--Net Sales Increase by 16% to a Third
Quarter Record of $1.02 Billion—
--Third Quarter Results Exceed
Forecast--
--Full Year Net Income Forecast
Increased--
G-III Apparel Group, Ltd. (NasdaqGS: GIII) today announced
operating results for the third quarter of fiscal 2018 ended
October 31, 2017.
For the third quarter ended October 31, 2017, G-III reported
that net sales increased 16% to $1.02 billion from $883.5 million
in the year-ago period. This increase includes net sales of
approximately $88.0 million of our DKNY and Donna Karan products.
The Company’s net income for the third quarter increased to $81.6
million, or $1.65 per diluted share, from $70.6 million, or $1.50
per diluted share, in the prior year’s comparable period. As
discussed below, the Company is increasing its prior guidance for
the full fiscal 2018 year, noting excellent wholesale net sales
across all major brands in the third quarter.
On an adjusted basis, excluding for the third quarter of fiscal
2018 non-cash imputed interest expense of $1.4 million related to
the note issued to the seller as part of the consideration for the
acquisition of Donna Karan International (“DKI”), equal to $0.02
per share, non-GAAP net income per share for the third quarter of
fiscal 2018 was $1.67.
Morris Goldfarb, G-III’s Chairman and Chief Executive Officer,
said, “We are pleased with our third quarter results which
surpassed our plan. We have executed our strategy with well-known
brands and compelling product in an environment that remains
challenging across our industry. Our products are selling well as
we head into the holiday season and we expect to close the year
with improved results and sustained momentum.”
Mr. Goldfarb concluded, “We have a growth strategy that works.
We continue to own and align with great brands, control our
distribution well, approach every relationship as a partner, and
deliver to the consumer a truly outstanding range of product. These
commitments have served us well and will continue to illuminate our
path to long term success.”
Outlook
The Company today increased its prior net income guidance for
the full fiscal year ending January 31, 2018. The Company continues
to forecast net sales of approximately $2.80 billion and is now
forecasting net income between $66 million and $71 million, or
between $1.33 and $1.43 per diluted share. The Company previously
forecasted net income between $56 million and $60 million, or
between $1.11 and $1.21 per diluted share.
The Company’s forecast includes Donna Karan-related transitional
expenses of approximately $1.8 million and non-cash imputed
interest expense of approximately $5.7 million. On an adjusted
basis, excluding transitional and imputed interest expenses, the
Company now anticipates non-GAAP net income of between
approximately $71 million and $76 million, or between $1.42 and
$1.52 per diluted share. The Company’s previous forecast was for
non-GAAP net income of between approximately $64 million and $69
million, or between $1.28 and $1.38 per diluted share.
The forecasted GAAP and non-GAAP results reflect expected
operating losses of approximately $23.9 million and additional
interest expense of approximately $22.8 million, equal to an
aggregate of $0.59 per diluted share, associated with the Donna
Karan business for the full fiscal 2018 year. The per share
forecasts above include the impact of the issuance of approximately
2.6 million shares of new G-III common stock to the seller of DKI
on December 1, 2016.
The Company is now forecasting projected full-year adjusted
EBITDA for fiscal 2018 between $188 million and $196 million
compared to adjusted EBITDA of $148.1 million in fiscal 2017 and
compared to its previous forecast of adjusted EBITDA of between
$180 million and $188 million. This adjusted EBITDA guidance
includes a forecasted full-year operating loss of approximately
$16.0 million associated with the Donna Karan business.
Non-GAAP Financial Measures
Reconciliations of GAAP net income to non-GAAP net income, 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, non-GAAP net income per share and
adjusted EBITDA should be evaluated in light of the Company’s
financial results 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, G. H. Bass, Andrew Marc, Marc New York, Eliza J and
Jessica Howard. G-III has fashion licenses under the Calvin Klein,
Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan,
Guess?, Vince Camuto, Ivanka Trump, 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 DKNY, Wilsons Leather,
G. H. Bass, Vilebrequin, Calvin Klein Performance and Karl
Lagerfeld Paris 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 AND
SELECTED BALANCE
SHEET DATA
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
October
31,
October
31,
2017
2016
2017
2016
Net sales $ 1,024,993 $ 883,476 $ 2,092,040 $ 1,783,145 Cost
of sales 634,128 562,024
1,296,428 1,140,381 Gross profit 390,865 321,452
795,612 642,764 Selling general and administrative expenses 242,740
198,274 636,000 504,547 Depreciation and amortization 6,906
8,033 27,480 22,898
Operating profit 141,219 115,145 132,132 115,319 Equity earnings
(loss) in unconsolidated affiliates 612 (1,437) (540) (820)
Interest and financing charges, net (13,884)
(1,701) (33,472) (3,999) Income before
taxes 127,947 112,007 98,120 110,500 Income tax expense
46,322 41,443 35,454
38,458 Net income $ 81,625 $ 70,564 $ 62,666 $ 72,042
Net income per common share:
Basic $ 1.67 $ 1.54 $ 1.29 $ 1.58 Diluted $ 1.65 $ 1.50 $ 1.27 $
1.53 Weighted average shares outstanding: Basic 48,846 45,918
48,729 45,713 Diluted 49,528 46,902 49,410 46,947
Selected Balance Sheet Data (in thousands):
At October
31,
2017
2016
Cash $ 68,229 $ 44,996 Working Capital 928,371 704,506 Inventory
592,822 490,555 Total Assets 2,259,053 1,423,441 Short-term
Revolving Debt — 91,334 Long-Term Debt 726,608 — Total
Stockholders' Equity 1,106,932 969,902
G-III APPAREL
GROUP, LTD. AND SUBSIDIARIES
RECONCILIATION OF
ACTUAL GAAP NET INCOME PER SHARE TO
ACTUAL NON-GAAP
NET INCOME PER SHARE
(Unaudited)
Actual Three Months Ended
October 31, 2017
Actual Three Months Ended
October 31, 2016
Actual Nine Months Ended
October 31, 2017
Actual Nine Months Ended
October 31, 2016
GAAP diluted net income per common share $ 1.65 $ 1.50 $ 1.27 $
1.53 Excluded from non-GAAP: Professional fees associated with the
DKI acquisition — — — 0.06 Non-cash imputed interest 0.03 — 0.09 —
Donna Karan related transitional expenses — — 0.04 — Income tax
benefit impacts of non-GAAP adjustments (0.01) — (0.05) (0.02)
Non-GAAP diluted net income per common share $ 1.67 $ 1.50 $ 1.35 $
1.57
Non-GAAP diluted net income per share is a “non-GAAP financial
measure” that excludes acquisition related professional fees,
non-cash imputed interest expense and Donna Karan related
transitional expenses, which are comprised primarily of severance
expenses, in connection with the acquisition of DKI. 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 charges in fiscal 2017 and 2018
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 GAAP NET INCOME PER SHARE TO
FORECASTED AND
ACTUAL NON-GAAP NET INCOME PER SHARE
(Unaudited)
Forecasted Twelve Months
Ending January 31, 2018
Actual Twelve Months Ended
January 31, 2017
GAAP diluted net income per common share $ 1.33 - $ 1.43 $ 1.10
Excluded from non-GAAP: Professional fees associated with the DKI
acquisition — 0.16 Non-cash imputed interest 0.11 0.02 Donna Karan
related transitional expenses 0.04 0.08 Asset impairment charges —
0.22 Income tax benefit impacts of non-GAAP adjustments (0.06)
(0.16) Non-GAAP diluted net income per common share $ 1.42 - $ 1.52
$ 1.42
Non-GAAP diluted net income per share is a “non-GAAP financial
measure” that excludes acquisition related professional fees,
non-cash imputed interest expense and Donna Karan related
transitional expenses, which are comprised primarily of severance
expenses, in connection with the acquisition of DKI, as well as
asset impairment charges 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 charges in fiscal 2017
and 2018 and asset impairment charges in fiscal 2017 related to our
retail operations segment 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 TwelveMonths EndingJanuary 31, 2018
Actual TwelveMonths EndedJanuary 31, 2017
Net income $ 66,000- $71,000 $ 51,938 Professional fees associated
with the DKI acquisition — 7,789 Donna Karan related transitional
expenses 1,800 3,910 Asset impairment charges — 10,480
Depreciation and amortization 37,200 32,481 Interest
and financing charges, net 45,000 15,675 Income tax expense
38,000 – 41,000 25,824 Adjusted EBITDA, as defined $
188,000 - $ 196,000 $ 148,097
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
professional fees and Donna Karan related transitional expenses,
which are comprised primarily of severance expenses in fiscal 2017
and 2018, as well as asset impairment charges in fiscal 2017
related to our retail operations segment. 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 Months
Ending January 31, 2018
Actual Twelve Months Ended
January 31, 2017
Net income $ 66,000- $ 71,000 $ 51,938 Excluded from
non-GAAP: Professional fees associated with the DKI acquisition —
7,789 Imputed non-cash interest 5,700 952 Acquisition related
transition expenses 1,800 3,910 Asset impairment charges — 10,480
Income tax expense impacts of non-GAAP adjustments (2,500) (7,682)
Non-GAAP net income, as defined $ 71,000- $76,000 $ 67,387
Non-GAAP diluted net income per share is a “non-GAAP financial
measure” that excludes acquisition related professional fees,
non-cash imputed interest expense and Donna Karan related
transitional expenses, which are comprised primarily of severance
expenses, in connection with the acquisition of DKI, as well as
asset impairment charges 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 forecasted and
actual performance by excluding acquisition-related expenses and
charges in fiscal 2017 and 2018 and asset impairment charges in
fiscal 2017 related to our retail operations segment that are not
indicative of our core business operating results. Management uses
this non-GAAP financial measure to assess our forecasted and actual
performance on a comparative basis and believes that it is also
useful to investors to enable them to assess our forecasted and
actual performance on a comparative basis across historical periods
and facilitate comparisons of our forecasted and actual 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/20171205005188/en/
For G-III Apparel Group, Ltd.Investor RelationsJames Palczynski,
203-682-8229orG-III Apparel Group, Ltd.Neal S. Nackman,
212-403-0500Chief Financial Officer
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