrative agent for the revolving credit facility and as collateral agent for the Lenders and the Issuers party thereto, Banc of America Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers, Banc of America Securities LLC, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as joint bookrunners, Deutsche Bank Securities Inc., as sole syndication agent for the Lenders and the Issuers party thereto, and HSBC Business Credit (USA) Inc., JPMorgan Chase Bank, N.A. and RBS Business Capital, a division of RBS Asset Finance Inc., each as a co-documentation agent for the Lenders and Issuers (incorporated by reference to Exhibit 10.1 to The Warnaco Group Inc.’s Form 10-Q filed November 9, 2010).* ## | |
10.2 | Guaranty, dated as of August 26, 2008, by The Warnaco Group, Inc. and each of the other entities listed on the signature pages thereof or that becomes a party thereto, in favor of Bank of America, N.A., as administrative agent for the revolving credit facility and as collateral agent for the Lenders (as defined therein) and Issuers (as defined therein) party thereto, and the Issuers and Lenders party thereto (incorporated by reference to Exhibit 10.2 to The Warnaco Group Inc.’s Form 10-Q filed August 6, 2010).* | |
10.3 | Pledge and Security Agreement, dated as of August 26, 2008, by The Warnaco Group, Inc., Warnaco Inc., and each of the other entities listed on the signature pages thereto or that becomes a party thereto, in favor of Bank of America, N.A., as collateral agent for the secured parties thereunder (incorporated by reference to Exhibit 10.3 to The Warnaco Group Inc.’s Form 10-Q filed November 9, 2010.* ## | |
10.4 | Canadian Credit Agreement, dated as of August 26, 2008, among Warnaco of Canada Company, The Warnaco Group, Inc., the Lenders (as defined therein) and Issuers (as defined therein) party thereto, Bank of America, N.A., as administrative agent for the revolving credit facility and as collateral agent for the Lenders and the Issuers party thereto, Banc of America Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers and joint book managers, and Deutsche Bank Securities Inc., as sole syndication agent for the Lenders and the Issuers party thereto (incorporated by reference to Exhibit 10.4 to The Warnaco Group Inc.’s Form 10-Q filed November 9, 2010).* ## | |
10.5 | U.S. Loan Party Canadian Facility Guaranty, dated as of August 26, 2008, by The Warnaco Group, Inc., Warnaco Inc., and each of the other entities listed on the signature pages thereto or that becomes a party thereto, in favor of, Bank of America, N.A. as administrative agent for the revolving credit facility and as collateral agent for the Lenders (as defined therein) and Issuers (as defined therein) party thereto, and the Issuers and Lenders party thereto (incorporated by reference to Exhibit 10.5 to The Warnaco Group Inc.’s Form 10-Q filed August 6, 2010).* | |
10.6 | Guaranty, dated as of August 26, 2008 by 4278941 Canada Inc., in favor of Bank of America, N.A. as lender (acting through its Canada branch) and as collateral agent, for itself and on behalf of the secured parties (incorporated by reference to Exhibit 10.6 to The Warnaco Group Inc.’s Form 8-K filed August 28, 2008).* | |
10.7 | General Security Agreement, dated as of August 26, 2008, granted by Warnaco of Canada Company to Bank of America, N.A. (incorporated by reference to Exhibit 10.7 to The Warnaco Group Inc.’s Form 10-Q filed November 9, 2010).* ## | |
10.8 | General Security Agreement, dated as of August 26, 2008, granted by 4278941 Canada Inc. to Bank of America, N.A. (incorporated by reference to Exhibit 10.8 to The Warnaco Group Inc.’s Form 10-Q filed November 9, 2010).* | |
10.9 | Securities Pledge Agreement, dated as of August 26, 2008 made by Warnaco of Canada Company to and in favour of Bank of America, N.A. as collateral agent (incorporated by reference to Exhibit 10.9 to The Warnaco Group Inc.’s Form 10-Q filed August 6, 2010).* | |
10.10 | Deed of Hypothec, dated as of August 26, 2008, between Warnaco of Canada Company and Bank of America, N.A. (incorporated by reference to Exhibit 10.10 to The Warnaco Group Inc.’s Form 10-Q filed August 6, 2010).* | |
10.11 | Deed of Hypothec, dated as of August 26, 2008, between 4278941 Canada Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.11 to The Warnaco Group Inc.’s Form 10-Q filed August 6, 2010).* | |
10.12 | Term Loan Agreement, dated as of June 17, 2011, among Warnaco Inc., Calvin Klein Jeanswear Company, Warnaco Swimwear Products Inc., The Warnaco Group, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 8-K filed June 23, 2011).* ## | |
10.13 | Guaranty, dated as of June 17, 2011, by The Warnaco Group, Inc. and each of the other entities listed on the signature pages thereto or that becomes a party thereto, in favor of JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent, each lender, and each other holder of an obligation thereunder (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.’s Form 8-K filed June 23, 2011).* |
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Exhibit No. | Description of Exhibit | |
10.14 | Pledge and Security Agreement, dated as of June 17, 2011, by Warnaco Inc., Calvin Klein Jeanswear Company, Warnaco Swimwear Products Inc., The Warnaco Group, Inc. and each of the other entities listed on the signature pages thereto or that from time to time becomes a party thereto, in favor of JPMorgan Chase Bank, N.A., as collateral agent for the secured parties thereunder (incorporated by reference to Exhibit 10.3 to The Warnaco Group, Inc.’s Form 8-K filed June 23, 2011).* ## | |
10.15 | Intercreditor Agreement, dated June 17, 2011, among JPMorgan Chase Bank, N.A., as adminstrative agent and as collateral agent under the Term Loan Agreement and Bank of America, N.A., as administrative agent and as collateral agent under each of the ABL Credit Facilities, and acknowledged by the borrowers, The Warnaco Group, Inc, and the other loan parties party thereto (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.’s Form 8-K filed June 23, 2011).* | |
10.16 | Canadian ABL Amendment, dated as of June 17, 2011, among Warnaco of Canada Company, the affiliates of the borrower party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.5 to The Warnaco Group, Inc.’s Form 8-K filed June 23, 2011).* | |
10.17 | U.S. ABL Amendment, dated as of June 17, 2011, among Warnaco Inc., the affiliates of the borrower party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.6 to The Warnaco Group, Inc.’s Form 8-K filed June 23, 2011).* | |
10.18 | Amendment No. 2, dated as of November 8, 2011, by and among Warnaco Inc., as borrower, the affiliates of the borrower party thereto, the lenders, issuers and swing loan lender party thereto and Bank of America, N.A., as administrative agent and collateral agent, which amends the Credit Agreement, dated as of August 26, 2008, by and among Warnaco Inc., The Warnaco Group, Inc., the lenders and issuers party thereto and Bank of America, N.A., as administrative agent and collateral agent for the lenders and the issuers party thereto, as amended by Amendment No. 1, dated June 17, 2011 (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 8-K filed November 15, 2011).* ## | |
10.19 | Amendment No. 2, dated as of November 8, 2011, by and among Warnaco of Canada Company, as borrower, the affiliates of the borrower party thereto, the lenders, issuers and swing loan lender party thereto and Bank of America, N.A., as administrative agent and collateral agent, which amends the Canadian Credit Agreement, dated as of August 26, 2008, by and among Warnaco of Canada Company, The Warnaco Group, Inc., the lenders and issuers party thereto and Bank of America, N.A., as administrative agent and collateral agent for the lenders and the issuers party thereto, as amended by Amendment No. 1, dated June 17, 2011 (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.’s Form 8-K filed November 15, 2011).* ## | |
10.20 | Warnaco Employee Retirement Plan (incorporated by reference to Exhibit 10.11 to The Warnaco Group, Inc.’s Registration Statement on Form S-1 (File No. 33-4587)).* | |
10.21 | The Warnaco Group, Inc. 2003 Stock Incentive Plan (incorporated by reference to Appendix D to The Warnaco Group, Inc.’s Proxy Statement filed April 29, 2003).* | |
10.22 | The Warnaco Group, Inc. Incentive Compensation Plan (incorporated by reference to Appendix E to The Warnaco Group, Inc.’s Proxy Statement filed April 29, 2003).* | |
10.23 | The Warnaco Group, Inc. 2005 Stock Incentive Plan (incorporated by reference to Annex A to The Warnaco Group, Inc.’s 2005 Proxy Statement on Schedule 14A filed on April 12, 2005).* | |
10.24 | The Warnaco Group, Inc. Amended and Restated 2005 Stock Incentive Plan (incorporated by reference to Appendix A to The Warnaco Group, Inc.’s 2008 Proxy Statement on Schedule 14A filed on April 11, 2008).* | |
10.25 | The Warnaco Group, Inc. 2008 Incentive Compensation Plan (incorporated by reference to Appendix B to The Warnaco Group, Inc.’s 2008 Proxy Statement on Schedule 14A filed on April 11, 2008).* | |
10.26 | The Warnaco Group, Inc. Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.18 to The Warnaco Group, Inc.’s Form 10-K filed March 2, 2009).* | |
10.27 | 2007 Non-Employee Directors Deferred Compensation Plan (incorporated by reference to Exhibit 10.17 to The Warnaco Group, Inc.’s Form 10-K filed March 7, 2007).* | |
10.28 | Amended and Restated 2007 Non-Employee Directors Deferred Compensation Plan (incorporated by reference to Exhibit 10.20 to The Warnaco Group, Inc.’s Form 10-K filed March 2, 2009).* | |
10.29 | Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.’s Form 8-K filed May 25, 2005).* | |
10.30 | Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to The Warnaco Group, Inc.’s Form 8-K filed May 25, 2005).* | |
10.31 | Form of Restricted Stock Unit Award Agreement for Joseph R. Gromek (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.’s Form 8-K filed May 25, 2005).* | |
10.32 | Form of The Warnaco Group, Inc. 2005 Stock Incentive Plan Notice of Grant of Restricted Stock (incorporated by reference to Exhibit 10.8 to The Warnaco Group, Inc.’s Form 8-K filed August 12, 2005).* | |
10.33 | Offer Letter and Employee Waiver, Release and Discharge of Claims pursuant to the Key Domestic Employee Retention Plan for Stanley P. Silverstein, dated November 26, 2001 (incorporated by reference to Exhibit 10.41 to The Warnaco Group, Inc.’s Form 10-K filed July 31, 2002).* |
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Exhibit No. | Description of Exhibit | |
10.34 | Amended and Restated Employment Agreement, dated as of December 19, 2007, between The Warnaco Group, Inc. and Joseph R. Gromek (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 8-K filed December 20, 2007).* | |
10.35 | Amended and Restated Letter Agreement, dated as of May 11, 2009, by and between The Warnaco Group, Inc. and Lawrence R. Rutkowski (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 10-Q filed May 15, 2009).* | |
10.36 | Amended and Restated Letter Agreement, dated as of December 31, 2008, by and between The Warnaco Group, Inc. and Frank Tworecke (incorporated by reference to Exhibit 10.28 to The Warnaco Group, Inc.’s Form 10-K filed March 2, 2009).* | |
10.37 | Amended and Restated Letter Agreement, dated as of December 31, 2008, by and between The Warnaco Group, Inc. and Helen McCluskey (incorporated by reference to Exhibit 10.29 to The Warnaco Group, Inc.’s Form 10-K filed March 2, 2009).* | |
10.38 | Amended and Restated Employment Agreement, dated as of December 31, 2008, by and between The Warnaco Group, Inc. and Stanley P. Silverstein (incorporated by reference to Exhibit 10.30 to The Warnaco Group, Inc.’s Form 10-K filed March 2, 2009).* | |
10.39 | Employment Agreement, dated as of August 11, 2008, by and between The Warnaco Group, Inc. and Jay L. Dubiner (incorporated by reference to Exhibit 10.31 to The Warnaco Group, Inc.’s Form 10-K filed March 2, 2009).* | |
10.40 | Amended and Restated Letter Agreement, dated as of December 31, 2008, by and between The Warnaco Group, Inc. and Dwight Meyer (incorporated by reference to Exhibit 10.32 to The Warnaco Group, Inc.’s Form 10-K filed March 2, 2009).* | |
10.41 | Amended and Restated Employment Agreement, dated as of December 31, 2008 by and between The Warnaco Group, Inc. and Elizabeth Wood (incorporated by reference to Exhibit 10.33 to The Warnaco Group, Inc.’s Form 10-K filed March 2, 2009).* | |
10.42 | Employment Agreement, dated as of October 31, 2011, by and between The Warnaco Group, Inc. and Martha J. Olson (incorporated by reference to Exhibit 10.9 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* | |
10.43 | First Amendment, dated as of October 31, 2011, to the Amended and Restated Employment Agreement, dated as of December 31, 2008, by and between The Warnaco Group, Inc. and Stanley P. Silverstein (incorporated by reference to Exhibit 10.10 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* | |
10.44 | First Amendment, dated as of October 31, 2011, to the Employment Agreement, dated as of August 11, 2008, by and between The Warnaco Group, Inc. and Jay L. Dubiner (incorporated by reference to Exhibit 10.11 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* | |
10.45 | First Amendment, dated as of October 31, 2011, to the Amended and Restated Employment Agreement, dated as of December 31, 2008, by and between The Warnaco Group, Inc. and Elizabeth Wood (incorporated by reference to Exhibit 10.12 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* | |
10.46 | Letter Agreement, dated as of December 13, 2011, by and between The Warnaco Group, Inc. and Helen McCluskey (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 8-K filed December 13, 2011).* | |
10.47 | Retirement Agreement, dated as of December 13, 2011, by and between The Warnaco Group, Inc. and Joseph R. Gromek (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.’s Form 8-K filed December 13, 2011).* | |
10.48 | Employment Agreement, dated as of January 31, 2012, by and between The Warnaco Group, Inc. and Mark Whyman. † | |
10.49 | Second Amendment, dated as of February 27, 2012, to the Employment Agreement, dated as of August 11, 2008, by and between The Warnaco Group, Inc. and Jay L. Dubiner. † | |
10.50 | Amended and Restated License Agreement, dated as of December 31, 1996, between Polo Ralph Lauren, L.P. and Warnaco Inc. (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.’s Form 10-Q filed November 14, 1997).* | |
10.51 | Amended and Restated Design Services Agreement, dated as of December 31, 1996, between Polo Ralph Lauren Enterprises, L.P. and Warnaco Inc. (incorporated by reference to Exhibit 10.5 to The Warnaco Group, Inc.’s Form 10-Q filed November 14, 1997).* | |
10.52 | License Agreement and Design Services Agreement Amendment and Extension, dated as of September 19, 2003, by and among PRL USA, Inc., as successor to Polo Ralph Lauren L.P., The Polo/Lauren Company, L.P., Polo Ralph Lauren Corporation, as successor to Polo Ralph Lauren L.P., and Warnaco Inc. and Warnaco of Canada Company (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.’s Form 10-Q filed November 18, 2003).* ## |
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Exhibit No. | Description of Exhibit | |
10.53 | License Agreement, dated as of August 4, 1994, between Calvin Klein, Inc. and Calvin Klein Jeanswear Company (incorporated by reference to Exhibit 10.20 to Designer Holdings, Ltd.’s Registration Statement on Form S-1 (File No. 333-02236)).* | |
10.54 | Amendment to the Calvin Klein License Agreement, dated as of December 7, 1994 (incorporated by reference to Exhibit 10.21 to Designer Holdings, Ltd.’s Registration Statement on Form S-1 (File No. 333-02236)).* | |
10.55 | Amendment to the Calvin Klein License Agreement, dated as of January 10, 1995 (incorporated by reference to Exhibit 10.22 to Designer Holdings, Ltd.’s Registration Statement on Form S-1 (File No. 333-02236)).* | |
10.56 | Amendment to the Calvin Klein License Agreement, dated as of February 28, 1995 (incorporated by reference to Exhibit 10.23 to Designer Holdings, Ltd.’s Registration Statement on Form S-1 (File No. 333-02236)).* | |
10.57 | Amendment to the Calvin Klein License Agreement, dated as of April 22, 1996 (incorporated by reference to Exhibit 10.38 to Designer Holdings, Ltd.’s Registration Statement on Form S-1 (File No. 333-02236)).* | |
10.58 | Amendment and Agreement, dated June 5, 2003, by and among Calvin Klein, Inc., Phillips-Van Heusen Corporation, Warnaco Inc., Calvin Klein Jeanswear Company, and CKJ Holdings Inc. (incorporated by reference to Exhibit 10.25 to Amendment No. 2 to the Registration Statement on Form S-4/A (File No. 333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries on December 18, 2003).* ## | |
10.59 | Consent and Amendment No. 1 to the Facility Agreement, dated as of February 5, 2002 (incorporated by reference to Exhibit 10.49 to The Warnaco Group, Inc.’s Form 10-K filed July 31, 2002).* | |
10.60 | Speedo Settlement Agreement, dated November 25, 2002, by and between Speedo International Limited and Authentic Fitness Corporation, Authentic Fitness Products, Inc., The Warnaco Group, Inc. and Warnaco Inc. (incorporated by reference to Exhibit 10.28 to The Warnaco Group, Inc.’s Form 10-K filed April 4, 2003).* | |
10.61 | Amendment to the Speedo Licenses, dated as of November 25, 2002, by and among Speedo International Limited, Authentic Fitness Corporation and Authentic Fitness Products, Inc. (incorporated by reference to Exhibit 10.29 to The Warnaco Group, Inc.’s Form 10-K filed April 4, 2003).* ## | |
10.62 | Settlement Agreement, dated January 22, 2001, by and between Calvin Klein Trademark Trust, Calvin Klein, Inc. and Calvin Klein and Linda Wachner, The Warnaco Group, Inc., Warnaco Inc., Designer Holdings, Ltd, CKJ Holdings, Inc., Jeanswear Holdings Inc., Calvin Klein Jeanswear Company and Outlet Holdings, Inc. (incorporated by reference to Exhibit 10.57 to The Warnaco Group, Inc.’s Form 10-K filed July 31, 2002).* ## | |
10.63 | Settlement Agreement, dated November 15, 2002, by and among Linda J. Wachner, the Debtors, the Bank of Nova Scotia and Citibank, N.A. in their capacity as Debt Coordinators for the Debtors’ Prepetition Secured Lenders and the Official Committee of Unsecured Creditors of the Debtors (incorporated by reference to Exhibit 10.38 to The Warnaco Group, Inc.’s Form 10-K filed April 4, 2003).* | |
10.64 | Acquisition Agreement, dated as of March 14, 1994, by and among Calvin Klein, Inc., The Warnaco Group, Inc. and Warnaco Inc. (incorporated by reference to Exhibit 10.6 to The Warnaco Group, Inc.’s Form 10-Q filed on May 24, 1994).* | |
10.65 | License Agreement, dated as of June 21, 2004, by and between The Warnaco Group, Inc. and Michael Kors (USA), Inc. (incorporated by reference to Exhibit 10.3 to The Warnaco Group, Inc.’s Form 10-Q filed August 6, 2004).* ## | |
10.66 | License Agreement, dated as of July 26, 2004, by and between Calvin Klein, Inc. and Warnaco Swimwear Inc. (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 10-Q filed November 10, 2004).* ## | |
10.67 | License Agreement, dated as of December 1, 2004, by and between The Warnaco Group, Inc. and SAP America, Inc. (incorporated by reference to Exhibit 10.46 to The Warnaco Group, Inc.’s Form 10-K filed March 17, 2005). * ## | |
10.68 | Amended and Restated License Agreement, dated as of December 31, 1997, by and between Calvin Klein, Inc. and Calvin Klein Jeanswear Asia Ltd. (incorporated by reference to Exhibit 10.62 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.69 | Amendment and Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., WF Overseas Fashion C.V. and the CKJ Entities (as defined therein), with respect to the Amended and Restated License Agreement, dated as of December 31, 1997, by and between Calvin Klein, Inc. and Calvin Klein Jeanswear Asia Ltd. (incorporated by reference to Exhibit 10.63 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.70 | Amended and Restated Letter Agreement, dated as of March 6, 2002, by and among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.p.A. (incorporated by reference to Exhibit 10.64 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.71 | Letter Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., WF Overseas Fashion C.V., CK Jeanswear N.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.p.A., with respect to the Amended and Restated Letter Agreement, dated as of March 6, 2002, by and among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.p.A. (incorporated by reference to Exhibit 10.65 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## |
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Exhibit No. | Description of Exhibit | |
10.72 | Amended and Restated License Agreement. dated December 31, 1997, by and between Calvin Klein, Inc. and CK Jeanswear Europe, S.p.A. (incorporated by reference to Exhibit 10.66 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.73 | Letter Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., WF Overseas Fashion C.V. and CK Jeanswear Europe, S.p.A., with respect to the Amended and Restated License Agreement. dated December 31, 1997, by and between Calvin Klein, Inc. and CK Jeanswear Europe, S.p.A. (incorporated by reference to Exhibit 10.67 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.74 | License Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V. (re: Bridge Apparel) (incorporated by reference to Exhibit 10.68 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.75 | License Agreement, dated as of January 31, 2006, by and among Calvin, Klein, Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V. (re: Bridge Accessories) (incorporated by reference to Exhibit 10.69 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.76 | License Agreement, dated as of January 31, 2006, by and among Calvin, Klein, Inc., CK Jeanswear Europe S.p.A, CK Jeanswear Asia Limited and WF Overseas Fashion C.V. (re: Jean Accessories) (incorporated by reference to Exhibit 10.70 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.77 | Letter Agreement, dated January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Europe S.p.A., CK Jeanswear Asia Limited and WF Overseas Fashion C.V. (re: Bridge Store) (incorporated by reference to Exhibit 10.71 to The Warnaco Group, Inc.’s Form 10-K filed March 3, 2006).* ## | |
10.78 | License Agreement, dated as of January 31, 2008, between Calvin Klein, Inc., WF Overseas Fashion C.V. and CK Jeanswear Europe S.r.l. (re: Bridge Accessories) (incorporated by reference to Exhibit 10.68 to The Warnaco Group, Inc.’s Form 10-K filed February 27, 2008).* ## | |
10.79 | License Agreement — Central and South America, dated as of January 31, 2008, between Calvin Klein, Inc. and WF Overseas Fashion C.V. (re: Bridge Accessories) (incorporated by reference to Exhibit 10.69 to The Warnaco Group, Inc.’s Form 10-K filed February 27, 2008).* ## | |
10.80 | License Agreement, dated as of January 31, 2008, between Calvin Klein, Inc., WF Overseas Fashion C.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.r.l. (re: Jean Accessories) (incorporated by reference to Exhibit 10.70 to The Warnaco Group, Inc.’s Form 10-K filed February 27, 2008).* ## | |
10.81 | License Agreement — Central and South America, dated as of January 31, 2008, between Calvin Klein, Inc. and WF Overseas Fashion C.V. (re: Jean Accessories) (incorporated by reference to Exhibit 10.71 to The Warnaco Group, Inc.’s Form 10-K filed February 27, 2008).* ## | |
10.82 | E-Commerce Agreement, dated as of January 31, 2008, Calvin Klein, Inc., WF Overseas Fashion C.V., CK Jeanswear N.V., CK Jeanswear Asia Limited, CK Jeanswear Europe S.r.l., Calvin Klein Jeanswear Company and CKJ Holdings, Inc. (incorporated by reference to Exhibit 10.72 to The Warnaco Group, Inc.’s Form 10-K filed February 27, 2008).* ## | |
10.83 | Amendment, dated as of July 8, 2011, to the License Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V., as amended (incorporated by reference to Exhibit 10.1 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* ## | |
10.84 | Amendment, dated as of July 8, 2011, to the Letter Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Europe S.p.A., CK Jeanswear Asia Limited and WF Overseas Fashion C.V. (incorporated by reference to Exhibit 10.2 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* ## | |
10.85 | Amendment, dated as of July 8, 2011, to the License Agreement, dated as of January 31, 2008, by and among Calvin Klein, Inc., WF Overseas Fashion C.V. and CK Jeanswear Europe S.r.l. (incorporated by reference to Exhibit 10.3 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* ## | |
10.86 | Amendment, dated as of July 8, 2011, to the License Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V., as amended (incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* ## | |
10.87 | Amendment, dated as of July 8, 2011, to the Amended and Restated License Agreement, dated as of January 1, 1997, by and between Calvin Klein, Inc. and Calvin Klein Jeanswear Asia Ltd., as amended (incorporated by reference to Exhibit 10.5 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* ## | |
10.88 | Amendment, dated as of July 8, 2011, to the Amended and Restated Letter Agreement, dated as of March 6, 2002, by and among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.p.A. (incorporated by reference to Exhibit 10.6 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* ## | |
10.89 | Amendment, dated as of July 8, 2011, to the License Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear Europe S.p.A, CK Jeanswear Asia Limited and WF Overseas Fashion C.V., as amended (incorporated by reference to Exhibit 10.7 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* ## |
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Exhibit No. | Description of Exhibit | |
10.90 | Amendment, dated as of July 8, 2011, to the License Agreement, dated as of January 31, 2008, by and among Calvin Klein, Inc., WF Overseas Fashion C.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.r.l. (incorporated by reference to Exhibit 10.8 to The Warnaco Group, Inc.’s Form 10-Q filed November 4, 2011).* ## | |
10.91 | Amendment, dated as of October 31, 2011, to the License Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V., as amended (re: | |
Bridge Apparel).† # | ||
10.92 | License Agreement, dated as of October 31, 2011, by and among Calvin Klein, Inc., WF Overseas Fashion C.V., Warnaco Italy s.r.l. and Warnaco Inc. (re: Bridge Apparel Store).† # | |
10.93 | Amendment, dated as of October 31, 2011, to the License Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V., as amended (re: | |
Bridge Accessories).† # | ||
10.94 | Amendment, dated as of October 31, 2011, to the License Agreement, dated August 4, 1994, by and among Calvin Klein, Inc., CKJ Holdings, Inc. and Calvin Klein Jeanswear Company, as amended (re: Jeans Apparel), and to the License Agreement, dated July 26, 2004, by and among Calvin Klein, Inc., Calvin Klein Jeanswear Company and CKJ Holdings, Inc., as amended (re: Jeans Accessories Store).† # | |
10.95 | Amendment, dated as of October 31, 2011, to the License Agreement, dated as of January 31, 2006, by and among Calvin Klein, Inc., CK Jeanswear Europe S.p.A, CK Jeanswear Asia Limited and WF Overseas Fashion C.V., as amended (re: Jeans Accessories).† # | |
21.1 | Subsidiaries of The Warnaco Group, Inc.† | |
23.1 | Consent of Independent Registered Public Accounting Firm.† | |
31.1 | Certification of Chief Executive Officer of The Warnaco Group, Inc. pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.† | |
31.2 | Certification of Chief Financial Officer of The Warnaco Group, Inc. pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.† | |
32.1 | Certifications of Chief Executive Officer and Chief Financial Officer of The Warnaco Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith) |
* | Previously filed. | |
** | The schedules to this agreement have been omitted pursuant to Item 601(b) (2) of Regulation S-K. The Company will furnish copies of any of the schedules to the Securities and Exchange Commission upon request. | |
† | Filed herewith. | |
# | Certain portions of this exhibit omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. | |
## | Certain portions of this exhibit omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment, which request was granted. |
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THE WARNACO GROUP, INC. | ||||
By: | /s/ HELEN MCCLUSKEY | |||
Name: | Helen McCluskey | |||
Title: | President and Chief Executive Officer |
SIGNATURE | TITLE | DATE | ||
/s/ HELEN MCCLUSKEY | Director, President and Chief Executive Officer (Principal Executive Officer) | February 29, 2012 | ||
/s/ LAWRENCE R. RUTKOWSKI | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | February 29, 2012 | ||
/s/ CHARLES R. PERRIN | Non-Executive Chairman of the Board of Directors | February 29, 2012 | ||
/s/ DAVID A. BELL | Director | February 29, 2012 | ||
/s/ ROBERT A. BOWMAN | Director | February 29, 2012 | ||
/s/ RICHARD KARL GOELTZ | Director | February 29, 2012 | ||
/s/ SHEILA A. HOPKINS | Director | February 29, 2012 | ||
/s/ NANCY A. REARDON | Director | February 29, 2012 | ||
/s/ DONALD SEELEY | Director | February 29, 2012 | ||
/s/ CHERYL NIDO TURPIN | Director | February 29, 2012 |
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New York, New York
February 29, 2012
F-1
Table of Contents
(Dollars in thousands, excluding per share data)
December 31, 2011 | January 1, 2011 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 232,531 | $ | 191,227 | ||||
Accounts receivable, less reserves of $94,739 and $95,639 as of December 31, 2011 and January 1, 2011, respectively | 322,976 | 318,123 | ||||||
Inventories | 350,835 | 310,504 | ||||||
Assets of discontinued operations | — | 125 | ||||||
Prepaid expenses and other current assets | 99,686 | 100,389 | ||||||
Deferred income taxes | 58,602 | 58,270 | ||||||
Total current assets | 1,064,630 | 978,638 | ||||||
Property, plant and equipment, net | 133,022 | 129,252 | ||||||
Other assets: | ||||||||
Licenses, trademarks and other intangible assets, net | 320,880 | 373,276 | ||||||
Deferred financing costs, net | 8,790 | 2,540 | ||||||
Deferred income taxes | 21,885 | 11,769 | ||||||
Other assets | 58,695 | 42,519 | ||||||
Goodwill | 139,948 | 115,278 | ||||||
Total assets | $ | 1,747,850 | $ | 1,653,272 | ||||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 47,513 | $ | 32,172 | ||||
Accounts payable | 141,797 | 152,714 | ||||||
Accrued liabilities | 212,655 | 227,561 | ||||||
Liabilities of discontinued operations | 6,797 | 18,800 | ||||||
Accrued income taxes payable | 41,762 | 37,957 | ||||||
Deferred income taxes | 1,476 | 262 | ||||||
Total current liabilities | 452,000 | 469,466 | ||||||
Long-term debt | 208,477 | — | ||||||
Deferred income taxes | 37,000 | 74,233 | ||||||
Other long-term liabilities | 137,973 | 136,967 | ||||||
Commitments and contingencies | ||||||||
Redeemable non-controlling interest | 15,200 | — | ||||||
Stockholders’ equity: | ||||||||
Preferred stock (See Note 13) | — | — | ||||||
Common stock: $0.01 par value, 112,500,000 shares authorized, 52,184,730 and 51,712,674 issued as of December 31, 2011 and January 1, 2011, respectively | 522 | 517 | ||||||
Additional paid-in capital | 721,356 | 674,508 | ||||||
Accumulated other comprehensive income | 16,242 | 43,048 | ||||||
Retained earnings | 625,760 | 501,394 | ||||||
Treasury stock, at cost 11,790,428 and 7,445,166 shares as of December 31, 2011 and January 1, 2011, respectively | (466,680 | ) | (246,861 | ) | ||||
Total stockholders’ equity | 897,200 | 972,606 | ||||||
Total liabilities, redeemable non-controlling interest and stockholders’ equity | $ | 1,747,850 | $ | 1,653,272 | ||||
F-2
Table of Contents
(Dollars in thousands, excluding per share amounts)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Net revenues | $ | 2,513,388 | $ | 2,295,751 | $ | 2,019,625 | ||||||
Cost of goods sold | 1,412,446 | 1,275,788 | 1,155,278 | |||||||||
Gross profit | 1,100,942 | 1,019,963 | 864,347 | |||||||||
Selling, general and administrative expenses | 844,696 | 758,053 | 638,907 | |||||||||
Amortization of intangible assets | 47,957 | 11,549 | 11,032 | |||||||||
Pension expense | 26,744 | 2,550 | 20,873 | |||||||||
Operating income | 181,545 | 247,811 | 193,535 | |||||||||
Other loss | 631 | 6,238 | 1,889 | |||||||||
Interest expense | 16,274 | 14,483 | 23,897 | |||||||||
Interest income | (3,361 | ) | (2,815 | ) | (1,248 | ) | ||||||
Income from continuing operations before provision for income taxes and non-controlling interest | 168,001 | 229,905 | 168,997 | |||||||||
Provision for income taxes | 36,006 | 82,107 | 64,272 | |||||||||
Income from continuing operations before non-controlling interest | 131,995 | 147,798 | 104,725 | |||||||||
Loss from discontinued operations, net of taxes | (4,802 | ) | (9,217 | ) | (6,227 | ) | ||||||
Net income | 127,193 | 138,581 | 98,498 | |||||||||
Less: Net income (loss) attributable to the non-controlling interest | (257 | ) | — | 2,500 | ||||||||
Net income attributable to Warnaco Group | $ | 127,450 | $ | 138,581 | $ | 95,998 | ||||||
Amounts attributable to Warnaco Group common shareholders: | ||||||||||||
Income from continuing operations, net of tax | $ | 132,252 | $ | 147,798 | $ | 102,225 | ||||||
Discontinued operations, net of tax | (4,802 | ) | (9,217 | ) | (6,227 | ) | ||||||
Net income | $ | 127,450 | $ | 138,581 | $ | 95,998 | ||||||
Basic income per common share attributable to Warnaco Group common shareholders (see Note 14): | ||||||||||||
Income from continuing operations | $ | 3.07 | $ | 3.26 | $ | 2.22 | ||||||
Loss from discontinued operations | (0.11 | ) | (0.20 | ) | (0.13 | ) | ||||||
Net income | $ | 2.96 | $ | 3.06 | $ | 2.09 | ||||||
Diluted income per common share attributable to Warnaco Group common shareholders (see Note 14): | ||||||||||||
Income from continuing operations | $ | 3.01 | $ | 3.19 | $ | 2.19 | ||||||
Loss from discontinued operations | (0.11 | ) | (0.20 | ) | (0.14 | ) | ||||||
Net income | $ | 2.90 | $ | 2.99 | $ | 2.05 | ||||||
Weighted average number of shares outstanding used in computing income per common share (see Note 14): | ||||||||||||
Basic | 42,425,750 | 44,701,643 | 45,433,874 | |||||||||
Diluted | 43,299,849 | 45,755,935 | 46,196,397 | |||||||||
F-3
Table of Contents
COMPREHENSIVE INCOME AND REDEEMABLE NON-CONTROLLING INTEREST
(Dollars in thousands)
Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
Warnaco Group | ||||||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||||||
Redeemable | Additional | Other | Total | |||||||||||||||||||||||||||||||||
Non-controlling | Common | Paid-in | Comprehensive | Retained | Treasury | Noncontrolling | Stockholders’ | Comprehensive | ||||||||||||||||||||||||||||
Interest | Stock | Capital | Income | Earnings | Stock | Interest | Equity | Income (Loss) | ||||||||||||||||||||||||||||
Balance at January 3, 2009 | $ | — | $ | 501 | $ | 631,891 | $ | 12,841 | $ | 268,016 | $ | (125,562 | ) | $ | 1,054 | $ | 788,741 | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 95,998 | 2,500 | 98,498 | $ | 98,498 | |||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 35,360 | 213 | 35,573 | 35,573 | ||||||||||||||||||||||||||||||||
Change in post retirement plans | (1,029 | ) | (1,029 | ) | (1,029 | ) | ||||||||||||||||||||||||||||||
Change on cash flow hedges | (699 | ) | (699 | ) | (699 | ) | ||||||||||||||||||||||||||||||
Other | — | 16 | 16 | 16 | ||||||||||||||||||||||||||||||||
Other comprehensive income | 229 | 33,861 | 33,861 | |||||||||||||||||||||||||||||||||
Comprehensive income | 2,729 | 132,359 | $ | 132,359 | ||||||||||||||||||||||||||||||||
Correction of adjustment to initially adopt accounting for uncertain tax positions | (1,201 | ) | (1,201 | ) | ||||||||||||||||||||||||||||||||
Purchase of 49% of non-controlling interest | (17,645 | ) | 235 | (17,410 | ) | |||||||||||||||||||||||||||||||
Dividend paid to non-controlling interest | (4,018 | ) | (4,018 | ) | ||||||||||||||||||||||||||||||||
Stock issued in connection with stock compensation plans | 5 | 4,679 | 4,684 | |||||||||||||||||||||||||||||||||
Compensation expense in connection with employee stock compensation plans | 14,453 | 14,453 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock related to stock compensation plans | (1,498 | ) | (1,498 | ) | ||||||||||||||||||||||||||||||||
Balance at January 2, 2010 | — | 506 | 633,378 | 46,473 | 362,813 | (127,060 | ) | — | 916,110 | |||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 138,581 | 138,581 | $ | 138,581 | ||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | (2,576 | ) | (2,576 | ) | (2,576 | ) | ||||||||||||||||||||||||||||||
Change in post retirement plans | (41 | ) | (41 | ) | (41 | ) | ||||||||||||||||||||||||||||||
Change in cash flow hedges | (820 | ) | (820 | ) | (820 | ) | ||||||||||||||||||||||||||||||
Other | 12 | 12 | 12 | |||||||||||||||||||||||||||||||||
Other comprehensive loss | (3,425 | ) | (3,425 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income | 135,156 | $ | 135,156 | |||||||||||||||||||||||||||||||||
Tax benefit related to exercise of equity awards | 1,069 | 1,069 | ||||||||||||||||||||||||||||||||||
Stock issued in connection with stock compensation plans | 11 | 17,475 | 17,486 | |||||||||||||||||||||||||||||||||
Compensation expense in connection with employee stock compensation plans | 22,586 | 22,586 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock related to stock compensation plans | (3,415 | ) | (3,415 | ) | ||||||||||||||||||||||||||||||||
Repurchases of common stock | (116,386 | ) | (116,386 | ) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2011 | — | 517 | 674,508 | 43,048 | 501,394 | (246,861 | ) | — | 972,606 | |||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 127,450 | 127,450 | $ | 127,450 | ||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | (24,626 | ) | (24,626 | ) | (24,626 | ) | ||||||||||||||||||||||||||||||
Change in cash flow hedges | (2,090 | ) | (2,090 | ) | (2,090 | ) | ||||||||||||||||||||||||||||||
Change in post retirement plans | (200 | ) | (200 | ) | (200 | ) | ||||||||||||||||||||||||||||||
Other | 110 | 110 | 110 | |||||||||||||||||||||||||||||||||
Other comprehensive income | (26,806 | ) | (26,806 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income | 100,644 | $ | 100,644 | |||||||||||||||||||||||||||||||||
Tax benefit related to exercise of equity awards | 12,055 | 12,055 | ||||||||||||||||||||||||||||||||||
Stock issued in connection with stock compensation plans | 5 | 10,062 | 10,067 | |||||||||||||||||||||||||||||||||
Compensation expense in connection with employee stock compensation plans | 24,731 | 24,731 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock related to stock compensation plans | (2,701 | ) | (2,701 | ) | ||||||||||||||||||||||||||||||||
Repurchases of common stock | (217,118 | ) | (217,118 | ) | ||||||||||||||||||||||||||||||||
Acquisition date fair value of redeemable non- controlling interest in joint venture in India | 15,200 | |||||||||||||||||||||||||||||||||||
Net loss attributable to redeemable non-controlling interest | (257 | ) | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments attributable to redeemable non-controlling interest | (2,827 | ) | ||||||||||||||||||||||||||||||||||
Adjustment to redemption value | 3,084 | (3,084 | ) | (3,084 | ) | |||||||||||||||||||||||||||||||
Balance at December 31, 2011 | $ | 15,200 | $ | 522 | $ | 721,356 | $ | 16,242 | $ | 625,760 | $ | (466,680 | ) | $ | — | $ | 897,200 | |||||||||||||||||||
F-4
Table of Contents
(Dollars in thousands)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 127,193 | $ | 138,581 | $ | 98,498 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Foreign exchange loss (gain) | 4,903 | 410 | (5,477 | ) | ||||||||
Loss from discontinued operations | 4,802 | 9,217 | 6,227 | |||||||||
Depreciation and amortization | 97,865 | 55,365 | 46,843 | |||||||||
Stock compensation | 24,731 | 22,586 | 14,453 | |||||||||
Provision for trade and other bad debts | 4,815 | 2,845 | 4,775 | |||||||||
Inventory writedown | 18,181 | 11,512 | 18,623 | |||||||||
Loss on repurchase of Senior Notes | — | 3,747 | — | |||||||||
Provision for deferred income tax | (17,343 | ) | 23,190 | 17,477 | ||||||||
Other | (1,745 | ) | (450 | ) | 1,008 | |||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (19,053 | ) | (33,122 | ) | (27,947 | ) | ||||||
Inventories | (65,677 | ) | (62,536 | ) | 67,470 | |||||||
Prepaid expenses and other assets | (5 | ) | (22,052 | ) | 9,906 | |||||||
Accounts payable, accrued expenses and other liabilities | (8,784 | ) | 55,145 | (5,090 | ) | |||||||
Accrued income taxes | (24,458 | ) | 20,924 | 17,115 | ||||||||
Net cash provided by operating activities from continuing operations | 145,425 | 225,362 | 263,881 | |||||||||
Net cash provided by (used in) operating activities from discontinued operations | (16,523 | ) | (1,205 | ) | 1,033 | |||||||
Net cash provided by operating activities | 128,902 | 224,157 | 264,914 | |||||||||
Cash flows from investing activities: | ||||||||||||
Proceeds on disposal of assets | 465 | 225 | 373 | |||||||||
Purchases of property, plant & equipment | (54,706 | ) | (44,357 | ) | (43,443 | ) | ||||||
Business acquisitions, net of cash acquired | (22,124 | ) | (29,942 | ) | (9,511 | ) | ||||||
Loan to non-controlling shareholder | (6,000 | ) | — | — | ||||||||
Disposal of businesses | 2,000 | 1,431 | — | |||||||||
Net cash (used in) investing activities from continuing operations | (80,365 | ) | (72,643 | ) | (52,581 | ) | ||||||
Net cash (used in) investing activities from discontinued operations | — | — | — | |||||||||
Net cash (used in) investing activities | (80,365 | ) | (72,643 | ) | (52,581 | ) | ||||||
F-5
Table of Contents
(Dollars in thousands)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Payment of deferred financing costs | (7,524 | ) | (70 | ) | (515 | ) | ||||||
Repurchase of Senior Notes due 2013 | — | (164,011 | ) | — | ||||||||
Premium on cancellation of interest rate swaps | — | — | 2,218 | |||||||||
Change in short-term notes payable | 25,604 | (13,340 | ) | (23,985 | ) | |||||||
Change in revolving credit loans | — | (189 | ) | (11,805 | ) | |||||||
Repayment of Italian Note | (13,370 | ) | — | — | ||||||||
Proceeds from 2011 Term Loan | 200,000 | — | — | |||||||||
Repayment of 2011 Term Loan | (1,000 | ) | — | — | ||||||||
Proceeds from the exercise of employee stock options | 9,275 | 16,733 | 4,034 | |||||||||
Purchase of treasury stock | (219,819 | ) | (119,801 | ) | (1,498 | ) | ||||||
Payment of dividend to non-controlling interest | — | — | (4,018 | ) | ||||||||
Cost to purchase non-controlling interest in an equity transaction | — | — | (5,339 | ) | ||||||||
Contingent payment related to acquisition of non-controlling interest in Brazilian subsidiary | (11,467 | ) | (3,442 | ) | — | |||||||
Tax benefit related to exercise of equity awards | 12,055 | 1,069 | — | |||||||||
Net cash (used in) financing activities from continuing operations | (6,246 | ) | (283,051 | ) | (40,908 | ) | ||||||
Net cash (used in) financing activities from discontinued operations | — | — | — | |||||||||
Net cash (used in) financing activities | (6,246 | ) | (283,051 | ) | (40,908 | ) | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (987 | ) | 2,010 | 1,702 | ||||||||
(Decrease) increase in cash and cash equivalents | 41,304 | (129,527 | ) | 173,127 | ||||||||
Cash and cash equivalents at beginning of period | 191,227 | 320,754 | 147,627 | |||||||||
Cash and cash equivalents at end of period | $ | 232,531 | $ | 191,227 | $ | 320,754 | ||||||
F-6
Table of Contents
(Currencies in thousands, excluding share and per share amounts
F-7
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-8
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts
F-9
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-10
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Buildings | 40 years | |
Building Improvements (including leasehold improvements) | 4-15 years | |
Machinery and equipment | 2-10 years | |
Furniture and fixtures (including store fixtures) | 1-10 years | |
Computer hardware | 3-5 years | |
Computer software | 3-7 years |
F-11
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
• | In determining the stock price volatility assumption used, the Company considers the historical volatility of its own stock price, based upon daily quoted market prices of the Company’s common stock (“Common Stock”) on the New York Stock Exchange and, prior to May 15, 2008, on the NASDAQ Stock Market LLC, over a period equal to the expected term of the related equity instruments. The Company relies only on historical volatility since it provides the most reliable indication of future volatility. Future volatility is expected to be consistent with historical; historical volatility is calculated using a simple average calculation method; historical data is available for the length of the option’s expected term and a sufficient number of price observations are used consistently. Since the Company’s stock options are not traded on a public market, the Company does not use implied volatility. A higher volatility input to the Black-Scholes-Merton model increases the resulting compensation expense. |
F-12
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
• | Expected option life is the period of time from the grant date to the date on which an option is expected to be exercised. The Company used historical data to calculate expected option life (which yielded an expected life of 4.1 years, 4.2 years and 3.72 years for Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively). A shorter expected term would result in a lower compensation expense. | ||
• | The Company’s risk-free rate of return assumption for options granted in Fiscal 2011, Fiscal 2010 and Fiscal 2009 was equal to the quoted yield for U.S. treasury bonds as of the dates of grant. |
F-13
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-14
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
1. | The critical terms of the hedging instrument (such as notional amount, interest rate, and maturity date, etc.) completely match the related terms of the hedged forecasted transaction (such as, notional amount, LIBOR interest rate and expected dates of the hedged transaction, etc.); |
F-15
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
2. | The strike price of the hedging option (or combination of options) matches the specified level beyond which the entity’s exposure is being hedged. This amount is the excess of LIBOR over 1.00% for both the interest rate cap and the hedged debt; | ||
3. | The hedging instrument’s cash flows at its maturity date completely offset the change in the hedged transaction’s cash flows for the risk being hedged. At the maturity date of the each of the caplets in the interest rate cap, the caplet will pay the Company the excess of LIBOR over 1.00% and, therefore, will limit the Company’s interest rate exposure to 1.00% (after the Company pays LIBOR on the hedged debt on those same dates); and | ||
4. | The hedging instrument can be exercised only on a single date—its contractual maturity date. (This condition is consistent with the entity’s focus on the hedging instrument’s terminal value). The interest rate cap allows exercise only on the maturity date of each caplet (which matches the dates on which interest payments are due on the hedged debt). |
F-16
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-17
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-18
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-19
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Net revenues | $ | — | $ | 1,355 | $ | 3,083 | ||||||
Loss before income tax provision (benefit) | $ | (5,090 | ) (a) | $ | (12,814 | ) | $ | (6,079 | ) (b) | |||
Income tax provision (benefit) | (288 | ) | (3,597 | ) | 148 | |||||||
Loss from discontinued operations | $ | (4,802 | ) | $ | (9,217 | ) | $ | (6,227 | ) | |||
(a) | includes a charge of approximately $3,900 in connection with the Lejaby business (See Note 19 of Notes to Consolidated Financial Statements — Legal Matters). | |
(b) | includes a charge of $3,423 related to the correction of an error in amounts recorded in prior periods. SeeNote 6 of Notes to Consolidated Financial Statements. |
F-20
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
December 31, | January 1, 2011 | |||||||
2011(a) | (a) | |||||||
Accounts receivable, net | $ | — | $ | 18 | ||||
Prepaid expenses and other current assets | — | 107 | ||||||
Assets of discontinued operations | $ | — | $ | 125 | ||||
Accounts payable | $ | 5 | $ | 32 | ||||
Accrued liabilities | 6,792 | 18,768 | ||||||
Liabilities of discontinued operations | $ | 6,797 | $ | 18,800 | ||||
(a) | Includes assets and liabilities related to the businesses that were discontinued in 2009, 2008 and 2007. |
F-21
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Cost of goods sold | $ | 1,893 | $ | 300 | $ | 1,764 | ||||||
Selling, general and administrative expenses (a) | 59,046 | 9,509 | 10,362 | |||||||||
$ | 60,939 | $ | 9,809 | $ | 12,126 | |||||||
Cash portion of restructuring items | $ | 20,919 | $ | 8,883 | $ | 11,921 | ||||||
Non-cash portion of restructuring items | $ | 40,020 | $ | 926 | $ | 205 |
Balance at January 3, 2009 | $ | 5,925 | ||
Charges for Fiscal 2009 | 11,921 | |||
Cash reductions for Fiscal 2009 | (14,402 | ) | ||
Non-cash changes and foreign currency effects | 128 | |||
Balance at January 2, 2010 | 3,572 | |||
Charges for Fiscal 2010 | 8,883 | |||
Cash reductions for Fiscal 2010 | (8,822 | ) | ||
Non-cash changes and foreign currency effects | (51 | ) | ||
Balance at January 1, 2011 | 3,582 | |||
Charges for Fiscal 2011 | 20,919 | |||
Cash reductions for Fiscal 2011 | (15,454 | ) | ||
Non-cash changes and foreign currency effects | 113 | |||
Balance at December 31, 2011 (b) | $ | 9,160 | ||
(a) | Includes $35,225 recorded in amortization of intangible assets for Fiscal 2011. | |
(b) | Includes approximately $7,079 recorded in accrued liabilities (part of current liabilities) which amounts are expected to be settled over the next 12 months and includes approximately $2,081 recorded in other long term liabilities which amounts are expected to be settled over the next two years. |
F-22
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Intimate | ||||||||||||||||||||||||
Sportswear | Apparel | Swimwear | ||||||||||||||||||||||
Group | Group | Group | Group Total | Corporate / Other | Total | |||||||||||||||||||
Fiscal 2011 | ||||||||||||||||||||||||
Net revenues | $ | 1,305,769 | $ | 932,131 | $ | 275,488 | $ | 2,513,388 | $ | — | $ | 2,513,388 | ||||||||||||
Operating income (loss) (f) (g) | 80,641 | 133,755 | 28,067 | 242,463 | (60,918 | ) | 181,545 | |||||||||||||||||
Depreciation and amortization | 72,831 | 21,254 | 2,413 | 96,498 | 1,368 | 97,866 | ||||||||||||||||||
Restructuring expense | 45,884 | 6,556 | 7,533 | 59,973 | 966 | 60,939 | ||||||||||||||||||
Capital expenditures | 26,662 | 26,170 | 435 | 53,267 | 2,103 | 55,370 | ||||||||||||||||||
Fiscal 2010 | ||||||||||||||||||||||||
Net revenues | $ | 1,204,065 | $ | 834,010 | $ | 257,676 | $ | 2,295,751 | $ | — | $ | 2,295,751 | ||||||||||||
Operating income (loss) (b) | 143,260 | 134,928 | 18,698 | 296,886 | (49,075 | ) | 247,811 | |||||||||||||||||
Depreciation and amortization (c) | 33,489 | 18,158 | 2,330 | 53,977 | 1,388 | 55,365 | ||||||||||||||||||
Restructuring expense | 1,818 | 3,596 | 3,582 | 8,996 | 813 | 9,809 | ||||||||||||||||||
Capital expenditures | 33,640 | 12,789 | 564 | 46,993 | 3,270 | 50,263 | ||||||||||||||||||
Fiscal 2009 | ||||||||||||||||||||||||
Net revenues | $ | 1,044,892 | $ | 723,222 | $ | 251,511 | $ | 2,019,625 | $ | — | $ | 2,019,625 | ||||||||||||
Operating income (loss) (a)(d) | 118,477 | 116,269 | 16,168 | 250,914 | (57,379 | ) | 193,535 | |||||||||||||||||
Depreciation and amortization (e) | 29,849 | 13,162 | 2,415 | 45,426 | 1,417 | 46,843 | ||||||||||||||||||
Restructuring expense | 3,242 | 4,314 | 3,019 | 10,575 | 1,551 | 12,126 | ||||||||||||||||||
Capital expenditures | 15,912 | 22,112 | 616 | 38,640 | 4,116 | 42,756 | ||||||||||||||||||
Balance Sheet | ||||||||||||||||||||||||
Total Assets: | ||||||||||||||||||||||||
Fiscal 2011 | $ | 994,425 | $ | 486,636 | $ | 148,982 | $ | 1,630,043 | $ | 117,807 | $ | 1,747,850 | ||||||||||||
Fiscal 2010 | 995,475 | 381,371 | 154,831 | 1,531,677 | 121,595 | 1,653,272 | ||||||||||||||||||
Property, Plant and Equipment: | ||||||||||||||||||||||||
Fiscal 2011 | $ | 64,149 | $ | 43,966 | $ | 2,220 | $ | 110,335 | $ | 22,687 | $ | 133,022 | ||||||||||||
Fiscal 2010 | 63,555 | 28,522 | 3,023 | 95,100 | 34,152 | 129,252 |
(a) | reflects a charge of $3,552 recorded during Fiscal 2009 related to the write down of inventory associated with the Company’s LZR Racer and other similar racing swimsuits. The Company recorded the write down as a result of the Federation Internationale de Natation’s ruling during Fiscal 2009 which banned the use of these types of suits in competitive swim events. | |
(b) | reflects the allocation of $9,892 of corporate expenses to the Sportswear Group ($6,924), the Intimate Apparel Group ($3,796) and the Swimwear Group (($828)), respectively, during Fiscal 2010 to conform to the presentation for Fiscal 2011. | |
(c) | reflects the allocation of $1,635 of corporate depreciation and amortization expense to the Sportswear Group ($842), the Intimate Apparel Group ($615) and the Swimwear Group ($178), respectively, during Fiscal 2010 to conform to the presentation for Fiscal 2011. |
F-23
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
(d) | reflects the allocation of $6,664 of corporate expenses to the Sportswear Group ($4,698), the Intimate Apparel Group ($2,638) and the Swimwear Group (($672)), respectively, during Fiscal 2009 to conform to the presentation for Fiscal 2011. | |
(e) | reflects the allocation of $1,653 of corporate depreciation and amortization expense to the Sportswear Group ($876), the Intimate Apparel Group ($562) and the Swimwear Group ($215), respectively, during Fiscal 2009 to conform to the presentation for Fiscal 2011. | |
(f) | includes a gain of $2,000 in the Intimate Apparel Group related to the sale and assignment of the Company’s Nancy Ganz® trademarks in Australia and New Zealand to the Company’s former licensee for cash consideration of $2,000. | |
(g) | includes a gain of $1,630 related to the recovery of an insurance claim for a fire in a warehouse in Peru, attributable partly to the Sportswear Group and partly to the Intimate Apparel Group, recorded in selling, general and administrative expenses on the Consolidated Statements of Operations. |
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Unallocated corporate expenses (a) | $ | 32,349 | $ | 45,213 | $ | 31,360 | ||||||
Foreign exchange losses (gains) | 165 | (1,206 | ) | 2,627 | ||||||||
Pension expense | 26,069 | 2,867 | 20,424 | |||||||||
Restructuring expense | 967 | 813 | 1,551 | |||||||||
Depreciation and amortization of corporate assets | 1,368 | 1,388 | 1,417 | |||||||||
Corporate/other expenses | $ | 60,918 | $ | 49,075 | $ | 57,379 | ||||||
(a) | the decrease in unallocated corporate expenses for Fiscal 2011 compared to Fiscal 2010 is related primarily to (i) a net reduction in amounts accrued for employee compensation ($9,200) and (ii) a decline in general administrative and professional fees ($3,700). The increase in unallocated corporate expenses for Fiscal 2010 compared to Fiscal 2009 was primarily related to: (i) an increase in amounts accrued for performance-based employee compensation and other employee benefits ($10,100), (ii) an increase in share-based compensation expense due primarily to the addition of Retirement Eligibility provisions in the Fiscal 2010 awards ($4,500) (seeNote 13 of Notes to Consolidated Financial Statements); (iii) an increase in professional fees ($1,500) and (iv) a charge for franchise taxes of $1,000, related to the correction of amounts recorded in prior periods (the amount was not material to any prior period). |
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Operating income by operating groups | $ | 242,463 | $ | 296,886 | $ | 250,914 | ||||||
Corporate/other expenses | (60,918 | ) | (49,075 | ) | (57,379 | ) | ||||||
Operating income | 181,545 | 247,811 | 193,535 | |||||||||
Other loss | 631 | 6,238 | 1,889 | |||||||||
Interest expense | 16,274 | 14,483 | 23,897 | |||||||||
Interest income | (3,361 | ) | (2,815 | ) | (1,248 | ) | ||||||
Income from continuing operations before provision for income taxes and non-controlling interest | $ | 168,001 | $ | 229,905 | $ | 168,997 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | % | Fiscal 2010 | % | Fiscal 2009 | % | |||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||
United States | $ | 1,013,239 | 40.3 | % | $ | 1,008,167 | 44.0 | % | $ | 916,691 | 45.4 | % | ||||||||||||
Europe | 628,094 | 25.0 | % | 576,644 | 25.1 | % | 551,595 | 27.3 | % | |||||||||||||||
Asia | 499,499 | 19.9 | % | 391,264 | 17.0 | % | 322,890 | 16.0 | % | |||||||||||||||
Mexico, Central and South America | 240,262 | 9.5 | % | 188,217 | 8.2 | % | 119,149 | 5.9 | % | |||||||||||||||
Canada | 132,294 | 5.3 | % | 131,459 | 5.7 | % | 109,300 | 5.4 | % | |||||||||||||||
$ | 2,513,388 | 100.0 | % | $ | 2,295,751 | 100.0 | % | $ | 2,019,625 | 100.0 | % | |||||||||||||
December 31, 2011 | January 1, 2011 | |||||||||||||||
Property, plant and equipment, net: | ||||||||||||||||
United States | $ | 35,437 | 26.6 | % | $ | 43,738 | 33.8 | % | ||||||||
Europe | 56,933 | 42.8 | % | 52,339 | 40.5 | % | ||||||||||
All other | 40,652 | 30.6 | % | 33,175 | 25.7 | % | ||||||||||
$ | 133,022 | 100.0 | % | $ | 129,252 | 100.0 | % | |||||||||
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Income from continuing operations before provision for income taxes and non-controlling interest: | ||||||||||||
Domestic | $ | 53,358 | $ | 70,997 | $ | 53,405 | ||||||
Foreign | 114,643 | 158,908 | 115,592 | |||||||||
Total | $ | 168,001 | $ | 229,905 | $ | 168,997 | ||||||
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Current: | ||||||||||||
Federal | $ | 2,580 | $ | 393 | $ | 2,784 | ||||||
State and local | 6,755 | 8,385 | 13,348 | |||||||||
Foreign | 44,014 | 50,139 | 30,663 | |||||||||
Total current tax provision | 53,349 | 58,917 | 46,795 | |||||||||
Deferred: | ||||||||||||
Federal | 14,208 | 22,680 | 21,241 | |||||||||
State and local | (2,936 | ) | 2,699 | (7,585 | ) | |||||||
Foreign | (27,981 | ) | (2,583 | ) | (671 | ) | ||||||
Valuation allowance increase (decrease) | (634 | ) | 394 | 4,492 | ||||||||
Total deferred tax provision | (17,343 | ) | 23,190 | 17,477 | ||||||||
Provision for income taxes | $ | 36,006 | $ | 82,107 | $ | 64,272 | ||||||
F-25
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Income from continuing operations before provision for income taxes and non-controlling interest: | $ | 168,001 | $ | 229,905 | $ | 168,997 | ||||||
Income tax expense computed at U.S. statutory rate | 58,800 | 80,467 | 59,149 | |||||||||
State income taxes, net of federal benefit | 2,447 | 8,193 | (b) | 3,647 | ||||||||
Foreign taxes less than the U.S. statutory rate | (25,277 | )(a) | (8,386 | ) | (10,465 | ) | ||||||
Foreign income taxed in the US | 531 | 508 | 2,428 | |||||||||
Increase (Decrease) in valuation allowance | (634 | ) | 394 | 4,492 | ||||||||
Cancellation of indebtedness recapture | — | — | 3,606 | |||||||||
Other, net | 139 | 931 | 1,415 | |||||||||
Provision for income taxes | $ | 36,006 | $ | 82,107 | $ | 64,272 | (c) | |||||
(a) | Includes an $10,900 tax benefit associated with the recognition of pre-2004 net operating losses in a foreign jurisdiction as a result of receiving a favorable ruling from that country’s taxing authority and a tax benefit of $7,300 related to a reduction in the reserve for uncertain tax positions in certain foreign tax jurisdictions. | |
(b) | Includes a tax charge of approximately $2,700 associated with the correction of an error in the 2006 through 2009 income tax provisions as a consequence of the loss of a credit related to prior year tax overpayments caused by the delayed filing of tax returns in a U.S. state taxing jurisdiction. | |
(c) | Includes a charge of approximately $3,600 in order to correct an error in prior period income tax provisions related to the recapture of cancellation of indebtedness income, which had been deferred in connection with the Company’s bankruptcy proceedings in 2003. |
F-26
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
December 31, 2011 | January 1, 2011 | |||||||
Deferred tax assets: | ||||||||
Inventory | $ | 7,300 | $ | 7,010 | ||||
Pension and post-retirement benefits | 16,625 | 11,170 | ||||||
Advertising credits | 1,381 | — | ||||||
Stock-based compensation | 19,062 | 13,536 | ||||||
Reserves and accruals | 50,352 | 47,225 | ||||||
Net operating losses | 24,654 | 12,516 | ||||||
Other | 22,410 | 18,672 | ||||||
141,784 | 110,129 | |||||||
Valuation allowance | (17,975 | ) | (18,513 | ) | ||||
Subtotal | 123,809 | 91,616 | ||||||
Gross deferred tax liabilities: | ||||||||
Depreciation and amortization | 81,798 | 96,072 | ||||||
Subtotal | 81,798 | 96,072 | ||||||
Deferred tax liability — net | $ | 42,011 | $ | (4,456 | ) | |||
F-27
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
• | an increase of $724 in Amortization of intangible assets (net of tax benefits of approximately $371) |
• | a $3,423 charge to Loss from discontinued operations, net of taxes |
F-28
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Balance as of the beginning of the fiscal year | $ | 86,556 | $ | 88,171 | $ | 85,968 | ||||||
Increases: | ||||||||||||
Tax Positions Taken — Current Year | 2,179 | 4,711 | 8,210 | |||||||||
Tax Positions Taken — Prior Year | 593 | 6,590 | (a) | 6,495 | ||||||||
Decreases: | ||||||||||||
Tax Positions Taken — Prior Year | (6,661 | ) | (10,409 | )(b) | (10,578 | ) | ||||||
Settlements During Year | (1,821 | ) | (1,676 | ) | (1,909 | ) | ||||||
Lapse of Statute of Limitations | (1,432 | ) | (831 | ) | (15 | ) | ||||||
Balance at the end of the fiscal year | $ | 79,414 | $ | 86,556 | $ | 88,171 | ||||||
(a) | Included in Fiscal 2010 is an adjustment of approximately $3,500 related to uncertain tax positions which were excluded from the tabular rollforward presentation for uncertain tax positions in prior periods. The amounts were appropriately included in the “Other long-term liabilities” line item in the Company’s Consolidated Balance Sheet for all periods presented. | |
(b) | Included in Fiscal 2010 is an adjustment of approximately $7,000 related to cumulative accrued interest and penalties which were historically included in the tabular rollforward for uncertain tax positions. The amounts were appropriately included the Company’s Consolidated Balance Sheets for all periods presented. |
F-29
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Pension Plan | Postretirement Plans | |||||||||||||||
December 31, | January 1, | December 31, | January 1, | |||||||||||||
2011 | 2011 | 2011 | 2011 | |||||||||||||
Change in projected benefit obligations: | ||||||||||||||||
Benefit obligation at beginning of period | $ | 161,896 | $ | 155,333 | $ | 4,569 | $ | 4,574 | ||||||||
Service cost | — | — | 81 | 86 | ||||||||||||
Interest cost | 9,173 | 9,241 | 236 | 258 | ||||||||||||
Actuarial loss (a) | 12,801 | 8,869 | 9 | 91 | ||||||||||||
Benefits paid | (11,706 | ) | (11,547 | ) | (430 | ) | (440 | ) | ||||||||
Benefit obligation at end of period | $ | 172,164 | $ | 161,896 | $ | 4,465 | $ | 4,569 | ||||||||
(a) | The Pension Plan’s actuarial loss in Fiscal 2011 is due primarily to the loss related to the change in the discount rate ($10,575) and other actuarial losses ($2,226) during Fiscal 2011. The Pension Plan’s actuarial loss in Fiscal 2010 is due primarily to the loss related to the change in the discount rate ($5,000) and other actuarial losses ($3,900) during Fiscal 2010. The Postretirement Plans’ actuarial loss in Fiscal 2011 is primarily related to the change in the discount rate ($274) and other actuarial losses (($265)). The Postretirement Plans’ actuarial loss in Fiscal 2010 is primarily related to the change in the discount rate ($100) and other actuarial gains ($10). |
F-30
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Pension Plan | Postretirement Plans | |||||||||||||||
December 31, | January 1, | December 31, | January 1, | |||||||||||||
2011 | 2011 | 2011 | 2011 | |||||||||||||
Fair value of plan assets at beginning of period | $ | 127,694 | $ | 118,334 | $ | — | $ | — | ||||||||
Actual return on plan assets | (4,076 | ) | 15,225 | — | ||||||||||||
Employer’s contributions | 9,450 | 5,682 | 430 | 440 | ||||||||||||
Benefits paid | (11,706 | ) | (11,547 | ) | (430 | ) | (440 | ) | ||||||||
Fair value of plan assets at end of period | $ | 121,362 | $ | 127,694 | $ | — | $ | — | ||||||||
Unfunded status | $ | (50,802 | ) | $ | (34,202 | ) | $ | (4,465 | ) | $ | (4,569 | ) | ||||
Unrecognized net actuarial loss (gain) | — | — | 67 | (61 | ) | |||||||||||
Net amount recognized / Retirement obligations (a) | $ | (50,802 | ) | $ | (34,202 | ) | $ | (4,398 | ) | $ | (4,630 | ) | ||||
(a) | The net amount recognized for the Pension Plan as of December 31, 2011 is included in the Company’s Consolidated Balance Sheets in accrued pension obligations, within Accrued liabilities and Other long-term liabilities. |
Pension Plan | Postretirement Plans | |||||||||||||||||||||||
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | |||||||||||||||||||
Service cost | $ | — | �� | $ | — | $ | — | $ | 81 | $ | 86 | $ | 78 | |||||||||||
Interest cost | 9,173 | 9,241 | 9,987 | 236 | 258 | 290 | ||||||||||||||||||
Expected return on plan assets | (9,107 | ) | (9,270 | ) | (7,867 | ) | — | — | — | |||||||||||||||
(Gain) loss on plan assets in excess of expected return | 13,202 | (5,974 | ) | (9,164 | ) | — | — | — | ||||||||||||||||
Net actuarial loss (a) | 12,801 | 8,869 | 28,733 | — | — | — | ||||||||||||||||||
Amortization of prior service cost | — | — | — | (237 | ) | (166 | ) | (166 | ) | |||||||||||||||
Amortization of loss | — | — | — | 47 | 56 | 2 | ||||||||||||||||||
Net cost (b) | $ | 26,069 | $ | 2,866 | $ | 21,689 | $ | 127 | $ | 234 | $ | 204 | ||||||||||||
(a) | The Pension Plan’s actuarial loss in Fiscal 2011 is due primarily to the loss related to the change in the discount rate ($10,575) and other actuarial losses ($2,226) during Fiscal 2011. The Pension Plan’s actuarial loss in Fiscal 2010 is due primarily to the loss related to the change in the discount rate ($5,000) and other actuarial losses ($3,900) during Fiscal 2010. The Pension Plan’s actuarial loss in Fiscal 2009 is due primarily to the loss related to the change in the discount rate ($26,800) and other actuarial losses ($1,900) during Fiscal 2009. | |
(b) | The Pension Plan’s net benefit (income) cost does not include (income) costs related to certain foreign defined benefit plans of $675, ($316) and ($816) in Fiscal 2011, Fiscal 2010 and Fiscal 2009, respectively. |
Pension | Postretirement | |||||||
Plan | Plans | |||||||
Initial net asset (obligation) | $ | — | $ | — | ||||
Prior service cost | — | (166 | ) | |||||
Net loss | — | 68 | ||||||
Total estimated amortization from Accumulated | ||||||||
Other Comprehensive Income for fiscal 2012 | $ | — | $ | (98 | ) | |||
F-31
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-32
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-33
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Quoted Prices | Significant | |||||||||||||||
in Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
Asset Category | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash and cash equivalents | $ | 10,094 | $ | 10,094 | ||||||||||||
Equity securities: | ||||||||||||||||
Capital equipment | 15,795 | 11,297 | $ | 4,498 | ||||||||||||
Consumer goods | 9,884 | 9,211 | 673 | |||||||||||||
Energy | 6,831 | 6,831 | ||||||||||||||
Finance | 5,203 | 4,895 | 308 | |||||||||||||
Gold Mines | 1,722 | 1,616 | 106 | |||||||||||||
Materials | 2,601 | 2,468 | 133 | |||||||||||||
Real Estate | 8,866 | 8,866 | ||||||||||||||
Services | 7,959 | 7,429 | 530 | |||||||||||||
Miscellaneous | 12,934 | 12,934 | ||||||||||||||
Fixed income securities: | ||||||||||||||||
U.S. government bonds | 10,372 | 10,372 | ||||||||||||||
Corporate bonds (a) | 13,095 | 13,095 | ||||||||||||||
Mortgage-backed securities | 11,379 | 11,379 | ||||||||||||||
Municipal Bonds | 242 | 242 | ||||||||||||||
Other types of investments: | ||||||||||||||||
Limited partnerships (b) | 6,973 | $ | 6,973 | |||||||||||||
Other | 457 | 457 | ||||||||||||||
$ | 124,407 | $ | 76,098 | $ | 41,336 | $ | 6,973 | |||||||||
F-34
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Quoted Prices | Significant | |||||||||||||||
in Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
Asset Category | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash and cash equivalents | $ | 11,882 | $ | 11,882 | ||||||||||||
Equity securities: | ||||||||||||||||
Capital equipment | 13,587 | 9,856 | $ | 3,731 | ||||||||||||
Consumer goods | 9,895 | 9,109 | 786 | |||||||||||||
Energy | 7,637 | 7,468 | 169 | |||||||||||||
Finance | 7,479 | 6,841 | 638 | |||||||||||||
Gold Mines | 1,704 | 1,704 | ||||||||||||||
Materials | 2,804 | 2,190 | 614 | |||||||||||||
Real Estate | 9,024 | 9,024 | ||||||||||||||
Services | 9,858 | 9,273 | 585 | |||||||||||||
Miscellaneous | 13,326 | 13,326 | ||||||||||||||
Fixed income securities: | ||||||||||||||||
U.S. government bonds | 9,922 | �� | 9,922 | |||||||||||||
Corporate bonds (a) | 14,424 | 14,424 | ||||||||||||||
Mortgage-backed securities | 9,566 | 9,566 | ||||||||||||||
Other types of investments: | ||||||||||||||||
Limited partnerships (b) | 9,631 | $ | 9,631 | |||||||||||||
Other | 479 | 479 | ||||||||||||||
$ | 131,218 | $ | 81,152 | $ | 40,435 | $ | 9,631 | |||||||||
(a) | this category represents investment grade bonds of U.S. issuers from diverse industries. | |
(b) | this category represents limited partnerships that invest capital in a diversified group of investment entities, generally hedge funds, private investment companies, portfolio funds and pooled investment vehicles which engage in a variety of investment strategies, managed by investment managers. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Limited | ||||
Partnerships | ||||
Balance — January 2, 2010 | $ | 12,925 | ||
Actual return on Plan assets: | ||||
Relating to assets still held at the reporting date | (2,851 | ) | ||
Relating to assets sold during the period | — | |||
Purchases, sales and settlements | (443 | ) | ||
Transfers in and/or out of Level 3 | — | |||
Ending balance — January 1, 2011 | 9,631 | |||
Actual return on Plan assets: | ||||
Relating to assets still held at the reporting date | (384 | ) | ||
Relating to assets sold during the period | 342 | |||
Purchases, sales and settlements | (2,616 | ) | ||
Transfers in and/or out of Level 3 | — | |||
Ending balance — December 31, 2011 | $ | 6,973 | ||
Pension | Postretirement | |||||||
Plan | Plans | |||||||
2012 | $ | 11,700 | $ | 380 | ||||
2013 | 11,600 | 360 | ||||||
2014 | 11,600 | 330 | ||||||
2015 | 11,600 | 320 | ||||||
2016 | 11,500 | 320 | ||||||
2017-2021 | 57,600 | 1,590 |
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Discount rate used for determining projected benefit obligation | 5.20 | % | 5.80 | % | 6.10 | % | ||||||
Discount rate used for determining net benefit (income) cost | 5.80 | % | 6.10 | % | 8.00 | % | ||||||
Long-term rate of return on plan assets | 7.00 | % | 8.00 | % | 8.00 | % | ||||||
Average rate of compensation increase for determining projected benefit obligation | N/A | N/A | N/A | |||||||||
Average rate of compensation increase for determining net benefit (income) cost | N/A | N/A | N/A |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
December 31, 2011 | January 1, 2011 | |||||||
Health care cost trend rate assumed next year: | ||||||||
Pre-65 | 7.6 | % | 7.8 | % | ||||
Post-65 | 7.6 | % | 7.8 | % | ||||
Rate at which the trend rate is assumed to decline (the ultimate trend rate) | 4.5 | % | 4.5 | % | ||||
Year trend rate reaches the ultimate rate | 2027 | 2027 |
F-37
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
One | One | |||||||
Percentage | Percentage | |||||||
Point | Point | |||||||
Increase | Decrease | |||||||
Effect on total of service and interest cost components | $ | 41 | $ | (33 | ) | |||
Effect on health care component of the accumulated | ||||||||
post-retirement benefit obligation | $ | 520 | $ | (428 | ) |
December 31, | ||||||||
2011 | January 1, 2011 | |||||||
Finished goods | $ | 350,010 | $ | 310,504 | ||||
Raw materials | 825 | — | ||||||
$ | 350,835 | $ | 310,504 | |||||
F-38
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
�� | ||||||||
December 31, 2011 | January 1, 2011 | |||||||
Land and land improvements | $ | 440 | $ | 440 | ||||
Building, building improvements and leasehold improvements | 118,400 | 103,231 | ||||||
Furniture and fixtures | 88,641 | 86,722 | ||||||
Machinery and equipment | 27,935 | 27,490 | ||||||
Computer hardware and software | 122,521 | 117,686 | ||||||
Construction in progress | 8,523 | 4,247 | ||||||
$ | 366,460 | $ | 339,816 | |||||
Less: Accumulated depreciation and amortization | (233,438 | ) | (210,564 | ) | ||||
Property, plant and equipment, net | $ | 133,022 | $ | 129,252 | ||||
December 31, 2011 | January 1, 2011 | |||||||||||||||||||||||
Gross Carrying | Accumulated | Gross Carrying | Accumulated | |||||||||||||||||||||
Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||||||
Finite-lived intangible assets: | ||||||||||||||||||||||||
Licenses for a term (Company as licensee) | $ | 323,950 | $ | 99,229 | $ | 224,721 | $ | 327,394 | $ | 54,907 | $ | 272,487 | ||||||||||||
Other | 34,459 | 14,932 | 19,527 | 34,258 | 11,297 | 22,961 | �� | |||||||||||||||||
358,409 | 114,161 | 244,248 | 361,652 | 66,204 | 295,448 | |||||||||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||||||||||
Trademarks | 53,519 | — | 53,519 | 54,715 | — | 54,715 | ||||||||||||||||||
Licenses in perpetuity | 23,113 | — | 23,113 | 23,113 | — | 23,113 | ||||||||||||||||||
76,632 | — | 76,632 | 77,828 | — | 77,828 | |||||||||||||||||||
Intangible Assets | $ | 435,041 | $ | 114,161 | $ | 320,880 | $ | 439,480 | $ | 66,204 | $ | 373,276 | ||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Other | ||||||||||||||||||||
Licenses | Licenses | Finite-lived | ||||||||||||||||||
in | for a | Intangible | ||||||||||||||||||
Trademarks | Perpetuity | Term | Assets | Total | ||||||||||||||||
Balance at January 2, 2010 | $ | 56,719 | $ | 23,951 | $ | 284,121 | $ | 12,040 | $ | 376,831 | ||||||||||
Amortization expense | — | — | (8,639 | ) | (2,910 | ) | (11,549 | ) | ||||||||||||
Translation adjustments | — | — | (1,147 | ) | (1,189 | ) | (2,336 | ) | ||||||||||||
Recapture of tax basis (a) | (2,004 | ) | (838 | ) | (1,848 | ) | (420 | ) | (5,110 | ) | ||||||||||
Acquisitions (b) | — | — | — | 15,096 | 15,096 | |||||||||||||||
Other | — | — | — | 344 | 344 | |||||||||||||||
Balance at January 1, 2011 | 54,715 | 23,113 | 272,487 | 22,961 | 373,276 | |||||||||||||||
Amortization expense (c) | — | — | (44,322 | ) | (3,635 | ) | (47,957 | ) | ||||||||||||
Translation adjustments | — | — | (5,944 | ) | (872 | ) | (6,816 | ) | ||||||||||||
Acquisitions (d) | — | — | 2,500 | 1,073 | 3,573 | |||||||||||||||
Tax benefit (e) | (1,196 | ) | — | — | — | (1,196 | ) | |||||||||||||
Balance at December 31, 2011 | $ | 53,519 | $ | 23,113 | $ | 224,721 | $ | 19,527 | $ | 320,880 | ||||||||||
(a) | Relates to the correction of errors in prior period deferred tax balances associated with the recapture of cancellation of indebtedness income which had been deferred in connection with the Company’s bankruptcy proceedings in 2003. | |
(b) | During Fiscal 2010, the Company completed the accounting for the acquisition of certain store assets in Brazil (seeNote 2 of Notes to Consolidated Financial Statements), which had been recorded as intangible assets of $3,592 on the date of acquisition during the fourth quarter of Fiscal 2009. During Fiscal 2010, the Company reclassified those assets as prepaid rent (included in Other assets on the Company’s Consolidated Balance Sheet). In addition, during Fiscal 2010, the Company recorded reacquired rights of $360 related to its acquisition of businesses in the People’s Republic of China and amortized that intangible asset to selling, general and administrative expense during Fiscal 2010. The Company also recorded reacquired rights of $18,328, which is being amortized over an eight year period, in connection with the acquisition of its Italian distributor in Fiscal 2010 (seeNote 2 of Notes to Consolidated Financial Statements). | |
(c) | Includes $35,225 related to the impairment of the Company’s licenses related to its CK/Calvin Klein bridge businesses. See Note 1 — Significant Accounting Policies — Long-lived Assets and Goodwill and Other Intangible Assets and Note 4 — Restructuring expense and Other Exit Costs of Notes to Consolidated Financial Statements. | |
(d) | Relates to intangible assets totaling $3,573 for reacquired rights and amendment of a license during Fiscal 2011, which will be amortized over a weighted average period of 25 years (seeNote 2ofNotes to Consolidated Financial Statements). | |
(e) | Relates to a tax benefit realized for the excess of tax deductible goodwill over book goodwill in certain jurisdictions that arose prior to the Effective Date. |
2012 | $ | 10,313 | ||
2013 | 10,224 | |||
2014 | 9,136 | |||
2015 | 9,114 | |||
2016 | 9,057 |
Sportswear | Intimate | Swimwear | ||||||||||||||
Group | Apparel Group | Group | Total | |||||||||||||
Goodwill balance at January 2, 2010 | $ | 108,633 | $ | 1,446 | $ | 642 | $ | 110,721 | ||||||||
Adjustment: | ||||||||||||||||
Translation adjustments | (3,182 | ) | 57 | — | (3,125 | ) | ||||||||||
Other (a) | 7,565 | 117 | — | 7,682 | ||||||||||||
Goodwill balance at January 1, 2011 | 113,016 | 1,620 | 642 | 115,278 | ||||||||||||
Adjustment: | ||||||||||||||||
Translation adjustments | (8,135 | ) | (741 | ) | — | (8,876 | ) | |||||||||
Other (b) | 29,514 | 4,032 | — | 33,546 | ||||||||||||
Goodwill balance at December 31, 2011 | $ | 134,395 | $ | 4,911 | $ | 642 | $ | 139,948 | ||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
(a) | Relates to the acquisition of businesses in the People’s Republic of China during Fiscal 2010 ($683 in Sportswear Group and $117 in Intimate Apparel Group) and in Italy ($6,882 in the Sportswear Group) (seeNote 2 of Notes to Consolidated Financial Statements). | |
(b) | Primarily relates to the acquisition of a controlling interest in the business of the Company’s distributor ofCalvin Kleinproducts in India during Fiscal 2011 ($28,898 in Sportswear Group and $3,930 in Intimate Apparel Group) (seeNote 2ofNotes to Consolidated Financial Statements). |
December 31, | January 1, | |||||||
2011 | 2011 | |||||||
Foreign currency translation adjustments | $ | 21,356 | $ | 45,982 | ||||
Actuarial (losses) related to post retirement medical plans, net of tax of $1,232 and $1,232 as of December 31, 2011 and January 1, 2011 , respectively | (1,299 | ) | (1,099 | ) | ||||
Loss on cash flow hedges, net of taxes of $2,930 and $871 as of December 31, 2011 and January 1, 2011, respectively | (3,937 | ) | (1,847 | ) | ||||
Other | 122 | 12 | ||||||
Total accumulated other comprehensive income | $ | 16,242 | $ | 43,048 | ||||
December 31, | January 1, | |||||||
2011 | 2011 | |||||||
Short-term debt: | ||||||||
Current portion of 2011 Term Loan | $ | 2,000 | $ | — | ||||
CKJEA notes payable and other | 43,021 | 18,802 | ||||||
2008 Credit Agreements | — | — | ||||||
Premium on interest rate cap — current | 2,492 | — | ||||||
Italian note | — | 13,370 | ||||||
47,513 | 32,172 | |||||||
Long-term debt: | ||||||||
2011 Term Loan | 197,000 | — | ||||||
Premium on interest rate cap | 11,477 | — | ||||||
208,477 | — | |||||||
Total Debt | $ | 255,990 | $ | 32,172 | ||||
F-41
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-42
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-43
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-44
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-45
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-46
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Weighted average risk free rate of return (a) | 1.61 | % | 1.72 | % | 1.84 | % | ||||||
Dividend yield | — | — | — | |||||||||
Expected volatility of the market price of the Company’s common stock | 57.7 | % | 56.8 | % | 59.3 | % | ||||||
Expected option life (years) | 4.10 | 4.20 | 3.72 |
(a) | Based on the quoted yield for U.S. five-year treasury bonds as of the date of grant. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Stock-based compensation expense before income taxes: | ||||||||||||
Stock options | $ | 8,654 | $ | 8,330 | $ | 5,721 | ||||||
Restricted stock grants | 16,077 | 14,256 | 8,732 | |||||||||
Total (a) | 24,731 | 22,586 | 14,453 | |||||||||
Income tax benefit: | ||||||||||||
Stock options | 2,990 | 2,966 | 2,048 | |||||||||
Restricted stock grants | 5,145 | 4,650 | 3,126 | |||||||||
Total | 8,135 | 7,616 | 5,174 | |||||||||
Stock-based compensation expense after income taxes: | ||||||||||||
Stock options | 5,664 | 5,364 | 3,673 | |||||||||
Restricted stock grants | 10,932 | 9,606 | 5,606 | |||||||||
Total | $ | 16,596 | $ | 14,970 | $ | 9,279 | ||||||
(a) | The primary reason for the increase in stock-based compensation expense for Fiscal 2010, compared to Fiscal 2009, related to the incorporation of a “Retirement Eligibility” feature that was applied to all the equity awards issued beginning in March 2010. SeeNote 1 — Nature of Operations and Significant Accounting Policies — ofNotes to Consolidated Financial Statements. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Options | Price | Life (years) | Value | |||||||||||||
Outstanding as of January 1, 2011 | 1,926,257 | $ | 33.73 | |||||||||||||
Granted | 364,800 | 55.25 | ||||||||||||||
Exercised | (322,391 | ) | 28.78 | |||||||||||||
Forfeited / Expired | (81,741 | ) | 42.72 | |||||||||||||
Outstanding as of December 31, 2011 | 1,886,925 | 38.35 | 7.0 | $ | 23,926 | |||||||||||
Options Exercisable as of December 31, 2011 | 1,125,191 | $ | 33.74 | 6.0 | $ | 18,398 | ||||||||||
Weighted Average | ||||||||
Restricted | Grant Date Fair | |||||||
shares/units | Value | |||||||
Unvested as of January 1, 2011 | 847,664 | $ | 36.93 | |||||
Granted | 229,943 | 55.24 | ||||||
Vested (a) | (144,658 | ) | 47.65 | |||||
Forfeited (b) | (73,183 | ) | 39.82 | |||||
Unvested as of December 31, 2011 | 859,766 | 39.77 | ||||||
(a) | does not include an additional 37,600 restricted units with a grant date fair value per share of $55.57 and 36,750 restricted units with a grant date fair value per share of $43.28, granted to Retirement-Eligible employees during Fiscal 2011 and Fiscal 2010, respectively, for which the requisite service period has been completed on the respective grant dates but the restrictions will not lapse until the end of the three-year vesting period. | |
(b) | does not include 1,300 restricted stock units granted as performance shares in Fiscal 2010 with a grant date fair value of $43.28. |
Fiscal 2011 | Fiscal 2010 | |||
Weighted average risk free rate of return | 1.07% | 1.25% | ||
Dividend yield | — | — | ||
Expected volatility — Company (a) | 61.50% | 65.0% | ||
Expected volatility -Peer Companies | 38.2%-113.4% | 39.8%-114.1% | ||
Remaining measurement period (years) | 2.83 | 2.83 |
(a) | Expected volatility — Company for Performance Awards granted on March 1, 2011 and on March 3, 2010 is based on a Remaining Measurement Period of 2.83 years. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Weighted Average | ||||||||
Performance Shares | Grant Date Fair Value | |||||||
Unvested as of January 1, 2011 | 75,750 | $ | 43.28 | |||||
Granted | 80,050 | 55.57 | ||||||
Vested (a) | — | — | ||||||
Forfeited | (1,300 | ) | 43.28 | |||||
Unvested as of December 31, 2011 (b) | 154,500 | $ | 49.65 | |||||
(a) | does not include 35,050 and 34,300 Performance Awards granted to Retirement Eligible Employees on March 1, 2011 and March 3, 2010, respectively, for which the requisite service period has been completed on the grant date; the restrictions on such awards will not lapse until the end of the three-year vesting period. | |
(b) | includes 18,613 shares that the Company is obligated to issue at the end of the three-year performance period based upon the Company’s performance to date. |
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Weighted-average grant date fair value of options granted | $ | 25.50 | $ | 20.06 | $ | 12.37 | ||||||
Intrinsic value of options exercised | 26.98 | 31.15 | 26.77 | |||||||||
Total fair value of restricted shares/units vested | 54.70 | 44.87 | 20.24 |
December 31, 2011 | January 1, 2011 | |||||||
Common Stock: | ||||||||
Balance at beginning of year | 51,712,674 | 50,617,795 | ||||||
Shares issued upon exercise of stock options | 322,391 | 885,905 | ||||||
Shares issued upon vesting of restricted stock grants | 144,658 | 202,941 | ||||||
Shares issued to directors / other | 5,007 | 6,033 | ||||||
Balance at end of year | 52,184,730 | 51,712,674 | ||||||
Treasury Stock: | ||||||||
Balance at beginning of year | 7,445,166 | 4,939,729 | ||||||
Purchases of Common Stock (a) | 4,345,262 | 2,505,437 | ||||||
Balance at end of year | 11,790,428 | 7,445,166 | ||||||
(a) | Represents 4,295,742 shares and 2,429,289 shares for Fiscal 2011 and Fiscal 2010, respectively, purchased under the Company’s share repurchase programs and 49,520 shares and 76,148 for Fiscal 2011 and Fiscal 2010, respectively, surrendered by employees in satisfaction of certain payroll tax obligations associated with the vesting of restricted stock. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Numerator for basic and diluted income per common share: | ||||||||||||
Income from continuing operations attributable to Warnaco Group common shareholders and participating securities | $ | 132,252 | $ | 147,798 | $ | 102,225 | ||||||
Less: allocation to participating securities | (1,934 | ) | (1,951 | ) | (1,262 | ) | ||||||
Income from continuing operations attributable to Warnaco Group common shareholders | $ | 130,318 | $ | 145,847 | $ | 100,963 | ||||||
Loss from discontinued operations, net of tax, attributable to Warnaco Group common shareholders and participating securities | $ | (4,802 | ) | $ | (9,217 | ) | $ | (6,227 | ) | |||
Less: allocation to participating securities | 70 | 122 | 77 | |||||||||
Loss from discontinued operations attributable to Warnaco Group common shareholders | $ | (4,732 | ) | $ | (9,095 | ) | $ | (6,150 | ) | |||
Net income attributable to Warnaco Group common shareholders and participating | $ | 127,450 | $ | 138,581 | $ | 95,998 | ||||||
Less: allocation to participating securities | (1,864 | ) | (1,829 | ) | (1,185 | ) | ||||||
Net income attributable to Warnaco Group common shareholders | $ | 125,586 | $ | 136,752 | $ | 94,813 | ||||||
Basic income per common share attributable to Warnaco Group common shareholders: | ||||||||||||
Weighted average number of common shares outstanding used in computing income per common share | 42,425,750 | 44,701,643 | 45,433,874 | |||||||||
Income per common share from continuing operations | $ | 3.07 | $ | 3.26 | $ | 2.22 | ||||||
Loss per common share from discontinued operations | (0.11 | ) | (0.20 | ) | (0.13 | ) | ||||||
Net income per common share | $ | 2.96 | $ | 3.06 | $ | 2.09 | ||||||
Diluted income per share attributable to Warnaco Group common shareholders: | ||||||||||||
Weighted average number of common shares outstanding used in computing basic income | 42,425,750 | 44,701,643 | 45,433,874 | |||||||||
Effect of dilutive securities: | ||||||||||||
Stock options and restricted stock units | 874,099 | 1,054,292 | 762,523 | |||||||||
Weighted average number of shares and share equivalents used in computing income per common share | 43,299,849 | 45,755,935 | 46,196,397 | |||||||||
Income per common share from continuing operations | $ | 3.01 | $ | 3.19 | $ | 2.19 | ||||||
Loss per common share from discontinued operations | (0.11 | ) | (0.20 | ) | (0.14 | ) | ||||||
Net income per common share | $ | 2.90 | $ | 2.99 | $ | 2.05 | ||||||
Number of anti-dilutive “out-of-the-money” stock options outstanding (a) | 338,500 | 363,750 | 436,034 | |||||||||
(a) | Options to purchase shares of Common Stock at an exercise price greater than the average market price for each period presented are anti-dilutive and, therefore not included in the computation of diluted income per common share from continuing operations. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Rental payments | ||||||||
Year | Real Estate | Equipment | ||||||
2012 | $ | 84,812 | $ | 11,352 | ||||
2013 | 72,876 | 8,471 | ||||||
2014 | 56,810 | 6,240 | ||||||
2015 | 47,121 | 2,975 | ||||||
2016 | 35,476 | 1,729 | ||||||
2017 and thereafter | 92,052 | — |
Minimum | ||||
Year | Royalty (a) | |||
2012 | $ | 65,784 | ||
2013 | 63,205 | |||
2014 | 49,209 | |||
2015 | 54,483 | |||
2016 | 55,172 | |||
2017 and thereafter | 807,763 |
(a) | Includes all minimum royalty obligations. Some of the Company’s license agreements have no expiration date or extend to 2044 or 2046. License agreements with no expiration date are assumed to end in 2044 for purposes of this table. Variable based minimum royalty obligations are based upon payments for the most recent fiscal year. Certain of the Company’s license agreements also require the Company to pay a specified percentage of net revenue (ranging from 1-6%) to the licensor for advertising and promotion of the licensed products (which amount is not included in minimum royalty obligations for purposes of this item). |
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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Level 1 | — | Inputs are quoted prices in active markets for identical assets or liabilities. | |
Level 2 | — | Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. | |
Level 3 | — | Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. |
December 31, 2011 | January 1, 2011 | |||||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | (Level 1) | (Level 2) | (Level 3) | |||||||||||||||||||
Assets | ||||||||||||||||||||||||
Foreign currency exchange contracts | $ | — | $ | 5,587 | $ | — | $ | — | $ | 834 | $ | — | ||||||||||||
Interest rate cap | 6,276 | — | ||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Foreign currency exchange contracts | $ | — | $ | 532 | $ | — | $ | — | $ | 3,282 | $ | — |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
December 31, 2011 | January 1, 2011 | |||||||||||||||||||||||||||||||||||||||
Fair | Total Gains | Fair | Gains | |||||||||||||||||||||||||||||||||||||
Value | (Level 1) | (Level 2) | (Level 3) | (Losses) | Value | (Level 1) | (Level 2) | (Level 3) | (Losses) | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||
Long-lived assets, retail stores | $ | 665 | — | — | $ | 665 | $ | (5,950 | ) | $ | 249 | — | — | $ | 249 | $ | (1,933 | ) | ||||||||||||||||||||||
Long-lived assets, intangible assets | 3,579 | — | — | 3,579 | (35,225 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||
$ | (41,175 | ) | $ | (1,933 | ) | |||||||||||||||||||||||||||||||||||
December 31, 2011 | January 1, 2011 | |||||||||||||||||
Balance Sheet | Carrying | Fair | Carrying | Fair | ||||||||||||||
Location | Amount | Value | Amount | Value | ||||||||||||||
Assets: | ||||||||||||||||||
Accounts receivable | Accounts receivable, net of reserves | $ | 322,976 | $ | 322,976 | $ | 318,123 | $ | 318,123 | |||||||||
Open foreign currency exchange contracts | Prepaid expenses and other current assets | 5,587 | 5,587 | 834 | 834 | |||||||||||||
Interest rate cap | Other assets | 6,276 | 6,276 | — | — | |||||||||||||
Liabilities: | ||||||||||||||||||
Accounts payable | Accounts payable | $ | 141,797 | $ | 141,797 | $ | 152,714 | $ | 152,714 | |||||||||
Short-term debt | Short-term debt | 43,021 | 43,021 | 32,172 | 32,172 | |||||||||||||
Open foreign currency exchange contracts | Accrued liabilities | 532 | 532 | 3,282 | 3,282 | |||||||||||||
2011 Term Loan, current portion | Short-term debt | 2,000 | 1,980 | — | — | |||||||||||||
2011 Term Loan | Long-term debt | 197,000 | 195,030 | — | — |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
F-55
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||
Fair Value | Fair Value | |||||||||||||||||||||||||||
Balance Sheet | December 31, | January 1, | Balance Sheet | December 31, | January 1, | |||||||||||||||||||||||
Type (a) | Location | 2011 | 2011 | Location | 2011 | 2011 | ||||||||||||||||||||||
Derivatives designated as hedging instruments under FASB ASC 815-20 | ||||||||||||||||||||||||||||
Foreign exchange contracts | CF | Prepaid expenses and other current assets | $ | 1,308 | $ | — | Accrued liabilities | $ | — | $ | 2,290 | |||||||||||||||||
Interest rate cap | CF | Other assets | 6,276 | — | Other long-term liabilities | — | — | |||||||||||||||||||||
$ | 7,584 | $ | — | $ | — | $ | 2,290 | |||||||||||||||||||||
Derivatives not designated as hedging instruments under FASB ASC 815-20 | ||||||||||||||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other current assets | $ | 4,279 | $ | 834 | Accrued liabilities | $ | 532 | $ | 992 | ||||||||||||||||||
Total derivatives | $ | 11,863 | $ | 834 | $ | 532 | $ | 3,282 | ||||||||||||||||||||
(a) | CF = cash flow hedge |
Location of | ||||||||||||||||||||||||||||||||||||||||||
Gain (Loss) | ||||||||||||||||||||||||||||||||||||||||||
Amount of Gain (Loss) Recognized in | Location of Gain | Amount of Gain (Loss) Reclassified | Recognized | Amount of Gain (Loss) Recognized | ||||||||||||||||||||||||||||||||||||||
OCI on Derivatives | (Loss) Reclassified | from Accumulated OCI into Income | in Income on | in Income on Derivative | ||||||||||||||||||||||||||||||||||||||
(Effective Portion) | from Accumulated | (Effective Portion) | Derivative | (Ineffective Portion) | ||||||||||||||||||||||||||||||||||||||
Derivatives in FASB ASC 815-20 | Nature of Hedged | Fiscal | Fiscal | Fiscal | OCI into Income | Fiscal | Fiscal | Fiscal | (Ineffective | Fiscal | Fiscal | Fiscal | ||||||||||||||||||||||||||||||
Cash Flow Hedging Relationships | Transaction | 2011 | 2010 | 2009 | (Effective Portion) | 2011 | 2010 | 2009 | Portion) (d) | 2011 | 2010 | 2009 | ||||||||||||||||||||||||||||||
Foreign exchange contracts | Minimum royalty and advertising costs (a) | $ | 434 | $ | 746 | $ | (450 | ) | cost of goods sold | $ | (572 | ) | $ | 793 | $ | (314 | ) | other loss/income | $ | 15 | $ | (3 | ) | $ | (1 | ) | ||||||||||||||||
Foreign exchange contracts | Purchases of inventory (b) | (140 | ) | (2,517 | ) | (1,868 | ) | cost of goods sold | (3,105 | ) | (1,260 | ) | (918 | ) | other loss/income | 80 | (45 | ) | (23 | ) | ||||||||||||||||||||||
Interest rate cap | Interest expense on 2011 Term Loan (c) | (8,119 | ) | — | — | interest expense | 1 | — | — | other loss/income | — | — | — | |||||||||||||||||||||||||||||
Total | $ | (7,825 | ) | $ | (1,771 | ) | $ | (2,318 | ) | $ | (3,676 | ) | $ | (467 | ) | $ | (1,232 | ) | $ | 95 | $ | (48 | ) | $ | (24 | ) | ||||||||||||||||
(a) | At December 31, 2011, the amount of minimum royalty and advertising costs hedged was $10,811; contracts expire through September 2012 .At January 1, 2011, the amount of minimum royalty and advertising costs hedged was $10,378; contracts expire through December 2011. At January 2, 2010, the amount of minimum royalty and advertising costs hedged was $9,213; contracts expire through September 2010. | |
(b) | At December 31, 2011, the amount of inventory purchases hedged was $45,500; contracts expire through November 2012. At January 1, 2011, the amount of inventory purchases hedged was $66,450; contracts expire through March 2012. At January 2, 2010, the amount of inventory purchases hedged was $26,760; contracts expire through April 2011. | |
(c) | seeNote 12ofNotes to Consolidated Financial Statements — Interest Rate Cap Agreement | |
(d) | No amounts were excluded from effectiveness testing. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Location of Gain | Amount of Gain (Loss) Recognized in | |||||||||||||||||||||||||||||||||||
Derivatives not designated as | Amount Hedged | Maturity Date | (Loss) Recognized | Income on Derivative | ||||||||||||||||||||||||||||||||
hedging instruments under FASB | Nature of Hedged | Fiscal | in Income on | Fiscal | ||||||||||||||||||||||||||||||||
ASC 815-20 | Transaction | Instrument | Fiscal 2011 | 2010 | Fiscal 2009 | Fiscal 2011 | Fiscal 2010 | Fiscal 2009 | Derivative | Fiscal 2011 | Fiscal 2010 | 2009 | ||||||||||||||||||||||||
Foreign exchange contracts (e) | Purchases of inventory | Forward contracts | $ | — | $ | — | $ | 6,032 | August 2010 | other loss/income | $ | — | $ | (142 | ) | $ | (2,865 | ) | ||||||||||||||||||
Foreign exchange contracts (f) | Intercompany sales of inventory | Forward contracts | 3,264 | 12,635 | 11,395 | July 2012 | April 2012 | December 2010 | other loss/income | — | (232 | ) | (387 | ) | ||||||||||||||||||||||
Foreign exchange contracts (g) | Minimum royalty and advertising costs | Forward contracts | 10,000 | 11,250 | 10,000 | October 2012 | January 2012 | October 2010 | other loss/income | 48 | 185 | (505 | ) | |||||||||||||||||||||||
Foreign exchange contracts | Intercompany payables | Forward contracts | — | — | 12,000 | January 2010 | other loss/income | — | — | 8 | ||||||||||||||||||||||||||
Foreign exchange contracts | Intercompany loans | Forward contracts | 34,500 | 20,000 | — | August 2012 | November 2011 | other loss/income | 2,001 | 1,007 | — | |||||||||||||||||||||||||
Foreign exchange contracts | Intercompany loans | Zero-cost collars | — | 1,500 | June 2010 | other loss/income | — | — | 258 | |||||||||||||||||||||||||||
Foreign exchange contracts | Intercompany loans | Forward contracts | 6,000 | — | — | July 2012 | other loss/income | (463 | ) | — | — | |||||||||||||||||||||||||
Foreign exchange contracts | Intercompany loans | Forward contracts | — | — | — | other loss/income | 155 | — | — | |||||||||||||||||||||||||||
Foreign exchange contracts | Intercompany payables | Zero-cost collars | — | — | 26,000 | June 2010 | other loss/income | — | 1,511 | 1,420 | ||||||||||||||||||||||||||
Foreign exchange contracts | Intercompany payables | Forward contracts | 30,000 | 31,000 | — | August 2012 | November 2011 | selling, general and administrative | (820 | ) | 534 | — | ||||||||||||||||||||||||
Foreign exchange contracts | Intercompany payables | Zero-cost collars | — | — | 14,500 | May 2010 | selling, general and administrative | (232 | ) | 2,688 | ||||||||||||||||||||||||||
Total | $ | 921 | $ | 2,631 | 617 | |||||||||||||||||||||||||||||||
(e) | Forward contracts used to offset 50% of U.S. dollar-denominated purchases of inventory by the Company’s foreign subsidiaries whose functional currencies were the Canadian dollar and Mexican peso, entered into by Warnaco Inc. on behalf of foreign subsidiaries. | |
(f) | Forward contracts used to offset 50% of Euro-denominated intercompany sales by a subsidiary whose functional currency is the Euro. | |
(g) | Forward contracts used to offset payment of minimum royalty and advertising costs related to sales of inventory by the Company’s foreign subsidiary whose functional currency was the Euro, entered into by Warnaco Inc. on behalf of a foreign subsidiary. |
Balance January 3, 2009 | $ | (328 | ) | |
Derivative losses recognized | (2,342 | ) | ||
Amount amortized to earnings | 1,256 | |||
Balance before tax effect | (1,414 | ) | ||
Tax effect | 387 | |||
Balance January 2, 2010, net of tax | (1,027 | ) | ||
Derivative losses recognized | (1,771 | ) | ||
Losses amortized to earnings | 467 | |||
Balance before tax effect | (2,331 | ) | ||
Tax effect | 484 | |||
Balance January 1, 2011, net of tax | (1,847 | ) | ||
Derivative losses recognized | (7,825 | ) | ||
Losses amortized to earnings | 3,676 | |||
Balance before tax effect | (5,996 | ) | ||
Tax effect | 2,059 | |||
Balance December 31, 2011, net of tax | $ | (3,937 | ) | |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal | ||||||||||||
2011 | Fiscal 2010 | Fiscal 2009 | ||||||||||
Cash paid (received) during the period for: | ||||||||||||
Interest expense | $ | 13,278 | $ | 13,739 | $ | 22,792 | ||||||
Interest income | (1,961 | ) | (979 | ) | (1,964 | ) | ||||||
Income taxes, net of refunds received | 65,750 | 36,924 | 29,680 | |||||||||
Supplemental non-cash investing and financing activities: | ||||||||||||
Accounts payable for purchase of fixed assets | 7,670 | 7,007 | 3,020 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Currencies in thousands, excluding share and per share amounts)
Fiscal 2011 | ||||||||||||||||
Second | Third | Fourth | ||||||||||||||
First Quarter | Quarter | Quarter | Quarter | |||||||||||||
Net revenues | $ | 662,161 | $ | 591,387 | $ | 645,121 | $ | 614,719 | ||||||||
Gross profit | 295,138 | 258,270 | 279,709 | 267,825 | ||||||||||||
Income (loss) from continuing operations before non-controlling interest | 44,532 | 45,566 | 48,629 | (6,732 | )(b) | |||||||||||
Loss from discontinued operations, net of taxes | (501 | ) | (63 | ) | (4,177 | ) | (61 | ) | ||||||||
Net income (loss) | 44,031 | 45,503 | 44,611 | (6,695 | ) | |||||||||||
Basic income per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 1.00 | $ | 1.03 | $ | 1.15 | $ | (0.11 | ) | |||||||
Loss from discontinued operations | (0.01 | ) | — | (0.10 | ) | — | ||||||||||
Net income (loss) | $ | 0.99 | $ | 1.03 | $ | 1.05 | $ | (0.11 | ) | |||||||
Diluted income per common share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.98 | $ | 1.01 | $ | 1.13 | $ | (0.11 | ) | |||||||
Loss from discontinued operatio ns | (0.01 | ) | — | (0.10 | ) | 0.00 | ||||||||||
Net income (loss) | $ | 0.97 | $ | 1.01 | $ | 1.03 | $ | (0.11 | ) | |||||||
Fiscal 2010 | ||||||||||||||||
Second | Third Quarter | Fourth | ||||||||||||||
First Quarter | Quarter | (a) | Quarter (a) | |||||||||||||
Net revenues | $ | 588,164 | $ | 519,334 | $ | 596,761 | $ | 591,492 | ||||||||
Gross profit | 267,118 | 229,742 | 269,025 | 254,078 | ||||||||||||
Income from continuing operations before non-controlling interest | 48,312 | 30,027 | 41,440 | 28,019 | ||||||||||||
Income (Loss) from discontinued operations, net of taxes | (337 | ) | (93 | ) | 57 | (8,844 | ) | |||||||||
Net income | 47,975 | 29,934 | 41,497 | 19,175 | ||||||||||||
Basic income per common share: | ||||||||||||||||
Income from continuing operations | $ | 1.05 | $ | 0.67 | $ | 0.92 | $ | 0.62 | ||||||||
Loss from discontinued operations | (0.01 | ) | (0.01 | ) | — | (0.18 | ) | |||||||||
Net income | $ | 1.04 | $ | 0.66 | $ | 0.92 | $ | 0.44 | ||||||||
Diluted income per common share: | ||||||||||||||||
Income from continuing operations | $ | 1.03 | $ | 0.65 | $ | 0.90 | $ | 0.61 | ||||||||
Loss from discontinued operations | (0.01 | ) | — | — | (0.19 | ) | ||||||||||
Net income | $ | 1.02 | $ | 0.65 | $ | 0.90 | $ | 0.42 | ||||||||
(a) | During the third and fourth quarters of Fiscal 2010, the Company recorded charges of $1,700 and $1,000, respectively, in its provision for income taxes associated with the correction of an error in the 2006 through 2009 income tax provisions as a consequence of the loss of a credit related to prior year tax overpayments caused by the delayed filing of tax returns in a U.S. state taxing jurisdiction. In addition, during the third and fourth quarters of Fiscal 2010, the Company recorded a charge of $1,269 and a gain of $269, respectively, related to the correction of amounts recorded in prior periods for franchise taxes. During the fourth quarter of Fiscal 2010, the Company also recorded a charge of $8,000 related to its settlement of the OP Action (seeNote 3 of Notes to Consolidated Financial Statements — Dispositions and Discontinued Operations). | |
(b) | During the fourth quarter of Fiscal 2011, the Company recorded a non-cash impairment charge of $35,225 related to its license to operate its “bridge” business. SeeNote 4-Restructuring Expense and Other Exit CostsofNotes to Consolidated Financial Statements. |
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Additions | ||||||||||||||||||||
Charges to | ||||||||||||||||||||
Balance at | Cost and | Balance at | ||||||||||||||||||
Beginning of | Expenses | Other Additions / | End of | |||||||||||||||||
Description | Period | (1) | Reclassification | Deductions | Period | |||||||||||||||
Fiscal 2009 | ||||||||||||||||||||
Receivable allowances | $ | 87,375 | $ | 242,755 | $ | — | (4) | $ | (240,148 | )(2) | $ | 89,982 | ||||||||
Tax valuation allowance | $ | 15,030 | $ | 3,552 | $ | (1,127 | )(3) | $ | — | $ | 17,455 | |||||||||
Fiscal 2010 | ||||||||||||||||||||
Receivable allowances | $ | 89,982 | $ | 197,388 | $ | — | (4) | $ | (191,731 | )(2) | $ | 95,639 | ||||||||
Tax valuation allowance | $ | 17,455 | $ | 394 | $ | 664 | (3) | $ | — | $ | 18,513 | |||||||||
Fiscal 2011 | ||||||||||||||||||||
Receivable allowances | $ | 95,639 | $ | 218,646 | $ | — | (4) | $ | (219,546 | )(2) | $ | 94,739 | ||||||||
Tax valuation allowance | $ | 18,513 | $ | (634 | ) | $ | 96 | (3) | $ | — | $ | 17,975 | ||||||||
(1) | With respect to receivable allowances, includes bad debts, cash discounts, customer allowances and sales returns. | |
(2) | Credits issued and amounts written-off, net of recoveries. | |
(3) | Relates primarily to adjustments to the Company’s valuation allowance resulting from changes in its deferred taxes due to: (a) basis differences resulting from the filing of the Company’s U.S. corporate income tax return,(b) finalized assessments of the Company’s foreign tax returns by local taxing authorities, (c) the realization of certain deferred tax assets that existed as of the date of the Company’s emergence from bankruptcy and (d) currency translation adjustments. | |
(4) | Amounts include reserve balances for discontinued operations. |
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