Polo Ralph Lauren Reports Third Quarter Fiscal 2004 Results.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 4, 2004 Results Driven by 8.8% Retail Comps 290 Basis Point Gain in Retail Operating Margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: Initial Outlook for Fiscal 2005 EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. in Range of $2.35 to $2.45 Polo Ralph Lauren Polo Ralph Lauren (NYSE: RL) is American fashion designer Ralph Lauren's luxury lifestyle company. Polo Ralph Lauren specializes in high-end casual/semi-formal wear for men and women, as well as accessories, fragrance, and housewares. Corporation (NYSE NYSE See: New York Stock Exchange : RL) today reported net income under Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") of $35.4 million, or $0.35 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the third quarter of Fiscal 2004 ended December December: see month. 27, 2003, compared to net income of $42.8 million, or $0.43 per diluted share, for the third quarter of Fiscal 2003. Adjusted net income was $47.7 million, or $0.47 per diluted share, for the third quarter of Fiscal 2004 compared to adjusted net income of $47.1 million, or $0.47 per diluted share, for the third quarter of Fiscal 2003. The results are adjusted to exclude restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and foreign currency gains and losses resulting from certain balance sheet transactions. The Company believes that these adjusted results provide a meaningful comparison of its ongoing operational and financial results. For a full analysis of the adjustments, please refer to the table reconciliation of GAAP results to adjusted results. "Our success continues to be driven by our own specialty stores Noun 1. specialty store - a store that sells only one kind of merchandise shop, store - a mercantile establishment for the retail sale of goods or services; "he bought it at a shop on Cape Cod" and in better department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. , which have the right mix of products, strong customer service and a clear point of view. We know that at the core of our success is the ability to attract customers through exciting products, strong merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. and dramatic advertising and marketing," said Ralph Lauren Ralph Lauren (born Ralph Lifschitz on October 14, 1939) is an American fashion designer and business executive. Life Ralph J. Lauren was born in the New York City borough of The Bronx to Ashkenazi Jewish immigrants Fraydl (Kotlar) and Frank Lifshitz, a house , Chairman and Chief Executive Officer. Commenting on the outlook, Mr. Lauren Lauren as a surname may refer to:
"We are very pleased to report such a strong quarter and believe that these results continue to demonstrate our ability to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution on our multi-year initiatives on many fronts. Our retail business had a terrific quarter and our year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. retail sales reflect improved performance in all our retail formats," said Roger Farah Farah (färä`), town (1985 est. pop. 21,000), capital of Farah prov., W Afghanistan, on the Farah River. Surrounded by a solid earth rampart, it is strategically located at the river crossing that controls the road from Herat to the Seistan , President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "In addition, the consolidation in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). is on track for completion this year and we have
initiated important new programs in our wholesale business to better
control the distribution and presentation of the brands. During this
pivotal year, we took on the direct responsibility for the operations of
the Lauren brand, and in just eight months built an entire organization,
designed, manufactured and brought to market two complete collections
with improvements in fabric and details, created an advertising and
marketing campaign, constructed a warehouse system that is currently
shipping out the first season on schedule, and prepared our Fall
collection for market in March."
Recent Achievements -- Delivered mid-teens sales comps in the third quarter at Ralph Lauren stores, low-twenties retail sales comps at Club Monaco Club Monaco is an upscale clothing retailer with more than 65 stores in North America. Canada, Hong Kong, Taiwan, Seoul, the United Arab Emirates and the United States. Club Monaco plans to open stores in the United Kingdom and expand to Philadelphia, and Manila. stores, and mid-single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. sales comps in outlet stores An outlet store or factory outlet is a retail store in which manufacturers sell their stock directly to the public through their own branded stores. The stores can be can be brick and mortar or online. , with a 290 basis point improvement in margins. -- Continued strategy to expand Ralph Lauren specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. retail stores in appropriate locations by opening a new 3,500 square foot store in New Canaan New Canaan (kā`nən), town (1990 pop. 17,864), Fairfield co., SW Conn.; settled c.1700, inc. 1801. It is mainly a residential town and suburb of nearby New York City. Silvermine Guild Arts Center is located there. , CT, offering a selection of apparel for men and women as well as childrenswear. -- Presented the Summer 2004 Lauren by Ralph Lauren line in November November: see month. 2003. The Spring and Summer lines were well received by the retail buyers and we continue to expect revenues of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $400 million with mid-teen margins in Fiscal 2005, the line's first full-year of operations. Our Greensboro Greensboro, city (1990 pop. 183,521), seat of Guilford co., N central N.C.; inc. 1829. The city is a financial, insurance, and distribution center for the region. distribution center has begun to handle the Lauren line and delivery of Spring 2004 merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain was on schedule to department stores beginning in January January: see month. . -- Continued strategy to further develop growth opportunities in Asia by strengthening the global management team through the addition of Andreas Andreas is a common male name in Cyprus, Greece, Germany, Flanders and Scandinavia. In the Greek language, from which it derives it means valiant. It may refer to:
International Licensing to manage Polo's licensed businesses in that part of the world. -- Launched international local-language web sites for France, Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). , Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. , Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. , United Kingdom, Chile Chile (chĭl`ē, Span. chē`lā), officially Republic of Chile, republic (2005 est. pop. 15,981,000), 292,256 sq mi (756,945 sq km), S South America, west of the continental divide of the Andes Mts. , Japan and Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. with features such as store locators and fashion show viewings. -- Paid down short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. in the first half of the fiscal year and ended the third quarter with $53.0 million in cash net of debt. Third Quarter Fiscal 2004 Income Statement Review Net Revenues - Net revenues were $645.4 million for the third quarter, an increase of 1.0%, compared to $639.2 million in the comparable year-ago quarter. Revenues were driven by double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. percent increases in retail sales and licensing royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. , which were partially offset by a decrease in the wholesale business, primarily in the secondary off-price off-price adj. 1. Of, relating to, or being a retail store that sells merchandise at prices lower than usual. 2. For sale at prices lower than usual: off-price assortments of women's clothing. market. Retail sales comps rose 8.8%, driven by positive comps in all of the Company's retail formats. Gross Profit - For the third quarter, gross profit was $333.0 million, an increase of 8.1%, compared to $307.9 million in the third quarter of Fiscal 2003, benefiting primarily from strong retail sales performance and increased licensing royalties, partially offset by a decrease in the men's wholesale business. Gross margin for the third quarter was 51.6% of net revenues compared to 48.2% of net revenues in the comparable year-ago quarter, an improvement of 340 basis points. SG&A Expenses - Total SG&A expenses in the third quarter were $256.6 million, an increase of $26.2 million or 11.4%, compared to $230.4 million in the third quarter of Fiscal 2003. The increase was driven primarily by the start-up Start-up The earliest stage of a new business venture. costs associated with the operations of the Lauren line, the change in business mix as a result of increased retail sales, and the consolidation of expenses of the Japanese Japanese (jăp'ənēz`), language of uncertain origin that is spoken by more than 125 million people, most of whom live in Japan. There are also many speakers of Japanese in the Ryukyu Islands, Korea, Taiwan, parts of the United States, and master license. Store Count At quarter end, the Company operated 265 stores compared to 251 stores at the third quarter end last year. For the period ended December 27, 2003, the company's retail group consisted of 55 Ralph Lauren stores, 62 Club Monaco stores, 117 Polo Outlet stores, 22 Polo Jeans Co. Outlet stores, and nine Club Monaco outlet stores. During the third quarter the Company opened one store and closed one. Restructuring Charge and Foreign Currency Gains and Losses Third quarter Fiscal 2004 results include a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta $15.9 million restructuring charge. Approximately $12.2 million of the restructuring charge is related to an adjustment to the reserve for lease termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. costs primarily associated with two Club Monaco properties, which were included in the Company's 2001 Operational Plan. The reserve was adjusted in the third quarter Fiscal 2004 because of market factors less favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. than estimated. Approximately $3.7 million of the restructuring charge is related to operational consolidation efforts in Europe associated with severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and contract termination Defense procurement: the cessation or cancellation, in whole or in part, of work under a prime contract or a subcontract thereunder for the convenience of, or at the option of, the government, or due to failure of the contractor to perform in accordance with the terms of the contract (default). costs. Third quarter Fiscal 2003 results include a pre-tax $8.0 million restructuring charge for operational consolidation efforts in Europe associated with severance and contract termination costs included in the Company's 2003 Restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). Plan. Third quarter Fiscal 2004 results include $3.6 million in foreign currency losses primarily related to transaction losses on unhedged inventory purchases in Europe. Third quarter Fiscal 2003 results include $1.3 million in foreign currency gains primarily related to Japanese forward contracts entered into in November 2002. Secondary Offering of Common Stock The Company expects to file a registration statement with the SEC later this month to conduct a secondary offering of up to 10.6 million shares of common stock owned by investment funds Noun 1. investment funds - money that is invested with an expectation of profit investment assets - anything of material value or usefulness that is owned by a person or company managed by Goldman Gold·man , Emma 1869-1940. Russian-born American anarchist. Jailed repeatedly for her advocacy of birth control and opposition to military conscription, she was deported to the Soviet Union in 1919. , Sachs Sachs , Hans 1494-1576. German writer and Meistersinger noted for his many dramas, poems, and songs. His life inspired Wagner's opera Die Meistersinger von Nürnberg (1868). & Co. Neither the Company, Mr. Ralph Lauren, nor any of his related entities will be converting or selling any shares in the offering or receiving any proceeds from the offering. This press release shall not constitute an offer to sell or the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of an offer to buy any securities. Please refer to the separate announcement issued today by the Company. Earnings Outlook The Company reiterated its previous guidance that adjusted earnings per share for the fourth quarter of Fiscal 2004 is expected to be in the range of $0.75 to $0.80 compared to $0.77 for the fourth quarter of Fiscal 2003. These projected results include approximately $0.04 loss per share associated with Lauren start-up costs and the loss of licensing revenues associated with the Lauren, Ralph Lauren, Ralph (lôr`ən, lərĕn`), 1939–, American fashion designer, b. New York City as Ralph Lipschitz. He began his career by creating neckties under the name Polo for Beau Brummel. and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. license royalties. Adjusted earnings per share exclude restructuring charges and foreign currency gains and losses resulting from certain balance sheet transactions. For Fiscal 2005, earnings per share are expected to be in the range of $2.35 to $2.45, excluding any foreign currency gains and losses resulting from certain balance sheet transactions. The Company expects high single-digit percent consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenue growth to drive approximately 150 basis points improvement in operating margins. Revenues are expected to reflect mid-teen percent growth in wholesale and mid-single digit percent growth in retail, partially offset by a slight decrease in licensing revenue as a result of the elimination of the Lauren, Ralph and Canadian license royalties. Conference Call As previously announced, the Company will host a conference call today, February February: see month. 4, 2004 at 9:00 A.M. Eastern to discuss the quarter results. To access the conference call, listeners should dial in by 8:45 A.M. Eastern today and request to be connected to the Polo Ralph Lauren Third Quarter 2004 conference call. The dial-in number is 1-973-317-5319. Alternatively, individuals are invited to listen to a live online broadcast of the conference call by accessing Polo's website at http://investor.polo.com. A telephone replay of the call will be available from 11:00 A.M. Eastern, Wednesday Wednesday: see week. , February 4, 2004 through 5:00 P.M. Eastern, Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , February 6, 2004 by dialing 1-973-709-2089 and entering pass code 325220. An online archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. of the broadcast will be available by accessing Polo's website at http://investor.polo.com. Polo Ralph Lauren Corporation is a leader in the design, marketing and distribution of premium lifestyle products in four categories: apparel, home, accessories and fragrances. For more than 35 years, Polo's reputation and distinctive image have been consistently developed across an expanding number of products, brands and international markets. The Company's brand names, which include "Polo", "Polo by Ralph Lauren", "Ralph Lauren Purple purple color worn by persons of high rank. [Western Culture: Misc.] See : Authority Label", "Polo Sport", "Ralph Lauren", "Blue Label", "Lauren", "Polo Jeans Co.", "RL", "Chaps", and "Club Monaco" among others, constitute one of the world's most widely recognized families of consumer brands. For more information, go to http://investor.polo.com. Certain statements including, without limitation, the statements made by Ralph Lauren and Roger Farah and the statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the earnings outlook contained herein constitute "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements are based on current expectations and involve certain risks and uncertainties. Actual results might differ materially from those projected in the forward-looking statements. Among the factors that could cause actual results to materially differ are the following: risks associated with implementing the Company's plans to enhance its worldwide luxury retail business, inventory management program and operating efficiency initiatives; risks associated with the start-up of the Lauren line; risks associated with changes in the competitive marketplace, including the introduction of new products or pricing changes by the Company's competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. ; changes in global economic and political conditions; risks associated with the Company's dependence on sales to a limited number of large department store customers, including risks related to extending credit to customers; risks associated with the Company's dependence on its licensing partners for a substantial portion of its net income and risks associated with a lack of operational and financial control over licensed businesses; risks associated with a general economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. and other events leading to a reduction in discretionary consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. ; risks associated with financial distress Financial distress Events preceding and including bankruptcy, such as violation of loan contracts. of licensees, including the impact of our net income and business of one or more licensees reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. ; risks associated with changes in social, political, economic and other conditions affecting foreign operations or sourcing and the possible adverse impact of changes in import restrictions; risks related to fluctuations in foreign currency affecting our foreign subsidiaries; foreign licensees' results of operations and the relative prices at which we and our foreign competitors sell products in the same market and our operating and manufacturing costs outside of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ; risks associated with our control by Lauren family members and the anti-takeover effect of multiple classes of stock; risks associated with consolidations, restructurings and other ownership changes in the retail industry; risks associated with competition in the segments of the fashion and consumer product industries in which the Company operates, including the Company's ability to shape, stimulate stimulate /stim·u·late/ (stim´u-lat) to excite functional activity. stim·u·late v. To arouse a body or a responsive structure to increased functional activity. and respond to changing consumer tastes and demands by producing attractive products, brands and marketing, and its ability to remain competitive in the areas of quality and price; risks associated with uncertainty relating to the Company's ability to implement its growth strategies; risks associated with the Company's entry into new markets either through internal development activities or through acquisition; risks associated with the possible adverse impact of the Company's unaffiliated manufacturers inability to manufacture in a timely manner, to meet quality standards or to use acceptable labor practices and other factors detailed in the filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Attached are the Consolidated Statements of Income and Net Revenues and Income from Operations for the three-month and nine-month periods ended December 27, 2003 and December 28, 2002 and the Consolidated Balance Sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. as of December 27, 2003 and December 28, 2002.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended
--------------------------
December 27, December 28,
2003 2002
------------ ------------
Wholesale Net Sales $219,147 $268,251
Retail Net Sales 358,984 315,052
------------ ------------
Net Sales 578,131 583,303
Licensing Revenue 67,234 55,867
------------ ------------
Net Revenues 645,365 639,170
Cost of Goods Sold 312,363 331,260
------------ ------------
Gross Profit 333,002 307,910
Depreciation and Amortization 18,602 20,904
Other SG&A Expenses 238,012 209,487
Restructuring Charge 15,930 8,000
------------ ------------
Total SG&A Expenses 272,544 238,391
Income From Operations 60,458 69,519
Foreign Currency (Gains) Losses 3,552 (1,262)
Interest Expense, net 2,510 3,359
------------ ------------
Income Before Income Taxes and Other
(Income) Expense 54,396 67,422
Provision for Income Taxes 19,854 24,610
------------ ------------
Income after Tax 34,542 42,812
Other (Income) Expense, net (A) (816) -
------------ ------------
Net Income $35,358 $42,812
============ ============
Net Income Per Share - Basic $0.36 $0.44
============ ============
Net Income Per Share - Diluted $0.35 $0.43
============ ============
Weighted Average Shares Outstanding - Basic 99,072,000 98,412,000
============ ============
Weighted Average Shares & Share Equivalents
Outstanding - Diluted 101,291,000 99,311,000
============ ============
Dividends Declared Per Share $0.05 $-
============ ============
(A) Includes Equity Investment Income of $1,027 net of Minority
Interest Expense of $211, related to our Japanese businesses.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)
The following is a reconciliation of Net Income to Net Income Before
Restructuring Charge and Foreign Currency (Gains) Losses:
Three Months Ended
--------------------------
December 27, December 28,
2003 2002
------------ ------------
Net Income $35,358 $42,812
Other (Income) Expense, net (816) -
Provision for Income Taxes 19,854 24,610
------------ ------------
Income before Income Taxes and Other
(Income) Expense 54,396 67,422
Restructuring Charge (B) 15,930 8,000
Foreign Currency (Gains) Losses (C) 3,552 (1,262)
------------ ------------
Income Before Income Taxes, Other (Income)
Expense, Restructuring Charge and Foreign
Currency (Gains) Losses 73,878 74,160
Provision for Income Taxes 26,965 27,068
Other (Income) Expense, net (816) -
------------ ------------
Net Income Before Restructuring Charge and
Foreign Currency (Gains) Losses $47,729 $47,092
============ ============
Net Income Per Share Before Restructuring
Charge and Foreign Currency (Gains) Losses -
Basic $0.48 $0.48
============ ============
Net Income Per Share Before Restructuring
Charge and Foreign Currency (Gains) Losses -
Diluted $0.47 $0.47
============ ============
(B) Third quarter Fiscal 2004 results include a pre-tax $15.9 million
restructuring charge. Approximately $12.2 million of the
restructuring charge is related to an adjustment to the reserve
for lease termination costs included in the Company's 2001
Operational Plan primarily associated with two Club Monaco
properties. The reserve was adjusted in the third quarter Fiscal
2004 because of less favorable market factors. Approximately $3.7
million of the restructuring charge is related to operational
consolidation efforts in Europe associated with severance and
contract termination costs. Third quarter Fiscal 2003 results
include a pre-tax $8.0 million restructuring charge for
operational consolidation efforts in Europe associated with
severance and contract termination costs included in the Company's
2003 Restructuring Plan.
(C) For the three months ended December 27, 2003, the foreign currency
losses primarily relate to transaction losses on unhedged
inventory purchases in Europe resulting from the variability in
the value of the Euro compared to the US dollar. In the prior
period, the Foreign Currency gains primarily related to Japanese
forward contracts, which we entered into in November 2002.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)
Nine Months Ended
--------------------------
December 27, December 28,
2003 2002
------------ ------------
Wholesale Net Sales $716,877 $765,694
Retail Net Sales 910,584 806,029
------------ ------------
Net Sales 1,627,461 1,571,723
Licensing Revenue 203,412 175,286
------------ ------------
Net Revenues 1,830,873 1,747,009
Cost of Goods Sold 898,553 885,229
------------ ------------
Gross Profit 932,320 861,780
Depreciation and Amortization 59,103 57,350
Other SG&A Expenses 708,350 624,575
Restructuring Charge 15,930 8,000
------------ ------------
Total SG&A Expenses 783,383 689,925
Income From Operations 148,937 171,855
Foreign Currency (Gains) Losses (531) 2,490
Interest Expense, net 7,624 10,285
------------ ------------
Income Before Income Taxes and Other
(Income) Expense 141,844 159,080
Provision for Income Taxes 51,773 58,064
------------ ------------
Income after Tax 90,071 101,016
Other (Income) Expense, net (A) (4,352) -
------------ ------------
Net Income $94,423 $101,016
============ ============
Net Income Per Share - Basic $0.96 $1.03
============ ============
Net Income Per Share - Diluted $0.94 $1.02
============ ============
Weighted Average Shares Outstanding - Basic 98,718,000 98,291,000
============ ============
Weighted Average Shares & Share Equivalents
Outstanding - Diluted 100,403,000 99,368,000
============ ============
Dividends Declared Per Share $0.15 $-
============ ============
(A) Includes Equity Investment Income of $5,477 net of Minority
Interest Expense of $1,125, related to our Japanese businesses.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)
The following is a reconciliation of Net Income to Net Income Before
Restructuring Charge and Foreign Currency (Gains) Losses:
Nine Months Ended
--------------------------
December 27, December 28,
2003 2002
------------ ------------
Net Income $94,423 $101,016
Other (Income) Expense, net (4,352) -
Provision for Income Taxes 51,773 58,064
------------ ------------
Income before Income Taxes and Other (Income)
Expense 141,844 159,080
Restructuring Charge (B) 15,930 8,000
Foreign Currency (Gains) Losses (C) (531) 2,490
------------ ------------
Income Before Income Taxes, Other (Income)
Expense, Restructuring Charge and Foreign
Currency (Gains) Losses 157,243 169,570
Provision for Income Taxes 57,394 61,893
Other (Income) Expense, net (4,352) -
------------ ------------
Net Income Before Restructuring Charge and
Foreign Currency (Gains) Losses $104,201 $107,677
============ ============
Net Income Per Share Before Restructuring
Charge and Foreign Currency (Gains) Losses -
Basic $1.06 $1.10
============ ============
Net Income Per Share Before Restructuring
Charge and Foreign Currency (Gains) Losses -
Diluted $1.04 $1.08
============ ============
(B) Results for the nine months ended December 27, 2003 include a
pre-tax $15.9 million restructuring charge. Approximately $12.2
million of the restructuring charge is related to an adjustment to
the reserve for lease termination costs included in the Company's
2001 Operational Plan primarily associated with two Club Monaco
properties. The reserve was adjusted in the third quarter Fiscal
2004 because of less favorable market factors. Approximately $3.7
million of the restructuring charge is related to operational
consolidation efforts in Europe associated with severance and
contract termination costs. Results for the nine months ended
December 28, 2002 include a pre-tax $8.0 million restructuring
charge for operational consolidation efforts in Europe associated
with severance and contract termination costs included in the
Company's 2003 Restructuring Plan.
(C) For the nine months ended December 27, 2003, the foreign currency
gains primarily relate to transaction gains on unhedged inventory
purchases and royalty payments in Europe resulting from increases
in the value of the Euro compared to the US dollar. In the prior
period, the Foreign Currency losses primarily related to
transaction losses on the unhedged portion of our Euro debt which
resulted from increases in the Eurodollar rate until we entered
into the cross currency swap in June 2002. This loss was partially
offset by gains on Japanese forward contracts, which we entered
into in November 2002.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
December 27, December 28,
2003 2002
----------- -----------
ASSETS
Current assets
Cash and cash equivalents $337,703 $441,584
Accounts receivable, net of allowances 292,248 262,559
Inventories 422,248 340,077
Deferred tax assets 31,078 8,901
Prepaid expenses and other 88,017 64,078
----------- -----------
1,171,294 1,117,199
Property and equipment, net 372,721 343,539
Deferred tax assets 58,583 66,356
Goodwill, net 335,646 295,378
Intangibles, net 17,950 -
Other assets 174,964 81,355
----------- -----------
$2,131,158 $1,903,827
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank borrowings $0 $105,752
Accounts payable 167,322 144,946
Income taxes payable 54,846 67,298
Accrued expenses and other 256,836 150,931
----------- -----------
479,004 468,927
Long-term debt 284,746 238,127
Other noncurrent liabilities 76,383 75,705
Stockholders' equity
Common Stock 1,044 1,028
Additional paid-in-capital 538,089 503,002
Retained earnings 855,890 703,140
Treasury Stock, Class A, at cost (4,145,800
and 3,894,532 shares) (78,975) (73,713)
Accumulated other comprehensive income (loss) (8,981) (5,737)
Unearned compensation (16,042) (6,652)
----------- -----------
Total stockholders' equity 1,291,025 1,121,068
----------- -----------
$2,131,158 $1,903,827
=========== ===========
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
NET REVENUES AND INCOME FROM OPERATIONS
(In thousands)
(Unaudited)
The net revenues and income from operations for the three and nine
months ended December 27, 2003 and December 28, 2002 for each segment
were as follows:
Three Months Ended Nine Months Ended
------------------ -----------------
December December December December
27, 28, 27, 28,
2003 2002 2003 2002
--------- --------- ----------- -----------
Net revenues:
Wholesale $219,147 $268,251 $716,877 $765,694
Retail 358,984 315,052 910,584 806,029
Licensing 67,234 55,867 203,412 175,286
--------- --------- ----------- -----------
$645,365 $639,170 $1,830,873 $1,747,009
========= ========= =========== ===========
Income (Loss) from
operations:
Wholesale $(3,330) $18,065 $(8,921) $31,904
Retail 45,411 30,703 77,731 59,883
Licensing 34,307 28,751 96,057 88,068
--------- --------- ----------- -----------
$76,388 $77,519 $164,867 $179,855
Less: Unallocated
Restructuring Charge 15,930 8,000 15,930 8,000
--------- --------- ----------- -----------
60,458 69,519 148,937 171,855
========= ========= =========== ===========
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