- First quarter revenue increased 4%
(increased 5% on a constant currency basis) compared to the prior
year period, which exceeded guidance.
- First quarter EPS exceeded guidance:
- GAAP basis: $0.89 compared to guidance
of $0.73 to $0.75
- Non-GAAP basis: $1.65 compared to
guidance of $1.58 to $1.60
- EPS included a negative impact of $0.11
per share related to foreign currency exchange rates compared to
guidance of $0.10
- Full year 2017 EPS guidance:
- GAAP basis: Raised to $6.24 to $6.34
from $6.20 to $6.30 previously
- Non-GAAP basis: Raised to $7.40 to
$7.50 from $7.30 to $7.40 previously
- Guidance includes a negative impact of
$0.35 per share related to foreign currency exchange rates compared
to previous guidance of $0.40
PVH Corp. [NYSE: PVH] reported 2017 first quarter results.
Non-GAAP Amounts:
Amounts stated to be on a non-GAAP basis exclude the items that
are described below under the heading “Non-GAAP Exclusions.”
Amounts stated on a constant currency basis are also deemed to be
on a non-GAAP basis. Reconciliations of amounts on a GAAP basis to
amounts on a non-GAAP basis are presented later in this release and
identify and quantify all excluded items.
CEO Comments:
Commenting on these results, Emanuel Chirico, Chairman and Chief
Executive Officer, noted, “We continue to experience strong
momentum in our Calvin Klein and Tommy Hilfiger businesses, which
allowed us to exceed both our sales and earnings guidance for the
first quarter despite the volatile macroeconomic environment and
the highly promotional retail market in the U.S.”
Mr. Chirico continued, “Our first quarter performance
underscored the power of our diversified business model and the
strength in our international businesses. We believe that our
brands, led by CALVIN KLEIN and Tommy Hilfiger, continue to
resonate with consumers and are gaining market share against our
competition. As the global retail environment shifts, we continue
to focus on adapting to change, while investing in our brands and
operating platforms to capitalize on the opportunities for each of
our businesses.”
Mr. Chirico concluded, “We are pleased to increase our earnings
guidance for the year despite the volatility that continues to
persist in the macroeconomic environment. We expect that our
best-in-class management teams, together with our proven business
model, will continue to drive the execution of our strategic
initiatives in an ever-changing environment. We believe the
investments we have made and continue to make in our business will
deliver long-term sustainable growth and stockholder value.”
First Quarter Business Review:
Calvin Klein
Revenue in the Calvin Klein business for the quarter increased
5% to $756 million (increased 6% on a constant currency basis)
compared to the prior year period, which includes a reduction of
approximately $15 million resulting from the November 2016
deconsolidation of the Company’s Calvin Klein business in Mexico
(the “Mexico deconsolidation”). Calvin Klein International revenue
increased 11% to $380 million (increased 13% on a constant currency
basis) compared to the prior year period, due principally to
continued strength in Europe and China. Calvin Klein International
comparable store sales increased 3%. Calvin Klein North America
revenue decreased 1% (also on a constant currency basis) to $375
million compared to the prior year period, principally driven by
the Mexico deconsolidation and a 5% decline in North America
comparable store sales.
Earnings before interest and taxes on a GAAP basis for the
quarter increased to $93 million compared to $90 million in the
prior year period. Included in the prior year period earnings were
costs of (i) $6 million incurred in connection with the
restructuring associated with the new global creative strategy for
CALVIN KLEIN and (ii) $3 million incurred in connection with the
Company’s integration of Warnaco and the related restructuring.
Earnings before interest and taxes on a non-GAAP basis discussed
below excludes these amounts. There were no non-GAAP exclusions in
the first quarter of 2017.
Earnings before interest and taxes for the quarter of $93
million, inclusive of a $6 million negative impact due to foreign
currency exchange rates, was lower than $99 million on a non-GAAP
basis in the prior year period. Excluding the negative impact of
foreign currency exchange rates, earnings on a non-GAAP basis was
flat compared to the prior year period, principally as a result of
the revenue increase discussed above, offset by a $7 million
planned increase in investments associated with the CALVIN KLEIN
creative team leadership changes and marketing expenditures,
primarily in the international business.
Tommy Hilfiger
Revenue in the Tommy Hilfiger business for the quarter increased
6% to $842 million (increased 9% on a constant currency basis)
compared to the prior year period. Tommy Hilfiger International
revenue increased 15% to $524 million (increased 19% on a constant
currency basis) compared to the prior year period. This increase
was driven by outstanding performance across all channels and
markets in Europe, as well as the inclusion of a full quarter of
revenue from the China business as a result of the April 2016
acquisition of the 55% interest in the Company’s former Tommy
Hilfiger joint venture in China (“TH China”) that it did not
already own (the “TH China acquisition”). Tommy Hilfiger
International comparable store sales increased 14%. Tommy Hilfiger
North America revenue decreased 5% (also on a constant currency
basis) to $318 million compared to the prior year period. The Tommy
Hilfiger North America revenue decline was principally due to a
reduction of approximately $20 million resulting from the
discontinuation of the Company’s directly operated womenswear
wholesale business in the U.S. and Canada during the fourth quarter
of 2016 in connection with the licensing of this business to G-III
Apparel Group, Ltd. (the “G-III license”) and a 4% comparable store
sales decline.
Earnings before interest and taxes on a GAAP basis for the
quarter decreased to $33 million compared to $206 million in the
prior year period, principally due to the net impact of (i) the
noncash gain of $153 million recorded in the prior year period to
write-up the Company’s equity investment in TH China to fair value
in connection with the TH China acquisition, (ii) $54 million of
costs incurred in the first quarter of 2017 in connection with the
agreements entered into during the quarter for a transaction to
restructure the Company’s supply chain relationship with Li &
Fung Trading Limited (“Li & Fung”), which also provides for the
termination of the Company’s non-exclusive buying agency agreement
with Li & Fung (the “Li & Fung termination”), (iii) a $23
million decrease in costs incurred in connection with the TH China
acquisition compared to the prior year period, (iv) $7 million of
costs incurred in the first quarter of 2017 in connection with the
relocation of the Tommy Hilfiger office in New York, including
noncash depreciation expense, and (v) $1 million of costs incurred
in the prior year period in connection with the G-III license.
Earnings before interest and taxes on a non-GAAP basis discussed
below excludes these amounts.
Earnings before interest and taxes on a non-GAAP basis for the
quarter increased to $101 million, inclusive of a $5 million
negative impact due to foreign currency exchange rates, compared to
$85 million in the prior year period. The earnings increase was
principally due to the Tommy Hilfiger International revenue
increase noted above, as well as gross margin improvements.
Heritage Brands
Revenue in the Heritage Brands business for the quarter
decreased 3% to $391 million compared to the prior year period,
principally resulting from a planned shift in the timing of
shipments from the first quarter into the second quarter as
compared to the prior year period. Comparable store sales were
flat.
Earnings before interest and taxes on a GAAP basis for the
quarter increased to $32 million compared to $30 million in the
prior year period. Included in the prior year period earnings were
$3 million of costs incurred in connection with (i) the Warnaco
integration and restructuring and (ii) the discontinuation of
several licensed product lines in the Heritage Brands dress
furnishings business. Earnings before interest and taxes on a
non-GAAP basis discussed below excludes this amount. There were no
non-GAAP exclusions in the first quarter of 2017.
The $32 million of earnings before interest and taxes for the
quarter was slightly lower than the $33 million on a non-GAAP basis
in the prior year period, as gross margin improvements were more
than offset by the revenue decline noted above.
First Quarter Consolidated Results:
Earnings per share was $0.89 on a GAAP basis for the first
quarter of 2017 compared to $2.83 in the prior year period. The
prior year period included the pre-tax noncash gain of $153 million
recorded to write-up the Company’s equity investment in TH China to
fair value in connection with the TH China acquisition. In
addition, the current and prior year periods include other costs as
described below.
Earnings per share was $1.65 on a non-GAAP basis for the first
quarter of 2017 compared to $1.50 in the prior year period.
Earnings per share on both a GAAP and non-GAAP basis for the first
quarter of 2017 included an $0.11 negative impact related to
foreign currency exchange rates.
First quarter revenue increased 4% to $2.0 billion (increased 5%
on a constant currency basis) compared to the prior year
period.
Earnings before interest and taxes on a GAAP basis for the
quarter decreased to $113 million compared to $295 million in the
prior year period, principally driven by an increase in costs
including (i) the noncash gain of $153 million recorded in the
prior year period to write-up the Company’s equity investment in TH
China to fair value in connection with the TH China acquisition,
(ii) $54 million of costs incurred in the first quarter of 2017 in
connection with the Li & Fung termination, (iii) $9 million of
costs incurred in the first quarter of 2017 in connection with the
noncash settlement of certain of the Company’s benefit obligations
related to its retirement plans as a result of an annuity purchased
for certain participants, under which such obligations were
transferred to an insurer, (iv) $7 million of costs incurred in the
first quarter of 2017 in connection with the relocation of the
Tommy Hilfiger office in New York, including noncash depreciation
expense, and (v) $2 million of costs incurred in the first quarter
of 2017 in connection with the consolidation of the Company’s
warehouse and distribution network in North America. These cost
increases were partially offset by a $23 million decrease in costs
incurred in connection with the TH China acquisition compared to
the prior year period and the absence of (i) $7 million of costs
incurred in the prior year period in connection with the Warnaco
integration and restructuring, (ii) $6 million of costs incurred in
the prior year period in connection with the restructuring
associated with the new global creative strategy for CALVIN KLEIN,
(iii) $3 million of costs incurred in the prior year period in
connection with the discontinuation of several licensed product
lines in the Heritage Brands dress furnishings business and (iv) $1
million of costs incurred in the prior year period in connection
with the G-III license. Earnings before interest and taxes on a
non-GAAP basis discussed below excludes these amounts.
Earnings before interest and taxes on a non-GAAP basis for the
quarter was $193 million, inclusive of a $12 million negative
impact due to foreign currency exchange rates, compared to $188
million in the prior year period. The improvement in earnings was
primarily due to an increase in earnings in the Tommy Hilfiger
business, partially offset by a $7 million planned increase in
investments associated with the CALVIN KLEIN creative team
leadership changes and marketing expenditures, as well as a $6
million planned increase in corporate expenses.
Net interest expense of $29 million was flat as compared to the
prior year period. The effective tax rate on a GAAP basis was 17.0%
as compared to 12.8% in the prior year period, principally due to
the benefit of certain discrete items in the prior year period,
including the lower tax rate applicable to the pre-tax gain
recorded to write-up the Company’s equity investment in TH China to
fair value in connection with the TH China acquisition. The
effective tax rate on a non-GAAP basis decreased to 20.7% compared
to 23.0% in the prior year period, principally attributable to a
favorable shift in the mix of earnings between tax
jurisdictions.
Inventory levels decreased 2% as compared to the prior year
period.
Stock Repurchase Program:
During the first quarter of 2017, the Company repurchased 0.6
million shares of its common stock for $60 million (5.2 million
shares for $501 million since inception) under the $1.250 billion
stock repurchase program authorized by the Board of Directors
through June 3, 2020. Stock repurchases under the program may be
made from time to time over the period through open market
purchases, accelerated share repurchase programs, privately
negotiated transactions or other methods, as the Company deems
appropriate. Purchases are made based on a variety of factors, such
as price, corporate requirements and overall market conditions,
applicable legal requirements and limitations, restrictions under
the Company’s debt arrangements, trading restrictions under the
Company’s insider trading policy and other relevant factors. The
program may be modified by the Board, including to increase or
decrease the repurchase limitation or extend, suspend, or terminate
the program, at any time, without prior notice.
2017 Guidance:
The Company expects its full year 2017 earnings per share
results will be negatively impacted compared to 2016 by $0.35 per
share attributable to foreign currency exchange rates due to the
stronger U.S. dollar against other currencies in which the Company
transacts significant levels of business. Changes in exchange rates
between the U.S. dollar and other currencies can impact the
Company’s earnings in two ways: a translation impact and a
transaction impact. The negative translation impact is related to
the earnings generated in foreign markets, which will translate
into fewer U.S. dollars. The negative impact on a transactional
basis is primarily due to the Company’s international businesses
purchasing inventory in U.S. dollars, as the increased local
currency value of inventory results in higher cost of goods in
local currency when the goods are sold.
Please see the section entitled “Full Year and Quarterly
Reconciliations of GAAP to Non-GAAP Amounts” at the end of this
release for further detail and reconciliations of GAAP to non-GAAP
amounts discussed in this section.
Full Year Guidance
The Company currently projects that 2017 earnings per share on a
GAAP basis will be in a range of $6.24 to $6.34 compared to $6.79
in 2016. The Company currently projects that 2017 earnings per
share on a non-GAAP basis will be in a range of $7.40 to $7.50
compared to $6.80 in 2016. Both projections include the expected
negative impact of $0.35 per share related to foreign currency
exchange rates.
Revenue in 2017 is projected to increase approximately 3%
(increase approximately 5% on a constant currency basis) as
compared to 2016. Negatively impacting revenue in 2017 as compared
to 2016 is a reduction in revenue due to the effects of the Mexico
deconsolidation and the G-III license. Revenue for the Calvin Klein
business is projected to increase approximately 6% (increase
approximately 7% on a constant currency basis), which includes the
negative impact of the Mexico deconsolidation. Revenue for the
Tommy Hilfiger business is projected to increase approximately 2%
(increase approximately 4% on a constant currency basis), which
includes the negative impact of the G-III license. Revenue for the
Heritage Brands business is projected to be flat compared to the
prior year.
Net interest expense in 2017 is projected to increase to
approximately $120 million compared to $115 million in 2016,
primarily due to the net impact of the issuance of €350 million of
senior notes in June 2016, partially offset by debt repayments made
during 2016 and those expected to be made in 2017 and the amendment
of the Company’s credit facility in the second quarter of 2016. The
Company estimates that the 2017 effective tax rate will be in a
range of 15.5% to 16.0% on a GAAP basis and in a range of 17.5% to
18.0% on a non-GAAP basis.
The Company’s estimate of 2017 earnings per share on a non-GAAP
basis excludes $124 million of pre-tax costs expected to be
incurred in connection with (i) the Li & Fung termination; (ii)
the TH China acquisition, primarily consisting of noncash
amortization of short-lived assets; (iii) the relocation of the
Tommy Hilfiger office in New York, including noncash depreciation
expense; (iv) the noncash settlement of certain of the Company’s
benefit obligations related to its retirement plans as a result of
an annuity purchased for certain participants, under which such
obligations were transferred to an insurer; and (v) the
consolidation of the Company’s warehouse and distribution network
in North America. Also excluded from the Company’s estimate of 2017
earnings per share on a non-GAAP basis are the estimated tax
effects of the above pre-tax items.
Second Quarter Guidance
The Company expects its second quarter 2017 earnings per share
results will be negatively impacted compared to the second quarter
of 2016 by $0.07 per share related to foreign currency exchange
rates due to the stronger U.S. dollar against other currencies in
which the Company transacts significant levels of business.
Second quarter 2017 earnings per share on a GAAP basis is
projected to be in a range of $1.35 to $1.38 compared to $1.11 in
the prior year period. The Company projects that second quarter
2017 earnings per share on a non-GAAP basis will be in a range of
$1.60 to $1.63 compared to $1.47 in the prior year period. Total
marketing expenses are planned to increase approximately $20
million over the prior year period, primarily in the Calvin Klein
business.
Revenue in the second quarter of 2017 is projected to increase
approximately 5% (increase approximately 7% on a constant currency
basis) compared to the prior year period. Negatively impacting
revenue in the second quarter of 2017 as compared to the prior year
period is a reduction in revenue due to the effects of the Mexico
deconsolidation and the G-III license. Revenue for the Calvin Klein
business in the second quarter is projected to increase
approximately 6% (increase approximately 8% on a constant currency
basis), which includes the negative impact of the Mexico
deconsolidation. Revenue for the Tommy Hilfiger business in the
second quarter is projected to increase approximately 1% (increase
approximately 4% on a constant currency basis), which includes the
negative impact of the G-III license. Revenue for the Heritage
Brands business in the second quarter is projected to increase
approximately 10%, due principally to a planned shift in the timing
of wholesale shipments into the second quarter from the first
quarter as compared to the prior year period.
Net interest expense in the second quarter of 2017 is projected
to increase to approximately $30 million compared to $28 million in
the prior year period, primarily due to the net impact of the
issuance of €350 million of senior notes in June 2016, partially
offset by debt repayments made during 2016 and expected to be made
in the first half of 2017. The Company estimates that the second
quarter 2017 effective tax rate will be approximately 19% on a GAAP
basis and approximately 20% on a non-GAAP basis.
The Company’s estimate of second quarter 2017 earnings per share
on a non-GAAP basis excludes $26 million of pre-tax costs expected
to be incurred in connection with (i) the Li & Fung
termination; (ii) the TH China acquisition, primarily consisting of
noncash amortization of short-lived assets; (iii) the relocation of
the Tommy Hilfiger office in New York, including noncash
depreciation expense; and (iv) the consolidation of the Company’s
warehouse and distribution network in North America. Also excluded
from the Company’s estimate of second quarter 2017 earnings per
share on a non-GAAP basis are the estimated tax effects of the
above pre-tax items.
Non-GAAP Exclusions:
The discussions in this release that refer to non-GAAP amounts
exclude the following:
- Pre-tax costs of approximately $55
million expected to be incurred in 2017 in connection with the Li
& Fung termination, of which $54 million was incurred in the
first quarter and $1 million is expected to be incurred in the
second quarter.
- Pre-tax costs of approximately $25
million expected to be incurred in 2017 in connection with the TH
China acquisition, primarily consisting of noncash amortization of
short-lived assets, of which $7 million was incurred in the first
quarter and $7 million is expected to be incurred in the second
quarter.
- Pre-tax costs of approximately $20
million expected to be incurred in 2017 in connection with the
relocation of the Tommy Hilfiger office in New York, including
noncash depreciation expense, of which $7 million was incurred in
the first quarter and $8 million is expected to be incurred in the
second quarter.
- Pre-tax costs of $9 million incurred in
the first quarter of 2017 in connection with the noncash settlement
of certain of the Company’s benefit obligations related to its
retirement plans as a result of an annuity purchased for certain
participants, under which such obligations were transferred to an
insurer.
- Pre-tax costs of approximately $15
million expected to be incurred in 2017 in connection with the
consolidation of the Company’s warehouse and distribution network
in North America, of which $2 million was incurred in the first
quarter and $10 million is expected to be incurred in the second
quarter.
- Pre-tax noncash gain of $153 million
recorded in the first quarter of 2016 to write-up the Company’s
equity investment in TH China to fair value in connection with the
TH China acquisition, which was completed in the first quarter of
2016. Partially offsetting the pre-tax gain were
transaction-related pre-tax costs of $83 million incurred in 2016,
primarily consisting of noncash valuation adjustments and
amortization of short-lived assets. Of these pre-tax costs, $30
million was incurred in the first quarter, $20 million was incurred
in the second quarter, $17 million was incurred in the third
quarter and $15 million was incurred in the fourth quarter.
- Pre-tax gain of $39 million recorded in
the fourth quarter of 2016 related to the recognized actuarial gain
on retirement plans.
- Pre-tax gain of $18 million recorded in
the third quarter of 2016 in connection with a payment made to the
Company to exit a Tommy Hilfiger flagship store in Europe.
- Pre-tax noncash loss of $84 million
recorded in 2016 in connection with the formation of the joint
venture in Mexico, of which $77 million was recorded in the third
quarter and $7 million was recorded upon completion of the Mexico
deconsolidation in the fourth quarter.
- Pre-tax costs of $16 million incurred
in the second quarter of 2016 in connection with the amendment of
the Company’s credit facility.
- Pre-tax costs of $11 million incurred
in the fourth quarter of 2016 in connection with the early
termination of the current license agreement for the Tommy Hilfiger
men’s tailored clothing business in North America in order to
consolidate under a different licensee the men’s tailored
businesses for all Company brands in North America beginning
January 1, 2018.
- Pre-tax costs of approximately $10
million incurred in 2016 in connection with the integration of
Warnaco and the related restructuring, of which $7 million was
incurred in the first quarter and $2 million was incurred in the
second quarter.
- Pre-tax costs of $6 million incurred in
the first quarter of 2016 in connection with the restructuring
associated with the new global creative strategy for CALVIN
KLEIN.
- Pre-tax costs of $4 million incurred in
2016 in connection with the G-III license, of which $1 million was
incurred in each of the first and second quarters and $2 million
was incurred in the third quarter.
- Pre-tax costs of $3 million incurred in
the first quarter of 2016 related to the discontinuation of several
licensed product lines in the Heritage Brands dress furnishings
business.
- Discrete tax benefits of $15 million
recorded in 2016 related to the resolution of uncertain tax
positions, of which $6 million was recorded in the first quarter,
$8 million was recorded in the third quarter and $1 million was
recorded in the fourth quarter.
- Estimated tax effects associated with
the above pre-tax items, which are based on the Company’s
assessment of deductibility. In making this assessment, the Company
evaluated each item that it had identified above as a non-GAAP
exclusion to determine if such item is taxable or tax deductible,
and if so, in what jurisdiction the tax expense or tax deduction
would occur. All items above were identified as either primarily
taxable or tax deductible, with the tax effect taken at the
statutory income tax rate of the local jurisdiction, or as
non-taxable or non-deductible, in which case the Company assumed no
tax effect.
As a supplement to the Company’s reported operating results, the
Company presents constant currency financial information, which is
a non-GAAP financial measure. The Company presents results in this
manner because it is a global company that reports financial
information in U.S. dollars in accordance with GAAP. Foreign
currency exchange rate fluctuations affect the amounts reported by
the Company in U.S. dollars with respect to its foreign revenues.
Exchange rate fluctuations can have a significant effect on
reported revenues. The Company believes presenting constant
currency information provides useful information to investors, as
it provides information to assess how its businesses performed
excluding the effects of changes in foreign currency exchange rates
and assists investors in evaluating the effectiveness of the
Company’s operations and underlying business trends in a manner
that is consistent with management’s evaluation of business
performance.
The Company calculates constant currency financial information
by translating its foreign revenues for the current year period
into U.S. dollars at the average exchange rates in effect during
the comparable prior year period (rather than at the actual
exchange rates in effect during the current year period).
Constant currency performance should be viewed in addition to,
and not in lieu of or as superior to, the Company’s operating
performance calculated in accordance with GAAP. The constant
currency information presented may not be comparable to similarly
described measures reported by other companies.
Please see Tables 1 through 8 and the sections entitled
“Reconciliations of 2017 Constant Currency Amounts” and “Full Year
and Quarterly Reconciliations of GAAP to Non-GAAP Amounts” later in
this release for reconciliations of GAAP to non-GAAP amounts.
The Company webcasts its conference calls to review its earnings
releases. The Company’s conference call to review its first
quarter earnings release is scheduled for Thursday, May 25, 2017 at
9:00 a.m. EDT. Please log on to the Company’s web site at
www.pvh.com and go to the Events page included in the
Investors section 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 as described above to
listen to the replay. In addition, an audio replay of the
conference call is available for 48 hours starting approximately
two hours after it is held. The replay of the conference call can
be accessed by calling (domestic) 888-203-1112 and (international)
719-457-0820 and using passcode 4598440. 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
revenue 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, (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 Company may be considered to be highly leveraged and uses
a significant portion of its cash flows to service its
indebtedness, as a result of which the Company might not have
sufficient funds to operate its businesses in the manner it intends
or has operated in the past; (iii) 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; (iv) 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 realize
benefits from acquisitions; (v) 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, 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), changes in available factory and
shipping capacity, wage and shipping cost escalation, civil
conflict, war or terrorist acts, the threat of any of the
foregoing, or political and labor instability in any of the
countries where the Company’s or its licensees’ or other business
partners’ products are sold, produced or are planned to be sold or
produced; (vi) 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, as well as reduced consumer traffic and
purchasing, as consumers become ill or limit or cease shopping in
order to avoid exposure; (vii) acquisitions and divestitures
and issues arising with acquisitions, divestitures and proposed
transactions, including, without limitation, the ability to
integrate an acquired entity or business into the Company with no
substantial adverse effect on the acquired entity’s, the acquired
business’s or the Company’s existing operations, employee
relationships, vendor relationships, customer relationships or
financial performance, and the disposal of the net assets of a
divested entity; (viii) 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;
(ix) the Company’s results could be adversely affected by the
strengthening of the U.S. dollar against foreign currencies in
which it transacts significant levels of business; (x) the
Company’s retirement plan expenses recorded throughout the year are
calculated using actuarial valuations that incorporate assumptions
and estimates about financial market, economic and demographic
conditions, and differences between estimated and actual results
give rise to gains and losses that are recorded immediately in
earnings, generally in the fourth quarter of the year; and
(xi) other risks and uncertainties indicated from time to time
in the Company’s filings with the Securities and Exchange
Commission (“SEC”).
This press release includes, and the conference call/webcast
will include, certain non-GAAP financial measures, as defined under
SEC rules. Reconciliations of these measures are 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 revenue or earnings, whether as a result of the
receipt of new information, future events or otherwise.
PVH CORP.
Consolidated GAAP Income
Statements
(In millions, except per share
data)
Quarter Ended
4/30/17
5/1/16
Net sales $ 1,875.0 $ 1,817.7 Royalty revenue 87.3 77.1
Advertising and other revenue 26.7 23.0 Total revenue
$ 1,989.0 $ 1,917.8 Gross profit on net sales
$ 966.8 $ 906.8 Gross profit on royalty, advertising and other
revenue 114.0 100.1 Total gross profit 1,080.8
1,006.9 Selling, general and administrative expenses 968.0
865.2 Gain to write-up equity investment in joint venture to
fair value 153.1 Equity in net income (loss) of
unconsolidated affiliates 0.4 (0.2 ) Earnings before
interest and taxes 113.2 294.6 Interest expense, net 28.7
29.0 Pre-tax income 84.5 265.6 Income
tax expense 14.4 34.0 Net income 70.1 231.6
Less: Net loss attributable to redeemable non-controlling
interest (1) (0.3 ) Net income attributable to PVH
Corp. $ 70.4 $ 231.6
Diluted net income per common share attributable to PVH Corp. (2)
$ 0.89 $ 2.83
Quarter
Ended
4/30/17
5/1/16
Depreciation and amortization expense $ 77.2 $ 70.6
Please see following pages for information related to non-GAAP
measures discussed in this release.
(1) The Company and Arvind Limited formed a joint venture in
Ethiopia in the second quarter of 2016, in which the Company owns a
75% interest. (2) Please see Note A in the Notes to
Consolidated GAAP Income Statements for reconciliations of GAAP
diluted net income per common share to diluted net income per
common share on a non-GAAP basis.
PVH CORP.Non-GAAP Measures(In millions, except
per share data)
The Company believes presenting its results for the periods
ended April 30, 2017 and May 1, 2016 excluding (i) the costs
incurred in those quarters in connection with the acquisition of
the 55% interest in TH Asia, Ltd. (“TH China”), its former joint
venture for Tommy Hilfiger in China, that it did not already own
(the “TH China acquisition”), a portion of which was noncash
valuation adjustments and amortization of short-lived assets; (ii)
the costs incurred in the first quarter of 2017 in connection with
the agreements entered into during the quarter for a transaction to
restructure the Company’s supply chain relationship with Li &
Fung Trading Limited (“Li & Fung”), which also provides for the
termination of the Company’s non-exclusive buying agency agreement
with Li & Fung (the “Li & Fung termination”); (iii) the
costs incurred in the first quarter of 2017 in connection with the
relocation of the Tommy Hilfiger office in New York, including
noncash depreciation expense; (iv) the costs incurred in the first
quarter of 2017 in connection with the noncash settlement of
certain of the Company’s benefit obligations related to its
retirement plans as a result of an annuity purchased for certain
participants, under which such obligations were transferred to an
insurer; (v) the costs incurred in the first quarter of 2017 in
connection with the consolidation of the Company’s warehouse and
distribution network in North America; (vi) the costs incurred in
the first quarter of 2016 in connection with its integration of The
Warnaco Group, Inc. (“Warnaco”) and the related restructuring;
(vii) the costs incurred in the first quarter of 2016 in connection
with the discontinuation of several licensed product lines in its
Heritage Brands dress furnishings business; (viii) the costs
incurred in the first quarter of 2016 in connection with the
licensing to G-III Apparel Group, Ltd. of the Tommy Hilfiger
womenswear wholesale business in the U.S. and Canada (the “G-III
license”), which resulted in the discontinuation of its directly
operated Tommy Hilfiger North America womenswear wholesale business
during the fourth quarter of 2016; (ix) the costs incurred in the
first quarter of 2016 in connection with the restructuring
associated with the new global creative strategy for CALVIN KLEIN;
(x) the noncash gain recorded in the first quarter of 2016 to
write-up its equity investment in TH China to fair value in
connection with the TH China acquisition; (xi) the one-time costs
recorded in the first quarter of 2016 on its equity investment in
TH China prior to the TH China acquisition closing; (xii) the tax
effects associated with the foregoing pre-tax items; and (xiii) the
tax benefits recorded in the first quarter of 2016 associated with
discrete items related to the resolution of uncertain tax
positions, which are on a non-GAAP basis, provides useful
information to investors. The Company excludes such amounts that it
deems non-recurring or non-operational and believes that this (i)
facilitates comparing current results against past and future
results by eliminating amounts that it believes are not comparable
between periods, thereby permitting management to evaluate
performance and investors to make decisions based on the ongoing
operations of the Company and (ii) assists investors in evaluating
the effectiveness of the Company’s operations and underlying
business trends in a manner that is consistent with management’s
evaluation of business performance. The Company believes that
investors often look at ongoing operations of an enterprise as a
measure of assessing performance. The Company uses its results
excluding these amounts to evaluate its operating performance and
to discuss its business with investment institutions, the Company’s
Board of Directors and others. The Company’s results excluding
the items described above are also the basis for certain incentive
compensation calculations. The non-GAAP measures should be viewed
in addition to, and not in lieu of or superior to, the Company’s
operating performance measures calculated in accordance with GAAP.
The non-GAAP information presented may not be comparable to
similarly titled measures reported by other companies.
The following table presents the non-GAAP measures that are
discussed in this release. Please see Tables 1 through 8 for
reconciliations of the GAAP amounts to amounts on a non-GAAP
basis.
Quarter Ended
4/30/17
5/1/16
Non-GAAP Measures Total gross profit(1) $ 1,008.0
Selling, general and administrative expenses(2) $ 888.7 825.2 Gain
to write-up equity investment in joint venture to fair value (3) —
Equity in net income of unconsolidated affiliates(4) 5.7 Earnings
before interest and taxes(5) 192.5 188.5 Income tax expense(6) 33.9
36.7 Net income attributable to PVH Corp.(7) 130.2 122.8 Diluted
net income per common share attributable to PVH Corp.(8) $ 1.65 $
1.50 Depreciation and amortization expense(9) $ 66.4
$ 65.2
PVH CORP.
Non-GAAP Measures (continued)
(1) Please see Table 3 for reconciliation of GAAP gross
profit to gross profit on a non-GAAP basis. (2) Please see Table 4
for reconciliations of GAAP selling, general and administrative
expenses (“SG&A”) to SG&A on a non-GAAP basis. (3) Please
see Table 5 for reconciliation of GAAP gain to write-up equity
investment in joint venture to fair value to gain to write-up
equity investment in joint venture to fair value on a non-GAAP
basis. (4) Please see Table 6 for reconciliation of GAAP equity in
net (loss) of unconsolidated affiliates to equity in net income of
unconsolidated affiliates on a non-GAAP basis. (5) Please see Table
2 for reconciliations of GAAP earnings before interest and taxes to
earnings before interest and taxes on a non-GAAP basis. (6) Please
see Table 7 for reconciliations of GAAP income tax expense to
income tax expense on a non-GAAP basis and an explanation of the
calculation of the tax effects associated with the pre-tax items
identified as non-GAAP exclusions. (7) Please see Table 1 for
reconciliations of GAAP net income to net income on a non-GAAP
basis. (8) Please see Note A in the Notes to Consolidated GAAP
Income Statements for reconciliations of GAAP diluted net income
per common share to diluted net income per common share on a
non-GAAP basis. (9) Please see Table 8 for reconciliations of GAAP
depreciation and amortization expense to depreciation and
amortization expense on a non-GAAP basis.
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts
(In millions, except per share
data)
Table 1 -
Reconciliations of GAAP net income to net income on a non-GAAP
basis
Quarter Ended
4/30/17
5/1/16
Net income attributable to PVH Corp. $ 70.4 $ 231.6
Diluted net income per common share attributable to PVH Corp.(1) $
0.89 $ 2.83 Pre-tax items excluded: Gross profit
charges associated with the TH China acquisition (short-lived
noncash inventory valuation adjustments) 1.1 SG&A
expenses associated with the Li & Fung termination 54.2
SG&A expenses associated with the relocation of the Tommy
Hilfiger office in New York (including noncash depreciation
expense) 7.0 SG&A expenses associated with the TH China
acquisition (a portion of which was noncash amortization of
short-lived assets) 6.9 23.1 SG&A expenses associated
with the noncash settlement of certain of the Company’s benefit
obligations related to its retirement plans as a result of an
annuity purchased for certain participants 9.4 SG&A
expenses associated with the consolidation of the Company’s
warehouse and distribution network in North America 1.8
SG&A expenses associated with the integration of Warnaco and
related restructuring 7.5 SG&A expenses associated with
the discontinuation of several licensed product lines in the
Heritage Brands dress furnishings business 2.6 SG&A
expenses associated with the G-III license 1.3 SG&A
expenses associated with the new global creative strategy for
CALVIN KLEIN and related restructuring 5.5 Gain to write-up
the Company’s equity investment in TH China to fair value (153.1 )
One-time expenses recorded on the Company’s equity
investment in TH China (recorded in equity in net income (loss) of
unconsolidated affiliates) 5.9 Tax effects of the above
pre-tax items(2) (19.5 ) 3.1 Discrete tax benefits related
to the resolution of uncertain tax positions (5.8 )
Net income on a non-GAAP basis attributable to PVH Corp. $ 130.2 $
122.8 Diluted net income per common share on a non-GAAP
basis attributable to PVH Corp.(1) $ 1.65 $
1.50
(1)
Please see Note A in the Notes to the
Consolidated GAAP Income Statements for reconciliations of GAAP
diluted net income per common share to diluted net income per
common share on a non-GAAP basis.
(2)
Please see Table 7 for an explanation of
the calculation of the tax effects of the above items.
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts (continued)
(In millions)
Table 2 -
Reconciliations of GAAP earnings before interest and taxes to
earnings before interest and taxes on a non-GAAP basis
Quarter Ended
4/30/17
5/1/16
Earnings before interest and taxes $ 113.2 $ 294.6
Items excluded: Gross profit charges associated with the TH
China acquisition (short-lived noncash inventory valuation
adjustments) 1.1 SG&A expenses associated with the Li
& Fung termination 54.2 SG&A expenses associated
with the relocation of the Tommy Hilfiger office in New York
(including noncash depreciation expense) 7.0 SG&A
expenses associated with the TH China acquisition (a portion of
which was noncash amortization of short-lived assets) 6.9 23.1
SG&A expenses associated with the noncash settlement of
certain of the Company’s benefit obligations related to its
retirement plans as a result of an annuity purchased for certain
participants 9.4 SG&A expenses associated with the
consolidation of the Company’s warehouse and distribution network
in North America 1.8 SG&A expenses associated with the
integration of Warnaco and related restructuring 7.5
SG&A expenses associated with the discontinuation of several
licensed product lines in the Heritage Brands dress furnishings
business 2.6 SG&A expenses associated with the G-III
license 1.3 SG&A expenses associated with the new global
creative strategy for CALVIN KLEIN and related restructuring 5.5
Gain to write-up the Company’s equity investment in TH China
to fair value (153.1 ) One-time expenses recorded on the
Company’s equity investment in TH China (recorded in equity in net
income (loss) of unconsolidated affiliates) 5.9
Earnings before interest and taxes on a non-GAAP basis
$ 192.5 $ 188.5
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts (continued)
(In millions)
Table 3 -
Reconciliation of GAAP gross profit to gross profit on a non-GAAP
basis
Quarter Ended
5/1/16
Gross profit $ 1,006.9 Items excluded: Gross
profit charges associated with the TH China acquisition
(short-lived noncash inventory valuation adjustments) 1.1
Gross profit on a non-GAAP basis $ 1,008.0
Table 4 -
Reconciliations of GAAP SG&A to SG&A on a non-GAAP
basis
Quarter Ended
4/30/17
5/1/16
SG&A $ 968.0 $ 865.2 Items excluded:
SG&A expenses associated with the Li & Fung termination
(54.2 ) SG&A expenses associated with the relocation of
the Tommy Hilfiger office in New York (including noncash
depreciation expense) (7.0 ) SG&A expenses associated
with the TH China acquisition (a portion of which was noncash
amortization of short-lived assets) (6.9 ) (23.1 ) SG&A
expenses associated with the noncash settlement of certain of the
Company’s benefit obligations related to its retirement plans as a
result of an annuity purchased for certain participants (9.4 )
SG&A expenses associated with the consolidation of the
Company’s warehouse and distribution network in North America (1.8
) SG&A expenses associated with the integration of
Warnaco and related restructuring (7.5 ) SG&A expenses
associated with the discontinuation of several licensed product
lines in the Heritage Brands dress furnishings business (2.6 )
SG&A expenses associated with the G-III license (1.3 )
SG&A expenses associated with the new global creative
strategy for CALVIN KLEIN and related restructuring (5.5 )
SG&A on a non-GAAP basis $ 888.7 $
825.2
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts (continued)
(In millions)
Table 5 -
Reconciliation of GAAP gain to write-up equity investment in joint
venture to fair value to gain to write-up equity investment in
joint venture to fair value on a non-GAAP basis
Quarter Ended
5/1/16
Gain to write-up equity investment in joint venture to fair
value $ 153.1 Items excluded: Gain to write-up the
Company’s equity investment in TH China to fair value (153.1 )
Gain to write-up equity investment in joint venture to fair
value on a non-GAAP basis $ —
Table 6 - Reconciliation
of GAAP equity in net (loss) of unconsolidated affiliates to equity
in net income of unconsolidated affiliates on a non-GAAP
basis Quarter Ended
5/1/16
Equity in net (loss) of unconsolidated affiliates $ (0.2 )
Items excluded: One-time expenses recorded on the
Company’s equity investment in TH China 5.9 Equity in
net income of unconsolidated affiliates on a non-GAAP basis
$ 5.7
Table 7 -
Reconciliations of GAAP income tax expense to income tax expense on
a non-GAAP basis
Quarter Ended
4/30/17
5/1/16
Income tax expense $ 14.4 $ 34.0 Items excluded:
Tax effects of pre-tax items identified as non-GAAP
exclusions (1) 19.5 (3.1 ) Discrete tax benefits related to
the resolution of uncertain tax positions 5.8
Income tax expense on a non-GAAP basis $ 33.9
$ 36.7
(1) The estimated tax effects associated with the
Company’s non-GAAP exclusions are based on the Company’s assessment
of deductibility. In making this assessment, the Company evaluated
each pre-tax item that it had identified above as a non-GAAP
exclusion to determine if such item is taxable or tax deductible
and, if so, in what jurisdiction the tax expense or tax deduction
would occur. All of the pre-tax items identified as non-GAAP
exclusions were identified as either primarily taxable or tax
deductible, with the tax effect taken at the statutory income tax
rate of the local jurisdiction, or as non-taxable or
non-deductible, in which case the Company assumed no tax effect.
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts (continued)
(In millions)
Table 8 -
Reconciliations of GAAP depreciation and amortization expense to
depreciation and amortization expense on a non-GAAP
basis
Quarter Ended
4/30/17
5/1/16
Depreciation and amortization expense $ 77.2 $ 70.6
Items excluded: Depreciation associated with the relocation
of the Tommy Hilfiger office in New York (4.5 ) Amortization
of short-lived assets associated with the TH China acquisition (6.3
) (3.7 ) Depreciation and amortization associated with the
G-III license (1.3 ) Depreciation and amortization
associated with the integration of Warnaco and related
restructuring (0.4 ) Depreciation and amortization
expense on a non-GAAP basis $ 66.4 $ 65.2
PVH CORP.
Notes to Consolidated GAAP Income
Statements
(In millions, except per share
data)
A. The Company computed its diluted net
income per common share as follows:
Quarter Ended Quarter
Ended 4/30/17 5/1/16
GAAP Non-GAAP GAAP
Non-GAAP
Results
Adjustments
(1)
Results
Results
Adjustments
(2)
Results
Net income attributable to PVH Corp. $ 70.4 $ (59.8 ) $
130.2 $ 231.6 $ 108.8 $ 122.8 Weighted average common shares
78.2 78.2 81.3 81.3 Weighted average dilutive securities 0.8
0.8 0.6 0.6 Total shares 79.0 79.0 81.9
81.9 Diluted net income per common share attributable
to PVH Corp. $ 0.89 $ 1.65 $ 2.83 $ 1.50
(1)
Represents the impact on net income in the quarter ended April 30,
2017 from the elimination of (i) the costs incurred in connection
with the TH China acquisition, primarily consisting of noncash
amortization of short-lived assets; (ii) the costs incurred in
connection with the Li & Fung termination; (iii) the costs
incurred in connection with the relocation of the Tommy Hilfiger
office in New York, including noncash depreciation expense; (iv)
the costs incurred in connection with the noncash settlement of
certain of the Company’s benefit obligations related to its
retirement plans as a result of an annuity purchased for certain
participants, under which such obligations were transferred to an
insurer; (v) the costs incurred in connection with the
consolidation of the Company’s warehouse and distribution network
in North America; and (vi) the tax effects associated with the
foregoing pre-tax items. Please see Table 1 for a reconciliation of
GAAP net income to net income on a non-GAAP basis. (2)
Represents the impact on net income in the
quarter ended May 1, 2016 from the elimination of (i) the costs
incurred in connection with the integration of Warnaco and the
related restructuring; (ii) the costs incurred in connection with
the discontinuation of several licensed product lines in the
Heritage Brands dress furnishings business; (iii) the costs
incurred in connection with the G-III license; (iv) the costs
incurred in connection with the restructuring associated with the
new global creative strategy for CALVIN KLEIN; (v) the noncash gain
recorded to write-up the Company’s equity investment in TH China to
fair value in connection with the TH China acquisition; (vi) the
one-time costs recorded on the Company’s equity investment in TH
China prior to the TH China acquisition closing; (vii) the costs
incurred in connection with the TH China acquisition, a portion of
which was noncash valuation adjustments and amortization of
short-lived assets; (viii) the tax effects associated with the
foregoing pre-tax items; and (ix) the tax benefits associated with
non-recurring discrete items related to the resolution of uncertain
tax positions. Please see Table 1 for a reconciliation of GAAP net
income to net income on a non-GAAP basis.
PVH CORP.
Consolidated Balance Sheets
(In millions)
4/30/17 5/1/16 ASSETS Current Assets: Cash and
Cash Equivalents $ 490.9 $ 365.1 Receivables 712.5 684.3
Inventories 1,253.8 1,281.4 Other 198.0 197.4 Total Current
Assets 2,655.2 2,528.2 Property, Plant and Equipment 751.6 749.9
Goodwill and Other Intangible Assets 7,163.4 7,381.0 Other Assets
342.1 226.0 $ 10,912.3 $ 10,885.1 LIABILITIES,
REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Accounts Payable and Accrued Expenses $ 1,335.7 $ 1,227.2
Short-Term Borrowings 42.5 41.0 Current Portion of Long-Term Debt —
126.7 Other Liabilities 1,498.6 1,636.3 Long-Term Debt 3,157.1
2,991.6 Redeemable Non-Controlling Interest 3.4 — Stockholders’
Equity 4,875.0 4,862.3 $ 10,912.3 $ 10,885.1
Note: Year over year balances are impacted by changes in foreign
currency exchange rates.
PVH CORP.
Segment Data (In millions)
REVENUE BY
SEGMENT
Quarter Ended Quarter Ended 4/30/17
5/1/16
Calvin Klein North
America
Net sales $ 330.1 $ 338.8 Royalty revenue 35.1 30.3 Advertising and
other revenue 10.2 11.5 Total 375.4 380.6
Calvin Klein
International
Net sales 354.8 316.3 Royalty revenue 19.6 18.6 Advertising and
other revenue 6.0 7.2 Total 380.4 342.1
Total Calvin
Klein
Net sales 684.9 655.1 Royalty revenue
54.7 48.9 Advertising and other revenue
16.2 18.7 Total
755.8 722.7
Tommy Hilfiger North
America
Net sales 298.1 321.1 Royalty revenue 16.5 11.0 Advertising and
other revenue 3.9 2.5 Total 318.5 334.6
Tommy Hilfiger
International
Net sales 507.8 444.6 Royalty revenue 10.1 11.6 Advertising and
other revenue 5.6 1.0 Total 523.5 457.2
Total Tommy
Hilfiger
Net sales 805.9 765.7 Royalty revenue
26.6 22.6 Advertising and other revenue
9.5 3.5 Total
842.0 791.8
Heritage Brands
Wholesale
Net sales 326.8 339.2 Royalty revenue 5.0 5.0 Advertising and other
revenue 0.9 0.7 Total 332.7 344.9
Heritage Brands
Retail
Net sales 57.4 57.7 Royalty revenue 1.0 0.6 Advertising and other
revenue 0.1 0.1 Total 58.5 58.4
Total Heritage
Brands
Net sales 384.2 396.9 Royalty revenue
6.0 5.6 Advertising and other revenue
1.0 0.8 Total
391.2 403.3
Total
Revenue
Net sales 1,875.0 1,817.7 Royalty
revenue 87.3 77.1 Advertising and other
revenue 26.7 23.0 Total $
1,989.0 $ 1,917.8
PVH CORP. Segment Data (continued)
(In millions)
EARNINGS BEFORE
INTEREST AND TAXES BY SEGMENT
Quarter Ended Quarter Ended
4/30/17 5/1/16 Results
Results Under Non-GAAP Under
Non-GAAP
GAAP
Adjustments(1)
Results
GAAP
Adjustments(2)
Results
Calvin Klein North America $ 41.9 $ 41.9 $ 38.1 $ (2.9 ) $
41.0 Calvin Klein International 51.6 51.6 52.2
(5.4 ) 57.6
Total Calvin Klein
93.5 93.5
90.3 (8.3 )
98.6 Tommy Hilfiger North America (18.8 )
(38.3 ) 19.5 23.0 (1.3 ) 24.3 Tommy Hilfiger International
52.1 (29.8 ) 81.9 183.3 123.0 60.3
Total Tommy Hilfiger 33.3
(68.1 ) 101.4
206.3 121.7
84.6 Heritage Brands Wholesale 30.3 30.3 27.9
(3.0 ) 30.9 Heritage Brands Retail 1.5 1.5 2.1
2.1
Total Heritage Brands
31.8 31.8
30.0 (3.0 )
33.0 Corporate (45.4 ) (11.2 ) (34.2 ) (32.0 )
(4.3 ) (27.7 )
Total earnings before interest and
taxes $ 113.2 $ (79.3
) $ 192.5 $ 294.6
$ 106.1 $ 188.5
(1) Adjustments for the quarter ended
April 30, 2017 represent the elimination of (i) the costs incurred
in connection with the TH China acquisition, primarily consisting
of noncash amortization of short-lived assets; (ii) the costs
incurred in connection with the Li & Fung termination; (iii)
the costs incurred in connection with the relocation of the Tommy
Hilfiger office in New York, including noncash depreciation
expense; (iv) the costs incurred in connection with the noncash
settlement of certain of the Company’s benefit obligations related
to its retirement plans as a result of an annuity purchased for
certain participants, under which such obligations were transferred
to an insurer; and (v) the costs incurred in connection with the
consolidation of the Company’s warehouse and distribution network
in North America. (2)
Adjustments for the quarter ended May 1,
2016 represent the elimination of (i) the costs incurred in
connection with the integration of Warnaco and the related
restructuring; (ii) the costs incurred in connection with the
discontinuation of several licensed product lines in the Heritage
Brands dress furnishings business; (iii) the costs incurred in
connection with the G-III license; (iv) the costs incurred in
connection with the restructuring associated with the new global
creative strategy for CALVIN KLEIN; (v) the noncash gain recorded
to write-up the Company’s equity investment in TH China to fair
value in connection with the TH China acquisition; (vi) the
one-time costs recorded on the Company’s equity investment in TH
China prior to the TH China acquisition closing; and (vii) the
costs incurred in connection with the TH China acquisition, a
portion of which was noncash valuation adjustments and amortization
of short-lived assets.
PVH CORP.Reconciliations of 2017 Constant Currency
Amounts(In millions)
As a supplement to the Company’s reported operating results, the
Company presents constant currency financial information, which is
a non-GAAP financial measure. The Company presents results in this
manner because it is a global company that reports financial
information in U.S. dollars in accordance with generally accepted
accounting principles in the U.S. Foreign currency exchange rate
fluctuations affect the amounts reported by the Company in U.S.
dollars with respect to its foreign revenues. Exchange rate
fluctuations can have a significant effect on reported revenues.
The Company believes presenting constant currency information
provides useful information to investors, as it provides
information to assess how its businesses performed excluding the
effects of changes in foreign currency exchange rates and assists
investors in evaluating the effectiveness of the Company’s
operations and underlying business trends in a manner that is
consistent with management’s evaluation of business
performance.
The Company calculates constant currency financial information
by translating its foreign revenues for the current year period
into U.S. dollars at the average exchange rates in effect during
the comparable prior year period (rather than at the actual
exchange rates in effect during the current year period).
Constant currency performance should be viewed in addition to,
and not in lieu of or superior to, the Company’s operating
performance calculated in accordance with GAAP. The constant
currency information presented may not be comparable to similarly
described measures reported by other companies.
GAAP Revenue % Change
Quarter Ended GAAP
Impact of Foreign
Exchange
Constant Currency
4/30/17 5/1/16 Calvin Klein North
America $ 375.4 $ 380.6 (1.4 )% (0.1 )% (1.3 )% Calvin Klein
International 380.4 342.1 11.2 % (2.2 )% 13.4 % Total Calvin Klein
755.8 722.7 4.6 % (1.1 )% 5.7 % Tommy Hilfiger North America
$ 318.5 $ 334.6 (4.8 )% (0.1 )% (4.7 )% Tommy Hilfiger
International 523.5 457.2 14.5 % (4.8 )% 19.3 % Total Tommy
Hilfiger 842.0 791.8 6.3 % (2.8 )% 9.1 % Total Revenue $
1,989.0 $ 1,917.8 3.7 % (1.6 )% 5.3 %
PVH CORP.Full Year and Quarterly Reconciliations of
GAAP to Non-GAAP Amounts
The Company is presenting its 2017 estimated results excluding
(a) the costs expected to be incurred in connection with the Li
& Fung termination; (b) the costs expected to be incurred in
connection with the TH China acquisition, primarily consisting of
noncash amortization of short-lived assets; (c) the costs expected
to be incurred in connection with the relocation of the Tommy
Hilfiger office in New York, including noncash depreciation
expense; (d) the costs incurred in the first quarter in connection
with the noncash settlement of certain of the Company’s benefit
obligations related to its retirement plans as a result of an
annuity purchased for certain participants, under which such
obligations were transferred to an insurer; (e) the costs expected
to be incurred in connection with the consolidation of the
Company’s warehouse and distribution network in North America; and
(f) the estimated tax effects associated with the foregoing pre-tax
costs. The 2017 estimated results are presented on both a GAAP and
non-GAAP basis. The Company believes presenting these results on a
non-GAAP basis provides useful additional information to investors.
The Company excludes such amounts that it deems non-recurring or
non-operational and believes that this (i) facilitates comparing
current results against past and future results by eliminating
amounts that it believes are not comparable between periods,
thereby permitting management to evaluate performance and investors
to make decisions based on the ongoing operations of the Company
and (ii) assists investors in evaluating the effectiveness of the
Company’s operations and underlying business trends in a manner
that is consistent with management’s evaluation of business
performance. The Company has provided the reconciliations set
forth below to present its estimates on a GAAP basis and excluding
these amounts. The Company uses its results excluding these
amounts to evaluate its operating performance and to discuss its
business with investment institutions, the Company’s Board of
Directors and others. The Company’s results excluding the
items described above are also the basis for certain incentive
compensation calculations. The non-GAAP measures should be viewed
in addition to, and not in lieu of or superior to, the Company’s
operating performance measures calculated in accordance with GAAP.
The non-GAAP information presented may not be comparable to
similarly titled measures reported by other companies. The
estimated tax effects associated with the above pre-tax items are
based on the Company’s assessment of deductibility. In making this
assessment, the Company evaluated each item that it had identified
above as a non-GAAP exclusion to determine if such item is taxable
or tax deductible, and if so, in what jurisdiction the tax expense
or tax deduction would occur. All items above were identified as
either primarily taxable or tax deductible, with the tax effect
taken at the statutory income tax rate of the local jurisdiction,
or as non-taxable or non-deductible, in which case the Company
assumed no tax effect.
2017 Net Income
Per Common Share Reconciliations
Current Guidance Previous Guidance Full Year2017(Estimated) Second
Quarter2017(Estimated) Full Year
2017(Estimated)
First Quarter2017(Estimated) GAAP net income per common
share attributable to PVH Corp. $6.24 - $6.34 $1.35 - $1.38 $6.20 -
$6.30 $0.73 - $0.75 Estimated per common share impact of items
identified as non-GAAP exclusions $(1.16) $(0.25) $(1.10) $(0.85)
Net income per common share attributable to PVH Corp. on a non-GAAP
basis $7.40 - $7.50 $1.60 - $1.63 $7.30 - $7.40 $1.58 - $1.60
2017 Tax Rate
Reconciliation
Full Year 2017(Estimated)
Second Quarter 2017(Estimated)
GAAP tax rate 15.5% - 16.0% 19% Estimated tax effects of
items identified as non-GAAP exclusions (2)% (1)% Tax rate on a
non-GAAP basis 17.5% - 18.0% 20%
The GAAP net income per common share attributable to PVH Corp.
amounts presented in the above table, as well as the amounts
excluded in providing non-GAAP earnings guidance, would be expected
to change as a result of acquisition, restructuring, divestment or
similar transactions or activities, the timing and strategy of
restructuring and integration initiatives or other one-time events,
if any, that the Company engages in or suffers during the period,
any market or other changes affecting the Company’s expected
actuarial gain or loss on retirement plans, or any discrete tax
events including events arising from audits or the resolution of
uncertain tax positions. The Company has no current understanding
or agreement regarding any such transaction or definitive plans
regarding any such activity that has not been announced or
completed.
PVH CORP.
Full Year and Quarterly Reconciliations
of GAAP to Non-GAAP Amounts (continued)
2017 Estimated
Revenue on a Constant Currency Basis Reconciliation
Full Year
2017(Estimated)(Consolidated)
Full Year 2017(Estimated)(Calvin
Klein)
Full Year
2017(Estimated)(TommyHilfiger)
SecondQuarter
2017(Estimated)(Consolidated)
SecondQuarter 2017(Estimated)(Calvin
Klein)
SecondQuarter
2017(Estimated)(TommyHilfiger)
GAAP revenue increase 3% 6% 2% 5% 6% 1% Impact of foreign
exchange (2)% (1)% (2)% (2)% (2)% (3)% Non-GAAP revenue increase on
a constant currency basis 5% 7% 4% 7% 8% 4%
Please refer to the section entitled “Reconciliations of 2017
Constant Currency Amounts” for a description of the presentation of
constant currency amounts.
Reconciliation of
GAAP Diluted Net Income Per Common Share to Diluted Net Income Per
Common Share on a Non-GAAP Basis
(Net Income in millions)
Full Year 2016 Second Quarter 2016 (Actual) (Actual)
ResultsUnderGAAP
Adjustments (1)
Non-GAAPResults
ResultsUnderGAAP
Adjustments (2)
Non-GAAPResults
Net income $ 549.0 $ (1.1 ) $ 550.1 $ 90.5 $ (29.3 ) $ 119.8
Total weighted average shares 80.9 80.9 81.3
81.3 Diluted net income per common share $ 6.79 $
6.80 $ 1.11 $ 1.47 (1)
Represents the impact on net income in the
year ended January 29, 2017 from the elimination of (i) a $39.1
million recognized actuarial gain on retirement plans; (ii) $9.8
million of costs incurred in connection with the integration of
Warnaco and the related restructuring; (iii) $2.6 million of costs
incurred in connection with the discontinuation of several licensed
product lines in the Heritage Brands dress furnishings business;
(iv) $4.2 million of costs incurred in connection with the G-III
license; (v) $5.5 million of costs incurred in connection with the
restructuring associated with the new global creative strategy for
CALVIN KLEIN; (vi) a $153.1 million noncash gain recorded to
write-up the Company’s equity investment in TH China to fair value
in connection with the TH China acquisition; (vii) $5.9 million of
one-time costs recorded on the Company’s equity investment in TH
China prior to the TH China acquisition closing; (viii) $76.9
million of costs incurred in connection with the TH China
acquisition, primarily consisting of noncash valuation adjustments
and amortization of short-lived assets; (ix) $15.8 million of costs
incurred in connection with the amendment of the Company’s credit
facility; (x) $83.5 million of noncash costs recorded in connection
with the deconsolidation of the Company’s subsidiary that
principally operated and managed its Calvin Klein business in
Mexico in connection with the formation of a joint venture in
Mexico to operate that and other businesses; (xi) an $18.1 million
gain recorded in connection with a payment made to the Company to
exit a Tommy Hilfiger flagship store in Europe; (xii) $11.0 million
of costs incurred in connection with the early termination of the
license agreement for the Tommy Hilfiger men’s tailored clothing
business in North America in order to consolidate under a different
licensee the men’s tailored businesses for all Company brands in
North America; (xiii) $10.9 million of tax expense associated with
the foregoing pre-tax items; and (xiv) $14.7 million of tax
benefits associated with discrete items related to the resolution
of uncertain tax positions.
PVH CORP.
Full Year and Quarterly Reconciliations
of GAAP to Non-GAAP Amounts (continued)
(2) Represents the impact on net income in the
quarter ended July 31, 2016 from the elimination of (i) $2.3
million of costs incurred in connection with the integration of
Warnaco and the related restructuring; (ii) $1.3 million of costs
incurred in connection with the G-III license; (iii) $20.3 million
of costs incurred in connection with the TH China acquisition,
primarily consisting of noncash valuation adjustments and
amortization of short-lived assets; (iv) $15.8 million of costs
incurred in connection with the amendment of the Company’s credit
facility; and (v) $10.4 million of tax benefits associated with the
foregoing pre-tax items.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170524006118/en/
PVH Corp.Dana Perlman, 212-381-3502Treasurer
and Senior Vice President, Business Development and Investor
Relationsinvestorrelations@pvh.com
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