Exhibit 99.1
Investor Relations: | Deborah Abraham | |
Vice President, Investor Relations | ||
(212) 287-8289 | ||
FOR IMMEDIATE RELEASE
WARNACO REPORTS SECOND QUARTER 2008 RESULTS
Company Raises Adjusted Fiscal 2008 Guidance
______________________________________________________________________
NEW YORK - --August 7, 2008 -- The Warnaco Group, Inc. (NYSE: WRC) today reported results for the second quarter ended July 5, 2008.
For the second quarter on a GAAP basis:
● | Net revenues rose 22% compared to the prior year quarter | |
● | Gross margin increased 290 basis points to 45% of net revenues | |
● | Operating margin increased 290 basis points to 10% of net revenues | |
● | Income from continuing operations increased 23% to $0.57 per diluted share |
For the second quarter on an adjusted basis (non-GAAP) (excluding certain tax items, restructuring expenses and pension income/expense):
● | Operating margin increased 330 basis points to 11% of net revenues | |
● | Income from continuing operations increased 56% to $0.71 per diluted share |
The accompanying tables provide a reconciliation of actual results to the as adjusted results.
The Company believes it is valuable for users of the Company’s financial statements to be made aware of the as adjusted financial information, as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis.
“We are pleased to report another strong quarter for Warnaco,” stated Joe Gromek, Warnaco’s President and Chief Executive Officer. “Our second quarter results included broad based strength with all operating segments and geographies recording increased revenue and profitability. Our key expansion initiatives, including international, direct-to-consumer and our Calvin Klein businesses, continued to fuel our growth. During the quarter, international revenues accounted for 50% of the Company’s total, led by 51%
growth in Europe. With powerful brands and an integrated global platform, we are excited about our opportunities both in the near and long term.”
Mr. Gromek concluded, “While we are mindful of macro economic challenges, we believe our strategies will continue to produce positive results and underscores our decision to again increase guidance. Longer term, we see ample opportunity for organic growth as we continue to execute our strategic plan.”
Fiscal 2008 Outlook
Based on a strong first half performance, for fiscal 2008, the Company now expects net revenues to grow 13% - 15% over comparable fiscal 2007 levels and, on an adjusted basis (excluding restructuring expense and a non-recurring repatriation tax charge, and assuming minimal pension income/expense), diluted earnings per share from continuing operations in the range of $2.80 - $2.90.
The accompanying tables provide a reconciliation of expected diluted earnings per share from continuing operations on a GAAP basis ($1.70 - $1.76 per diluted share (assuming minimal pension income/expense) to the adjusted fiscal 2008 outlook above.
Second Quarter Highlights
Total Company
Net revenues rose 22% to $503.8 million compared to $412.5 million in the prior year period and gross margin increased to 45% compared to 42% in the prior year quarter. Operating income was $48.9 million, or 10% of net revenues, compared to $28.2 million, or 7% of net revenues, in the second quarter of fiscal 2007.
Income from continuing operations was $26.5 million, or $0.57 per diluted share, compared to $21.6 million, or $0.46 per diluted share, in the prior year quarter. Income from continuing operations for the second quarter of 2008 and 2007 includes approximately $6.0 million and $3.2 million, respectively, of pre-tax restructuring expense (the second quarter of 2007 also benefited from $6.3 million of other income related primarily to net gains on intercompany loans denominated in currency other than that of the foreign subsidiaries’ functional currency). Net income was $19.4 million, or $0.41 per diluted share, compared to $13.8 million, or $0.30 per diluted share, in the prior year quarter.
On an adjusted, non-GAAP basis (excluding certain tax items, restructuring expenses and pension income), income from continuing operations was $33.4 million, or $0.71 per diluted share, compared to $21.4 million, or $0.46 per diluted share, in the prior year period. Net income was $26.3 million, or $0.56 per diluted share, compared to $13.6 million, or $0.29 per diluted share, in the prior year quarter.
The translation of foreign currencies, primarily as a result of a stronger euro and Canadian dollar, increased second quarter 2008 net revenues, gross margin and
operating income by approximately $17.0 million, $8.1 million and $2.0 million, respectively, compared to the second quarter of fiscal 2007.
The Company’s adjusted non-GAAP effective tax rate (excluding certain non-recurring items, the non-cash tax charge associated with the repatriation of the proceeds from the sale of Lejaby®, and certain restructuring expenses for which there was no tax benefit) in the quarter was 32% compared to an adjusted rate of 26% in the first quarter. The increased rate reflects additional tax expense to attain the Company’s anticipated annualized non-GAAP effective tax rate of 29% (compared to an annualized non-GAAP effective tax rate of 25% in fiscal 2007).
Segment Results
Sportswear
Revenues for the Sportswear Group increased 29% to $249.4 million and operating income increased to $23.0 million, or 9% of net revenues. Calvin Klein Jeans revenue growth remained strong and included double digit increases in all geographies. Operating income reflects sharp improvements in Chaps operating profit, resulting from improved product offerings and lower dilution, combined with continued strength in the Calvin Klein Jeans businesses.
Intimate Apparel
Intimate Apparel Group revenues rose 24% to $172.7 million and operating income increased to $31.8 million, or 18% of Intimate Apparel Group net revenues. All brands and businesses within the Intimate Apparel Group contributed to the strong results. While international expansion remains a key contributor to the growth of Calvin Klein Underwear, the U.S. Calvin Klein Underwear business increased revenues by 9% despite a challenging environment. Expanded distribution and strong response to new product offerings contributed to both top and bottom line improvement for the Group’s core brands, Warner’s® and Olga®.
Swimwear
Swimwear Group revenues rose 2% to $81.7 million and operating income increased to $7.7 million, or 9% of net revenues. Strong European demand, driven by fashion right design, continued to drive Calvin Klein swim revenues higher. While Speedo® revenues decreased $1.5 million, Speedo operating income was up significantly to $6.9 million, or 10% of Speedo net revenues. Group results benefited from a lower restructuring expense as well as a reduction in SG&A expense, as compared to the prior year period.
Balance Sheet
Cash and cash equivalents at July 5, 2008 were $154.5 million compared to $163.1 million at June 30, 2007. Since June 30, 2007, the Company has repurchased approximately $24.7 million of its common stock, repaid approximately $83.6 million of debt and received cash proceeds of approximately $47.4 million from the sale of its Lejaby, Catalina®, Anne Cole® and Cole of California® businesses.
Accounts receivable, net, increased to $310.9 million at July 5, 2008 from $278.6 million at June 30, 2007, primarily due to increased sales toward the end of the quarter and growth in our European business.
Net inventories were $316.3 million at July 5, 2008, down from $357.1 million at June 30, 2007, primarily as a result of discontinued operations, and in line with the Company’s needs to service its ongoing business.
“Our business continues to generate positive cash flow, which we are investing in those areas of the Company that are expected to produce long-term sustainable growth. We begin the second half of the year well positioned, with increased cash and reduced debt and operating with less inventory, as compared to a year ago,” stated Larry Rutkowski, Warnaco’s Executive Vice President and Chief Financial Officer.
Subsequent Events
The Company expects to enter into a new $300 million Asset Based Revolving Credit facility, which is expected to close during the third quarter. As part of this refinancing, the Company expects to retire the outstanding balance of its Term B loans.
Conference Call Information
Stockholders and other persons are invited to listen to the first quarter earnings conference call scheduled for today, Thursday, August 7, 2008, at 9:00 a.m. EDT. To participate in Warnaco’s conference call, dial (877) 692-2592 approximately five to ten minutes prior to the 9:00 a.m. start time. The call will also be broadcast live over the Internet at www.warnaco.com. An online archive will be available following the call.
This press release was furnished to the SEC (www.sec.gov) and may also be accessed through the Company’s internet website: www.warnaco.com.
ABOUT WARNACO
The Warnaco Group, Inc., headquartered in New York, is a leading apparel company engaged in the business of designing, sourcing, marketing and selling intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear and accessories under such owned and licensed brands as Warner's®, Olga®, and Speedo®, as well as Chaps® sportswear and denim, and Calvin Klein® men's and women's underwear, men’s and women’s bridge apparel and accessories, men's and women's jeans and jeans accessories, junior women's and children's jeans and men’s and women's swimwear.
FORWARD-LOOKING STATEMENTS
The Warnaco Group, Inc. notes that this press release, the conference call scheduled for August 7, 2008 and certain other written, electronic and oral disclosure made by the Company from time to time, may contain forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties and reflect, when made, the Company's
estimates, objectives, projections, forecasts, plans, strategies, beliefs, intentions, opportunities and expectations. Actual results may differ materially from anticipated results, targets or expectations and investors are cautioned not to place undue reliance on any forward-looking statements. Statements other than statements of historical fact, including, without limitation, future financial targets, are forward-looking statements. These forward-looking statements may be identified by, among other things, the use of forward-looking language, such as the words "believe," "anticipate," "estimate," "expect," "intend," "may," "project," "scheduled to," "seek," "should," "will be," "will continue," "will likely result, " "targeted", or the negative of those terms, or other similar words and phrases or by discussions of intentions or strategies.
The following factors, among others and in addition to those described in the Company's reports filed with the SEC (including, without limitation, those described under the headings "Risk Factors" and "Statement Regarding Forward-Looking Disclosure," as such disclosure may be modified or supplemented from time to time), could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by it: the Company's ability to execute its repositioning and sale initiatives (including achieving enhanced productivity and profitability) previously announced; economic conditions that affect the apparel industry; the Company's failure to anticipate, identify or promptly react to changing trends, styles, or brand preferences; further declines in prices in the apparel industry; declining sales resulting from increased competition in the Company’s markets; increases in the prices of raw materials; events which result in difficulty in procuring or producing the Company's products on a cost-effective basis; the effect of laws and regulations, including those relating to labor, workplace and the environment; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; the Company’s ability to protect its intellectual property or the costs incurred by the Company related thereto; the risk of product safety issues, defects or other production problems associated with our products; the Company’s dependence on a limited number of customers; the effects of consolidation in the retail sector; the Company’s dependence on license agreements with third parties; the Company’s dependence on the reputation of its brand names, including, in particular, Calvin Klein; the Company’s exposure to conditions in overseas markets in connection with the Company’s foreign operations and the sourcing of products from foreign third-party vendors; the Company's foreign currency exposure; the Company’s history of insufficient disclosure controls and procedures and internal controls and restated financial statements; unanticipated future internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; the effects of fluctuations in the value of investments of the Company’s pension plan; the sufficiency of cash to fund operations, including capital expenditures; the Company's ability to service its indebtedness, the effect of changes in interest rates on the Company's indebtedness that is subject to floating interest rates and the limitations imposed on the Company's operating and financial flexibility by the agreements governing the Company's indebtedness; the Company’s dependence on its senior management team and other key personnel; the Company’s reliance on information technology; the limitations on purchases under the Company's share repurchase program contained in the Company's debt instruments, the number of shares that the Company purchases under such program and the prices paid for such shares; the Company’s inability to achieve its financial targets and strategic objectives, as a result of one or more of the factors described above, changes in the assumptions underlying the targets or goals, or otherwise; the failure of acquired businesses to generate expected levels of revenues; the failure of the Company to successfully integrate such businesses with its existing businesses (and as a result, not achieving all or a substantial portion of the anticipated benefits of such acquisitions); and such acquired businesses being adversely affected, including by one or more of the factors described above and thereby failing to achieve anticipated revenues and earnings growth.
The Company encourages investors to read the section entitled "Risk Factors" and the discussion of the Company's critical accounting policies under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Discussion of Critical Accounting Policies" included in the Company's Annual Report on Form 10-K, as such discussions may be modified or supplemented by subsequent reports that the Company files with the SEC. The discussion in this press release is not exhaustive but is designed to highlight important factors that may affect actual results. Forward-looking statements speak only as of the date on which they are made, and, except for the Company's ongoing obligation under the U.S. federal securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Schedule 1 | ||||||||||
THE WARNACO GROUP, INC. | ||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||||
(Dollars in thousands, excluding per share amounts) | ||||||||||
(Unaudited) |
As Reported | Restructuring | As Adjusted | ||||||||||
Second Quarter | Charges and | Taxation (c) | Second Quarter | |||||||||
of Fiscal 2008 | Pension (b) | of Fiscal 2008 (d) | ||||||||||
Net revenues | $ 503,835 | $ - | $ - | $ 503,835 | ||||||||
Cost of goods sold | 278,924 | (104) | 278,820 | |||||||||
Gross profit | 224,911 | 104 | - | 225,015 | ||||||||
Selling, general and administrative expenses | 173,682 | (5,871) | 167,811 | |||||||||
Amortization of intangible assets | 2,588 | 2,588 | ||||||||||
Pension income | (291) | 291 | - | |||||||||
Operating income | 48,932 | 5,684 | - | 54,616 | ||||||||
Other expense | (1,203) | (1,203) | ||||||||||
Interest expense | 7,086 | 7,086 | ||||||||||
Interest income | (671) | (671) | ||||||||||
Income from continuing operations before | ||||||||||||
provision for income taxes and minority interest | 43,720 | 5,684 | - | 49,404 | ||||||||
Provision for income taxes | 17,078 | (1,236) | 15,842 | |||||||||
Income from continuing operations before minority interest | 26,642 | 5,684 | 1,236 | 33,562 | ||||||||
Minority Interest | (148) | (148) | ||||||||||
Income from continuing operations | 26,494 | 5,684 | 1,236 | 33,414 | ||||||||
Loss from discontinued operations, net of taxes | (7,130) | (a) | (7,130) | |||||||||
Net income | $ 19,364 | $ 5,684 | $ 1,236 | $ 26,284 | ||||||||
Basic income per common share: | ||||||||||||
Income from continuing operations | $ 0.58 | $ 0.13 | $ 0.03 | $ 0.74 | ||||||||
Loss from discontinued operations | (0.15) | - | - | (0.16) | ||||||||
Net income | $ 0.43 | $ 0.13 | $ 0.03 | $ 0.58 | ||||||||
Diluted income per common share: | ||||||||||||
Income from continuing operations | $ 0.57 | $ 0.12 | $ 0.03 | $ 0.71 | ||||||||
Loss from discontinued operations | (0.16) | - | - | (0.15) | ||||||||
Net income | $ 0.41 | $ 0.12 | $ 0.03 | $ 0.56 | ||||||||
Weighted average number of shares outstanding used in computing income per common share: | ||||||||||||
Basic | 45,340,695 | 45,340,695 | 45,340,695 | 45,340,695 | ||||||||
Diluted | 46,780,639 | 46,780,639 | 46,780,639 | 46,780,639 | ||||||||
(a) | Includes operations related to the Company's designer swimwear (excluding Calvin Klein) and Lejaby businesses which have been classified as | |||||||||||
as discontinued operations. | ||||||||||||
(b) | This adjustment seeks to present the Company's consolidated condensed statement of operations on a continuing basis without the effects | |||||||||||
of restructuring charges or pension income. See note (d) below. | ||||||||||||
(c) | Adjustment based on the the Company's expected tax rate of 28.7% for Fiscal 2008, which rate excludes the effects of restructuring charges, | |||||||||||
pension income and certain tax related items. See note (d) below. | ||||||||||||
(d) | The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing | |||||||||||
operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation | ||||||||||||
from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in | ||||||||||||
reporting its results to provide investors with an additional tool to evaluate the Company's operating results. | ||||||||||||
Schedule 1a | |||||||||||||||||
THE WARNACO GROUP, INC. | |||||||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | |||||||||||||||||
(Dollars in thousands, excluding per share amounts) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
As Reported Second Quarter of Fiscal 2007 | Restructuring Charges and Pension (b) | Taxation (c) | As Adjusted Second Quarter of Fiscal 2007 (d) | ||||||||||||||
Net revenues | $ | 412,501 | $ | - | $ | - | $ | 412,501 | |||||||||
Cost of goods sold | 240,413 | (2,401 | ) | 238,012 | |||||||||||||
Gross profit | 172,088 | 2,401 | - | 174,489 | |||||||||||||
Selling, general and administrative expenses | 140,770 | (845 | ) | 139,925 | |||||||||||||
Amortization of intangible assets | 3,617 | 3,617 | |||||||||||||||
Pension income | (509 | ) | 509 | - | |||||||||||||
Operating income | 28,210 | 2,737 | - | 30,947 | |||||||||||||
Other income | (6,280 | ) | (6,280 | ) | |||||||||||||
Interest expense | 9,494 | 9,494 | |||||||||||||||
Interest income | (753 | ) | (753 | ) | |||||||||||||
Income from continuing operations before | |||||||||||||||||
provision for income taxes | 25,749 | 2,737 | - | 28,486 | |||||||||||||
Provision for income taxes | 4,181 | - | 2,912 | 7,093 | |||||||||||||
Income from continuing operations | 21,568 | 2,737 | (2,912 | ) | 21,393 | ||||||||||||
Loss from discontinued operations, net of taxes | (7,791 | )(a) | (7,791 | ) | |||||||||||||
Net income | $ | 13,777 | $ | 2,737 | $ | (2,912 | ) | $ | 13,602 | ||||||||
Basic income per common share: | |||||||||||||||||
Income from continuing operations | $ | 0.48 | $ | 0.06 | $ | (0.06 | ) | $ | 0.47 | ||||||||
Loss from discontinued operations | (0.17 | ) | - | - | (0.17 | ) | |||||||||||
Net income | $ | 0.31 | $ | 0.06 | $ | (0.06 | ) | $ | 0.30 | ||||||||
Diluted income per common share: | |||||||||||||||||
Income from continuing operations | $ | 0.46 | $ | 0.06 | $ | (0.06 | ) | $ | 0.46 | ||||||||
Loss from discontinued operations | (0.16 | ) | - | - | (0.17 | ) | |||||||||||
Net income | $ | 0.30 | $ | 0.06 | $ | (0.06 | ) | $ | 0.29 | ||||||||
Weighted average number of shares outstanding used in | |||||||||||||||||
computing income per common share: | |||||||||||||||||
Basic | 45,146,246 | 45,146,246 | 45,146,246 | 45,146,246 | |||||||||||||
Diluted | 46,534,530 | 46,534,530 | 46,534,530 | 46,534,530 | |||||||||||||
(a) | Includes operations related to the Company's designer swimwear (excluding Calvin Klein) and Lejaby businesses which have been classified as | ||||||||||||||||
as discontinued operations. | |||||||||||||||||
(b) | This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects | ||||||||||||||||
of restructuring charges or pension income. See note (d) below. | |||||||||||||||||
(c) | Adjustment to reflect the Company's income from continuing operations at a normalized tax rate of 24.9% which reflects the Company's | ||||||||||||||||
tax rate for Fiscal 2007 excluding the effects of restructuring charges, pension income and certain tax related items. See note (d) below. | |||||||||||||||||
(d) | The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing | ||||||||||||||||
operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results. | |||||||||||||||||
Schedule 2 | |||||||||||||||||
THE WARNACO GROUP, INC. | |||||||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | |||||||||||||||||
(Dollars in thousands, excluding per share amounts) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
As Reported | Restructuring | As Adjusted | |||||||||||||||
Six Months Ended | Charges and | Taxation (d) | Six Months Ended | ||||||||||||||
July 5, 2008 | Pension (c) | July 5, 2008 (e) | |||||||||||||||
Net revenues | $ | 1,072,063 | $ | - | $ | 1,072,063 | |||||||||||
Cost of goods sold | 592,781 | (840 | ) | 591,941 | |||||||||||||
Gross profit | 479,282 | 840 | - | 480,122 | |||||||||||||
Selling, general and administrative expenses | 369,988 | (25,477 | ) | 344,511 | |||||||||||||
Amortization of intangible assets | 5,062 | 5,062 | |||||||||||||||
Pension income | (582 | ) | 582 | - | |||||||||||||
Operating income | 104,814 | 25,735 | - | 130,549 | |||||||||||||
Other expense | 4,258 | 4,258 | |||||||||||||||
Interest expense | 16,476 | 16,476 | |||||||||||||||
Interest income | (1,604 | ) | (1,604 | ) | |||||||||||||
Income from continuing operations before | |||||||||||||||||
provision for income taxes and minority interest | 85,684 | 25,735 | - | 111,419 | |||||||||||||
Provision for income taxes | 51,765 | (a) | (19,788 | ) | 31,977 | ||||||||||||
Income from continuing operations before minority interest | 33,919 | 25,735 | 19,788 | 79,442 | |||||||||||||
Minority Interest | (359 | ) | (359 | ) | |||||||||||||
Income from continuing operations | 33,560 | 25,735 | 19,788 | 79,083 | |||||||||||||
Income from discontinued operations, net of taxes | 3,513 | (b) | 3,513 | ||||||||||||||
Net income | $ | 37,073 | $ | 25,735 | $ | 19,788 | $ | 82,596 | |||||||||
Basic income per common share: | |||||||||||||||||
Income from continuing operations | $ | 0.75 | $ | 0.57 | $ | 0.44 | $ | 1.76 | |||||||||
Income from discontinued operations | 0.07 | - | - | 0.08 | |||||||||||||
Net income | $ | 0.82 | $ | 0.57 | $ | 0.44 | $ | 1.84 | |||||||||
Diluted income per common share: | |||||||||||||||||
Income from continuing operations | $ | 0.72 | $ | 0.55 | $ | 0.42 | $ | 1.70 | |||||||||
Income from discontinued operations | 0.08 | - | - | 0.07 | |||||||||||||
Net income | $ | 0.80 | $ | 0.55 | $ | 0.42 | $ | 1.77 | |||||||||
Weighted average number of shares outstanding used in | |||||||||||||||||
computing income per common share: | |||||||||||||||||
Basic | 44,953,200 | 44,953,200 | 44,953,200 | 44,953,200 | |||||||||||||
Diluted | 46,590,322 | 46,590,322 | 46,590,322 | 46,590,322 | |||||||||||||
(a) | Includes, among other items, a non-recurring tax charge of approximately $19,000 related to the repatriation, to the United States, of the net proceeds received in connection with the sale of the Lejaby business. | ||||||||||||||||
(b) | Includes operations related to the Company's designer swimwear (excluding Calvin Klein) and Lejaby businesses which have been classified as as discontinued operations. | ||||||||||||||||
(c) | This adjustment seeks to present the Company's consolidated condensed statement of operations on a continuing basis without the effects of restructuring charges or pension income. See note (e) below. | ||||||||||||||||
(d) | Adjustment to reflect the Company's income from continuing operations at a normalized tax rate of 28.7% which reflects the Company's estimated tax rate for fiscal 2008 excluding the effects of restructuring charges, pension income and certain tax related items (including a non-recurring tax charge of approximately $19,000 related to the repatriation, to the United States of the net proceeds received in connection with the sale of the Lejaby business). See note (e) below. | ||||||||||||||||
(e) | The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results. |
Schedule 2a | |||||||||||||||||
THE WARNACO GROUP, INC. | |||||||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | |||||||||||||||||
(Dollars in thousands, excluding per share amounts) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
As Reported | Restructuring | As Adjusted | |||||||||||||||
Six Months Ended | Charges and | Taxation (c) | Six Months Ended | ||||||||||||||
June 30, 2007 | Pension (b) | June 30, 2007 (d) | |||||||||||||||
Net revenues | $ | 881,741 | $ | - | $ | - | $ | 881,741 | |||||||||
Cost of goods sold | 512,295 | (3,001 | ) | 509,294 | |||||||||||||
Gross profit | 369,446 | 3,001 | - | 372,447 | |||||||||||||
Selling, general and administrative expenses | 283,567 | (1,087 | ) | 282,480 | |||||||||||||
Amortization of intangible assets | 7,051 | 7,051 | |||||||||||||||
Pension income | (693 | ) | 693 | - | |||||||||||||
Operating income | 79,521 | 3,395 | - | 82,916 | |||||||||||||
Other income | (6,882 | ) | (6,882 | ) | |||||||||||||
Interest expense | 18,806 | 18,806 | |||||||||||||||
Interest income | (1,036 | ) | (1,036 | ) | |||||||||||||
Income from continuing operations before | |||||||||||||||||
provision for income taxes | 68,633 | 3,395 | - | 72,028 | |||||||||||||
Provision for income taxes | 18,817 | - | (882 | ) | 17,935 | ||||||||||||
Income from continuing operations | 49,816 | 3,395 | 882 | 54,093 | |||||||||||||
Income from discontinued operations, net of taxes | 1,936 | (a) | 1,936 | ||||||||||||||
Net income | $ | 51,752 | $ | 3,395 | $ | 882 | $ | 56,029 | |||||||||
Basic income per common share: | |||||||||||||||||
Income from continuing operations | $ | 1.11 | $ | 0.08 | $ | 0.02 | $ | 1.20 | |||||||||
Income from discontinued operations | 0.04 | - | - | 0.04 | |||||||||||||
Net income | $ | 1.15 | $ | 0.08 | $ | 0.02 | $ | 1.24 | |||||||||
Diluted income per common share: | |||||||||||||||||
Income from continuing operations | $ | 1.07 | $ | 0.07 | $ | 0.02 | $ | 1.16 | |||||||||
Income from discontinued operations | 0.04 | - | - | 0.05 | |||||||||||||
Net income | $ | 1.11 | $ | 0.07 | $ | 0.02 | $ | 1.21 | |||||||||
Weighted average number of shares outstanding used in | |||||||||||||||||
computing income per common share: | |||||||||||||||||
Basic | 45,058,976 | 45,058,976 | 45,058,976 | 45,058,976 | |||||||||||||
Diluted | 46,482,664 | 46,482,664 | 46,482,664 | 46,482,664 | |||||||||||||
(a) | Includes operations related to the Company's designer swimwear (excluding Calvin Klein) and Lejaby businesses which have been classified as as discontinued operations. | ||||||||||||||||
(b) | This adjustment seeks to present the Company's consolidated condensed statement of operations on a continuing basis without the effects of restructuring charges or pension income. See note (d) below. | ||||||||||||||||
(c) | Adjustment to reflect the Company's income from continuing operations at a normalized tax rate of 24.9% which reflects the Company's tax rate for Fiscal 2007 excluding the effects of restructuring charges, pension income and certain tax related items. See note (d) below. | ||||||||||||||||
(d) | The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results. |
Schedule 3 | ||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||||||
(Dollars in thousands) | ||||||||||||
(Unaudited) | ||||||||||||
July 5, 2008 | December 29, 2007 | June 30, 2007 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 154,516 | $ | 191,918 | $ | 163,054 | ||||||
Accounts receivable, net | 310,883 | 267,450 | 278,570 | |||||||||
Inventories | 316,350 | 332,652 | 357,073 | |||||||||
Assets of discontinued operations (a) | 10,520 | 67,931 | 4,532 | |||||||||
Other current assets | 168,032 | 133,211 | 57,830 | |||||||||
Total current assets | 960,301 | 993,162 | 861,059 | |||||||||
Property, plant and equipment, net | 112,627 | 111,916 | 118,317 | |||||||||
Intangible and other assets | 536,724 | 501,425 | 604,058 | |||||||||
TOTAL ASSETS | $ | 1,609,652 | $ | 1,606,503 | $ | 1,583,434 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Short-term debt | $ | 35,562 | $ | 56,115 | $ | 45,360 | ||||||
Accounts payable and accrued liabilities | 286,513 | 294,271 | 275,279 | |||||||||
Accrued income taxes payable | 25,109 | 12,199 | 15,892 | |||||||||
Liabilities of discontinued operations (b) | 17,141 | 42,566 | 1,678 | |||||||||
Total current liabilities | 364,325 | 405,151 | 338,209 | |||||||||
Long-term debt | 265,291 | 310,500 | 331,402 | |||||||||
Other long-term liabilities | 121,778 | 117,956 | 189,977 | |||||||||
Total stockholders' equity | 858,258 | 772,896 | 723,846 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,609,652 | $ | 1,606,503 | $ | 1,583,434 | ||||||
(a) Assets of discontinued operations include the following: | ||||||||||||
July 5, 2008 | December 29, 2007 | June 30, 2007 | ||||||||||
Accounts receivable, net | $ | 8,931 | $ | 21,487 | $ | 3,103 | ||||||
Inventories | 192 | 28,167 | 745 | |||||||||
Other current assets | 1,024 | 6,741 | 555 | |||||||||
Property, plant and equipment, net | 373 | 3,001 | - | |||||||||
Intangible and other assets | - | 8,535 | 129 | |||||||||
Assets of discontinued operations | $ | 10,520 | $ | 67,931 | $ | 4,532 | ||||||
(b) Liabilities of discontinued operations include the following: | ||||||||||||
July 5, 2008 | December 29, 2007 | June 30, 2007 | ||||||||||
Accounts payable | $ | 5,017 | $ | 14,867 | $ | 614 | ||||||
Accrued liabilities | 9,563 | 21,700 | 1,064 | |||||||||
Other long-term liabilities | 2,561 | 5,999 | - | |||||||||
Liabilities of discontinued operations | $ | 17,141 | $ | 42,566 | $ | 1,678 | ||||||
Schedule 4 | |||||||||||||||||
THE WARNACO GROUP, INC. | |||||||||||||||||
NET REVENUES AND OPERATING INCOME BY BUSINESS GROUP | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Net revenues: | Second Quarter | Second Quarter | Increase / | % | |||||||||||||
of Fiscal 2008 | of Fiscal 2007 | (Decrease) | Change | ||||||||||||||
Sportswear Group | $ | 249,395 | $ | 192,890 | $ | 56,505 | 29.3 | % | |||||||||
Intimate Apparel Group | 172,746 | 139,453 | 33,293 | 23.9 | % | ||||||||||||
Swimwear Group | 81,694 | 80,158 | 1,536 | 1.9 | % | ||||||||||||
Net revenues | $ | 503,835 | $ | 412,501 | $ | 91,334 | 22.1 | % | |||||||||
Second Quarter | % of Group | Second Quarter | % of Group | ||||||||||||||
of Fiscal 2008 | Net Revenues | of Fiscal 2007 | Net Revenues | ||||||||||||||
Operating income (loss): | |||||||||||||||||
Sportswear Group (a) | $ | 23,040 | 9.2 | % | $ | 18,300 | 9.5 | % | |||||||||
Intimate Apparel Group (a), (b) | 31,826 | 18.4 | % | 22,016 | 15.8 | % | |||||||||||
Swimwear Group (a), (b) | 7,658 | 9.4 | % | 937 | 1.2 | % | |||||||||||
Unallocated corporate expenses (b) | (13,592 | ) | na | (13,043 | ) | na | |||||||||||
Operating income | $ | 48,932 | na | $ | 28,210 | na | |||||||||||
Operating income as a percentage of | |||||||||||||||||
total net revenues | 9.7 | % | 6.8 | % | |||||||||||||
(a) Includes an allocation of shared services expenses as follows: |
Second Quarter | Second Quarter | |||||||
of Fiscal 2008 | of Fiscal 2007 | |||||||
Sportswear Group | $ | 5,453 | $ | 5,584 | ||||
Intimate Apparel Group | $ | 4,430 | $ | 4,289 | ||||
Swimwear Group | $ | 3,824 | $ | 4,980 | ||||
(b) Includes restructuring charges as follows: | ||||||||
Second Quarter | Second Quarter | |||||||
of Fiscal 2008 | of Fiscal 2007 | |||||||
Sportswear Group | $ | 4,401 | $ | 21 | ||||
Intimate Apparel Group | 18 | 19 | ||||||
Swimwear Group | 144 | 3,206 | ||||||
Unallocated corporate expenses | 1,412 | - | ||||||
$ | 5,975 | $ | 3,246 |
Schedule 4a
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY BUSINESS GROUP
(Dollars in thousands)
(Unaudited)
Net revenues: | Six Months Ended | Six Months Ended | Increase / | % | |||||
July 5, 2008 | June 30, 2007 | (Decrease) | Change | ||||||
Sportswear Group | $ 549,514 | $ 428,321 | $ 121,193 | 28.3% | |||||
Intimate Apparel Group | 340,345 | 276,823 | 63,522 | 22.9% | |||||
Swimwear Group | 182,204 | 176,597 | 5,607 | 3.2% | |||||
Net revenues | $ 1,072,063 | $ 881,741 | $ 190,322 | 21.6% | |||||
Six Months Ended | % of Group | Six Months Ended | % of Group | ||||||
July 5, 2008 | Net Revenues | June 30, 2007 | Net Revenues | ||||||
Operating income (loss): | |||||||||
Sportswear Group (a) | $ 45,119 | 8.2% | $ 45,226 | 10.6% | |||||
Intimate Apparel Group (a), (b) | 64,250 | 18.9% | 45,734 | 16.5% | |||||
Swimwear Group (a), (b) | 22,476 | 12.3% | 14,415 | 8.2% | |||||
Unallocated corporate expenses (b) | (27,031) | na | (25,854) | na | |||||
Operating income | $ 104,814 | na | $ 79,521 | na | |||||
Operating income as a percentage of total net revenues | 9.8% | 9.0% | |||||||
(a) Includes an allocation of shared services expenses as follows:
Six Months Ended | Six Months Ended | |||||||
July 5, 2008 | June 30, 2007 | |||||||
Sportswear Group | $ | 10,910 | $ | 11,165 | ||||
Intimate Apparel Group | $ | 8,861 | $ | 8,581 | ||||
Swimwear Group | $ | 7,648 | $ | 9,960 | ||||
(b) Includes restructuring charges as follows:
Six Months Ended | Six Months Ended | |||||||
July 5, 2008 | June 30, 2007 | |||||||
Sportswear Group | $ | 23,096 | $ | 119 | ||||
Intimate Apparel Group | 695 | 120 | ||||||
Swimwear Group | 1,114 | 3,872 | ||||||
Unallocated corporate expenses | 1,412 | (23 | ) | |||||
$ | 26,317 | $ | 4,088 | |||||
Schedule 5 | ||||||||||
THE WARNACO GROUP, INC. | ||||||||||
NET REVENUES AND OPERATING INCOME BY REGION & CHANNEL | ||||||||||
(Dollars in thousands) | ||||||||||
(Unaudited) |
By Region: | Net Revenues |
Second Quarter of Fiscal 2008 | Second Quarter of Fiscal 2007 | Increase | % Change | ||||||||||||
United States | $ | 254,484 | $ | 241,921 | $ | 12,563 | 5.2% | ||||||||
Europe | 119,790 | 79,304 | 40,486 | 51.1% | |||||||||||
Asia | 71,790 | 50,426 | 21,364 | 42.4% | |||||||||||
Canada | 31,349 | 26,109 | 5,240 | 20.1% | |||||||||||
Mexico, Central and South America | 26,422 | 14,741 | 11,681 | 79.2% | |||||||||||
Total | $ | 503,835 | $ | 412,501 | $ | 91,334 | 22.1% | ||||||||
Operating Income | |||||||||||||||
Second Quarter of Fiscal 2008 | Second Quarter of Fiscal 2007 | Increase / (Decrease) | % Change | ||||||||||||
United States | $ | 33,452 | $ | 22,271 | $ | 11,181 | 50.2% | ||||||||
Europe | 8,000 | 6,275 | 1,725 | 27.5% | |||||||||||
Asia | 10,548 | 6,880 | 3,668 | 53.3% | |||||||||||
Canada | 7,898 | 3,852 | 4,046 | 105.0% | |||||||||||
Mexico, Central and South America | 2,627 | 1,975 | 652 | 33.0% | |||||||||||
Unallocated corporate expenses | (13,592 | ) | (13,043 | ) | (549 | ) | 4.2% | ||||||||
Total | $ | 48,933 | $ | 28,210 | $ | 20,723 | 73.5% | ||||||||
By Channel: | Net Revenues | ||||||||||||||
Second Quarter of Fiscal 2008 | Second Quarter of Fiscal 2007 | Increase | % Change | ||||||||||||
Wholesale | $ | 396,964 | $ | 335,521 | $ | 61,443 | 18.3% | ||||||||
Retail | 106,871 | 76,980 | 29,891 | 38.8% | |||||||||||
Total | $ | 503,835 | $ | 412,501 | $ | 91,334 | 22.1% | ||||||||
Operating Income | |||||||||||||||
Second Quarter of Fiscal 2008 | Second Quarter of Fiscal 2007 | Increase / (Decrease) | % Change | ||||||||||||
Wholesale | $ | 47,633 | $ | 26,569 | $ | 21,064 | 79.3% | ||||||||
Retail | 14,892 | 14,684 | 208 | 1.4% | |||||||||||
Unallocated corporate expenses | (13,592 | ) | (13,043 | ) | (549 | ) | 4.2% | ||||||||
Total | $ | 48,933 | $ | 28,210 | $ | 20,723 | 73.5% | ||||||||
Schedule 5a | ||||||
THE WARNACO GROUP, INC. | ||||||
NET REVENUES AND OPERATING INCOME BY REGION & CHANNEL | ||||||
(Dollars in thousands) | ||||||
(Unaudited) | ||||||
By Region: | Net Revenues | ||||||||||||||
Six Months Ended July 5, 2008 | Six Months Ended June 30, 2007 | Increase | % Change | ||||||||||||
United States | $ | 511,498 | $ | 487,726 | $ | 23,772 | 4.9% | ||||||||
Europe | 291,956 | 200,976 | 90,980 | 45.3% | |||||||||||
Asia | 158,373 | 112,821 | 45,552 | 40.4% | |||||||||||
Canada | 58,850 | 49,512 | 9,338 | 18.9% | |||||||||||
Mexico, Central and South America | 51,386 | 30,706 | 20,680 | 67.3% | |||||||||||
Total | $ | 1,072,063 | $ | 881,741 | $ | 190,322 | 21.6% | ||||||||
Operating Income | |||||||||||||||
Six Months Ended July 5, 2008 | Six Months Ended June 30, 2007 | Increase / (Decrease) | % Change | ||||||||||||
United States | $ | 61,822 | $ | 46,869 | $ | 14,953 | 31.9% | ||||||||
Europe | 23,366 | 28,389 | (5,023 | ) | -17.7% | ||||||||||
Asia | 26,306 | 16,766 | 9,540 | 56.9% | |||||||||||
Canada | 14,184 | 8,370 | 5,814 | 69.5% | |||||||||||
Mexico, Central and South America | 6,167 | 4,981 | 1,186 | 23.8% | |||||||||||
Unallocated corporate expenses | (27,031 | ) | (25,854 | ) | (1,177 | ) | 4.6% | ||||||||
Total | $ | 104,814 | $ | 79,521 | $ | 25,293 | 31.8% | ||||||||
By Channel: | Net Revenues | ||||||||||||||
Six Months Ended July 5, 2008 | Six Months Ended June 30, 2007 | Increase | % Change | ||||||||||||
Wholesale | $ | 859,851 | $ | 728,935 | $ | 130,916 | 18.0% | ||||||||
Retail | 212,212 | 152,806 | 59,406 | 38.9% | |||||||||||
Total | $ | 1,072,063 | $ | 881,741 | $ | 190,322 | 21.6% | ||||||||
Operating Income | |||||||||||||||
Six Months Ended July 5, 2008 | Six Months Ended June 30, 2007 | Increase / (Decrease) | % Change | ||||||||||||
Wholesale | $ | 102,780 | $ | 79,796 | $ | 22,984 | 28.8% | ||||||||
Retail | 29,065 | 25,579 | 3,486 | 13.6% | |||||||||||
Unallocated corporate expenses | (27,031 | ) | (25,854 | ) | (1,177 | ) | 4.6% | ||||||||
Total | $ | 104,814 | $ | 79,521 | $ | 25,293 | 31.8% | ||||||||
Schedule 6 | ||||||||
THE WARNACO GROUP, INC. | ||||||||
SUPPLEMENTAL SCHEDULE - FISCAL 2008 OUTLOOK | ||||||||
(Dollars in thousands, excluding per share amounts) | ||||||||
(Unaudited) | ||||||||
NET REVENUE GUIDANCE | Percentages | |||||||
(Unaudited) | ||||||||
Estimated growth in net revenues in Fiscal 2008 over comparable Fiscal 2007 levels. | 13.00% | to | 15.00% | |||||
EARNINGS PER SHARE GUIDANCE | U.S. Dollars | |||||||
Diluted Income per common share from continuing operations | (Unaudited) | |||||||
GAAP basis | $ 1.70 | to | $ 1.76 | |||||
Restructuring charges (a) | 0.60 | to | 0.64 | |||||
Taxation related items (b) | 0.50 | 0.50 | ||||||
As adjusted (Non-GAAP basis) (c) | $ 2.80 | to | $ 2.90 | |||||
(a) | Reflects between $27,000 to $30,000 of restructuring charges (net of an income tax benefit of between $2,000 and $3,000) | |||||||
for Fiscal 2008 primarily related to the transfer of the Calvin Klein Collection Business. | ||||||||
(b) | Reflects certain tax related items including, among other items, a non-recurring tax charge of approximately $19,000 | |||||||
related to the repatriation, to the United States of the net proceeds received in connection with the sale of the Lejaby business. | ||||||||
(c) | The Company believes it is useful for users of the Company's financial statements to be made aware of the "adjusted" | |||||||
net revenue growth and per share amounts related to the Company's income from continuing operations as such | ||||||||
measures are used by management to evaluate the operating performance of the Company's continuing | ||||||||
businesses on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial | ||||||||
measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The | ||||||||
Company presents such non-GAAP financial measures in reporting its projected results to provide investors | ||||||||
with an additional tool to evaluate the Company's operating results. | ||||||||
14