-- Updates Financial Guidance for Remainder
of Fiscal 2017 --
G-III Apparel Group, Ltd. (NasdaqGS:GIII) today announced
operating results for the third quarter of fiscal 2017 ended
October 31, 2016.
For the third quarter ended October 31, 2016, G-III reported
that net sales were $883 million as compared to $910 million in the
year-ago period. The Company’s net income for the third quarter was
$70.6 million, or $1.50 per diluted share, compared to $87.2
million, or $1.87 per diluted share, in the prior year’s comparable
period. On an adjusted basis, excluding items resulting in other
income equal to $0.02 per share in the quarter ended October 31,
2015, non-GAAP net income per diluted share for the third quarter
was $1.50 as compared to $1.85 in the prior year’s third quarter. A
reconciliation of GAAP net income per share to non-GAAP net income
per share is presented in a table accompanying the condensed
financial statements included in this release.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer,
said, “We have systematically, steadily and thoughtfully
diversified into a wide range of categories, both organically and
through strategic acquisitions. We have achieved tremendous
diversification, built a portfolio of incredible brands and
cemented a leadership position across the industry. We believe that
our premium brands, including those that come with our acquisition
today of the Donna Karan business, position us extremely well to
drive sales and profit growth well into the future. We see a
multi-billion dollar revenue growth opportunity for our Company
over time.”
Mr. Goldfarb concluded, “While conditions in our industry have
been and remain challenging, we have what it takes across the
organization in terms of drive, commitment and talent to carry
through on our growth initiatives and deliver excellent value for
our shareholders, our customers and our partners.”
Outlook
The Company today revised its prior guidance for the full fiscal
year ending January 31, 2017. The Company is now forecasting net
sales of approximately $2.43 billion and net income between $67
million and $72 million, or a range between $1.41 and $1.51 per
diluted share. The full year forecast includes our estimate of net
sales of approximately $25 million and operating losses and
additional interest expense of approximately $21 million, before
taxes, equal to $0.28 per diluted share, associated with the
acquisition of Donna Karan International, Inc. The current year’s
forecast also includes professional fees of approximately $15
million, before taxes, equal to approximately $0.20 per diluted
share, in connection with the acquisition. In addition, our
forecast includes the impact of the issuance of approximately 2.6
million shares of new G-III common stock to the seller.
On an adjusted basis, excluding the acquisition’s impact on net
sales, operating losses, interest expense, fourth quarter
professional fees and the number of shares outstanding, our updated
forecast is for net sales of $2.41 billion and net income between
$87 million and $93 million, or a range between $1.86 and $1.96 per
diluted share, compared to our previous guidance of net sales of
approximately $2.48 billion and net income between $102 million and
$106 million, or a range between $2.16 and $2.26 per diluted share.
The previous forecast and the adjusted forecast have both been
reduced for professional fees associated with the acquisition of
Donna Karan incurred in the second quarter of $3 million, before
taxes, equal to approximately $0.04 per diluted share. For the
fiscal year ended January 31, 2016, net sales were $2.34 billion
and net income was $114.3 million, or $2.46 per diluted share.
Excluding professional fees associated with the acquisition of
Donna Karan in fiscal 2017 and other income in fiscal 2016, the
Company is forecasting non-GAAP net income per diluted share of
between $1.61 and $1.71, for the full 2017 fiscal year compared to
$2.44 for the 2016 fiscal year. The non-GAAP forecast includes the
estimated operating losses and additional interest expense of
approximately $21 million, before taxes, equal to $0.28 per diluted
share, and the issuance of additional shares associated with the
acquisition of Donna Karan. Excluding the operating losses,
additional interest expense, professional fees and issuance of
additional shares associated with the Donna Karan acquisition,
forecasted non-GAAP net income per diluted share is $1.90 to $2.00.
The Company had previously forecast non-GAAP net income of between
$2.20 and $2.30 per diluted share, which also excluded any
operating losses, additional interest expense, professional fees
and issuances of additional shares associated with the acquisition
of Donna Karan.
The Company is now projecting adjusted EBITDA for fiscal 2017 of
between approximately $163 million and $171 million compared to
adjusted EBITDA of $210.1 million in fiscal 2016 and to its
previous forecast of adjusted EBITDA of between approximately $199
million and $206 million. The current projection includes estimated
operating losses of $14 million from the acquisition, but excludes
professional fees associated with the acquisition of Donna
Karan.
Non-GAAP net income per diluted share and adjusted EBITDA should
be evaluated in light of the Company’s financial results prepared
in accordance with U.S. GAAP. Reconciliations of forecasted and
actual GAAP net income per share to forecasted and actual non-GAAP
net income per share and of GAAP net income to adjusted EBITDA are
included in tables accompanying the condensed financial statements
in this release.
About G-III Apparel Group,
Ltd.
G-III is a leading manufacturer and distributor of apparel and
accessories under licensed brands, owned brands and private label
brands. G-III’s owned brands include Donna Karan, DKNY,
Vilebrequin, Andrew Marc, Marc New York, Bass, G.H. Bass, Weejuns,
G-III Sports by Carl Banks, Eliza J, Black Rivet and Jessica
Howard. G-III has fashion licenses under the Calvin Klein, Tommy
Hilfiger, Karl Lagerfeld, Kenneth Cole, Cole Haan, Guess?, Jones
New York, Jessica Simpson, Vince Camuto, Ivanka Trump, Ellen Tracy,
Kensie, Levi's and Dockers brands. Through our team sports
business, G-III has licenses with the National Football League,
National Basketball Association, Major League Baseball, National
Hockey League, Hands High, Touch by Alyssa Milano and more than 100
U.S. colleges and universities. G-III also operates retail stores
under the Donna Karan, Wilsons Leather, Bass, G.H. Bass & Co.,
Vilebrequin and Calvin Klein Performance names.
Statements concerning G-III's business outlook
or future economic performance, anticipated revenues, expenses or
other financial items; product introductions and plans and
objectives related thereto; and statements concerning assumptions
made or expectations as to any future events, conditions,
performance or other matters are "forward-looking statements" as
that term is defined under the Federal Securities laws.
Forward-looking statements are subject to risks, uncertainties and
factors which include, but are not limited to, reliance on licensed
product, reliance on foreign manufacturers, risks of doing business
abroad, the current economic and credit environment, the nature of
the apparel industry, including changing customer demand and
tastes, customer concentration, seasonality, risks of operating a
retail business, customer acceptance of new products, the impact of
competitive products and pricing, dependence on existing
management, possible disruption from acquisitions, risks relating
to G-III’s acquisition of Donna Karan International Inc. and
general economic conditions, as well as other risks detailed in
G-III's filings with the Securities and Exchange Commission. G-III
assumes no obligation to update the information in this
release.
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES (NASDAQGS:GIII) CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
October
31,
October
31,
2016
2015
2016
2015
Net sales $ 883,476 $ 909,865 $ 1,783,145 $ 1,816,714 Cost
of sales 562,024 572,808
1,140,381 1,156,890 Gross profit 321,452
337,057 642,764 659,824 Selling general and administrative expenses
198,274 191,044 504,547 469,560 Depreciation and amortization
8,033 6,611 22,898
18,213 Operating profit 115,145 139,402 115,319 172,051 Loss
in unconsolidated affiliates (1,437 ) – (820 ) – Other income – 896
– 896 Interest and financing charges, net (1,701 )
(1,955 ) (3,999 ) (4,107 ) Income before taxes
112,007 138,343 110,500 168,840 Income tax expense 41,443
51,187 38,458 62,471
Net income $ 70,564 $ 87,156 $ 72,042 $
106,369
Net income per common share:
Basic $ 1.54 $ 1.92 $ 1.58 $ 2.36
Diluted $ 1.50 $ 1.87 $ 1.53 $ 2.29
Weighted average shares outstanding: Basic 45,918 45,311 45,713
45,117 Diluted 46,902 46,526 46,947 46,392
Selected
Balance Sheet Data (in thousands):
At October
31,
2016
2015
Cash
$ 44,996 $ 54,298 Working Capital 704,506 646,358 Inventory 490,555
510,374 Total Assets 1,423,441 1,416,492 Short-term Revolving Debt
91,334 171,840 Total Stockholders' Equity 969,902 884,996
G-III APPAREL GROUP,
LTD. AND SUBSIDIARIES RECONCILIATION OF FORECASTED AND
ACTUAL GAAP NET INCOME PER SHARE TO FORECASTED AND ACTUAL
NON-GAAP NET INCOME PER SHARE (Unaudited)
Three Months Ended October
31, 2016
Three Months Ended October
31, 2015
Nine Months Ended October
31, 2016
Nine Months Ended October
31, 2015
GAAP diluted net income per common share $ 1.50 $ 1.87 $ 1.53 $
2.29 Excluded from non-GAAP:
Professional fees associatedwith Donna
Karanacquisition, net of taxes
- - 0.04 - Other income, net of taxes - (0.02) - (0.02)
Non-GAAP diluted netincome per common
share
$ 1.50 $ 1.85 $ 1.57 $ 2.27
Forecasted Twelve Months Ending
January 31, 2017
Actual Twelve Months Ended
January 31, 2016
GAAP diluted net income per common share $ 1.41 - $ 1.51 $ 2.46
Excluded from non-GAAP:
Professional fees associatedwith Donna
Karanacquisition, net of taxes
0.20 - Other income, net of taxes - (0.02)
Non-GAAP diluted netincome per common
share
$ 1.61 - $ 1.71 $ 2.44
Non-GAAP diluted net income per share is a “non-GAAP financial
measure” that excludes (i) professional fees incurred in connection
with the acquisition of Donna Karan in fiscal 2017 and (ii) other
income in fiscal 2016 which consisted of the reduction of the
estimated contingent consideration payable in connection with the
acquisition of Vilebrequin. Management believes that this non-GAAP
financial measure provides meaningful supplemental information
regarding our performance by excluding acquisition expenses and
other income that is not indicative of our core business operating
results. Management uses this non-GAAP financial measure to assess
our performance on a comparative basis and believes that it is also
useful to investors to enable them to assess our performance on a
comparative basis across historical periods and facilitate
comparisons of our operating results to those of our competitors.
The presentation of this financial information is not intended to
be considered in isolation or as a substitute for, or superior to,
the financial information prepared and presented in accordance with
GAAP.
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES RECONCILIATION OF PRIOR GUIDANCE TO UPDATED
GUIDANCE (Unaudited) Forecasted Twelve Months
Ending January 31, 2017 Prior Guidance
Revised guidance excluding
DKI acquisition
Revised guidance including
DKI acquisition
(In millions except per share amounts)
Net Sales $ 2,480 $
2,410 $ 2,430
Operating profit 167 - 175 142 - 150 117 - 125
Net income 102 - 106 87 -93 67 -72
Net income per
share diluted share 2.16 - 2.26 1.86 - 1.96 1.41 -1.51
Non-GAAP net income per diluted share 2.20 - 2.30 1.90 –
2.00 1.61 - 1.71
Diluted Shares 47.0 47.0 47.5
The table above illustrates our prior guidance issued with our
press release on August 30, 2016, our revised guidance in this
release excluding the impact of the acquisition of Donna Karan and
our revised guidance in this release including the impact of the
acquisition. The revised guidance includes our estimate of net
sales of approximately $25 million and operating losses and
additional interest expense of approximately $21 million, before
taxes, equal to $0.28 per diluted share, associated with the
acquisition of Donna Karan. The revised guidance also includes
professional fees associated with the acquisition of Donna Karan of
approximately $15.0 million, before taxes, equal to approximately
$0.20 per diluted share, in connection with the acquisition. In
addition, it includes the impact of the issuance of approximately
2.6 million shares of new G-III common stock to the seller. Our
prior GAAP guidance and our revised guidance excluding the
acquisition of Donna Karan for net income and net income per
diluted share included $3 million, before taxes, equal to $0.04 per
diluted share, of professional fees which were incurred in the
second quarter of fiscal 2017 in connection with the acquisition.
Our prior guidance above for non-GAAP income per diluted share
excluded the professional fees incurred in connection with the
acquisition. Management believes that the non-GAAP financial
measures included in the table provide meaningful supplemental
information regarding our performance by excluding items that are
not indicative of our core business operating results. Management
uses this non-GAAP financial measure to assess our performance on a
comparative basis and believes that it is also useful to investors
to enable them to assess our performance on a comparative basis
across historical periods and facilitate comparisons of our
operating results to those of our competitors. The presentation of
this financial information is not intended to be considered in
isolation or as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP.
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
RECONCILIATION OF FORECASTED AND ACTUAL NET INCOME TO FORECASTED
AND ACTUAL ADJUSTED EBITDA
(In thousands)
(Unaudited)
Forecasted Twelve Actual Months Ending Twelve Months Ended
January 31,
2017
January 31,
2016
Net income $ 67,000 – $ 72,000 $ 114,333 Professional
fees associated with the Donna Karan acquisition 15,000 - Other
income - (1,068) Depreciation and amortization 31,700 25,392
Interest and financing charges, net 13,300 6,691 Income tax expense
36,000 – 39,000 64,800 Adjusted EBITDA, as defined $ 163,000
– $ 171,000 $ 210,148
Adjusted EBITDA is a “non-GAAP financial measure” which
represents earnings before depreciation and amortization, interest
and financing charges, net, and income tax expense and excludes (i)
estimated expenses incurred in connection with the acquisition of
Donna Karan in fiscal 2017 and (ii) other income in fiscal 2016
which consisted of the reduction of the estimated contingent
consideration payable in connection with the acquisition of
Vilebrequin. Forecasted net income and adjusted EBITDA include $14
million of estimated operating losses associated with the
acquisition of Donna Karan. Adjusted EBITDA is being presented as a
supplemental disclosure because management believes that it is a
common measure of operating performance in the apparel industry.
Adjusted EBITDA should not be construed as an alternative to net
income as an indicator of the Company’s operating performance, or
as an alternative to cash flows from operating activities as a
measure of the Company’s liquidity, as determined in accordance
with generally accepted accounting principles.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161201006290/en/
Investor RelationsJames Palczynski, (203) 682-8229orG-III
Apparel Group, Ltd.Neal S. Nackman, (212) 403-0500Chief Financial
Officer
G III Apparel (NASDAQ:GIII)
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