-- Third Quarter EPS of $0.89 Exceeds Guidance by $0.07
-- Full Year EPS Guidance Increased
Business Editors
NEW YORK--(BUSINESS WIRE)--Nov. 20, 2006--Phillips-Van Heusen
Corporation (NYSE: PVH) reported third quarter 2006 results.
GAAP Earnings
Third quarter 2006 GAAP net income was $50.8 million, or $0.89 per
share, compared with third quarter 2005 GAAP net income of $40.3
million, or $0.73 per share. For the nine months, GAAP net income was
$128.5 million, or $2.19 per share, in 2006 compared with $88.8
million, or $1.44 per share, in 2005.
Non-GAAP Earnings
The discussions in this release that refer to non-GAAP earnings
per share exclude certain items which are described under the heading
"Non-GAAP Exclusions."
For the third quarter of 2006, there were no non-GAAP exclusions
and, thus, no non-GAAP earnings per share. GAAP earnings per share of
$0.89 was $0.07 to $0.09 ahead of previous guidance and a 25%
improvement over third quarter 2005 non-GAAP earnings per share of
$0.71. For the nine months, non-GAAP earnings per share was $2.16 in
2006 compared with $1.52 in 2005, an increase of 42%.
The third quarter earnings per share improvement was driven by
strong sales performance coupled with a significant improvement in
gross margin. In the Calvin Klein licensing business, operating
earnings increased 31% and operating margins were up almost 700 basis
points, reflecting the significant leverage inherent in the licensing
business model. The Company's wholesale and retail businesses grew
operating earnings a combined 17% on 6% sales growth, as strong
product sell-throughs drove gross margin improvements in the quarter.
Revenues
Total revenues in the third quarter of 2006 increased 7% to $568.3
million from $533.2 million in the prior year. Revenue growth was
driven by an 11% increase in Calvin Klein royalties due to continued
growth from existing and new licensees. The licensed Calvin Klein
fragrance business showed particular strength, as women's Euphoria
continued to perform exceptionally well and was joined by the global
launch of men's Euphoria. The positive comp store performance that the
Company's outlet retail business experienced in the first half of the
year continued and accelerated during the quarter, with comp store
sales growth of 11%. In addition, revenues benefited from the growth
across all of the Company's wholesale sportswear businesses, but were
partially offset by an anticipated sales decrease in the Company's
wholesale dress shirt business reflecting the residual impact of the
Federated/May door closings for the year.
For the nine months, total revenues increased 6% to $1,533.6
million in 2006 from $1,448.8 million in 2005.
Balance Sheet
The Company ended the quarter with $358.6 million in cash, an
increase of $188.3 million compared with the prior year's third
quarter. Receivables ended the quarter 11% below prior year levels,
reflecting strong collections. Inventories ended the quarter on plan,
up 7% from last year and in line with the Company's sales growth
projections for the fourth quarter. The Company's higher year over
year cash position, coupled with higher investment rates of return,
resulted in a 46% decrease in net interest expense for the third
quarter.
CEO Comments
Commenting on these results, Emanuel Chirico, Chief Executive
Officer, noted, "We are extremely pleased with our third quarter
results, which continue the positive trends we experienced in the
first half of this year. The strength of the Calvin Klein brand and
the execution of our business model for that brand continue to be key
drivers in our earnings growth. The performance of Calvin Klein, along
with the growth exhibited by our outlet retail and wholesale
sportswear businesses, enabled us to again exceed our previous
guidance."
Mr. Chirico continued, "During the third quarter, we announced our
agreement to acquire Superba, Inc., a leading neckwear company with
estimated 2006 revenues of $140 million. The deal is expected to be
effective January 1, 2007 and will be modestly accretive to 2007
earnings. This acquisition is consistent with our strategy of adding
brands or product categories that are synergistic and complement our
existing businesses, in this case, dress shirts."
Mr. Chirico concluded, "Our brands continue to perform extremely
well across all channels of distribution, enabling us to intensify the
investments we are making in marketing our brands. During this
upcoming holiday season, we are planning a $20 million increase in
national advertising spending to support our Calvin Klein, Van Heusen,
IZOD and Arrow brands. We believe that in the context of the changing
retail landscape it is critical to take our message directly to
consumers. We feel that this continued commitment to the long-term
strength of our brands will pay dividends in the future."
2006 Earnings Guidance
GAAP Earnings Per Share
For the fourth quarter of 2006, GAAP earnings per share is
projected to be $0.43, which compares with $0.41 in 2005. For the full
year 2006, GAAP earnings per share is projected to be $2.60, which
compares with $1.85 in 2005.
Non-GAAP Earnings Per Share
For the fourth quarter of 2006, the Company expects no non-GAAP
adjustments to projected GAAP earnings per share of $0.43. This
represents a 19% improvement over fourth quarter 2005 non-GAAP
earnings per share of $0.36. Included in the projection for the fourth
quarter of 2006 is a $20 million increase in national advertising
expense over the prior year's fourth quarter.
For the full year 2006, non-GAAP earnings per share estimates are
being increased to $2.59 from $2.46 to $2.50. This represents a 38%
improvement over full year 2005 non-GAAP earnings per share of $1.88.
Included in the 2006 projection is a $22 million increase in national
advertising expense over 2005.
Revenues
The Company projects fourth quarter 2006 revenues to be in a range
of $528 million to $532 million, which represents an increase of 15%
to 16% over last year. Total revenues for the full year 2006 are
expected to be $2.06 billion to $2.07 billion, which represents an
increase of 8% over last year.
The Company's 2006 revenues and earnings guidance does not reflect
the impact of the pending acquisition of Superba, Inc., which would
not be expected to have a material effect on 2006 revenues and
earnings.
2007 Earnings Guidance
The Company believes 2007 earnings per share will grow to a range
of $2.97 to $3.05, which represents growth of 15% to 18% over 2006
projected non-GAAP earnings per share of $2.59. Revenues are projected
to grow 5% to 7% in 2007. The Company's 2007 revenues and earnings
guidance does not reflect the impact of the pending Superba
acquisition, which is expected to be modestly accretive to earnings
after giving effect to anticipated integration costs.
Non-GAAP Exclusions
Non-GAAP earnings per share in 2006 excludes (a) a one time
pre-tax gain of $32.0 million associated with the sale on January 31,
2006 by the Company of minority interests in certain entities that
operate various licensed Calvin Klein jeans and sportswear businesses
in Europe and Asia; (b) pre-tax costs of $11.3 million associated with
the closing in May 2006 of the Company's apparel manufacturing
facility in Ozark, Alabama; (c) pre-tax costs of $10.5 million
resulting from the departure in February 2006 of Mark Weber, the
Company's former Chief Executive Officer and (d) an inducement payment
of $10.2 million and costs of $0.7 million associated with the
secondary common stock offering completed in the second quarter of
2006.
Non-GAAP earnings per share in 2005 is presented as if stock
options had been expensed under the provisions of SFAS 123 ($0.02 per
share effect in the third quarter, $0.10 per share effect in the nine
months, $0.05 per share effect in the fourth quarter and $0.15 per
share effect for the year) and excludes an inducement payment of $12.9
million and costs of $1.3 million associated with the secondary common
stock offering completed in the second quarter of 2005.
Please see reconciliations of GAAP to non-GAAP earnings per share
for 2005 and 2006.
The Company webcasts its conference calls to review its earnings
releases. The Company's conference call to review its third quarter
earnings release is scheduled for Tuesday, November 21, 2006 at 11:00
a.m. EST. Please log on either to the Company's web site at
www.pvh.com and go to the News Releases page or to
www.companyboardroom.com to listen to the live webcast of the
conference call. The webcast will be available for replay for one year
after it is held, commencing approximately two hours after the live
broadcast ends. Please log on to www.pvh.com or
www.companyboardroom.com as described above to listen to the replay.
In addition, an audio replay of the conference call is available for
48 hours starting one hour after it is held. The replay of the
conference call can be accessed by calling 1-888-203-1112 and using
passcode #4750129. The conference call and webcast consist of
copyrighted material. They may not be re-recorded, reproduced,
re-transmitted, rebroadcast or otherwise used without the Company's
express written permission. Your participation represents your consent
to these terms and conditions, which are governed by New York law.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995: Forward-looking statements in this press release
and made during the conference call / webcast, including, without
limitation, statements relating to the Company's future revenues and
earnings, plans, strategies, objectives, expectations and intentions,
are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
such forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy, and
some of which might not be anticipated, including, without limitation,
the following: (i) the Company's plans, strategies, objectives,
expectations and intentions are subject to change at any time at the
discretion of the Company; (ii) the levels of sales of the Company's
apparel, footwear and related products, both to its wholesale
customers and in its retail stores, the levels of sales of the
Company's licensees at wholesale and retail, and the extent of
discounts and promotional pricing in which the Company and its
licensees and other business partners are required to engage, all of
which can be affected by weather conditions, changes in the economy,
fuel prices, reductions in travel, fashion trends, consolidations,
repositionings and bankruptcies in the retail industries,
repositionings of brands by the Company's licensors and other factors;
(iii) the Company's plans and results of operations will be affected
by the Company's ability to manage its growth and inventory, including
the Company's ability to continue to realize revenue growth from
developing and growing Calvin Klein; (iv) the Company's operations and
results could be affected by quota restrictions and the imposition of
safeguard controls (which, among other things, could limit the
Company's ability to produce products in cost-effective countries that
have the labor and technical expertise needed), the availability and
cost of raw materials (particularly petroleum-based synthetic fabrics,
which are currently in high demand), the Company's ability to adjust
timely to changes in trade regulations and the migration and
development of manufacturers (which can affect where the Company's
products can best be produced), and civil conflict, war or terrorist
acts, the threat of any of the foregoing, or political and labor
instability in the United States or any of the countries where the
Company's products are or are planned to be produced; (v) disease
epidemics and health related concerns, which could result in closed
factories, reduced workforces, scarcity of raw materials and scrutiny
or embargoing of goods produced in infected areas; (vi) acquisitions
and issues arising with acquisitions and proposed transactions,
including without limitation, the ability to integrate an acquired
entity into the Company with no substantial adverse affect on the
acquired entity's or the Company's existing operations, employee
relationships, vendor relationships, customer relationships or
financial performance; (vii) the failure of the Company's licensees to
market successfully licensed products or to preserve the value of the
Company's brands, or their misuse of the Company's brands and (viii)
other risks and uncertainties indicated from time to time in the
Company's filings with the Securities and Exchange Commission.
This press release includes, and the conference call/webcast will
include, certain non-GAAP financial measures, as defined under SEC
rules. A reconciliation of these measures is included in the financial
information later in this release, as well as in the Company's Current
Report on Form 8-K furnished to the SEC in connection with this
earnings release, which is available on the Company's website at
www.pvh.com and on the SEC's website at www.sec.gov.
The Company does not undertake any obligation to update publicly
any forward-looking statement, including, without limitation, any
estimate regarding revenues or earnings, whether as a result of the
receipt of new information, future events or otherwise.
PHILLIPS-VAN HEUSEN CORPORATION
Consolidated Income Statements
(In thousands, except per share data)
Quarter Ended Quarter Ended
10/29/06 10/30/05
------------- -------------
Net sales $ 500,235 $ 471,778
Royalty revenues 52,037 47,559
Advertising and other revenues 15,989 13,844
------------- -------------
Total revenues $ 568,261 $ 533,181
============= =============
Gross profit on net sales $ 212,355 $ 187,843
Gross profit on royalty, advertising
and other revenues 68,026 61,403
------------- -------------
Total gross profit 280,381 249,246
Selling, general and administrative
expenses 195,738 177,638
------------- -------------
Earnings before interest and taxes 84,643 71,608
Interest expense, net 3,923 7,249
------------- -------------
Pre-tax income 80,720 64,359
Income tax expense 29,947 24,070
------------- -------------
Net income 50,773 40,289
Preferred stock dividends on
convertible stock 3,229
------------- -------------
Net income available to common
stockholders $ 50,773 $ 37,060
============= =============
Diluted net income per common share(1) $ 0.89 $ 0.73
============= =============
Per share impact of expensing stock
options (0.02)(2)
-------------
Diluted net income per common share as
adjusted $ 0.71 (2)
=============
(1) Please see the Notes to Consolidated Income Statements for a
reconciliation of diluted net income per common share.
(2) The adjustment to include the impact of expensing stock options
for 2005 is for illustrative purposes only. The Company did not
expense stock options in fiscal 2005. The Company implemented the
provisions of SFAS 123R beginning in the first quarter of 2006.
PHILLIPS-VAN HEUSEN CORPORATION
Consolidated Income Statements
(In thousands, except per share data)
Nine Months Ended
10/29/06
--------------------------------------
Results
Under Non-GAAP
GAAP Adjustments(1) Results(1)
----------- -------------- -----------
Net sales $1,361,543 $1,361,543
Royalty revenues 130,384 130,384
Advertising and other revenues 41,700 41,700
----------- -----------
Total revenues $1,533,627 $1,533,627
=========== ===========
Gross profit on net sales $ 578,168 $ 578,168
Gross profit on royalty,
advertising and other revenues 172,084 172,084
----------- -----------
Total gross profit 750,252 750,252
Selling, general and
administrative expenses 564,148 $(21,829) 542,319
Gain on sale of investments 32,043 (32,043)
----------- -------------- -----------
Earnings before interest
and taxes 218,147 (10,214) 207,933
Interest expense, net 13,901 13,901
----------- -------------- -----------
Pre-tax income 204,246 (10,214) 194,032
Income tax expense 75,775 (3,789) 71,986
----------- -------------- -----------
Net income 128,471 (6,425) 122,046
Preferred stock dividends on
convertible stock
Preferred stock dividends on
converted stock 3,230 3,230
Inducement payment and offering
costs 10,948 (10,948)
----------- -------------- -----------
Net income available to common
stockholders $ 114,293 $ 4,523 $ 118,816
=========== ============== ===========
Diluted net income per common
share(3) $ 2.19 $ 2.16
=========== ===========
--------------------------------------
Per share impact of expensing
stock options
Diluted net income per common
share as adjusted
Nine Months Ended
10/30/05
--------------------------------------
Results
Under Non-GAAP
GAAP Adjustments(2) Results(2)
----------- -------------- -----------
Net sales $1,292,451 $1,292,451
Royalty revenues 117,059 117,059
Advertising and other
revenues 39,249 39,249
----------- -----------
Total revenues $1,448,759 $1,448,759
=========== ===========
Gross profit on net sales $ 512,488 $ 512,488
Gross profit on royalty,
advertising and other
revenues 156,308 156,308
----------- -----------
Total gross profit 668,796 668,796
Selling, general and
administrative expenses 504,437 504,437
Gain on sale of investments
------------ -----------
Earnings before interest
and taxes 164,359 164,359
Interest expense, net 22,555 22,555
----------- -----------
Pre-tax income 141,804 141,804
Income tax expense 53,035 53,035
----------- -----------
Net income 88,769 88,769
Preferred stock dividends on
convertible stock 9,688 9,688
Preferred stock dividends on
converted stock 2,051 2,051
Inducement payment and
offering costs 14,205 $(14,205)
----------- -------------- -----------
Net income available to
common stockholders $ 62,825 $ 14,205 $ 77,030
=========== ============== ===========
Diluted net income per
common share(3) $ 1.44 $ 1.62
=========== ===========
Per share impact of
expensing stock options (0.10)(4)
-----------
Diluted net income per
common share as adjusted $ 1.52 (4)
===========
(1) Adjustments for the nine months ended October 29, 2006 consist of
(a) a one time pre-tax gain of $32.0 million associated with the
sale by the Company on January 31, 2006 of minority interests in
certain entities that operate various licensed Calvin Klein jeans
and sportswear businesses in Europe and Asia; (b) pre-tax costs of
$10.5 million resulting from the departure in February 2006 of
Mark Weber, the Company's former Chief Executive Officer; (c)
pre-tax costs of $11.3 million associated with closing the
Company's apparel manufacturing facility in Ozark, Alabama in May
2006; and (d) an inducement payment and offering costs of $10.9
million. The inducement payment and offering costs related to the
conversion of the Company's remaining outstanding shares of Series
B convertible preferred stock by the holders of such stock into
11.6 million shares of common stock and the subsequent sale of
10.1 million shares of such stock by the holders in May 2006. The
inducement payment and offering costs include (a) an inducement
payment of $0.88 per share of common stock received upon
conversion, or an aggregate of $10.2 million and (b) certain
costs, totaling $0.7 million, incurred by the Company in
connection with the secondary common stock offering. The
inducement payment was based on the net present value of the
dividends that the Company would have been obligated to pay the
holders of the Series B convertible preferred stock through the
earliest date on which it was estimated that the Company would
have had the right to convert the Series B convertible preferred
stock, net of the net present value of the dividends payable on
the shares of common stock into which the Series B convertible
preferred stock was convertible over the same period.
(2) Adjustments for the nine months ended October 30, 2005 consist of
the inducement payment and offering costs related to the
conversion of a portion of the Company's Series B convertible
preferred stock by certain holders of such stock into 7.3 million
shares of common stock and the subsequent sale of the 7.3 million
common shares by the holders in July 2005. The inducement payment
and offering costs include (a) an inducement payment of $1.75 per
share of common stock sold in the secondary common stock offering,
or an aggregate of $12.9 million and (b) certain costs, totaling
$1.3 million, incurred by the Company in connection with the
secondary common stock offering. The inducement payment was based
on the net present value of the dividends that the Company would
have been obligated to pay the holders of the Series B convertible
preferred stock through the earliest date on which it was
estimated that the Company would have had the right to convert the
Series B convertible preferred stock, net of the net present value
of the dividends payable on the shares of common stock into which
the Series B convertible preferred stock was convertible over the
same period.
(3) Please see the Notes to Consolidated Income Statements for a
reconciliation of diluted net income per common share.
(4) The adjustment to include the impact of expensing stock options
for 2005 is for illustrative purposes only. The Company did not
expense stock options in fiscal 2005. The Company implemented
the provisions of SFAS 123R beginning in the first quarter of
2006.
Notes to Consolidated Income Statements:
1. The Company believes presenting non-GAAP results for the nine
months ended October 29, 2006 and October 30, 2005 provides useful
information to investors because many investors make decisions based
on the ongoing operations of an enterprise. The Company believes that
investors often look at ongoing operations as a measure of assessing
performance and as a basis for comparing past results against future
results. Thus, the Company believes that the following items do not
represent normal operating items and, as such, has provided
reconciliations to present its ongoing results of operations excluding
these items: (a) the gain associated with the sale by the Company on
January 31, 2006 of minority interests in certain entities that
operate various licensed Calvin Klein jeans and sportswear businesses
in Europe and Asia; (b) costs resulting from the departure in February
2006 of Mark Weber, the Company's former Chief Executive Officer; (c)
costs associated with the May 2006 closing of the Company's apparel
manufacturing facility in Ozark, Alabama; and (d) the May 2006 and
July 2005 inducement payments and offering costs discussed in
footnotes (3) and (4) to Note 2b below. The results excluding these
items are the basis for certain incentive compensation calculations.
The Company believes that presenting its results including the impact
of expensing stock options for 2005 provides useful information to
investors because this allows investors to compare the Company's
results for 2005 as if stock options were expensed, to its results for
2006 which include the impact of expensing stock options. The Company
also uses its results excluding items (a) through (d) listed above and
including the impact of expensing stock options to discuss its
business with investment institutions, the Company's Board of
Directors and others.
2a. The Company computed its quarterly diluted net income per common
share as follows:
(In thousands, except per share data)
Quarter Ended Quarter Ended
10/29/06 10/30/05
------------- -------------
Net income $ 50,773 $ 40,289
============= =============
Weighted average common shares
outstanding 55,430 42,063
Impact of dilutive stock options and
warrants 1,383 1,777
Impact of assumed convertible preferred
stock conversion 11,566
------------- -------------
Total shares 56,813 55,406
============= =============
Diluted net income per common share $ 0.89 $ 0.73
============= =============
Per share impact of expensing stock
options (0.02)(1)
-------------
Diluted net income per common share as
adjusted $ 0.71 (1)
=============
(1) The adjustment to include the impact of expensing stock options
for 2005 is for illustrative purposes only. The Company did not
expense stock options in fiscal 2005. The Company implemented the
provisions of SFAS 123R beginning in the first quarter of 2006.
2b. The Company computed its year to date diluted net income per
common share as follows:
(In thousands, except per share data)
Nine Months Ended
10/29/06
----------------------------------
Results Non-
Under GAAP
GAAP Adjustments Results
--------- ----------- ---------
Net income $128,471 $ (6,425)(1) $122,046
Less:
Preferred stock dividends on
converted stock 3,230 (3,230)(2)
Inducement payment and offering
costs 10,948 (10,948)(3)
--------- ----------- ---------
Net income available to common
stockholders $114,293 $7,753 $122,046
========= =========== =========
Weighted average common shares
outstanding 50,921 50,921
Impact of dilutive stock options
and warrants 1,287 1,287
Impact of assumed convertible
preferred stock conversion
Impact of converted preferred stock
4,321 (5) 4,321
--------- ----------- ---------
Total shares 52,208 4,321 56,529
========= =========== =========
Diluted net income per common share
$2.19 $2.16
========= =========
----------------------------------
Per share impact of expensing stock
options
Diluted net income per common share
as adjusted
Nine Months Ended
10/30/05
--------------------------------
Results Non-
Under GAAP
GAAP Adjustments Results
-------- ----------- --------
Net income $88,769 $88,769
Less:
Preferred stock dividends on
converted stock 2,051 $ (2,051)(2)
Inducement payment and offering
costs 14,205 (14,205)(4)
-------- ----------- --------
Net income available to common
stockholders $72,513 $16,256 $88,769
======== =========== ========
Weighted average common shares
outstanding 36,845 36,845
Impact of dilutive stock options
and warrants 1,928 1,928
Impact of assumed convertible
preferred stock conversion 11,566 11,566
Impact of converted preferred
stock 4,463 (5) 4,463
--------- ----------- --------
Total shares 50,339 4,463 54,802
======== =========== ========
Diluted net income per common
share $1.44 $1.62
======== ========
Per share impact of expensing
stock options (0.10)(6)
--------
Diluted net income per common
share as adjusted $ 1.52 (6)
========
(1) Includes (a) the gain associated with the sale by the Company on
January 31, 2006 of minority interests in certain entities that
operate various licensed Calvin Klein jeans and sportswear
businesses in Europe and Asia; (b) costs resulting from the
departure in February 2006 of Mark Weber, the Company's former
Chief Executive Officer; and (c) costs associated with the closing
in May 2006 of the Company's apparel manufacturing facility in
Ozark, Alabama.
(2) Elimination of dividends on preferred stock which would not have
been included in the EPS computation under the if-converted method
if the inducement payment and offering costs had not been
incurred. Eliminating such costs requires an EPS recalculation
when applying the if-converted method of calculating diluted
earnings per share.
(3) Elimination of May 2006 inducement payment and offering costs
associated with the conversion of preferred shares and the sale of
shares of common stock issued upon conversion. The inducement
payment and offering costs include (a) an inducement payment of
$0.88 per share of common stock received upon conversion, or an
aggregate of $10.2 million, and (b) certain costs, totaling $0.7
million, incurred by the Company in connection with the secondary
common stock offering.
(4) Elimination of July 2005 inducement payment and offering costs
associated with the conversion of preferred shares and the sale of
the shares of common stock issued upon conversion. The inducement
payment and offering costs include (a) an inducement payment of
$1.75 per share of common stock sold in the secondary common stock
offering, or an aggregate of $12.9 million, and (b) certain costs,
totaling $1.3 million, incurred by the Company in connection with
the secondary common stock offering.
(5) Additional shares which would have been included in the EPS
computation under the if-converted method if the inducement
payment and offering costs had not been incurred.
(6) The adjustment to include the impact of expensing stock options
for 2005 is for illustrative purposes only. The Company did not
expense stock options in fiscal 2005. The Company implemented the
provisions of SFAS 123R beginning in the first quarter of 2006.
PHILLIPS-VAN HEUSEN CORPORATION
Consolidated Balance Sheets
(In thousands)
October 29, October 30,
2006 2005
----------- -----------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 358,602 $ 170,265
Receivables 168,742 189,679
Inventories 280,762 262,874
Other, including deferred taxes of $23,435
and $13,666 34,397 22,667
----------- -----------
Total Current Assets 842,503 645,485
Property, Plant and Equipment 157,689 155,566
Goodwill and Other Intangible Assets 920,409 893,225
Other 24,308 29,448
----------- -----------
$1,944,909 $1,723,724
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses $ 248,074 $ 217,170
Other Liabilities, including deferred taxes of
$265,704 and $233,141 393,916 381,665
Long-Term Debt 399,535 399,522
Series B Convertible Preferred Stock 161,926
Stockholders' Equity 903,384 563,441
----------- -----------
$1,944,909 $1,723,724
=========== ===========
PHILLIPS-VAN HEUSEN CORPORATION
Business Data
(In thousands)
Quarter Quarter
Ended Ended
10/29/06 10/30/05
--------- ---------
Revenues - Wholesale and Retail
--------------------------------------------------
Net sales $500,235 $471,778
Royalty revenues 7,098 6,954
Advertising and other revenues 1,639 1,480
--------- ---------
Total 508,972 480,212
Revenues - Calvin Klein Licensing
--------------------------------------------------
Royalty revenues 44,939 40,605
Advertising and other revenues 14,350 12,364
--------- ---------
Total 59,289 52,969
Total Revenues
--------------------------------------------------
Net sales 500,235 471,778
Royalty revenues 52,037 47,559
Advertising and other revenues 15,989 13,844
--------- ---------
Total $568,261 $533,181
========= =========
Operating earnings - Wholesale and Retail $69,953 $59,988
Operating earnings - Calvin Klein Licensing 27,690 21,129
Corporate expenses 13,000 9,509
--------- ---------
Earnings before interest and taxes $84,643 $71,608
========= =========
PHILLIPS-VAN HEUSEN CORPORATION
Business Data
(In thousands)
Nine Months Ended
10/29/06
--------------------------------------
Results Nine Months
Under Non-GAAP Ended
GAAP Adjustments Results 10/30/05
----------- ----------- ----------- -----------
Revenues -
Wholesale and
Retail
-------------------
Net sales $1,361,543 $1,361,543 $1,292,451
Royalty revenues 19,823 19,823 18,650
Advertising and
other revenues 4,977 4,977 3,886
----------- ----------- -----------
Total 1,386,343 1,386,343 1,314,987
Revenues - Calvin
Klein Licensing
-------------------
Royalty revenues 110,561 110,561 98,409
Advertising and
other revenues 36,723 36,723 35,363
----------- ----------- -----------
Total 147,284 147,284 133,772
Total Revenues
-------------------
Net sales 1,361,543 1,361,543 1,292,451
Royalty revenues 130,384 130,384 117,059
Advertising and
other revenues 41,700 41,700 39,249
----------- ----------- -----------
Total $1,533,627 $1,533,627 $1,448,759
=========== =========== ===========
Operating earnings
- Wholesale and
Retail $ 164,980 $ 11,294 (1) $ 176,274 $ 138,817
Operating earnings
- Calvin Klein
Licensing 100,735 (32,043)(2) 68,692 54,131
Corporate expenses 47,568 (10,535)(3) 37,033 28,589
----------- ----------- ----------- -----------
Earnings before
interest and taxes $ 218,147 $(10,214) $ 207,933 $ 164,359
=========== =========== =========== ===========
(1) Consists of costs associated with the May 2006 closing of the
Company's apparel manufacturing facility in Ozark, Alabama.
(2) Consists of the one time gain associated with the sale by the
Company on January 31, 2006 of minority interests in certain
entities that operate various licensed Calvin Klein jeans and
sportswear businesses in Europe and Asia.
(3) Consists of costs resulting from the departure in February 2006 of
Mark Weber, the Company's former Chief Executive Officer.
PHILLIPS-VAN HEUSEN CORPORATION
Reconciliation of GAAP to non-GAAP 2006 Earnings Per Share Estimate
Set forth below is the Company's reconciliation of its 2006 full year
GAAP diluted earnings per share estimate to diluted earnings per share
excluding the following: (a) the gain associated with the sale by the
Company on January 31, 2006 of minority interests in certain entities
that operate various licensed Calvin Klein jeans and sportswear
businesses in Europe and Asia; (b) costs resulting from the departure
of Mark Weber, the Company's former Chief Executive Officer; (c) costs
associated in February 2006 with the May 2006 closing of the Company's
apparel manufacturing facility in Ozark, Alabama; and (d) the May 2006
inducement payment and offering costs described in footnote (1) below.
The Company believes that investors often look at ongoing operations
as a measure of assessing performance and as a basis for comparing
past results against future results. Therefore, the Company believes
presenting its results excluding items (a) through (d) listed above
for its 2006 full year earnings estimate provides useful information
to investors because this allows investors to make decisions based on
the ongoing operations of the enterprise. The Company uses its
results excluding the items listed above to discuss its business with
investment institutions, the Company's Board of Directors and others.
Such results are also the basis for certain incentive compensation
calculations.
(In thousands, except per share data)
2006 Full Year
---------------------------------- GAAP Non-GAAP
Earnings Adjustments Earnings
--------- ----------- ---------
----------------------------------------------------------------------
Net income $153,375 $153,375
One time net gain associated with
the sale of minority interests in
certain entities $(20,155) (20,155)
Departure costs associated with
Mark Weber, the Company's former
CEO 6,626 6,626
Restructuring costs associated with
manufacturing facility closing 7,104 7,104
--------- ----------- ---------
Net income as adjusted 153,375 (6,425) 146,950
Less:
Inducement payment and offering
costs 10,948 (10,948)(1)
Preferred stock dividends 3,230 (3,230)(2)
--------- ----------- ---------
Net income available to common
stockholders for diluted earnings
per share $139,197 $7,753 $146,950
========= =========== =========
Shares outstanding:
Weighted average common shares
outstanding 52,100 52,100
Impact of diluted stock options
and warrant 1,400 1,400
Impact of preferred stock 3,241 (3) 3,241
--------- ----------- ---------
Total shares outstanding for
calculation 53,500 3,241 56,741
========= =========== =========
Diluted earnings per share $2.60 $2.59
========= =========
(1) Elimination of inducement payment and offering costs associated
with the conversion of preferred shares and the sale of shares of
common stock issued upon conversion. The inducement payment and
offering costs include (a) an inducement payment of $0.88 per
share of common stock converted by the preferred stockholders, or
an aggregate of $10.2 million, and (b) certain costs, totaling
$0.7 million, incurred by the Company in connection with the
secondary common stock offering.
(2) Elimination of dividends on preferred stock which would not have
been included in the EPS computation under the if-converted method
if the inducement payment and offering costs had not been
incurred. Eliminating such costs requires an EPS recalculation
when applying the if-converted method of calculating diluted
earnings per share.
(3) Additional shares which would have been included in the EPS
computation under the if-converted method if the inducement
payment and offering costs had not been incurred.
PHILLIPS-VAN HEUSEN CORPORATION
Reconciliation of GAAP to non-GAAP 2005 Earnings Per Share
Set forth below is the Company's reconciliation of its 2005 full year
GAAP diluted earnings per share to: (i) diluted earnings per share
excluding the July 2005 inducement and offering costs and (ii) diluted
earnings per share excluding the July 2005 inducement and offering
costs and including the impact of expensing stock options. The
Company believes that investors often look at ongoing operations as a
measure of assessing performance and as a basis for comparing past
results against future results. Therefore, the Company believes that
presenting its results excluding the July 2005 inducement and offering
costs provides useful information to investors because this allows
investors to make decisions based on the ongoing operations of the
enterprise. Such results were the basis for certain incentive
compensation calculations. Further, the Company believes that
presenting its results excluding the July 2005 inducement payment and
offering costs and including the impact of expensing stock options
provides useful information to investors because this allows investors
to compare the Company's results for 2005 to its estimates for 2006
which include the impact of expensing stock options, as required by
SFAS 123R. The Company uses its results excluding the July 2005
inducement and offering costs and including the impact of expensing
stock options to discuss its business with investment institutions,
the Company's Board of Directors and others.
(In thousands, except per share data)
2005 Full Year
------------------------------- GAAP Non-GAAP
Earnings Adjustments Earnings
--------- ----------- ---------
-------------------------------------------------------------------
Net income $111,688 $111,688
Less:
Preferred dividends on
converted preferred stock 2,051 $ (2,051)(1)
Inducement payment and
offering costs 14,205 (14,205)(2)
--------- ----------- ---------
Net income available to common
stockholders for diluted
earnings per share $95,432 $16,256 $111,688
========= =========== =========
Shares outstanding:
Weighted average common shares
outstanding 38,297 38,297
Impact of dilutive stock
options and warrant 1,832 1,832
Impact of assumed convertible
preferred stock conversion 11,566 11,566
Impact of converted preferred
stock 3,347 (3) 3,347
--------- ----------- ---------
Total shares outstanding for
calculation 51,695 3,347 55,042
========= =========== =========
Diluted earnings per share $1.85 $2.03
=========
Per share impact of expensing
stock options (0.15)(4)
---------
Diluted earnings per share as
adjusted $1.88
=========
(1) Elimination of dividends on preferred stock which would not have
been included in the EPS computation under the if-converted method
if the inducement payment and offering costs had not been
incurred. Eliminating such costs requires an EPS recalculation
when applying the if-converted method of calculating diluted
earnings per share.
(2) Elimination of inducement payment and offering costs associated
with the conversion of preferred shares and the sale of the shares
of common stock issued upon conversion. The inducement payment
and offering costs include (a) an inducement payment of $1.75 per
share of common stock converted by the preferred stockholders, or
an aggregate of $12.9 million, and (b) certain costs, totaling
$1.3 million, incurred by the Company in connection with the
secondary common stock offering.
(3) Additional shares which would have been included in the EPS
computation under the if-converted method if the inducement
payment and offering costs had not been incurred.
(4) The adjustment to include the impact of expensing stock options
for 2005 is for illustrative purposes only. The Company did not
expense stock options in fiscal 2005. The Company implemented the
provisions of SFAS 123R beginning in the first quarter of 2006.
CONTACT: Phillips-Van Heusen Corporation
Michael Shaffer, 212-381-3523
Executive Vice President and Chief Financial Officer
www.pvh.com
SOURCE: Phillips-Van Heusen Corporation
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