UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) June 9, 2005
POLO RALPH LAUREN CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
001-13057 13-2622036
- --------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
650 MADISON AVENUE, NEW YORK, NEW YORK 10022
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 318-7000
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On June 10, 2005, Polo Ralph Lauren Corporation (the "Company")
reported its results of operations for its fiscal quarter and fiscal year ended
April 2, 2005. A copy of the press release issued by the Company concerning the
foregoing results is furnished herewith as Exhibit 99.1 and is incorporated
herein by reference.
The information in this Form 8-K, including the accompanying exhibit,
is being furnished under Item 2.02 and shall not be deemed to be "filed" for the
purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange
Act"), or otherwise subject to the liability of such section, nor shall such
information be deemed incorporated by reference in any filing under the
Securities Act of 1933 or the Exchange Act, regardless of the general
incorporation language of such filing, except as shall be expressly set forth by
specific reference in such filing.
ITEM 4.02. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW.
(a) On June 9, 2005, the Company's management and Audit Committee
concluded that the Company will restate certain prior period financial
statements for the following items:
1. Accounting for Leasing Transactions
On February 7, 2005, the Office of the Chief Accountant of the
Securities and Exchange Commission ("SEC") issued a letter to the
American Institute of Certified Public Accountants expressing its views
regarding certain operating lease accounting issues and their
application under accounting principles generally accepted in the
United States of America. The Company's management subsequently
initiated a review of its lease-related accounting practices and
determined that the manner in which it accounts for construction
allowances and the period over which it recognizes rent expense were
not in accordance with Financial Accounting Standards Board ("FASB")
Technical Bulletin No. 88-1 "Issues Relating to Accounting for Leases"
("FTB No. 88-1").
With respect to construction allowances, FTB No. 88-1 states that lease
incentives should be treated by the lessee as a reduction of rental
expense and amortized on a straight-line basis over the term of the
lease in accordance with FTB No. 85-3 "Accounting for Operating Leases
with Scheduled Rent Increases." Accordingly, the restatement will
reflect long-term liabilities for the unamortized portion of
construction allowances (deferred lease incentives) which are amortized
over the lease term on a straight-line basis as a reduction of rent
expense. The Company had previously recorded these allowances as a
reduction of property and
equipment and amortized them over the lease term as a reduction of
depreciation expense.
In determining the proper period over which to recognize rent expense
with free rent periods and/or rent escalation, FTB No. 88-1 considers
the lessee's possession or right to control the physical use of the
property, and requires that straight-line rent expense begin when the
lessee takes possession of or controls the use of the space. The
Company had previously recorded straight-line rent expense beginning on
the store opening date, as the Company believed that "possession" under
FTB No. 88-1 occurred on the date it took physical control of the space
through occupancy, without considering the construction build-out
period.
The impact of the construction allowance restatement on the Company's
April 3, 2004 consolidated balance sheet is an increase in property and
equipment, net of approximately $11.4 million and an increase in
deferred lease costs of approximately $20.6 million. The impact on the
Company's selling general and administrative costs is an increase of
approximately $2.9 million for fiscal 2004, a decrease of approximately
$2.4 million for fiscal 2003 and a decrease of $0.1 million for 2002.
2. R L Media Consolidation
In February 2000 Ralph Lauren Media LLC, a joint venture with National
Broadcasting Company, Inc. and certain affiliated companies ("NBC"),
was formed. Under this 30-year joint venture agreement, Ralph Lauren
Media is owned 50% by the Company and 50% by NBC. The Company has used
the equity method of accounting for this investment since inception.
The Company has determined, upon subsequent review and with the benefit
of addition interpretations of under FASB Interpretation 46R ("FIN
46R"), issued on December 24, 2003, that consolidation of Ralph Lauren
Media into the Company's financial statements was required as of April
3, 2004. The impact on the Company's balance sheet as of April 3, 2004
is to increase assets by approximately $18 million and liabilities by
approximately $9.0 million. There was no effect on prior years'
reported earnings.
The Company will restate results for fiscal 2001 through fiscal 2004
and the first three quarters of fiscal 2005. Accordingly, the financial
statements and independent auditors' reports contained in the Company's filings
with the Securities and Exchange Commission for these periods should no longer
be relied upon. These restatements will be reflected in the Company's Annual
Report on Form 10-K for fiscal 2005, which it expects to file by July 1, 2005.
The Audit Committee and management of the Company discussed with the
Company's independent registered public accounting firm the matters disclosed in
this Item 4.02(a) of this Form 8-K.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable
(b) Pro forma financial information.
Not applicable
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
----------- -----------
99.1 Press release, dated June 10, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
POLO RALPH LAUREN CORPORATION
Date: June 10, 2005 By: /s/ Tracey T. Travis
-----------------------------------
Name: Tracey T. Travis
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
- -------------
99.1 Press release, dated June 10, 2005
EXHIBIT 99.1
------------
Investor Contact: Denise Gillen 212.318.7516
Media Contact: Nancy Murray 212.813.7862
Polo Ralph Lauren Reports Fourth Quarter and Fiscal Year 2005 Results
Company Confirms EPS Outlook for Fiscal Year 2006 in Range of $2.75 to $2.85
New York (June 10, 2005) - Polo Ralph Lauren Corporation (NYSE: RL) today
reported net income of $23.4 million, or $0.22 per diluted share, for the fourth
quarter of Fiscal 2005 compared to net income of $76.4 million, or $0.75 per
diluted share, for the fourth quarter of Fiscal 2004. For Fiscal Year 2005, net
income was $190.4 million, or $1.83 per diluted share, compared to net income of
$169.2 million, or $1.68 per diluted share, for Fiscal Year 2004. The Fiscal
Year 2004 results presented above have been restated to reflect the accounting
for leases as discussed below in greater detail.
Adjusted net income was $85.1 million, or $0.81 per diluted share, for the
fourth quarter of Fiscal 2005 compared to $80.4 million, or $0.79 per diluted
share, for the fourth quarter of Fiscal 2004. Adjusted net income was $257.2
million, or $2.47 per diluted share, for Fiscal Year 2005 compared to $184.7
million, or $1.83 per diluted share, for Fiscal Year 2004. Adjusted results
exclude a litigation reserve, a reserve associated with alleged breach of the
company's retail computer systems, the foreign currency effect of certain
transactions involving our European operations, an adjustment in accounting for
leases, the results of Ralph Lauren Media, and restructuring charges.
The Company reports all financial results in accordance with U.S. Generally
Accepted Accounting Principles (GAAP), but management believes that the
supplemental presentation of results adjusted to exclude these items provides
investors with useful information regarding the Company's core business results.
The Company does not suggest that investors should consider adjusted results in
isolation from or as a substitute for financial information prepared in
accordance with GAAP. For a full analysis of the adjustments, please refer to
the reconciliation tables of GAAP results to adjusted results.
"Our results for Fiscal Year 2005 underscore the strength of our unique
business, which continues to deliver strong growth and profitability," said
Ralph Lauren, Chairman and Chief Executive Officer. "We are successful because
we remain consistent to our vision. Our company has never been stronger and we
continue to be a leader across all products, regions and customer
segments."
"We executed well strategically and financially this year," said Roger Farah,
President and Chief Operating Officer. "Our company focus continues to be on
generating strong operating cash flow by being in control of the growth of our
brands and by fine tuning our global operations."
1
2
FOURTH QUARTER AND FULL YEAR FISCAL 2005 INCOME STATEMENT REVIEW
NET REVENUES Net revenues for the fourth quarter increased 10.2% to $902.2
million compared to $818.8 million in the fourth quarter last year. Our
wholesale revenues were $543.0 million, up 10.0% over last year, driven by the
inclusion of childrenswear in our wholesale segment and increases in Europe and
our womenswear brands. Wholesale revenues also reflect a decrease in our
menswear as we continue to strategically reposition the Polo brand into more
appropriate distribution channels and reduce sales into the secondary market.
Based on a 13-week fourth quarter in Fiscal 2005, reported retail sales grew
12.2% to $291.5 million compared to $259.9 million in the 14-week fourth quarter
last year, with comparable store sales down 4.2%. We believe it is more relevant
to discuss comparable store sales excluding last year's 14th week and on that
basis comparable store sales increased 4.1% in the quarter. Licensing revenues
increased 3.5% reflecting the positive performance of our men's Chaps line
domestically and strength in our international licensing, which more than offset
the absence of royalty income associated with the previously licensed
childrenswear line.
Net revenues for the full year increased 24.7% to $3.305 billion compared to
$2.650 billion last year. Our wholesale revenues were $1.712 billion, up 41.4%
over last year, driven by our womenswear brands, childrenswear and increases in
Europe. Wholesale revenues also reflect a decrease in our menswear as we
continue to strategically reposition the Polo brand into more appropriate
distribution channels and reduce sales into the secondary market. Based on a
52-week year in Fiscal 2005, reported retail sales grew 15.2% to $1.349 billion
compared to $1.170 billion in the 53-week year last year, with comparable store
sales up 4.4%. We believe it is more relevant to discuss comparable store sales
excluding last year's additional week and on that basis comparable store sales
increased 6.3% in Fiscal 2005. Licensing revenues decreased 9.0% reflecting the
absence of the Lauren and childrenswear lines, partially offset by the positive
performance of our Chaps for men line in the United States and strength in our
international licensing.
GROSS PROFIT For the fourth quarter of Fiscal 2005, gross profit was $476.9
million, an increase of 22%, compared to $391.0 million in the fourth quarter of
Fiscal 2004. The increased gross profit was generated primarily by the addition
of childrenswear and the inclusion of Ralph Lauren Media, as well as strong
increases in Europe. Gross profit also reflects improved performance in our
Ralph Lauren retail stores, both in the U.S. and Europe. Gross margin improved
510 basis points in the fourth quarter to 52.9% of revenues compared to 47.8%
last year, reflecting improvements in both our wholesale and retail segments.
For the full year Fiscal 2005, gross profit was $1.685 billion, an increase of
27.3%, compared to $1.323 billion in Fiscal 2004. The increased gross profit was
generated primarily by our wholesale segment, reflecting the addition of Lauren,
childrenswear and Ralph Lauren Media, as well as increases in Europe. Gross
profit also reflects improved performance in our retail segment partially offset
by a decrease in our licensing royalty. Gross margin improved 110 basis points
to 51% of net revenues compared to 49.9% last year, reflecting improvements in
both our wholesale and retail segments.
SG&A EXPENSES In the fourth quarter, operating expenses were $435.4 million\
and included the following:
o a charge of $100 million associated with the Jones Apparel litigation
following the Appellate Division's March 24, 2005 decision.
o a charge of $6.2 million associated with alleged breach of the
company's retail computer systems including penalties, monitoring
expenses and credit card re issuance costs and other related claims.
Although we have taken a charge we plan to vigorously contest both the
appropriateness and amount of these penalties and claims and to
continue to explore possible claims against others.
o expense of $1.3 million related to an adjustment in accounting for
leases in the fourth quarter of Fiscal 2005 and $0.1 million in the
fourth quarter of Fiscal 2004. This adjustment to our accounting for
leases requires restatement of prior periods reflecting a change in the
timing of rent expense recognition at lease inception from current
practice of recording rent expense beginning at the opening date of a
location. Additionally, the restatement will include an adjustment to
our accounting for tenant allowances.
o a restructuring charge of $0.5 million in the fourth quarter of Fiscal
2005 and $3.6 million in the fourth quarter of Fiscal 2004 related to
operational consolidation efforts in Europe.
Excluding these items, operating expenses in the fourth quarter were $327.4
million compared to $262.6 million in the fourth quarter last year. The increase
in operating expenses was driven primarily by the inclusion of expenses for
childrenswear and Ralph Lauren Media, as well as increased spending in Europe to
grow our wholesale and retail businesses there, increased spending in the United
States associated with the expansion of our specialty retail stores, including
Rugby, and costs associated with the newly required implementation of Sarbanes
Oxley.
For the full year fiscal 2005, operating expenses were $1.385 billion and
included the following:
o a charge of $100 million associated with the Jones Apparel litigation
o a charge of $6.2 million associated with the alleged breach of the
company's retail computer systems.
o expense of $5.8 million related to adjustments in accounting for leases
in Fiscal 2005 and $2.9 million in Fiscal 2004.
o a restructuring charge of $2.3 million in Fiscal 2005 and $19.6 million
in Fiscal 2004 related to operational consolidation efforts in Europe.
Excluding these items, operating expenses were $1.270 billion compared to $1.029
billion last year. The increase in operating expenses was driven primarily by
the inclusion of expenses for childrenswear, Lauren, and Ralph Lauren Media, as
well as higher spending in Europe to grow our wholesale and retail businesses
there and increased spending in the United States associated with the expansion
of our specialty retail stores.
OPERATING INCOME Operating income for the fourth quarter decreased 66.7% to
$41.5 million compared to $124.7 million in the fourth quarter last year.
Operating income, excluding the $108.0 million of above listed items, was $149.5
million, compared to $128.4 million, excluding the $3.7 million of the above
listed items last year, representing a gain of 16%.
Operating income for the full year increased 10.6% to $299.7 million compared to
$270.9 million last year. Operating income, excluding the $114.3 million of
above listed items, was $414.0 million, compared to $293.4 million, excluding
the $22.5 million of above listed items last year, which represents a 42%
increase.
CONSOLIDATION OF RALPH LAUREN MEDIA
In February 2000 we announced the formation of Ralph Lauren Media, a joint
venture with National Broadcasting Company, Inc. and certain affiliated
companies ("NBC") to bring the Ralph Lauren lifestyle to consumers via multiple
media platforms, including the Internet (primarily Polo.com). Under this 30-year
joint venture agreement, Ralph Lauren Media is owned 50% by us and 50% by NBC.
The Company has used the equity method of accounting for this investment since
inception. At the end of the fourth quarter of Fiscal 2005 the Company
determined that under FASB Interpretation 46R, consolidation of Ralph Lauren
Media into its financial statements was required as of April 3, 2004. The
presented balance
3
4
sheet data as of April 3, 2004, has been restated to include the assets and
liabilities of Ralph Lauren Media. There was no effect on prior years' reported
earnings.
RECENT DEVELOPMENTS
o In the fourth quarter comparable retail store sales, based on a 13-week
fourth quarter in Fiscal 2005 and Fiscal 2004, increased 4.1% overall.
Comparable retail store sales increased 3.1% at Ralph Lauren stores and
5.6% in our outlet stores and decreased 1.9% at Club Monaco stores.
Comparable retail store sales increased 6.3% overall for the full
fiscal year, with Ralph Lauren stores increasing 8.2%, outlet stores
increasing 5.7% and Club Monaco stores increasing 5.2%.
o Our strategic store expansion plan continues on track with the opening
of twenty stores globally during the fiscal year. In the fourth quarter
we continued the roll-out of our Rugby stores, a new concept store with
a full lifestyle collection targeting 18 to 25 year old men and women
customers, by opening stores in Chapel Hill, NC, and Charlottesville,
VA, bringing the total to three Rugby stores opened this year.
o We continued to expand our executive talent with the addition of Scott
Bowman as President, International Business Development, with
responsibility for our owned and licensed businesses in Japan, Far East
Asia, Australia and South and Central America and the promotion of
Susie McCabe to President, Factory Stores, with global responsibility
for the operations of our factory outlet stores in the United States
and internationally.
o As part of our development of a global luxury accessories business, we
signed a definitive agreement to acquire Ralph Lauren Footwear Co.,
Inc., our global licensee for footwear for men, women and children, for
$110 million in cash. We expect the transaction to close later this
month.
o Building on the positive customer response to our expanded lifestyle
Chaps for men line, we plan to design, develop, produce and deliver
Chaps for women, a new classic sportswear look for Missy sizes, and
Chaps for boys, sizes four to 20. In addition, we have entered into a
one-year exclusive arrangement with Kohl's to sell Chaps for women and
Chaps for boys in all of their locations beginning in the spring of
2006.
FISCAL 2005 FORM 10-K
The Company will restate its financial statements for Fiscal 2001 through Fiscal
2004 and the first three quarters of Fiscal 2005 to reflect the adjustments to
its accounting for leases and Ralph Lauren Media. As a result, these financial
statements and the independent auditor reports should no longer be relied upon.
The Company intends to defer its Form 10-K filing to July 1, 2005.
STORE COUNT
At the end of the fourth quarter, we operated 278 stores, with 2.2 million
square feet, compared to 261 stores, with 2.0 million square feet, at the end of
the fourth quarter last year. Our retail group consisted of 58 Ralph Lauren
stores, three Rugby stores, 69 Club Monaco stores, 124 Polo factory outlet
stores, 19 Polo Jeans Co. factory outlet stores, and five Club Monaco outlet
stores. During the fourth quarter we opened five stores and closed five.
FISCAL 2006 OUTLOOK
The company reiterated that for Fiscal Year 2006 earnings per share are expected
to be in the range of $2.75 to $2.85. These projected results include the
expected dilution from the acquisition of Ralph Lauren Footwear, the negative
effect of the adjustment in accounting for leases and the contribution of Ralph
Lauren Media. The Company projects mid-single digit percent consolidated revenue
growth, reflecting
approximately low single digit growth in wholesale sales, high single digit
growth in retail sales and flat licensing royalty. Gross Profit is expected to
expand significantly while S, G & A is expected to increase due to the inclusion
of footwear in the wholesale segment. Operating margins are expected to improve
approximately 100 basis points. The consolidated tax rate is expected to be
35.5% and the Company expects to have approximately 106 million shares
outstanding.
The Company expects the earnings results of the first half of Fiscal 2006 to
exceed the first half of Fiscal 2005 and the second half of Fiscal 2006 to
exceed the second half of Fiscal 2005. As a percentage of annual profits, the
first quarter of the year, or the June-end quarter, is the smallest quarter due
to less wholesale shipments for the summer compared to other seasons. The
Company expects the profits in the second quarter to be the largest in the year.
For the first quarter of Fiscal 2006, the Company expects consolidated revenues
to increase more than 20%, reflecting more than 25% growth in wholesale sales,
10% growth in retail sales including Ralph Lauren Media and a slight decrease in
licensing royalty. Operating income is expected to increase significantly with
operating margin almost doubling last year's. The Company expects the tax rate
to be 35.5% and shares outstanding to be between 105 million and 106 million
shares.
CHANGE IN SEGMENT REPORTING
The Company operates in three integrated business segments - wholesale, retail
and licensing - and has historically fully allocated corporate overhead expenses
to each segment. The Company is changing its corporate overhead allocations to
reflect how management presently views its business. The Company is finalizing
the allocations for its Fiscal 2005 segment reporting and will include such
information in its 10-K to be filed by July 1, 2005. The Company also will
report the previous years in a comparable manner.
CONFERENCE CALL
As previously announced, we will host a conference call and live online
broadcast today at 9:00 A.M. Eastern. The dial-in number is 1-719-457-2679. The
online broadcast is accessible 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 37 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 by Ralph Lauren", "Ralph Lauren Purple Label", "Ralph Lauren",
"Black Label", "Blue Label", "Lauren by Ralph Lauren", "Polo Jeans Co.", "RRL",
"RLX", "Rugby", "RL Childrenswear", "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.
THIS PRESS RELEASE AND ORAL STATEMENTS MADE FROM TIME TO TIME BY REPRESENTATIVES
OF THE COMPANY CONTAIN CERTAIN "FORWARD-LOOKING STATEMENTS" CONCERNING CURRENT
EXPECTATIONS ABOUT THE COMPANY'S FUTURE RESULTS AND CONDITION, INCLUDING SALES,
STORE OPENINGS, GROSS MARGINS, EXPENSES AND EARNINGS. ACTUAL RESULTS MIGHT
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. AMONG
THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO MATERIALLY DIFFER INCLUDE, AMONG
OTHERS, CHANGES IN THE COMPETITIVE MARKETPLACE, INCLUDING THE INTRODUCTION OF
NEW PRODUCTS OR PRICING CHANGES BY OUR COMPETITORS, CHANGES IN THE ECONOMY AND
OTHER EVENTS LEADING TO A REDUCTION IN DISCRETIONARY CONSUMER SPENDING; 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 CHANGES IN SOCIAL, POLITICAL, ECONOMIC AND OTHER CONDITIONS
AFFECTING FOREIGN OPERATIONS OR SOURCING (INCLUDING
5
6
FOREIGN EXCHANGE FLUCTUATIONS) AND THE POSSIBLE ADVERSE IMPACT OF CHANGES IN
IMPORT RESTRICTIONS; RISKS ASSOCIATED WITH UNCERTAINTY RELATING TO THE COMPANY'S
ABILITY TO IMPLEMENT ITS GROWTH STRATEGIES OR ITS ABILITY TO SUCCESSFULLY
INTEGRATE ACQUIRED BUSINESSES; RISKS ARISING OUT OF LITIGATION OR TRADEMARK
CONFLICTS, AND OTHER RISK FACTORS IDENTIFIED IN THE COMPANY'S FORM 10-K, 10-Q
AND 8-K REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS TO
REFLECT SUBSEQUENT EVENTS OR CIRCUMSTANCES.
Attached are the Consolidated Statements of Income and Net Revenues and Income
from Operations for the three-month and twelve-month periods ended April 2, 2005
and April 3, 2004, as restated, and the Consolidated Balance Sheets as of April
2, 2005 and April 3, 2004, as restated.
# # # #
Tables Follow
###
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
TWELVE MONTHS ENDED
------------------------------
APRIL 2, APRIL 3,
2005 2004
-------------- --------------
AS RESTATED
Wholesale Net Sales $ 1,712,040 $ 1,210,397
Retail Net Sales 1,348,645 1,170,447
-------------- --------------
NET SALES 3,060,685 2,380,844
Licensing Revenue 244,730 268,810
-------------- --------------
NET REVENUES 3,305,415 2,649,654
Cost of Goods Sold 1,620,869 1,326,335
-------------- --------------
GROSS PROFIT 1,684,546 1,323,319
Depreciation Expense 106,850 85,635
Other SG&A Expenses 1,275,670 947,227
Restructuring Charge 2,341 19,566
-------------- --------------
TOTAL SG&A EXPENSES 1,384,861 1,052,428
Income From Operations 299,685 270,891
Foreign Currency (Gains) Losses (6,072) 1,864
Interest Expense, net 6,391 10,000
-------------- --------------
Income Before Income Taxes and Other (Income) Expense 299,366 259,027
Provision for Income Taxes 107,336 93,875
-------------- --------------
Income after Tax 192,030 165,152
Other Expense (Income), net (A) 1,605 (4,077)
-------------- --------------
NET INCOME $ 190,425 $ 169,229
============== ==============
NET INCOME PER SHARE - BASIC $ 1.88 $ 1.71
============== ==============
NET INCOME PER SHARE - DILUTED $ 1.83 $ 1.68
============== ==============
Weighted Average Shares Outstanding - Basic 101,519,000 98,977,000
============== ==============
Weighted Average Shares & Share Equivalents Outstanding - Diluted 104,010,000 100,960,000
============== ==============
(A) Includes Equity Investment Income of $6,411 and $5,497 net of
Minority Interest Expense of $3,815 and $1,420 for FY05 and FY04,
respectively. Also included in FY05 is $4,201 of Minority Interest
Expense for RL Media.
The following is a reconciliation of Net Income to Adjusted Net Income:
TWELVE MONTHS ENDED
------------------------------
APRIL 2, APRIL 3,
2005 2004
-------------- --------------
AS RESTATED
Net Income $ 190,425 $ 169,229
Other Expense (Income), net 1,605 (4,077)
Provision for Income Taxes 107,336 93,875
Restructuring Charge 2,341 19,566
Foreign Currency (Gains) Losses (6,072) 1,864
Litigation Reserve 100,000 -
Alleged Breach of Retail Computer Systems Reserve 6,200 -
Lease Adjustments 5,829 2,905
Ralph Lauren Media Consolidation Adjustment (4,243) -
-------------- --------------
Revised Income Before Income Taxes 403,421 283,362
Revised Provision for Income Taxes 144,644 102,694
Other Expense (Income), net 1,605 (4,077)
-------------- --------------
Net Income Excluding Restructuring, Foreign Currency (Gains) Losses,
Litigation Reserve, Alleged Breach of Retail Computer Systems
Reserve, Lease Adjustments and RL Media Consolidation $ 257,172 $ 184,745
============== ==============
ADJUSTED NET INCOME PER SHARE - BASIC $ 2.53 $ 1.87
============== ==============
ADJUSTED NET INCOME PER SHARE - DILUTED $ 2.47 $ 1.83
============== ==============
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
------------------------------
APRIL 2, APRIL 3,
2005 2004
-------------- --------------
AS RESTATED
Wholesale Net Sales $ 543,009 $ 493,519
Retail Net Sales 291,499 259,863
-------------- --------------
NET SALES 834,508 753,382
Licensing Revenue 67,714 65,399
-------------- --------------
NET REVENUES 902,222 818,781
Cost of Goods Sold 425,313 427,782
-------------- --------------
GROSS PROFIT 476,909 390,999
Depreciation Expense 32,826 24,791
Other SG&A Expenses 402,118 237,857
Restructuring Charge 494 3,636
-------------- --------------
TOTAL SG&A EXPENSES 435,438 266,284
Income From Operations 41,471 124,715
Foreign Currency (Gains) Losses (2,739) 2,395
Interest Expense, net 733 2,376
-------------- --------------
Income Before Income Taxes and Other Expense 43,477 119,944
Provision for Income Taxes 17,349 43,224
-------------- --------------
Income after Tax 26,128 76,720
Other Expense, net (A) 2,732 274
-------------- --------------
NET INCOME $ 23,396 $ 76,446
============== ==============
NET INCOME PER SHARE - BASIC $ 0.23 $ 0.77
============== ==============
NET INCOME PER SHARE - DILUTED $ 0.22 $ 0.75
============== ==============
Weighted Average Shares Outstanding - Basic 102,506,000 99,699,000
============== ==============
Weighted Average Shares & Share Equivalents Outstanding - Diluted 105,341,000 102,265,000
============== ==============
(A) Includes Equity Investment Income of $629 and $20 net of Minority
Interest Expense of $608 and $295 for FY05 and FY04, respectively.
Also included in FY05 is $2,753 of Minority Interest Expense for RL
Media.
The following is a reconciliation of Net Income to Adjusted Net Income:
THREE MONTHS ENDED
------------------------------
APRIL 2, APRIL 3,
2005 2004
-------------- --------------
AS RESTATED
Net Income $ 23,396 $ 76,446
Other Expense (Income), net 2,732 274
Provision for Income Taxes 17,349 43,224
Restructuring Charge 494 3,636
Foreign Currency (Gains) Losses (2,739) 2,395
Litigation Reserve 100,000 -
Alleged Breach of Retail Computer Systems Reserve 6,200 -
Lease Adjustments 1,253 140
Ralph Lauren Media Consolidation Adjustment (2,607) -
-------------- --------------
Revised Income Before Income Taxes 146,078 126,115
Revised Provision for Income Taxes 58,291 45,448
Other Expense (Income), net 2,732 274
-------------- --------------
Net Income Excluding Restructuring, Foreign Currency (Gains) Losses,
Litigation Reserve, Alleged Breach of Retail Computer Systems
Reserve, Lease Adjustments and RL Media Consolidation $ 85,055 $ 80,393
============== ==============
ADJUSTED NET INCOME PER SHARE - BASIC $ 0.83 $ 0.81
============== ==============
ADJUSTED NET INCOME PER SHARE - DILUTED $ 0.81 $ 0.79
============== ==============
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
APRIL 2, APRIL 3,
2005 2004
--------------- ---------------
AS RESTATED
ASSETS
Current assets
Cash and cash equivalents $ 350,485 $ 352,335
Accounts receivable, net of allowances 455,682 441,724
Inventories 430,082 373,170
Deferred tax assets 74,821 21,565
Prepaid expenses and other 102,693 98,357
--------------- ---------------
1,413,763 1,287,151
Property and equipment, net 487,894 408,741
Deferred tax assets 35,973 65,542
Goodwill, net 558,858 341,603
Intangibles, net 46,991 17,640
Other assets 183,190 176,875
--------------- ---------------
$ 2,726,669 $ 2,297,552
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 184,394 $ 188,919
Income tax payable 72,148 77,736
Accrued expenses and other 365,868 238,545
--------------- ---------------
622,410 505,200
Long-term debt 290,960 277,345
Other noncurrent liabilities 137,591 99,560
Stockholders' equity
Common Stock 1,085 1,053
Additional paid-in-capital 664,279 563,457
Retained earnings 1,090,310 921,602
Treasury Stock, Class A, at cost (4,177,600 and 4,145,800 shares) (80,027) (78,975)
Accumulated other comprehensive income 29,973 23,104
Unearned compensation (29,912) (14,794)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 1,675,708 1,415,447
--------------- ---------------
$ 2,726,669 $ 2,297,552
=============== ===============