--Provides Fiscal 2018 Guidance--
G-III Apparel Group, Ltd. (NasdaqGS:GIII) today announced
operating results for the fourth quarter and full fiscal 2017 year
and provided financial guidance for the first quarter and full
fiscal 2018 year.
Net sales for the fiscal year ended January 31, 2017 were up
1.8% to $2.39 billion from $2.34 billion in the prior year. Growth
over the prior year was primarily the result of increases in the
Company’s wholesale non-outerwear business and net sales from the
Donna Karan International (“DKI”) business in the last two months
of the fiscal year and was offset, in part, by softer demand for
outerwear and a decline in net sales in the Company’s retail
businesses.
The Company reported GAAP net income for the fiscal year ended
January 31, 2017 of $51.9 million, or $1.10 per diluted share,
compared to $114.3 million, or $2.46 per diluted share, in the
prior year.
On an adjusted basis, for fiscal 2017, excluding (i)
professional fees of $7.8 million related to the acquisition of
DKI, (ii) non-cash imputed interest expense of $1.0 million related
to the note issued to seller as part of the consideration for the
acquisition of DKI, (iii) severance of $3.9 million (all related to
the acquisition of DKI) and (iv) asset impairments of $10.5 million
(related to the retail operations segment), equal to $0.32 per
diluted share, and, for fiscal 2016, excluding items that resulted
in other income of $1.1 million, equal to $0.02 per diluted share,
non-GAAP net income per diluted share for the full fiscal 2017 year
decreased to $1.42 from $2.44 in the prior fiscal year.
Included in both GAAP and non-GAAP results for fiscal 2017 are
operating losses of $9.2 million and additional interest expense of
$7.5 million related to the operation and ownership of DKI, equal
to an aggregate of $0.24 per diluted share. The acquisition of DKI
was completed on December 1, 2016.
For the fourth quarter ended January 31, 2017, net sales
increased by 14.4% to $603 million from $527 million in the fourth
quarter last year. The year-over-year increase in net sales in the
fourth quarter reflects strength in the Company’s non-outerwear
wholesale business, including new product launches, as well as the
inclusion of approximately $29.0 million of net sales from the DKI
business in the last two months of the quarter. These increases
were partially offset by declines in net sales of the Company’s
retail businesses.
The Company reported a fourth quarter net loss of $20.1 million,
or $0.42 per share, compared to net income of $8.0 million, or
$0.16 per diluted share, in the fourth quarter last year.
On an adjusted basis, for the fourth quarter of fiscal 2017,
excluding (i) professional fees of $5.2 million, (ii) non-cash
imputed interest expense of $1.0 million, (iii) severance of $3.9
million (all related to the acquisition of DKI) and (iv) asset
impairments of $10.5 million (related to the retail operations
segment) equal to $0.26 per share, non-GAAP net loss was $0.16 per
share for the fourth quarter of fiscal 2017 compared to non-GAAP
net income per diluted share of $0.17 in the fourth quarter last
year.
Included in both GAAP and non-GAAP results for the fourth
quarter of fiscal 2017 are losses of $9.2 million and additional
interest expense of $7.5 million related to the operation and
ownership of DKI, equal to an aggregate of $0.21 per share.
Morris Goldfarb, Chairman and Chief Executive Officer of G-III
Apparel Group, Ltd., commented, “Fiscal 2017 was another important
year for our Company. We completed the acquisition of Donna Karan
which made us the owner of two of the world’s most iconic and
recognizable power brands in Donna Karan and DKNY. This acquisition
further bolsters our value proposition and strengthens our position
as an all-season diversified apparel company with a broad portfolio
of brands offered in multiple channels of retail distribution. Our
non-outerwear wholesale business performed well in the face of
significant headwinds as the traditional retail environment has
become increasingly disrupted as a result of evolving consumer
buying behavior and continued penetration of e-commerce. We expect
to initiate a number of new product launches in the coming year as
we seek to offer superior value in the marketplace.”
Mr. Goldfarb continued, “While our near-term financial outlook
reflects the dilutive impact of our recent acquisition of Donna
Karan, we believe the mid-year re-launch of the DKNY and Donna
Karan brands will have a positive impact in the second half of the
year. We are confident that we have one of the most desirable
portfolios of brands in the industry and that DKNY and Donna Karan
will quickly take their place alongside Calvin Klein, Tommy
Hilfiger, and Karl Lagerfeld as the cornerstone brands for the
growth of our business.”
Outlook
G-III Apparel Group today issued guidance for the fiscal year
ending January 31, 2018. For fiscal 2018, the Company is
forecasting net sales of approximately $2.73 billion and net income
between $40 million and $45 million, or between $0.80 and $0.90 per
diluted share.
The Company is forecasting DKI transitional expenses of $9
million and non-cash imputed interest expense of $6 million in its
forecasted results. On an adjusted basis, excluding transitional
expenses and imputed interest expense, the Company is anticipating
non-GAAP net income between approximately $49 million and $54
million, or between $0.99 and $1.09 per diluted share.
The forecasted GAAP and non-GAAP results reflect expected
operational losses of $31 million and additional interest expense
of $36 million, or an aggregate of $0.85 per diluted share,
associated with the Donna Karan business. The forecast also
includes the full year impact of the issuance of approximately 2.6
million shares of new G-III common stock to the seller of DKI.
The Company is projecting full-year adjusted EBITDA for fiscal
2018 between $162 million and $171 million compared to adjusted
EBITDA of $148.1 million in fiscal 2017. This adjusted EBITDA
guidance includes a full-year loss of approximately $20 million
associated with the Donna Karan business.
For the first fiscal quarter ending April 30, 2017, the Company
is forecasting net sales of approximately $500 million and a net
loss between $20 million and $25 million, or between $0.41 and
$0.51 per share. This forecast compares to net sales of $457
million and net income of $2.8 million, or $0.06 per diluted share,
reported in the first quarter of fiscal 2017.
The first quarter forecast assumes DKI transitional expenses of
$3.0 million and non-cash imputed interest expense of $1.4 million.
On an adjusted basis, excluding transitional and imputed interest
expense, the Company is forecasting a non-GAAP net loss between
$0.35 and $0.45 per share.
The forecasted GAAP and non-GAAP results for the first quarter
of fiscal 2018 reflect expected operational losses of $26 million
and additional interest expense of $9 million, or an aggregate of
$0.45 per share, associated with the Donna Karan business. The
forecast also includes the full impact of the issuance of
approximately 2.6 million shares of new G-III common stock to the
seller of DKI.
The Company anticipates that it will incur losses from the Donna
Karan operations during the first half of fiscal 2018 that will be
partially offset by growth in operating profitability beginning in
the third quarter as the Company begins shipments and re-launches
DKNY and Donna Karan products. The Company anticipates the impact
of operational losses and additional interest in the second quarter
of fiscal 2018 will approximate the first quarter impact.
Non-GAAP Financial Measures
Reconciliations of GAAP net income per share to Non-GAAP net
income per share and of GAAP net income to adjusted EBITDA are
presented in tables accompanying the condensed financial statements
included in this release and provide useful information to evaluate
the Company’s operational performance. Non-GAAP net income per
share and adjusted EBITDA should be evaluated in light of the
Company’s financial statements prepared in accordance with
GAAP.
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, Eliza J, Andrew Marc, Marc New York, Bass, and Jessica
Howard. G-III has fashion licenses under the Calvin Klein, Tommy
Hilfiger, Karl Lagerfeld, Kenneth Cole, Cole Haan, Guess?, Vince
Camuto, Ivanka Trump, Kensie, Jessica Simpson, 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 DKNY, Wilsons Leather,
Bass, 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
(NASDAQ:GIII)
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share
amounts)
(Unaudited) Three Months Ended Twelve Months Ended 1/31/2017
1/31/2016 1/31/2017 1/31/2016 Net sales $
603,289 $ 527,428 $ 2,386,435 $ 2,344,142 Cost of sales 405,192
348,614 1,545,574 1,505,504 Gross profit 198,097 178,814 840,861
838,638 Selling, general and administrative expenses 199,890
159,202 704,436 628,762 Depreciation and amortization 9,583 7,179
32,481 25,392 Asset impairments 10,480
-
10,480
-
Operating profit (loss) (21,856) 12,433 93,464 184,484 Other income
(expense) 793 444 (27) 1,340 Interest and financing charges, net
(11,676) (2,584) (15,675) (6,691) Income (loss) before taxes
(32,739) 10,293 77,762 179,133 Income tax expense (benefit)
(12,634) 2,329 25,824 64,800 Income (loss) attributable to G-III $
(20,105) $ 7,964 $ 51,938 $ 114,333 Net income (loss) per
common share: Basic $ (0.42) $ 0.17 $ 1.12 $ 2.52 Diluted $ (0.42)
$ 0.17 $ 1.10 $ 2.46 Weighted average shares outstanding:
Basic 47,789 45,540 46,308 45,328 Diluted 47,789 46,536 47,394
46,512
Selected Balance Sheet Data (in thousands):
At January
31,
2017
2016
Cash
$
79,957
$
132,587
Working Capital
570,474
657,636
Inventory
483,269
485,311
Total Assets
1,856,373
1,184,070
Long-Term Debt
461,757
-
Total Stockholders’ Equity
1,021,236
888,127
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME (LOSS) PER
SHARE TO NON-GAAP NET INCOME (LOSS) PER SHARE
(Unaudited) Three Months Ended Twelve Months Ended
January 31, January 31,
2017
2016
2017
2016
GAAP diluted net income (loss) per common share ($0.42) $0.17 $1.10
$2.46 Excluded from Non-GAAP: Professional fees associated with the
DKI acquisition 0.10
-
0.16
-
Non-cash imputed interest 0.02
-
0.02
-
Acquisition related severance expense 0.08
-
0.08
-
Asset impairment charges 0.22
-
0.22
-
Other income
-
-
-
(0.03) Income tax expense (benefit) impacts of non-GAAP adjustments
(0.16) - (0.16) 0.01 Non-GAAP diluted net income
(loss) per common share ($0.16) $0.17 $1.42 $2.44
Non-GAAP diluted net income (loss) per share is a “non-GAAP
financial measure” that excludes (i) professional fees, non-cash
imputed interest expense and severance expense in connection with
the acquisition of DKI in fiscal 2017, as well as asset impairments
related to the retail operations segment, and (ii) other income in
fiscal 2016 that consisted of the reduction of the estimated
contingent consideration payable in connection with the acquisition
of Vilebrequin. Income tax impacts of non-GAAP adjustments are
calculated using the effective tax rates for the respective period.
Management believes that this non-GAAP financial measure provides
meaningful supplemental information regarding our performance by
excluding acquisition-related 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 FORECASTED AND ACTUAL NET
INCOME TO FORECASTED AND ACTUAL ADJUSTED EBITDA
(In thousands)
(Unaudited)
Forecasted Actual Actual Twelve Months Ending Twelve Months
Ended Twelve Months Ended
January 31,
2018
January 31,
2017
January 31,
2016
Net income $ 40,000 – $ 45,000 $ 51,938 $ 114,333 Professional fees
associated with the DKI acquisition
-
7,789 - Acquisition related transition expenses 9,000 3,910 - Asset
impairment charges
-
10,480 - Other income
-
-
(1,068) Depreciation and amortization 39,000 32,481 25,392 Interest
and financing charges, net 51,000 15,675 6,691 Income tax expense
23,000 - 27,000
25,824 64,800 Adjusted EBITDA, as defined $ 162,000 –
$ 171,000 $148,097 $ 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)
professional fees and severance expense in connection with the
acquisition of DKI in fiscal 2017, as well as asset impairments
related to the retail operations segment, and (ii) other income in
fiscal 2016 that consisted of the reduction of the estimated
contingent consideration payable in connection with the acquisition
of Vilebrequin. 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.
G-III APPAREL GROUP, LTD. AND
SUBSIDIARIES RECONCILIATION OF FORECASTED AND ACTUAL NET
INCOME
TO NON-GAAP NET INCOME
(In thousands)
(Unaudited)
Forecasted
Twelve
Actual
Twelve
Actual
Twelve
Months
Ending
Months
Ended
Months
Ended
1/31/2018
1/31/2017
1/31/2016
Net income $ 40,000 – $ 45,000 $51,938 $114,333 Professional fees
associated with the DKI acquisition
-
7,789 - Imputed non-cash interest 6,000 952 - Acquisition related
transition expenses 9,000 3,910 - Asset impairment charges
-
10,480 - Other income
-
-
(1,068) Income tax expense (benefit) impacts of non-GAAP
adjustments (6,000) (7,682) 377 Non-GAAP Net income,
as defined $ 49,000 - $ 54,000 $67,387 $113,642
Non-GAAP net income is a “non-GAAP financial measure” that
excludes (i) professional fees, non-cash imputed interest expense
and severance expense in connection with the acquisition of DKI in
fiscal 2017, as well as asset impairments related to the retail
operations segment, 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. Non-GAAP income tax benefits are calculated using the
estimated and actual effective tax rates for the respective
periods. 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.
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
RECONCILIATION OF FORECASTED AND ACTUAL NET INCOME (LOSS)
PER SHARE TO NON-GAAP NET INCOME (LOSS) PER SHARE
(Unaudited)
Three Months Ended Twelve Months Ended April 30, January 31,
Forecast
2017
2016
Forecast
2018
2017
GAAP diluted net income (loss) per common share ($0.41) - ($0.51)
$0.06 $0.80 - $0.90 $1.10 Excluded from Non-GAAP: Professional fees
associated with the DKI acquisition - - - 0.16 Non-cash imputed
interest 0.03 - 0.12 0.02 Acquisition related transitional expenses
0.06 - 0.18 0.08 Asset impairment charges - - - 0.22 Income tax
benefit impacts of non-GAAP adjustments (0.03) - (0.11)
(0.16) Non-GAAP diluted net income (loss) per common share
($0.35) - ($0.45) $0.06 $0.99 - $1.09 $1.42
Non-GAAP diluted net income (loss) per share is a “non-GAAP
financial measure” that excludes acquisition related professional
fees, non-cash imputed interest expense and transitional expenses,
which are comprised primarily of severance expenses, in connection
with the acquisition of DKI, as well as asset impairments related
to the retail operations segment in fiscal 2017. Income tax impacts
of non-GAAP adjustments are calculated using the effective tax
rates for the respective period. Management believes that this
non-GAAP financial measure provides meaningful supplemental
information regarding our performance by excluding
acquisition-related 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170327005365/en/
Investor RelationsJames Palczynski, 203-682-8229orG-III Apparel
Group, Ltd.Neal S. Nackman, 212-403-0500Chief Financial Officer
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