The Warnaco Group, Inc. (NYSE: WRC) today reported results for the second quarter ended June 30, 2012.
For the second quarter:
- Net revenues decreased 5%, to $563.9 million, compared to the prior year quarter.
- Net revenues, in constant currency, were flat compared to the prior year quarter.
- The Company incurred a $12.0 million impairment charge pertaining to the note receivable related to its 2008 sale of Lejaby® to Palmers Textil AG, referred to as the Lejaby impairment charge.
- Income per diluted share from continuing operations was $0.23, compared to $1.01 in the prior year quarter.
- Income per diluted share from continuing operations on an adjusted, non-GAAP basis was $0.72 compared to $0.82 in the prior year quarter (which excludes restructuring expense, pension expense, tax-related items and, for the current quarter, the Lejaby impairment charge).
The accompanying tables provide a reconciliation of actual results to the adjusted, non-GAAP results.
The Company believes it is valuable for users of the Company's financial statements to be made aware of the adjusted financial information, as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis and to make operating and strategic decisions. In addition, the Company uses performance targets based, in part, on non-GAAP income from continuing operations and non-GAAP operating income as a component of the measurement of certain employee incentive compensation.
"Our second quarter results were in line with our projections. As expected, a positive performance in Asia and Latin America during the quarter offset softness in Europe and the U.S. Despite a decline in comparable store sales, reflecting challenging macroeconomic conditions, our Calvin Klein direct-to-consumer business was up 6% in constant currency, further validating our core international and retail expansion strategies. Speedo had a great quarter reflecting the benefit of our Olympic initiatives as well as the kickoff of our segmentation strategy, which will drive future growth for the brand. In addition, we continued to exercise disciplined control over our expenses while continuing to invest in our direct-to-consumer expansion. We took further action in Europe, as we previously announced, to position the business for improved operating performance over time," commented Helen McCluskey, Warnaco's President and Chief Executive Officer.
"We are making progress in reshaping our organization to reflect the consumer-centric vision I outlined earlier in the year. We are very excited about the caliber of talent we are attracting to our design and merchandising teams as we consolidate the group into New York. We are confident that we are taking the appropriate actions to ensure that these changes will have a significant benefit for the business over the long term."
"In the near term, looking ahead to the second half, with good visibility to forward bookings and more favorable product costs, we expect second half net revenue and gross margin to increase and to meet our projections for the balance of 2012," concluded McCluskey.
Adjusted Fiscal 2012 Outlook
For fiscal 2012, primarily based on the adverse effect of recent foreign currency exchange rates, the Company now anticipates:
- Net revenues, on a reported basis, will be down 2% to flat (up approximately 2% - 4% based on constant currency) compared to fiscal 2011; and
- Adjusted, non-GAAP, diluted earnings per share from continuing operations (excluding restructuring expense, pension expense and the Lejaby impairment charge) in the range of $4.00 - $4.15.
Schedule 7 of the accompanying tables provides a reconciliation of anticipated diluted earnings per share from continuing operations, on a GAAP basis of $2.94- $3.00 per diluted share (assuming minimal pension expense), to the adjusted, non-GAAP fiscal 2012 outlook above.
Prior guidance was for net revenue growth in the range of 0%-2% (and 2%-4% based on constant currency) compared to fiscal 2011 and adjusted, non-GAAP diluted earnings per share from continuing operations (excluding restructuring expense and pension expense) in the range of $4.00 - $4.25.
Second Quarter Highlights
Total Company
Net revenues fell 5% to $563.9 million, compared to the prior year period and were flat in constant currency. In the quarter, a 10% increase in Swimwear Group net revenues, fueled by a powerful performance from Speedo®, were more than offset by declines in Sportswear and Intimate Apparel net revenues. Challenging market conditions, particularly in the U.S. and Europe, a more promotional environment and the unfavorable effects of fluctuations in currency exchange rates adversely affected the Company's net revenues.
Gross margin decreased 130 basis points to 42% of net revenues, compared to the prior year period, due primarily to product cost inflation, increased customer allowances and the effects of currency fluctuations. Gross profit decreased 8% compared to the prior year quarter to $238.9 million. Selling, General & Administrative "SG&A" expense was down 2%, compared to the prior year quarter, to $199.3 million; however, as a percentage of net revenues, SG&A expense increased 110 basis points to 35% of net revenues. SG&A, in the quarter, was adversely impacted by approximately $13.1 million of restructuring expense as well as increased expense related to the Company's growth in its direct-to-consumer square footage, which was more than offset by disciplined expense control related to its wholesale businesses and lower employee compensation and professional fees.
Operating income was $32.8 million, a decline of $19.8 million, or 38%, compared to the prior year quarter, and includes approximately $16.2 million of restructuring expense.
Other expense was $12.9 million compared to other income of $0.2 million in the prior year quarter. The increase was primarily due to an impairment charge to the Company's receivables recorded in the quarter (related to a note issued by Palmers Textil AG in connection with the Company's 2008 sale of the Lejaby business to Palmers) as the Company now expects that a portion of the receivable might not be collectible.
Income from continuing operations decreased to $9.6 million, or $0.23 per diluted share, compared to $45.6 million, or $1.01 per diluted share, in the prior year quarter. On an adjusted, non-GAAP basis (excluding costs related to restructuring expense, pension expense, the impairment charge related to the Palmer's note and tax-related items), income from continuing operations was $30.2 million, or $0.72 per diluted share, compared to $37.0 million, or $0.82 per diluted share, in the prior year period.
The effect of fluctuations in foreign currency exchange rates for the quarter decreased net revenues, gross profit and SG&A by $27.2 million, $12.8 million and $11.9 million, respectively, compared to the prior year quarter and had an immaterial effect on income per diluted share from continuing operations. An additional discussion regarding the effects of fluctuations in foreign currency exchange rates on operating results can be found in the Company's Form 10-Q, for the quarter ended June 30, 2012, which will be filed with the Securities and Exchange Commission.
The effective tax rate in the quarter was 42%, compared to 9% in the prior year quarter. The second quarter's effective tax rate primarily reflects a year-to-date adjustment based upon a higher estimated annual effective tax rate, while the prior year quarter reflects the benefit of approximately $10 million related to the recognition of net operating losses in a foreign jurisdiction. The Company expects its full year Fiscal 2012 adjusted non-GAAP effective tax rate to be approximately 32.5%.
Balance Sheet
Cash and cash equivalents at June 30, 2012 were $295.3 million compared to $294.8 million at July 2, 2011. During the twelve month period ended June 30, 2012, the Company used more than $138.4 million to purchase 2.9 million shares of its common stock, under its Board authorized repurchase programs, including 200,000 shares purchased in the second quarter 2012, for approximately $8.8 million. The Company ended the quarter in a net cash position of $43.0 million.
Inventories at June 30, 2012 were $330.6 million, down $24.8 million (or 7%) compared to $355.4 million at July 2, 2011. Disciplined inventory management and fluctuations in foreign currency exchange rates more than offset inventory increases related to the expansion of the Company's direct-to-consumer business as well as increased product costs. The Company remains comfortable with the quality of its inventory and expects inventory to decline through the remainder of fiscal 2012.
Conference Call Information
Stockholders and other persons are invited to listen to the second quarter fiscal 2012 earnings conference call scheduled for today, Monday, August 6, 2012, at 4:30 p.m. EDT. To participate in Warnaco's conference call, dial (877) 692-2592 approximately five minutes prior to the 4:30 p.m. start time. The call will also be broadcast live over the Internet at www.warnaco.com. An online archive will be available following the call.
This press release was furnished to the SEC (www.sec.gov) and may also be accessed through the Company's internet website: www.warnaco.com.
ABOUT WARNACO
The Warnaco Group, Inc., headquartered in New York, is a leading global apparel company engaged in the business of designing, sourcing, marketing and selling men's, women's and children's sportswear and accessories, intimate apparel, and swimwear under such owned and licensed brands as Calvin Klein®, Speedo®, Chaps®, Warner's® and Olga®. For more information, visit www.warnaco.com.
FORWARD-LOOKING STATEMENTS
The Warnaco Group, Inc. notes that this press release, the conference call scheduled for August 6, 2012 and certain other written, electronic and oral disclosure made by the Company from time to time, may contain forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties and reflect, when made, the Company's estimates, objectives, projections, forecasts, plans, strategies, beliefs, intentions, opportunities and expectations. Actual results may differ materially from anticipated results, targets or expectations and investors are cautioned not to place undue reliance on any forward-looking statements. Statements other than statements of historical fact, including, without limitation, future financial targets, are forward-looking statements. These forward-looking statements may be identified by, among other things, the use of forward-looking language, such as the words "believe," "anticipate," "estimate," "expect," "intend," "may," "project," "scheduled to," "seek," "should," "will be," "will continue," "will likely result," "targeted," or the negative of those terms, or other similar words and phrases or by discussions of intentions or strategies.
The following factors, among others and in addition to those described in the Company's reports filed with the SEC (including, without limitation, those described under the headings "Risk Factors" and "Statement Regarding Forward-Looking Disclosure," as such disclosure may be modified or supplemented from time to time), could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by it: the Company's ability to execute its repositioning and sale initiatives (including achieving enhanced productivity and profitability) previously announced; deterioration in global or regional or other macroeconomic conditions that affect the apparel industry, including turmoil in the financial and credit markets; the Company's failure to anticipate, identify or promptly react to changing trends, styles, or brand preferences; the Company's failure to use the most recent and effective advertising media to reach customers; further declines in prices in the apparel industry and other pricing pressures; declining sales resulting from increased competition in the Company's markets; increases in the prices of raw materials or costs to produce or transport products; events which result in difficulty in procuring or producing the Company's products on a cost-effective basis; the effect of laws and regulations, including those relating to labor, workplace and the environment; possible additional tax liabilities; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; the Company's ability to protect its intellectual property or the costs incurred by the Company related thereto; the risk of product safety issues, defects or other production problems associated with the Company's products; the Company's dependence on a limited number of customers; the effects of consolidation in the retail sector; the Company's dependence on license agreements with third parties including, in particular, its license agreement with CKI, the licensor of the Company's Calvin Klein brand name; the Company's dependence on the reputation of its brand names, including, in particular, Calvin Klein; the Company's exposure to conditions in overseas markets in connection with the Company's foreign operations and the sourcing of products from foreign third-party vendors; the Company's foreign currency exposure; unanticipated future internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; the effects of fluctuations in the value of investments of the Company's pension plan; the sufficiency of cash to fund operations, including capital expenditures; the Company recognizing impairment charges for its long-lived assets; uncertainty over the outcome of litigation matters and other proceedings; the Company's ability to service its indebtedness, the effect of changes in interest rates on the Company's indebtedness that is subject to floating interest rates and the limitations imposed on the Company's operating and financial flexibility by the agreements governing the Company's indebtedness; the Company's dependence on its senior management team and other key personnel; the Company's reliance on information technology; the limitations on purchases under the Company's share repurchase program contained in the Company's debt instruments, the number of shares that the Company purchases under such program and the prices paid for such shares; the Company's inability to achieve its financial targets and strategic objectives, as a result of one or more of the factors described above, changes in the assumptions underlying the targets or goals, or otherwise; the inability to successfully implement restructuring and disposition activities; the Company's inability to successfully transition its sourcing, design and merchandising functions related to Calvin Klein Jeans from Italy to New York; the failure of acquired businesses to generate expected levels of revenues; the failure of the Company to successfully integrate such businesses with its existing businesses (and as a result, not achieving all or a substantial portion of the anticipated benefits of such acquisitions); and such acquired businesses being adversely affected, including by one or more of the factors described above and thereby failing to achieve anticipated revenues and earnings growth.
The Company encourages investors to read the section entitled "Risk Factors" and the discussion of the Company's critical accounting policies under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Discussion of Critical Accounting Policies" included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as such discussions may be modified or supplemented by subsequent reports that the Company files with the SEC. The discussion in this press release is not exhaustive but is designed to highlight important factors that may affect actual results. Forward-looking statements speak only as of the date on which they are made, and, except for the Company's ongoing obligation under the U.S. federal securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Schedule 1 | ||||||||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(Dollars in thousands, excluding per share amounts) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
June 30, 2012 | July 2, 2011 | June 30, 2012 | July 2, 2011 | |||||||||||||||
Net revenues | $ | 563,911 | $ | 591,387 | $ | 1,179,452 | $ | 1,253,548 | ||||||||||
Cost of goods sold | 324,972 | 333,117 | 673,028 | 700,140 | ||||||||||||||
Gross profit | 238,939 | 258,270 | 506,424 | 553,408 | ||||||||||||||
Selling, general and administrative expenses | 199,344 | 202,854 | 411,965 | 425,491 | ||||||||||||||
Amortization of intangible assets | 6,850 | 3,126 | 9,549 | 6,285 | ||||||||||||||
Pension income | (55 | ) | (309 | ) | (109 | ) | (621 | ) | ||||||||||
Operating income | 32,800 | 52,599 | 85,019 | 122,253 | ||||||||||||||
Other loss (income) | 12,894 | (215 | ) | 12,625 | (859 | ) | ||||||||||||
Interest expense | 4,645 | 3,460 | 9,094 | 6,156 | ||||||||||||||
Interest income | (1,001 | ) | (810 | ) | (1,874 | ) | (1,556 | ) | ||||||||||
Income from continuing operations before provision | ||||||||||||||||||
for income taxes and non-controlling interest | 16,262 | 50,164 | 65,174 | 118,512 | ||||||||||||||
Provision for income taxes | 6,822 | 4,598 | 22,813 | 28,414 | ||||||||||||||
Income from continuing operations before non-controlling interest | 9,440 | 45,566 | 42,361 | 90,098 | ||||||||||||||
Income (loss) from discontinued operations, net of taxes | (9 | ) | (63 | ) | 3,025 | (564 | ) | |||||||||||
Net income | 9,431 | 45,503 | 45,386 | 89,534 | ||||||||||||||
Less: Net loss attributable to the non-controlling interest | (185 | ) | - | (146 | ) | - | ||||||||||||
Net income attributable to Warnaco Group | 9,616 | 45,503 | 45,532 | 89,534 | ||||||||||||||
Amounts attributable to Warnaco Group common shareholders: | ||||||||||||||||||
Income from continuing operations, net of taxes | $ | 9,625 | $ | 45,566 | $ | 42,507 | $ | 90,098 | ||||||||||
Income (loss) from discontinued operations, net of taxes | (9 | ) | (63 | ) | 3,025 | (564 | ) | |||||||||||
Net income | $ | 9,616 | $ | 45,503 | $ | 45,532 | $ | 89,534 | ||||||||||
Basic income per common share: | ||||||||||||||||||
Income from continuing operations | $ | 0.23 | $ | 1.03 | $ | 1.03 | $ | 2.03 | ||||||||||
Income (loss) from discontinued operations | - | - | 0.07 | (0.01 | ) | |||||||||||||
Net income | $ | 0.23 | $ | 1.03 | $ | 1.10 | $ | 2.02 | ||||||||||
Diluted income per common share: | ||||||||||||||||||
Income from continuing operations | $ | 0.23 | $ | 1.01 | $ | 1.01 | $ | 1.99 | ||||||||||
Income (loss) from discontinued operations | - | - | 0.07 | (0.02 | ) | |||||||||||||
Net income | $ | 0.23 | $ | 1.01 | $ | 1.08 | $ | 1.97 | ||||||||||
Weighted average number of shares outstanding used in | ||||||||||||||||||
computing income per common share: | ||||||||||||||||||
Basic | 40,962,008 | 43,622,535 | 40,746,295 | 43,757,202 | ||||||||||||||
Diluted | 41,551,860 | 44,458,373 | 41,505,033 | 44,698,317 |
Schedule 2 | ||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||||||
(Dollars in thousands) | ||||||||||||
(Unaudited) | ||||||||||||
June 30, 2012 | December 31, 2011 | July 2, 2011 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 295,346 | $ | 232,531 | $ | 294,802 | ||||||
Accounts receivable, net | 283,370 | 322,976 | 320,416 | |||||||||
Inventories | 330,571 | 350,835 | 355,384 | |||||||||
Other current assets | 159,118 | 158,288 | 166,333 | |||||||||
Total current assets | 1,068,405 | 1,064,630 | 1,136,935 | |||||||||
Property, plant and equipment, net | 127,950 | 133,022 | 130,566 | |||||||||
Intangible and other assets | 522,173 | 550,198 | 596,787 | |||||||||
TOTAL ASSETS | $ | 1,718,528 | $ | 1,747,850 | $ | 1,864,288 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Short-term debt | $ | 46,399 | $ | 47,513 | $ | 12,673 | ||||||
Accounts payable and accrued liabilities | 304,293 | 354,452 | 344,591 | |||||||||
Taxes | 14,206 | 43,238 | 23,589 | |||||||||
Liabilities of discontinued operations | - | 6,797 | 3,433 | |||||||||
Total current liabilities | 364,898 | 452,000 | 384,286 | |||||||||
Long-term debt | 206,360 | 208,477 | 210,631 | |||||||||
Other long-term liabilities | 171,974 | 174,973 | 232,448 | |||||||||
Redeemable non-controlling interest | 15,200 | 15,200 | - | |||||||||
Total stockholders' equity | 960,096 | 897,200 | 1,036,923 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,718,528 | $ | 1,747,850 | $ | 1,864,288 | ||||||
NET CASH AND CASH EQUIVALENTS (NET DEBT) | $ | 42,587 | $ | (23,459 | ) | $ | 71,498 |
Schedule 3 | ||||||||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||||||||
NET REVENUES AND OPERATING INCOME BY SEGMENT | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Net revenues: | Three Months Ended | Three Months Ended | Increase / | % | Constant $ | |||||||||||||
June 30, 2012 | July 2, 2011 | (Decrease) | Change | % Change (a) | ||||||||||||||
Sportswear Group | $ | 265,028 | $ | 286,289 | $ | (21,261 | ) | -7.4 | % | -1.2 | % | |||||||
Intimate Apparel Group | 212,126 | 226,443 | (14,317 | ) | -6.3 | % | -2.7 | % | ||||||||||
Swimwear Group | 86,757 | 78,655 | 8,102 | 10.3 | % | 11.9 | % | |||||||||||
Net revenues | $ | 563,911 | $ | 591,387 | $ | (27,476 | ) | -4.6 | % | 0.0 | % | |||||||
Three Months Ended | % of Group | Three Months Ended | % of Group | |||||||||||||||
June 30, 2012 | Net Revenues | July 2, 2011 | Net Revenues | |||||||||||||||
Operating income (loss): | ||||||||||||||||||
Sportswear Group (b), (c) | $ | (11,283 | ) | -4.3 | % | $ | 15,957 | 5.6 | % | |||||||||
Intimate Apparel Group (b), (c) | 25,993 | 12.3 | % | 34,470 | 15.2 | % | ||||||||||||
Swimwear Group (b), (c) | 13,645 | 15.7 | % | 10,705 | 13.6 | % | ||||||||||||
Unallocated corporate (c), (d) | 4,445 | na | (8,533 | ) | na | |||||||||||||
Operating income | $ | 32,800 | na | $ | 52,599 | na | ||||||||||||
Operating income as a percentage of | ||||||||||||||||||
total net revenues | 5.8 | % | 8.9 | % | ||||||||||||||
(a) Reflects the percentage increase (decrease) in net revenues for the Three Months Ended June 30, 2012, compared to the Three Months Ended July 2, 2011, assuming foreign-based net revenues for the Three Months Ended June 30, 2012 are translated into U.S. dollars using the same foreign currency exchange rates that were used in the calculation of net revenues for the Three Months Ended July 2, 2011. See Schedule 6a. | ||||||||||||||||||
(b) Shared services expenses included in the operating income of the business groups are as follows: | ||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||
June 30, 2012 | July 2, 2011 | |||||||||||||||||
Sportswear Group | $ | 7,556 | $ | 6,970 | ||||||||||||||
Intimate Apparel Group | $ | 5,703 | $ | 4,992 | ||||||||||||||
Swimwear Group | $ | 2,891 | $ | 2,435 | ||||||||||||||
(c) Includes restructuring charges and other exit costs as follows: | ||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||
June 30, 2012 | July 2, 2011 | |||||||||||||||||
Sportswear Group | $ | 11,986 | $ | 1,974 | ||||||||||||||
Intimate Apparel Group | 3,223 | 1,480 | ||||||||||||||||
Swimwear Group | 806 | 1,187 | ||||||||||||||||
Unallocated corporate | 197 | 313 | ||||||||||||||||
$ | 16,212 | $ | 4,954 | |||||||||||||||
(d) For the Three Months Ended June 30, 2012 compared to the Three Months Ended July 2, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains. |
Schedule 3a | ||||||||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||||||||
NET REVENUES AND OPERATING INCOME BY SEGMENT | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Net revenues: | Six Months Ended | Six Months Ended | Increase / | % | Constant $ | |||||||||||||
June 30, 2012 | July 2, 2011 | (Decrease) | Change | % Change (a) | ||||||||||||||
Sportswear Group | $ | 565,831 | $ | 625,760 | $ | (59,929 | ) | -9.6 | % | -6.0 | % | |||||||
Intimate Apparel Group | 435,003 | 447,437 | (12,434 | ) | -2.8 | % | -0.4 | % | ||||||||||
Swimwear Group | 178,618 | 180,351 | (1,733 | ) | -1.0 | % | 0.1 | % | ||||||||||
Net revenues | $ | 1,179,452 | $ | 1,253,548 | $ | (74,096 | ) | -5.9 | % | -3.1 | % | |||||||
Six Months Ended | % of Group | Six Months Ended | % of Group | |||||||||||||||
June 30, 2012 | Net Revenues | July 2, 2011 | Net Revenues | |||||||||||||||
Operating income (loss): | ||||||||||||||||||
Sportswear Group (b), (c) | $ | 2,300 | 0.4 | % | $ | 54,557 | 8.7 | % | ||||||||||
Intimate Apparel Group (b), (c) | 55,947 | 12.9 | % | 65,007 | 14.5 | % | ||||||||||||
Swimwear Group (b), (c) | 28,482 | 15.9 | % | 24,773 | 13.7 | % | ||||||||||||
Unallocated corporate (c), (d) | (1,710 | ) | na | (22,084 | ) | na | ||||||||||||
Operating income | $ | 85,019 | na | $ | 122,253 | na | ||||||||||||
Operating income as a percentage of | ||||||||||||||||||
total net revenues | 7.2 | % | 9.8 | % | ||||||||||||||
(a) Reflects the percentage increase (decrease) in net revenues for the Six Months Ended June 30, 2012 compared to the Six Months Ended July 2, 2011, assuming foreign-based net revenues for the Six Months Ended June 30, 2012 are translated into U.S. dollars using the same foreign currency exchange rates that were used in the calculation of net revenues for the Six Months Ended July 2, 2011. See Schedule 6b. | ||||||||||||||||||
(b) Shared services expenses included in the operating income of the business groups are as follows: | ||||||||||||||||||
Six Months Ended | Six Months Ended | |||||||||||||||||
June 30, 2012 | July 2, 2011 | |||||||||||||||||
Sportswear Group | $ | 14,589 | $ | 13,843 | ||||||||||||||
Intimate Apparel Group | $ | 10,870 | $ | 9,701 | ||||||||||||||
Swimwear Group | $ | 5,598 | $ | 5,225 | ||||||||||||||
(c) Includes restructuring charges and other exit costs as follows: | ||||||||||||||||||
Six Months Ended | Six Months Ended | |||||||||||||||||
June 30, 2012 | July 2, 2011 | |||||||||||||||||
Sportswear Group | $ | 15,677 | $ | 3,624 | ||||||||||||||
Intimate Apparel Group | 6,251 | 2,922 | ||||||||||||||||
Swimwear Group | 827 | 4,264 | ||||||||||||||||
Unallocated corporate | 47 | 633 | ||||||||||||||||
$ | 22,802 | $ | 11,443 | |||||||||||||||
(d) For the Six Months Ended June 30, 2012 compared to the Six Months Ended July 2, 2011, primarily reflects decreases in restructuring charges, decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains. |
Schedule 4 | ||||||||||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||||||||||
NET REVENUES AND OPERATING INCOME BY REGION | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
By Region: | Net Revenues | |||||||||||||||||||
Three Months Ended June 30, 2012 | Three Months Ended July 2, 2011 | Increase / (Decrease) | % Change | Constant $ % Change (a) | ||||||||||||||||
United States | $ | 247,827 | $ | 250,645 | $ | (2,818 | ) | -1.1 | % | -1.1 | % | |||||||||
Europe | 107,728 | 128,093 | (20,365 | ) | -15.9 | % | -7.1 | % | ||||||||||||
Asia | 116,432 | 113,785 | 2,647 | 2.3 | % | 4.9 | % | |||||||||||||
Mexico and Central and South America | 61,978 | 62,132 | (154 | ) | -0.2 | % | 18.3 | % | ||||||||||||
Canada (b) | 29,946 | 36,732 | (6,786 | ) | -18.5 | % | -14.5 | % | ||||||||||||
Total | $ | 563,911 | $ | 591,387 | $ | (27,476 | ) | -4.6 | % | 0.0 | % | |||||||||
Operating Income (loss) | ||||||||||||||||||||
Three Months Ended June 30, 2012 | % of Net Revenues | Three Months Ended July 2, 2011 | % of Net Revenues | Increase / (Decrease) | % Change | |||||||||||||||
United States (c) | $ | 20,751 | 8.4 | % | $ | 34,043 | 13.6 | % | $ | (13,292 | ) | -39.0 | % | |||||||
Europe (c) | (17,159 | ) | -15.9 | % | (8,088 | ) | -6.3 | % | (9,071 | ) | -112.2 | % | ||||||||
Asia (c) | 14,243 | 12.2 | % | 18,604 | 16.4 | % | (4,361 | ) | -23.4 | % | ||||||||||
Mexico and Central and South America (c) | 6,861 | 11.1 | % | 13,044 | 21.0 | % | (6,183 | ) | -47.4 | % | ||||||||||
Canada (c) | 3,659 | 12.2 | % | 3,529 | 9.6 | % | 130 | 3.7 | % | |||||||||||
Unallocated corporate (c), (d), (e) | 4,445 | na | (8,533 | ) | na | 12,978 | 152.1 | % | ||||||||||||
Total | $ | 32,800 | 5.8 | % | $ | 52,599 | 8.9 | % | $ | (19,799 | ) | -37.6 | % | |||||||
(a) Reflects the percentage increase (decrease) in net revenues for the Three Months Ended June 30, 2012, compared to the Three Months Ended July 2, 2011, assuming foreign-based net revenues for the Three Months Ended June 30, 2012 are translated into U.S. dollars using the same foreign currency exchange rates in the calculation of net revenues for the Three Months Ended July 2, 2011. See Schedule 6a. | ||||||||||||||||||||
(b) The decrease in net revenues for the Three Months Ended June 30, 2012 compared to the Three Months Ended July 2, 2011 is primarily due to the closure of outlet stores during Fiscal 2011. | ||||||||||||||||||||
(c) Includes restructuring charges and other exit costs as follows: | ||||||||||||||||||||
Three Months Ended June 30, 2012 | Three Months Ended July 2, 2011 | |||||||||||||||||||
United States | $ | 7,358 | $ | 1,589 | ||||||||||||||||
Europe | 8,192 | 797 | ||||||||||||||||||
Asia | 96 | - | ||||||||||||||||||
Canada | 158 | 2,255 | ||||||||||||||||||
Mexico and Central and South America | 210 | (1 | ) | |||||||||||||||||
Unallocated corporate | 198 | 314 | ||||||||||||||||||
Total | $ | 16,212 | $ | 4,954 | ||||||||||||||||
(d) Includes expense of $346 during the Three Months Ended June 30, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York. These costs are recorded in "unallocated corporate expenses" and not in the Sportswear Group. | ||||||||||||||||||||
(e) For the Three Months Ended June 30, 2012 compared to the Three Months Ended July 2, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains. |
Schedule 4a | ||||||||||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||||||||||
NET REVENUES AND OPERATING INCOME BY REGION | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
By Region: | Net Revenues | |||||||||||||||||||
Six Months | Six Months |
| ||||||||||||||||||
Ended June 30, | Ended July 2, | Increase / | Constant $ | |||||||||||||||||
2012 | 2011 | (Decrease) | % Change | % Change (a) | ||||||||||||||||
United States | $ | 496,236 | $ | 535,788 | $ | (39,552 | ) | -7.4 | % | -7.4 | % | |||||||||
Europe | 254,040 | 296,562 | (42,522 | ) | -14.3 | % | -9.1 | % | ||||||||||||
Asia | 254,195 | 240,561 | 13,634 | 5.7 | % | 6.5 | % | |||||||||||||
Mexico and Central and South America | 115,081 | 113,850 | 1,231 | 1.1 | % | 14.5 | % | |||||||||||||
Canada (b) | 59,900 | 66,787 | (6,887 | ) | -10.3 | % | -7.3 | % | ||||||||||||
Total | $ | 1,179,452 | $ | 1,253,548 | $ | (74,096 | ) | -5.9 | % | -3.1 | % | |||||||||
Operating Income (loss) | ||||||||||||||||||||
Six Months |
| Six Months |
|
| ||||||||||||||||
Ended June 30, | % of Net | Ended July 2, | % of Net | Increase / | ||||||||||||||||
2012 | Revenues | 2011 | Revenues | (Decrease) | % Change | |||||||||||||||
United States (c) | $ | 50,400 | 10.2 | % | $ | 76,153 | 14.2 | % | $ | (25,753 | ) | -33.8 | % | |||||||
Europe (c) | (19,022 | ) | -7.5 | % | (2,512 | ) | -0.8 | % | (16,510 | ) | -657.2 | % | ||||||||
Asia (c) | 40,337 | 15.9 | % | 45,046 | 18.7 | % | (4,709 | ) | -10.5 | % | ||||||||||
Mexico and Central and South America (c) | 8,962 | 7.8 | % | 19,986 | 17.6 | % | (11,024 | ) | -55.2 | % | ||||||||||
Canada (c) | 6,052 | 10.1 | % | 5,664 | 8.5 | % | 388 | 6.9 | % | |||||||||||
Unallocated corporate (c), (d), (e) | (1,710 | ) | na | (22,084 | ) | na | 20,374 | 92.3 | % | |||||||||||
Total | $ | 85,019 | 7.2 | % | $ | 122,253 | 9.8 | % | $ | (37,234 | ) | -30.5 | % | |||||||
(a) Reflects the percentage increase (decrease) in net revenues for the Six Months Ended June 30, 2012 compared to the Six Months Ended July 2, 2011, assuming foreign-based net revenues for the Six Months Ended June 30, 2012 are translated into U.S. dollars using the same foreign currency exchange rates that were used in the calculation of net revenues for the Six Months Ended July 2, 2011. See Schedule 6b. | ||||||||||||||||||||
(b) The decrease in net revenue for the Six Months Ended June 30, 2012 compared to the Six Months Ended July 2, 2011 is primarily due to the closure of outlet stores during Fiscal 2011. | ||||||||||||||||||||
(c) Includes restructuring charges and other exit costs as follows: | ||||||||||||||||||||
Six Months Ended June 30, 2012 | Six Months Ended July 2, 2011 | |||||||||||||||||||
United States | $ | 8,191 | $ | 4,626 | ||||||||||||||||
Europe | 11,306 | 1,766 | ||||||||||||||||||
Asia | 96 | - | ||||||||||||||||||
Canada | 2,385 | 4,352 | ||||||||||||||||||
Mexico and Central and South America | 778 | 67 | ||||||||||||||||||
Unallocated corporate | 46 | 632 | ||||||||||||||||||
Total | $ | 22,802 | $ | 11,443 | ||||||||||||||||
(d) Includes expense of $346 during the Six Months Ended June 30, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York. These costs are recorded in "unallocated corporate expenses" and not in the Sportswear Group. | ||||||||||||||||||||
(e) For the Six Months Ended June 30, 2012 compared to the Six Months Ended July 2, 2011, primarily reflects decreases in restructuring charges, decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains. |
Schedule 5 | |||||||||||||||||||
THE WARNACO GROUP, INC. | |||||||||||||||||||
NET REVENUES AND OPERATING INCOME BY CHANNEL | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
By Channel: | Net Revenues | ||||||||||||||||||
| |||||||||||||||||||
Three Months | Three Months |
| |||||||||||||||||
Ended June 30, | Ended July 2, | Increase / | Constant $ | ||||||||||||||||
2012 | 2011 | (Decrease) | % Change | % Change (a) | |||||||||||||||
Wholesale | $ | 391,973 | $ | 417,251 | $ | (25,278 | ) | -6.1 | % | -2.5 | % | ||||||||
Retail | 171,938 | 174,136 | (2,198 | ) | -1.3 | % | 5.9 | % | |||||||||||
Total | $ | 563,911 | $ | 591,387 | $ | (27,476 | ) | -4.6 | % | 0.0 | % | ||||||||
Operating Income (loss) | |||||||||||||||||||
| |||||||||||||||||||
Three Months | Three Months | ||||||||||||||||||
Ended June 30, | % of Net | Ended July 2, | % of Net | Increase / | |||||||||||||||
2012 | Revenues | 2011 | Revenues | (Decrease) | % Change | ||||||||||||||
Wholesale (b), (c) | $ | 22,152 | 5.7 | % | $ | 42,387 | 10.2 | % | $ | (20,235 | ) | -47.7 | % | ||||||
Retail (b), (c) | 6,203 | 3.6 | % | 18,745 | 10.8 | % | (12,542 | ) | -66.9 | % | |||||||||
Unallocated corporate (c), (d), (e) | 4,445 | na | (8,533 | ) | na | 12,978 | 152.1 | % | |||||||||||
Total | $ | 32,800 | 5.8 | % | $ | 52,599 | 8.9 | % | $ | (19,799 | ) | -37.6 | % | ||||||
(a) Reflects the percentage increase (decrease) in net revenues for the Three Months Ended June 30, 2012, compared to the Three Months Ended July 2, 2011, assuming foreign-based net revenues for the Three Months Ended June 30, 2012 are translated into U.S. dollars using the same foreign currency exchange rates in the calculation of net revenues for the Three Months Ended July 2, 2011. See Schedule 6a. | |||||||||||||||||||
(b) For the Three Months Ended June 30, 2012 and the Three Months Ended July 2, 2011, wholesale operating income includes an intercompany profit of $6,372 and $4,730, respectively, related to certain inventories sold by the retail business to end consumers. Conversely, for the Three Months Ended June 30, 2012 and the Three Months Ended July 2, 2011, retail operating income includes an intercompany charge of $6,372 and $4,730, respectively, related to these inventories. | |||||||||||||||||||
(c) Includes restructuring charges and other exit costs as follows: | |||||||||||||||||||
|
| ||||||||||||||||||
Three Months Ended | Three Months | ||||||||||||||||||
June 30, 2012 | Ended July 2, 2011 | ||||||||||||||||||
Wholesale | $ | 9,246 | $ | 3,334 | |||||||||||||||
Retail | 6,768 | 1,307 | |||||||||||||||||
Unallocated corporate | 198 | 313 | |||||||||||||||||
Total | $ | 16,212 | $ | 4,954 | |||||||||||||||
(d) Includes expense of $346 during the Three Months Ended June 30, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York. These costs are recorded in "unallocated corporate expenses" and not in the Sportswear Group. | |||||||||||||||||||
(e) For the Three Months Ended June 30, 2012 compared to the Three Months Ended July 2, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains. |
Schedule 5a | ||||||||||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||||||||||
NET REVENUES AND OPERATING INCOME BY CHANNEL | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
By Channel: | Net Revenues | |||||||||||||||||||
Six Months | Six Months |
| ||||||||||||||||||
Ended June 30, | Ended July 2, | Increase / | Constant $ | |||||||||||||||||
2012 | 2011 | (Decrease) | % Change | % Change (a) | ||||||||||||||||
Wholesale | $ | 828,491 | $ | 911,335 | $ | (82,844 | ) | -9.1 | % | -7.0 | % | |||||||||
Retail | 350,961 | 342,213 | 8,748 | 2.6 | % | 7.1 | % | |||||||||||||
Total | $ | 1,179,452 | $ | 1,253,548 | $ | (74,096 | ) | -5.9 | % | -3.1 | % | |||||||||
Operating Income (loss) | ||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||
Ended June 30, | % of Net | Ended July 2, | % of Net | Increase / | ||||||||||||||||
2012 | Revenues | 2011 | Revenues | (Decrease) | % Change | |||||||||||||||
Wholesale (b), (c) | $ | 77,048 | 9.3 | % | $ | 118,058 | 13.0 | % | $ | (41,010 | ) | -34.7 | % | |||||||
Retail (b), (c) | 9,681 | 2.8 | % | 26,279 | 7.7 | % | (16,598 | ) | -63.2 | % | ||||||||||
Unallocated corporate (c), (d), (e) | (1,710 | ) | na | (22,084 | ) | na | 20,374 | 92.3 | % | |||||||||||
Total | $ | 85,019 | 7.2 | % | $ | 122,253 | 9.8 | % | $ | (37,234 | ) | -30.5 | % | |||||||
(a) Reflects the percentage increase (decrease) in net revenues for the Six Months Ended June 30, 2012, compared to the Six Months Ended July 2, 2011, assuming foreign-based net revenues for the Six Months Ended June 30, 2012 are translated into U.S. dollars using the same foreign currency exchange rates in the calculation of net revenues for the Six Months Ended July 2, 2011. See Schedule 6b. | ||||||||||||||||||||
(b) For the Six Months Ended June 30, 2012 and the Six Months Ended July 2, 2011, wholesale operating income includes an intercompany profit of $17,132 and $15,218, respectively, related to certain inventories sold by the retail business to end consumers. Conversely, for the Six Months Ended June 30, 2012 and the Six Months Ended July 2, 2011, retail operating income includes an intercompany charge of $17,132 and $15,218, respectively, related to these inventories. | ||||||||||||||||||||
(c) Includes restructuring charges and other exit costs as follows: | ||||||||||||||||||||
|
| |||||||||||||||||||
Six Months Ended | Six Months Ended | |||||||||||||||||||
June 30, 2012 | July 2, 2011 | |||||||||||||||||||
Wholesale | $ | 12,765 | $ | 9,504 | ||||||||||||||||
Retail | 9,991 | 1,307 | ||||||||||||||||||
Unallocated corporate | 46 | 632 | ||||||||||||||||||
Total | $ | 22,802 | $ | 11,443 | ||||||||||||||||
(d) Includes expense of $346 during the Six Months Ended June 30, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York. These costs are recorded in "unallocated corporate expenses" and not in the Sportswear Group. | ||||||||||||||||||||
(e) For the Six Months Ended June 30, 2012 compared to the Six Months Ended July 2, 2011, primarily reflects decreases in restructuring charges, decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains. |
Schedule 6 | ||||||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||||||
NON-GAAP MEASURES | ||||||||||||||||
(Dollars in thousands, excluding per share amounts) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
The Warnaco Group, Inc.'s ("Warnaco Group" and, collectively with its subsidiaries, the "Company") reported financial results are presented in accordance with U.S. generally accepted accounting principles ("GAAP"). The reported operating income, income from continuing operations and diluted earnings per share from continuing operations reflect certain items which affect the comparability of those reported results. Those financial results are also presented on a non-GAAP basis, as defined by Regulation S-K Section 10(e) issued by the Securities and Exchange Commission to exclude the effect of these items. The Company's computation of these non-GAAP measures may vary from others in its industry. These non-GAAP financial measures are not intended to be, and should not be, considered in isolation from, or as a substitute for, the most directly comparable GAAP financial measure to which they are reconciled, as presented in the following table: | ||||||||||||||||
Three Months Ended* | Six Months Ended* | |||||||||||||||
June 30, | July 2, | June 30, | July 2, | |||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
Operating income, as reported (GAAP) | $ | 32,800 | $ | 52,599 | $ | 85,019 | $ | 122,253 | ||||||||
Restructuring charges and other exit costs (a) | 16,212 | 4,954 | 22,802 | 11,443 | ||||||||||||
Pension income (b) | (55 | ) | (309 | ) | (109 | ) | (621 | ) | ||||||||
Operating income, as adjusted (non-GAAP) (e) | $ | 48,957 | $ | 57,244 | $ | 107,712 | $ | 133,075 | ||||||||
Income from continuing operations attributable to Warnaco Group common | ||||||||||||||||
shareholders, as reported (GAAP) | $ | 9,625 | $ | 45,566 | $ | 42,507 | $ | 90,098 | ||||||||
Restructuring charges and other exit costs, net of income tax (a) | 11,755 | 3,402 | 16,424 | 7,720 | ||||||||||||
Pension income, net of income tax (b) | (21 | ) | (184 | ) | (42 | ) | (381 | ) | ||||||||
Lejaby loan receivable (c) | 12,040 | - | 12,040 | - | ||||||||||||
Taxation adjustment (d) | (3,204 | ) | (11,788 | ) | (3,346 | ) | (10,137 | ) | ||||||||
Income from continuing operations attributable to Warnaco Group common | ||||||||||||||||
shareholders, as adjusted (non-GAAP) (e) | $ | 30,195 | $ | 36,996 | $ | 67,583 | $ | 87,300 | ||||||||
Diluted earnings per share from continuing operations attributable to Warnaco Group common | ||||||||||||||||
shareholders, as reported (GAAP) | $ | 0.23 | $ | 1.01 | $ | 1.01 | $ | 1.99 | ||||||||
Restructuring charges and other exit costs, net of income tax (a) | 0.28 | 0.07 | 0.39 | $ | 0.16 | |||||||||||
Pension income, net of income tax (b) | - | - | - | - | ||||||||||||
Lejaby loan receivable (c) | 0.29 | - | 0.29 | - | ||||||||||||
Taxation adjustment (d) | (0.08 | ) | (0.26 | ) | (0.08 | ) | (0.22 | ) | ||||||||
Diluted earnings per share from continuing operations attributable to Warnaco | ||||||||||||||||
Group common shareholders, as adjusted (non-GAAP) (e) | $ | 0.72 | $ | 0.82 | $ | 1.61 | $ | 1.93 | ||||||||
*See footnotes on following page. | ||||||||||||||||
Schedule 6 (cont.) | ||||||||||||||||
THE WARNACO GROUP, INC. | ||||||||||||||||
NON-GAAP MEASURES | ||||||||||||||||
(Dollars in thousands, excluding per share amounts) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
a) For all periods presented, this adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of restructuring charges and other exit costs. The income tax rates used to compute the income tax effect related to this adjustment correspond to the local statutory tax rates of the reporting entities that incurred restructuring charges and other exit costs. | ||||||||||||||||
b) For all periods presented, this adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of pension income. The income tax rates used to compute the income tax effect related to this adjustment correspond to the local statutory tax rates of the reporting entities that recognized pension income. | ||||||||||||||||
c) For the Three and Six Months Ended June 30, 2012, this adjustment seeks to present income from continuing operations attributable to Warnaco Group common shareholders and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of the adjustments to the loan receivable related to the Company's discontinued Lejaby business. These adjustments were recorded in other income/expense within income from continuing operations on the Company's Consolidated Condensed Financial Statements. The reporting entity that recorded this adjustment has a 0% local statutory tax rate. | ||||||||||||||||
d) For the Three and Six Months Ended June 30, 2012 and the Three and Six Months Ended July 2, 2011, this adjustment reflects an additional amount required in order to present income from continuing operations attributable to Warnaco Group common shareholders and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders at the Company's forecasted normalized tax rates for the fiscal year ending December 29, 2012 ("Fiscal 2012") (32.5%) and the fiscal year ended December 31, 2011 ("Fiscal 2011") (33.2%), respectively. The Company's forecasted normalized tax rates for both Fiscal 2012 and Fiscal 2011 exclude the effects of restructuring charges and other exits costs, pension income and certain tax adjustments related to either changes in estimates in prior period tax provisions or adjustments for certain discrete tax items. Adjustments for discrete items reflect the federal, state and foreign tax effects related to: 1) income taxes associated with legal entity reorganizations and restructurings; 2) tax provision or benefit resulting from statute expirations or the finalization of income tax examinations; and 3) other adjustments not considered part of the Company's core business activities. In addition, this adjustment for Fiscal 2011 excludes the effect of a benefit of $10,900 recorded during the Three and Six Months Ended July 2, 2011 associated with the recognition of net operating losses in a foreign jurisdiction resulting from the successful petition of that country's taxing authority. | ||||||||||||||||
e) The Company believes it is valuable for users of its financial statements to be made aware of the non-GAAP financial information, as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis and to make operating and strategic decisions. Management believes such non-GAAP measures will also enhance users' ability to analyze trends in the Company's business. In addition, the Company uses performance targets based on non-GAAP operating income and diluted earnings per share from continuing operations as a component of the measurement of incentive compensation. |
Schedule 6a | ||||||||||
THE WARNACO GROUP, INC. | ||||||||||
SUPPLEMENTAL SCHEDULE | ||||||||||
NET REVENUES ON A CONSTANT CURRENCY BASIS | ||||||||||
(Dollars in thousands) | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended June 30, 2012 | ||||||||||
GAAP | Impact of Foreign | Non-GAAP (Note 1) | ||||||||
As Reported | Currency Exchange | Constant Currency | ||||||||
By Segment: | ||||||||||
Sportswear Group | $ | 265,028 | $ | (17,712 | ) | $ | 282,740 | |||
Intimate Apparel Group | 212,126 | (8,223 | ) | 220,349 | ||||||
Swimwear Group | 86,757 | (1,277 | ) | 88,034 | ||||||
Net revenues | $ | 563,911 | $ | (27,212 | ) | $ | 591,123 | |||
By Region: | ||||||||||
United States | $ | 247,827 | $ | - | $ | 247,827 | ||||
Europe | 107,728 | (11,254 | ) | 118,982 | ||||||
Asia | 116,432 | (2,964 | ) | 119,396 | ||||||
Mexico and Central and South America | 61,978 | (11,531 | ) | 73,509 | ||||||
Canada | 29,946 | (1,463 | ) | 31,409 | ||||||
Total | $ | 563,911 | $ | (27,212 | ) | $ | 591,123 | |||
Note 1: | ||||||||||
The Company 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 when it translates its foreign revenues into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. 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 uses constant currency information to provide a framework to assess how its businesses performed excluding the effects of changes in foreign currency exchange rates. Management believes this information is useful to investors to facilitate comparisons of operating results and better identify trends in the Company's businesses. | ||||||||||
To calculate the increase in segment revenues on a constant currency basis, net revenues for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period). | ||||||||||
These constant currency performance measures should be viewed in addition to, and not in isolation from, or as a substitute for, the Company's operating performance measures calculated in accordance with GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies. |
Schedule 6b | ||||||||||
THE WARNACO GROUP, INC. | ||||||||||
SUPPLEMENTAL SCHEDULE | ||||||||||
NET REVENUES ON A CONSTANT CURRENCY BASIS | ||||||||||
(Dollars in thousands) | ||||||||||
(Unaudited) | ||||||||||
Six Months Ended June 31, 2012 | ||||||||||
GAAP | Impact of Foreign | Non-GAAP* | ||||||||
As Reported | Currency Exchange | Constant Currency | ||||||||
By Segment: | ||||||||||
Sportswear Group | $ | 565,831 | $ | (22,321 | ) | $ | 588,152 | |||
Intimate Apparel Group | 435,003 | (10,579 | ) | 445,582 | ||||||
Swimwear Group | 178,618 | (1,951 | ) | 180,569 | ||||||
Net revenues | $ | 1,179,452 | $ | (34,851 | ) | $ | 1,214,303 | |||
By Region: | ||||||||||
United States | $ | 496,236 | $ | - | $ | 496,236 | ||||
Europe | 254,040 | (15,680 | ) | 269,720 | ||||||
Asia | 254,195 | (1,885 | ) | 256,080 | ||||||
Mexico and Central and South America | 115,081 | (15,294 | ) | 130,375 | ||||||
Canada | 59,900 | (1,992 | ) | 61,892 | ||||||
Total | $ | 1,179,452 | $ | (34,851 | ) | $ | 1,214,303 | |||
* See Note 1 on Schedule 6a. |
Schedule 7 | ||||||||
THE WARNACO GROUP, INC. | ||||||||
SUPPLEMENTAL SCHEDULE - FISCAL 2012 OUTLOOK | ||||||||
(Unaudited) | ||||||||
NET REVENUE GUIDANCE | Percentages | |||||||
Estimated increase in net revenues for Fiscal 2012 compared to levels in Fiscal 2011 | ||||||||
GAAP basis | -2.00% | to | 0.00% | |||||
Non-GAAP basis (constant currency) (a) | 2.00% | to | 4.00% | |||||
EARNINGS PER SHARE GUIDANCE (based on recent exchange rates) | U.S. Dollars | |||||||
Diluted income per common share from continuing operations | ||||||||
GAAP basis (assuming minimal pension expense / income) | $ 2.94 | to | $ 3.00 | |||||
Restructuring charges and other exit costs (b) | 0.77 | to | 0.86 | |||||
Adjustment of Lejaby loan receivable (c) | 0.29 | to | 0.29 | |||||
As adjusted (non-GAAP basis) (d) | $ 4.00 | to | $ 4.15 | |||||
(a) | To calculate the expected increase in net revenues on a constant currency basis, expected net revenues for Fiscal 2012 for entities reporting in currencies other than the U.S. dollar have been translated into U.S. dollars at the average exchange rates in effect during Fiscal 2011. | |||||||
(b) | Reflects between $32 million to $35 million of estimated restructuring charges (net of an income tax benefit of between $13 million and $15 million) primarily related to the consolidation of certain international operations, the reorganization of the Company's management structure, the closure of facilities or retail stores, the exit of CKJ.com and the transition of the Company's CK/Calvin Klein "bridge" businesses back to Calvin Klein, Inc. | |||||||
(c) | Reflects $12.0 million of expenses related to the adjustment of the loan receivable in connection with the Company's Lejaby discontinued business. The reporting entity that recorded this adjustment has a 0% local statutory tax rate. Such adjustment was recorded in other income/expense within income from continuing operations. | |||||||
(d) | The Company believes it is useful for users of its financial statements to be made aware of the "As Adjusted" (non-GAAP) forecasted diluted income per common share from continuing operations as this is one of the measures used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis. The Company believes that this non-GAAP measure will also enhance users' ability to analyze trends in the Company's business. In addition, the Company uses performance targets based, in part, on this non-GAAP measure as a component of the measurement of employee incentive compensation. Management does not, nor should investors, consider this non-GAAP financial measure in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. |
Investor Relations:
The Warnaco Group, Inc.
Deborah Abraham,
212-287-8289
Vice President, Investor Relations