Exhibit 99.1
Recent Developments
Set forth below are preliminary estimates of certain unaudited financial information for the three months ended February 24, 2019 and actual unaudited financial results for the three months ended February 25, 2018. Our actual results for the three months ended February 24, 2019 will not be available until after the completion of this offering. We have provided ranges, rather than specific amounts, for the preliminary estimates primarily because our financial closing and review procedures for the three months ended February 24, 2019 are not yet complete. The estimated ranges are preliminary and have not been audited or reviewed and are thus inherently uncertain and subject to change as we complete our financial closing and review procedures for the three months ended February 24, 2019. We are in the process of completing these closing and review procedures and, while we currently expect that our final results will be consistent with the preliminary estimates set forth below, such final results may differ materially from the preliminary estimates as a result of various factors, including those that are set forth under “Risk Factors” and “Special Note Regarding Forward-
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Looking Statements.” The preliminary estimates are not necessarily indicative of the results to be achieved for the remainder of fiscal year 2019 or any future period.
The preliminary estimates set forth below have been prepared by, and are the responsibility of, our management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled or performed any procedures with respect to the preliminary estimates. Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto.
Three Months Ended | ||||||||||||
February 24, 2019 (Estimated) | February 25, 2018 (Actual) | |||||||||||
(in millions) | Low | High | ||||||||||
Net revenues | $ | 1,420 | $ | 1,435 | $ | 1,343.7 | ||||||
Net income | 130 | 146 | (18.6 | ) | ||||||||
Other Financial and Operating Data | ||||||||||||
Adjusted EBIT | $ | 195 | $ | 205 | $ | 179.4 | ||||||
Adjusted Net Income | 136 | 149 | 83.5 |
For the three months ended February 24, 2019, we estimate net revenues in the range of $1,420 million to $1,435 million, representing an increase in the range of 6% to 7% over the three months ended February 25, 2018 (10% to 11% on a constant-currency basis). Net revenues are estimated to increase on both reported and constant-currency bases, with currency translation impacting net revenues unfavorably by $48 million, for the three months ended February 24, 2019 as compared to the prior year period. The estimated increase in net revenues is due to strong performance across all regions and channels.
For the three months ended February 24, 2019, we estimate net income in the range of $130 million to $146 million. Prior year net loss of $19 million was the result of a $136 million provisionalnon-cash tax charge, including a $99 millionre-measurement of our deferred tax assets and liabilities at lower rates and a $37 millionone-time transition tax on undistributed foreign earnings, each as a result of the enactment of the 2017 Tax Cuts and Jobs Act, or the Tax Act.
For the three months ended February 24, 2019, we estimate Adjusted EBIT in the range of $195 million to $205 million, representing an increase in the range of 9% to 14% over the three months ended February 25, 2018. Currency translation impacted Adjusted EBIT for the three months ended February 24, 2019, unfavorably by $9 million.
For the three months ended February 24, 2019, we estimate Adjusted Net Income in the range of $136 million to $149 million, representing an increase in the range of 63% to 78% over the three months ended February 25, 2018.
Adjusted EBIT, Adjusted Net Income and constant-currency net revenues arenon-GAAP financial measures used by management to measure our operating performance. For more information on thesenon-GAAP financial measures, see “Selected Consolidated Financial andOther Data—Non-GAAP Financial Measures.”
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The following table provides a preliminary reconciliation of preliminary estimated net income, the most directly comparable financial measure calculated in accordance with GAAP, to preliminary estimated Adjusted EBIT for the three months ended February 24, 2019, and a reconciliation of actual net income to actual Adjusted EBIT for the three months ended February 25, 2018.
Three Months Ended | ||||||||||||
February 24, 2019 (Estimated) | February 25, 2018 (Actual) | |||||||||||
(in millions) | Low | High | ||||||||||
Net income | $ | 130 | $ | 146 | $ | (18.6 | ) | |||||
Income tax expense | 35 | 39 | 167.6 | |||||||||
Interest expense | 19 | 16 | 15.5 | |||||||||
Loss on early extinguishment of debt | — | — | — | |||||||||
Other (income) expense, net (1) | 3 | — | 9.6 | |||||||||
Charges related to the transition to being a public company(2) | 2 | — | — | |||||||||
Impact of changes in fair value on cash-settled stock based compensation(3) | 6 | 4 | 5.0 | |||||||||
Restructuring and related charges, severance and asset impairment charges, net | — | — | 0.3 | |||||||||
Pension and postretirement benefit plan curtailment and net settlement losses (gains) (4) | — | — | — | |||||||||
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Adjusted EBIT | $ | 195 | $ | 205 | $ | 179.4 | ||||||
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(1) | For the three months ended February 24, 2019, other (income) expense, net includes an estimated $4 million of net periodic benefit costs, primarily interest cost and expected return on plan assets as a result of our adoption of ASUNo. 2017-10 in the three months ended February 24, 2019. For the three months ended February 25, 2018, the adoption of ASUNo. 2017-10 has not been reflected. Upon adoption of ASUNo. 2017-10, the impact to Adjusted EBIT for the three months ended February 25, 2018 will be an increase of $0.8 million. |
(2) | Includes fees and expenses in connection with our transition to being a public company, including incremental consulting fees associated with being a public company. |
(3) | Includes the impact of the changes in fair value of our Class B common stock following the grant date on cash-settled awards, which are classified as liabilities. Following this offering, we anticipate that we will no longer grant cash-settled awards and will instead grant stock-settled awards to our employees. As a result, the liabilities and stock-based compensation expense subject to the variability of the fair market value at the end of each reporting period would be replaced by stock-based compensation expense based on the grant-date fair value of the awards. |
(4) | Includesnon-cash pension curtailment and settlement charges. |
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The following table provides a preliminary reconciliation of preliminary estimated net income, the most directly comparable financial measure calculated in accordance with GAAP, to preliminary estimated Adjusted Net Income for the three months ended February 24, 2019, and a reconciliation of actual net income to actual Adjusted Net Income for the three months ended February 25, 2018.
Three Months Ended | ||||||||||||
February 24, 2019 (Estimated) | February 25, 2018 (Actual) | |||||||||||
(in millions) | Low | High | ||||||||||
Net income | $ | 130 | $ | 146 | $ | (18.6 | ) | |||||
Loss on early extinguishment of debt | — | — | — | |||||||||
Charges related to the transition to being a public company(1) | 2 | — | ||||||||||
Impact of changes in fair value on cash-settled stock based compensation(2) | 6 | 4 | 5.0 | |||||||||
Restructuring and related charges, severance and asset impairment charges, net | — | — | 0.3 | |||||||||
Pension and postretirement benefit plan curtailment and net settlement losses (gains)(3) | — | — | — | |||||||||
Remeasurement of deferred tax assets and liabilities(4) | — | — | 99.2 | |||||||||
Tax impact of adjustments(5) | (2 | ) | (1 | ) | (2.4 | ) | ||||||
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Adjusted Net Income | $ | 136 | $ | 149 | $ | 83.5 | ||||||
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(1) | Includes fees and expenses in connection with our transition to being a public company, including incremental consulting fees associated with being a public company. |
(2) | Includes the impact of the changes in fair value of our Class B common stock following the grant date on cash-settled awards, which are classified as liabilities. Following this offering, we anticipate that we will no longer grant cash-settled awards and will instead grant stock-settled awards to our employees. As a result, the liabilities and stock-based compensation expense subject to the variability of the fair market value at the end of each reporting period would be replaced by stock-based compensation expense based on the grant-date fair value of the awards. |
(3) | Includesnon-cash pension curtailment and settlement charges. |
(4) | Represents the impact of there-measurement of our deferred tax assets and liabilities based on the lower rates at which they are expected to reverse in the future as a result of the Tax Act. |
(5) | For the three months ended February 24, 2019 income tax impact of such adjustments, we utilize an effective tax rate equal to our estimated income tax expense divided by our estimated income before income taxes. For the three months ended February 25, 2018, we utilize an effective tax rate equal to our income tax expense divided by our income before income taxes, as reflected in our statement of operations for the relevant period, excluding from income tax expense the effect of the $99 millionre-measurement described in footnote (4) above. The effective tax rates reflected above are 21% for the three months ended February 24, 2019 and 46% for the three months ended February 25, 2018. |
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The following table sets forth the preliminary calculation of preliminary estimated net revenues for the three months ended February 24, 2019, as compared to net revenues on a constant-currency basis for the three months ended February 25, 2018. We calculate constant-currency amounts by translating local currency amounts in the prior-year period at actual foreign exchange rates for the current period.
February 24, 2019 (Estimated) | % Increase (Decrease) Over Prior Year (Estimated) | February 25, 2018 (Actual) | ||||||||||||||||||
(in millions) | Low | High | Low | High | ||||||||||||||||
Total net revenues: | ||||||||||||||||||||
As reported | $ | 1,420 | $ | 1,435 | 6 | % | 7 | % | $ | 1,343.7 | ||||||||||
Impact of foreign currency exchange rates | — | — | — | — | (47.7 | ) | ||||||||||||||
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Constant-currency net revenues | $ | 1,420 | $ | 1,435 | 10 | % | 11 | % | $ | 1,296.0 | ||||||||||
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