EXHIBIT 99.1
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P R E S S R E L E A S E
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Investor Contact: Denise Gillen 212.318.7516
Media Contact: Nancy Murray 212.813.7862
POLO RALPH LAUREN REPORTS FIRST QUARTER FISCAL 2006 RESULTS
FIRST QUARTER REVENUES UP 24%; OPERATING PROFIT INCREASED 306%; EPS UP 300%
COMPANY RAISES EPS OUTLOOK FOR FISCAL YEAR 2006 TO RANGE OF $2.85 TO $2.92
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New York (August 9, 2005) - Polo Ralph Lauren Corporation (NYSE: RL) today
reported net income of $50.7 million, or $0.48 per diluted share, for the first
quarter of Fiscal 2006 compared to net income of $12.7 million, or $0.12 per
diluted share, for the first quarter of Fiscal 2005.
Net revenues for the first quarter increased 24% to $752 million compared to
$606 million in the first quarter last year. Gross profit was $414 million, an
increase of 31%, compared to $316 million in the first quarter of Fiscal 2005.
Gross margin rate improved 300 basis points in the first quarter to 55.1% of
revenues compared to 52.1% last year, reflecting improvements in both our
wholesale and retail segments resulting from a continued focus on inventory
management, sourcing efficiencies and better sell-throughs. Operating expenses
as a percent of revenues improved 440 basis points in the first quarter to 44.4%
compared to 48.8% for the first quarter last year. SG&A expenses were $334
million compared to $296 million in the first quarter of Fiscal 2005.
"We continue to be excited by the strong customer response to our brand and its
growing appeal," said Ralph Lauren, Chairman and Chief Executive Officer. "One
of the keys to our success is that we are not about a season or a fashion
moment. We are unique in our industry. The breadth and depth of our brands
across all product categories distributed through multiple channels and in
multiple geographies show the strength of our business."
"Looking ahead, this will be a very significant year for our business," Mr.
Lauren continued. "We will continue to invest in the rollout of our
international expansion, further develop our luxury accessories business and
expand our global specialty stores. We continue to be pleased by our ongoing
progress and are excited about the many opportunities we see ahead."
"There are four primary growth drivers in our business: Expansion of specialty
stores, international development, new merchandise opportunities and strong
margin increases as a result of leveraging our global infrastructure," said
Roger Farah, President and Chief Operating Officer. "We advanced our multi-year
strategy by improving comparable store sales, expanding our international
presence, with particular growth in Europe, and driving better sell-throughs in
specialty and better department stores. In addition, we continue to enjoy the
benefits of a number of operating improvements in global sourcing and product
presentation and merchandising."
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Mr. Farah continued, "Our operating margin performance was particularly strong
this quarter due to strong sell-throughs on spring and summer products, as well
as progress on the integration of our global infrastructure and improvement to
supply chain execution. We will continue to invest in the business during the
year, with increases in advertising campaigns, as well as the retail expansion
in Asia as we open our first major store in Tokyo in March."
FIRST QUARTER FISCAL 2006 SEGMENT REVIEW
WHOLESALE Sales in wholesale were $337 million, up 41% over last year. Operating
profit was $46 million, up from a loss of $2.6 million last year. Growth in our
wholesale segment this quarter was driven by strong contributions from
childrenswear, solid demand for menswear and continued expansion of our business
throughout Europe.
RETAIL Retail sales were $357 million, up 15% from last year, and operating
profit was $36 million, up 46% from $24 million in the same period last year.
Retail segment operating margins improved 210 basis points in the quarter with
comparable store sales up 7.3%, driven largely by improved sell-throughs at full
price. Comparable retail store sales increased 7.1% at Ralph Lauren stores, 6.5%
in our factory stores and 12.6% at Club Monaco stores. Ralph Lauren Media
revenues increased 22%.
LICENSING Licensing revenues were $57 million, up slightly from last year, and
operating profit was $35 million, up 11% from $32 million in the comparable
quarter last year. We continue to see licensing as an important part of our
business and enjoyed strong response to our Chaps for men domestic product lines
and in international regions.
RECENT DEVELOPMENTS
o PROGRESS IN DEVELOPMENT OF ACCESSORIES BUSINESS: On July 15, 2005, we
completed the acquisition of Ralph Lauren Footwear Co., Inc., our
global licensee for footwear for men, women and children, for $108
million in cash, advancing our strategy to develop a global luxury
accessories business. We intend to develop this business to capitalize
on what we believe is a strong long-term opportunity for us in both
wholesale and retail.
o INVENTORY IMPROVEMENTS: We continue to make excellent progress in
managing our inventory levels and turnover. Inventory was $468 million
compared to $432 million last year, and inventory turnover was 3.8x
this year compared to 3.4x a year ago. Inventory levels increased 8% on
a 27% sales increase in our wholesale and retail businesses.
o STORE COUNT: At the end of the first quarter, we operated 282 stores,
with 2.2 million square feet, compared to 260 stores, with 2.0 million
square feet, at the end of the first quarter last year. Our retail
group consists of 59 Ralph Lauren stores, three Rugby stores, 70 Club
Monaco stores, 128 Polo factory stores, 17 Polo Jeans Co. factory
stores, and five Club Monaco factory stores.
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FISCAL 2006 OUTLOOK AS COMPARED TO FISCAL 2005 GAAP RESULTS
FULL YEAR FISCAL 2006 OUTLOOK
o EARNINGS PER SHARE (EPS) are expected to be in the range of $2.85 to
$2.92, an increase from previous expectations. While the Company's
projected results reflect strong operating performance, they will be
somewhat offset by an increase in dilution from the acquisition of
Ralph Lauren Footwear, a higher tax rate, the effect of a higher share
count and the effect of unfavorable exchange rates.
o CONSOLIDATED REVENUE growth is projected to be high single digit,
reflecting high single digit growth in wholesale sales, low-teens
growth in retail sales and licensing royalty flat to last year.
o OPERATING MARGINS are expected to increase in a range of 400 to 450
basis points reflecting expansion in our wholesale and retail segments
somewhat offset by a decrease in net licensing income.
o INTEREST INCOME, NET OF INTEREST EXPENSE is expected to be
approximately $2.0 million based on higher interest rates on higher
cash balances.
o OTHER INCOME, EXPENSE is expected to be an expense of approximately
$3.6 million primarily due to the minority interest related to Ralph
Lauren Media.
o THE CONSOLIDATED TAX RATE is expected to be 37.2% and the Company
expects to have 106.6 million SHARES OUTSTANDING compared to 104
million shares last year.
SECOND QUARTER FISCAL 2006 OUTLOOK
o CONSOLIDATED REVENUE growth is projected to be low double digits,
reflecting high single digit growth in wholesale sales as we deliver
our fall merchandise, mid-teens growth in retail sales and licensing
royalty flat to last year.
o OPERATING MARGINS are expected to increase in a range of 150 to 200
basis points reflecting expansion in our wholesale and retail segments
with a decrease in net licensing income.
o INTEREST INCOME, NET OF INTEREST EXPENSE is expected to be slightly
positive based on higher interest rates on higher cash balances.
o OTHER INCOME, EXPENSE is expected to be an expense of approximately
$2.0 million primarily due to the minority interest related to Ralph
Lauren Media.
o THE CONSOLIDATED TAX RATE is expected to be 37.1% and the Company
expects to have 106.2 million SHARES OUTSTANDING compared to 103.6
million last year.
SECOND HALF FISCAL 2006 OUTLOOK
o CONSOLIDATED REVENUE growth is projected to be mid-single digit,
reflecting a slight decrease in wholesale sales, low-double digits
growth in retail sales and licensing royalty flat to last year.
o OPERATING MARGINS are expected to increase in a range of 450 to 500
basis points.
o INTEREST INCOME, NET OF INTEREST EXPENSE is expected to be
approximately $1.5 million based on higher interest rates on higher
cash balances.
o OTHER INCOME, EXPENSE is expected to be an expense of approximately
$2.0 million primarily due to the minority interest related to Ralph
Lauren Media.
o THE CONSOLIDATED TAX RATE is expected to be 37.1% and the Company
expects to have approximately 107.4 million SHARES OUTSTANDING compared
to 104.8 million last year.
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CONFERENCE CALL
As previously announced, we will host a conference call and live online
broadcast today at 9:00 A.M. Eastern. The dial-in number is 1-719-457-2680. The
online broadcast is accessible at HTTP://INVESTOR.POLO.COM
Polo Ralph Lauren Corporation is a leader in the design, marketing and
distribution of premium lifestyle products in four categories: apparel, home,
accessories and fragrances. For more than 37 years, Polo's reputation and
distinctive image have been consistently developed across an expanding number of
products, brands and international markets. The Company's brand names, which
include "Polo by Ralph Lauren", "Ralph Lauren Purple Label", "Ralph Lauren",
"Black Label", "Blue Label", "Lauren by Ralph Lauren", "Polo Jeans Co.", "RRL",
"RLX", "Rugby", "RL Childrenswear", "Chaps", and "Club Monaco" among others,
constitute one of the world's most widely recognized families of consumer
brands. For more information, go to HTTP://INVESTOR.POLO.COM.
THIS PRESS RELEASE AND ORAL STATEMENTS MADE FROM TIME TO TIME BY REPRESENTATIVES
OF THE COMPANY CONTAIN CERTAIN "FORWARD-LOOKING STATEMENTS" CONCERNING CURRENT
EXPECTATIONS ABOUT THE COMPANY'S FUTURE RESULTS AND CONDITION, INCLUDING SALES,
STORE OPENINGS, GROSS MARGINS, EXPENSES AND EARNINGS. ACTUAL RESULTS MIGHT
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. AMONG
THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO MATERIALLY DIFFER INCLUDE, AMONG
OTHERS, CHANGES IN THE COMPETITIVE MARKETPLACE, INCLUDING THE INTRODUCTION OF
NEW PRODUCTS OR PRICING CHANGES BY OUR COMPETITORS, CHANGES IN THE ECONOMY AND
OTHER EVENTS LEADING TO A REDUCTION IN DISCRETIONARY CONSUMER SPENDING; RISKS
ASSOCIATED WITH THE COMPANY'S DEPENDENCE ON SALES TO A LIMITED NUMBER OF LARGE
DEPARTMENT STORE CUSTOMERS, INCLUDING RISKS RELATED TO EXTENDING CREDIT TO
CUSTOMERS; RISKS ASSOCIATED WITH THE COMPANY'S DEPENDENCE ON ITS LICENSING
PARTNERS FOR A SUBSTANTIAL PORTION OF ITS NET INCOME AND RISKS ASSOCIATED WITH A
LACK OF OPERATIONAL AND FINANCIAL CONTROL OVER LICENSED BUSINESSES; RISKS
ASSOCIATED WITH CHANGES IN SOCIAL, POLITICAL, ECONOMIC AND OTHER CONDITIONS
AFFECTING FOREIGN OPERATIONS OR SOURCING (INCLUDING FOREIGN EXCHANGE
FLUCTUATIONS) AND THE POSSIBLE ADVERSE IMPACT OF CHANGES IN IMPORT RESTRICTIONS;
RISKS ASSOCIATED WITH UNCERTAINTY RELATING TO THE COMPANY'S ABILITY TO IMPLEMENT
ITS GROWTH STRATEGIES OR ITS ABILITY TO SUCCESSFULLY INTEGRATE ACQUIRED
BUSINESSES; RISKS ARISING OUT OF LITIGATION OR TRADEMARK CONFLICTS, AND OTHER
RISK FACTORS IDENTIFIED IN THE COMPANY'S FORM 10-K, 10-Q AND 8-K REPORTS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY UNDERTAKES NO
OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS TO REFLECT
SUBSEQUENT EVENTS OR CIRCUMSTANCES.
Attached are the Consolidated Statements of Income and Net Revenues and Income
from Operations for the three-month periods ended July 2, 2005 and July 3, 2004,
as restated; the Consolidated Balance Sheets as of July 2, 2005 and July 3,
2004, as restated; Consolidated Statements of Income and Net Revenues and Income
from Operations for the three-month period ended October 2, 2004, as restated;
and Consolidated Statements of Income and Net Revenues and Income from
Operations for the three-month period ended January 1, 2005, as restated.
# # # #
Tables Follow
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4
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
(In thousands, except share and per share data)
(UNAUDITED)
THREE MONTHS ENDED
-----------------------------------
JULY 2, JULY 3,
2005 2004
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(AS RESTATED
SEE NOTE B)
Wholesale Net Sales $ 337,199 $ 239,024
Retail Net Sales 357,404 310,040
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NET SALES 694,603 549,064
Licensing Revenue 57,339 56,942
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NET REVENUES 751,942 606,006
Cost of Goods Sold 337,514 290,478
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GROSS PROFIT 414,428 315,528
Depreciation and Amortization Expense 28,662 23,922
Other SG&A Expenses 305,545 271,121
Restructuring Charge -- 731
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TOTAL SG&A EXPENSES 334,207 295,774
Income From Operations 80,221 19,754
Foreign Currency (Gains) Losses (41) 211
Interest (Income) Expense, net (433) 1,627
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Income Before Income Taxes and Other Income 80,695 17,916
Provision for Income Taxes 30,343 6,316
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Income after Tax 50,352 11,600
Other (Income) Expense, net (A) (355) (1,125)
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NET INCOME $ 50,707 $ 12,725
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NET INCOME PER SHARE - BASIC $ 0.49 $ 0.13
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NET INCOME PER SHARE - DILUTED $ 0.48 $ 0.12
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Weighted Average Shares Outstanding - Basic 103,048,000 100,481,000
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Weighted Average Shares & Share Equivalents Outstanding - Diluted 105,491,000 102,802,000
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Dividends declared per share $ 0.05 $ 0.05
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(A) Includes Equity Investment Income of $1,795 and $1,988 net of Minority
Interest Expense of $828 and $500 for FY06 and FY05 (as restated),
respectively. Also includes $612 and $363 of Minority Interest Expense for
RL Media for FY06 and FY05 (as restated), respectively.
(B) Restated for change in lease accounting and the consolidation of RL Media.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
JULY 2, JULY 3,
2005 2004
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(AS RESTATED
SEE NOTE A)
ASSETS
Current assets
Cash and cash equivalents $ 522,327 $ 197,425
Accounts receivable, net of allowances 275,598 252,410
Inventories 467,610 432,320
Deferred tax assets 70,730 24,854
Prepaid expenses and other 111,220 69,714
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1,447,485 976,723
Property and equipment, net 488,728 430,939
Deferred tax assets 34,634 66,182
Goodwill, net 547,752 578,546
Intangibles, net 46,043 18,746
Other assets 179,172 177,659
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$ 2,743,814 $ 2,248,795
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 160,324 $ 133,103
Income tax payable 55,689 40,323
Accrued expenses and other 375,744 251,970
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591,757 425,396
Long-term debt 269,149 278,983
Other noncurrent liabilities 139,785 107,026
Stockholders' equity
Common Stock 1,099 1,065
Additional paid-in-capital 715,784 599,284
Retained earnings 1,133,048 927,945
Treasury Stock, Class A, at cost (4,215,908 and 4,156,300 shares) (81,629) (79,344)
Accumulated other comprehensive income 19,341 24,702
Unearned compensation (44,520) (36,262)
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TOTAL STOCKHOLDERS' EQUITY 1,743,123 1,437,390
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$ 2,743,814 $ 2,248,795
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(A) Restated for change in lease accounting, the consolidation of RL Media,
reclassification between Cash & Accounts Receivable for credit card
collections and certain other reclassifications.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
NET REVENUES AND INCOME FROM OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
The net revenues and income from operations for the periods ended July 2, 2005
and July 3, 2004 for each segment were as follows:
THREE MONTHS ENDED
----------------------------
JULY 2, JULY 3,
2005 2004
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(AS RESTATED
SEE NOTE A)
NET REVENUES:
Wholesale $ 337,199 $ 239,024
Retail 357,404 310,040
Licensing 57,339 56,942
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$ 751,942 $ 606,006
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INCOME (LOSS) FROM OPERATIONS:
Wholesale $ 46,269 $ (2,633)
Retail 35,650 24,444
Licensing 35,212 31,847
Corporate (36,910) (33,173)
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$ 80,221 $ 20,485
Less: Unallocated Restructuring Charge -- 731
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$ 80,221 $ 19,754
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(A) Restated for change in lease accounting and the consolidation of RL Media.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
(In thousands, except share and per share data)
(UNAUDITED)
THREE MONTHS ENDED
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OCTOBER 2, OCTOBER 2,
2004 2004
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(AS PREVIOUSLY (AS RESTATED
REPORTED) SEE NOTE B)
Wholesale Net Sales $ 502,563 $ 502,563
Retail Net Sales 318,978 330,912
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NET SALES 821,541 833,475
Licensing Revenue 62,139 62,139
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NET REVENUES 883,680 895,614
Cost of Goods Sold 445,925 449,580
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GROSS PROFIT 437,755 446,034
Depreciation and Amortization Expense 23,724 26,664
Other SG&A Expenses 289,462 296,204
Restructuring Charge 897 897
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TOTAL SG&A EXPENSES 314,083 323,765
Income From Operations 123,672 122,269
Foreign Currency (Gains) Losses (3,145) (3,145)
Interest (Income) Expense, net 2,045 2,042
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Income Before Income Taxes and Other Income 124,772 123,372
Provision for Income Taxes 44,294 43,391
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Income after Tax 80,478 79,981
Other (Income) Expense, net (A) 71 713
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NET INCOME $ 80,407 $ 79,268
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NET INCOME PER SHARE - BASIC $ 0.79 $ 0.78
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NET INCOME PER SHARE - DILUTED $ 0.78 $ 0.77
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Weighted Average Shares Outstanding - Basic 101,192,000 101,192,000
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Weighted Average Shares & Share Equivalents Outstanding - Diluted 103,571,000 103,571,000
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Dividends declared per share $ 0.05 $ 0.05
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(A) Includes Equity Investment Income of $1,188 and $1,188 net of Minority
Interest Expense of $1,904 and $1,904 for FY05 (as reported) and FY05 (as
restated), respectively. Also includes $0 and $(3) of Minority Interest
Expense for RL Media for FY05 (as reported) and FY05 (as restated),
respectively. FY05 (as reported) includes $645 of Dividend Income from RL
Media.
(B) Restated for change in lease accounting and the consolidation of RL Media.
The net revenues and income from operations for the period ended October 2, 2004
as previously reported and as restated for each segment were as follows:
THREE MONTHS ENDED
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OCTOBER 2, OCTOBER 2,
2004 2004
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(AS PREVIOUSLY (AS RESTATED
REPORTED) SEE NOTE B)
Net revenues:
Wholesale $ 502,563 $ 502,563
Retail 318,978 330,912
Licensing 62,139 62,139
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$ 883,680 $ 895,614
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Income (Loss) from operations:
Wholesale $ 81,512 $ 99,874
Retail 23,172 19,251
Licensing 19,885 42,637
Corporate -- (38,596)
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$ 124,569 $ 123,166
Less: Unallocated Restructuring Charge 897 897
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$ 123,672 $ 122,269
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POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
(In thousands, except share and per share data)
(UNAUDITED)
THREE MONTHS ENDED
-----------------------------------
JANUARY 1, JANUARY 1,
2005 2005
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(AS PREVIOUSLY (AS RESTATED
REPORTED) SEE NOTE B)
Wholesale Net Sales $ 427,445 $ 427,445
Retail Net Sales 402,613 416,194
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NET SALES 830,058 843,639
Licensing Revenue 57,935 57,935
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NET REVENUES 887,993 901,574
Cost of Goods Sold 449,960 455,498
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GROSS PROFIT 438,033 446,076
Depreciation and Amortization Expense 26,096 26,745
Other SG&A Expenses 296,885 302,923
Restructuring Charge 218 218
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TOTAL SG&A EXPENSES 323,199 329,886
Income From Operations 114,834 116,190
Foreign Currency (Gains) Losses (400) (400)
Interest (Income) Expense, net 1,996 1,989
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Income Before Income Taxes and Other Income 113,238 114,601
Provision for Income Taxes 40,199 40,280
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Income after Tax 73,039 74,321
Other (Income) Expense, net (A) (1,803) (715)
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NET INCOME $ 74,842 $ 75,036
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NET INCOME PER SHARE - BASIC $ 0.73 $ 0.74
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NET INCOME PER SHARE - DILUTED $ 0.72 $ 0.72
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Weighted Average Shares Outstanding - Basic 101,896,000 101,896,000
============= =============
Weighted Average Shares & Share Equivalents Outstanding - Diluted 104,325,000 104,325,000
============= =============
Dividends declared per share $ 0.05 $ 0.05
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(A) Includes Equity Investment Income of $2,607 and $2,607 net of Minority
Interest Expense of $804 and $804 for FY05 (as reported) and FY05 (as
restated), respectively. Also includes $0 and $1,088 of Minority Interest
Expense for RL Media for FY05 (as reported) and FY05 (as restated),
respectively.
(B) Restated for change in lease accounting and the consolidation of RL Media.
The net revenues and income from operations for the period ended January 1, 2005
as previously reported and as restated for each segment were as follows:
THREE MONTHS ENDED
-----------------------------------
JANUARY 1, JANUARY 1,
2005 2005
------------- -------------
(AS PREVIOUSLY (AS RESTATED
REPORTED) SEE NOTE B)
Net revenues:
Wholesale $ 427,445 $ 427,445
Retail 402,613 416,194
Licensing 57,935 57,935
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$ 887,993 $ 901,574
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Income (Loss) from operations:
Wholesale $ 47,653 $ 61,742
Retail 49,459 49,174
Licensing 17,940 37,079
Corporate -- (31,587)
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$ 115,052 $ 116,408
Less: Unallocated Restructuring Charge 218 218
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$ 114,834 $ 116,190
============= =============