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): May 26, 2004
POLO RALPH LAUREN CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 001-13057 13-2622036
- ---------------------------- ------------------------ ---------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
650 MADISON AVENUE, NEW YORK, NEW YORK 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 318-7000
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 26, 2004, the Registrant reported its results of operations for
its fourth fiscal quarter and fiscal year ended April 3, 2004. A copy of the
press release issued by the Registrant 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 12 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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
POLO RALPH LAUREN CORPORATION
By: /s/ Gerald M. Chaney
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Name: Gerald M. Chaney
Title: Senior Vice President of Finance
and Chief Financial Officer
Date: May 26, 2004
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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99.1 Press Release of Polo Ralph Lauren Corporation, dated May 26, 2004.
EXHIBIT 99.1
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Investor Contact: Denise Gillen
212.318.7516
Media Contact: Nancy Murray
212.813.7862
POLO RALPH LAUREN REPORTS FOURTH QUARTER AND FISCAL YEAR 2004 RESULTS
Fourth Quarter Revenues Driven by Successful Re-Launch of Lauren by Ralph Lauren
Line and 10.1% Comparable Retail Store Sales; Retail Operating Margins Increased
810 Basis Points
Company Confirms EPS Outlook for Fiscal Year 2005 in Range of $2.35 to $2.45
Company to Acquire Childrenswear Licensee
New York (May 26, 2004) - Polo Ralph Lauren Corporation (NYSE: RL) today
reported net income of $76.5 million, or $0.75 per diluted share, for fourth
quarter Fiscal 2004 compared to net income of $73.2 million, or $0.74 per
diluted share, for fourth quarter Fiscal 2003. For Fiscal Year 2004, net income
was $171.0 million, or $1.69 per diluted share, compared to net income of $174.2
million, or $1.76 per diluted share for Fiscal Year 2003.
Adjusted net income was $80.4 million, or $0.79 per diluted share, for the
fourth quarter Fiscal 2004 compared to $76.1 million, or $0.77 per diluted
share, for the fourth quarter Fiscal 2003. Adjusted net income was $184.6
million, or $1.83 per diluted share, for Fiscal Year 2004 compared to $183.7
million, or $1.85 per diluted share, for Fiscal Year 2003. Outstanding diluted
shares increased due to the inclusion of more stock options as a result of the
higher stock price during the year. Adjusted results exclude restructuring
charges and foreign currency gains and losses resulting from certain balance
sheet transactions. For a full analysis of the adjustments, please refer to the
table reconciliation of GAAP results to adjusted results.
"We ended the year stronger than ever," said Ralph Lauren, Chairman and Chief
Executive officer. "We produced continued success in our retail group, we took
back Lauren by Ralph Lauren and quickly built it into an even stronger brand,
and we made remarkable progress on our long-term global strategies. I am proud
of the 13,000 employees of this company who accomplished this while delivering
growth and increasing our overall financial strength."
"Over the past few years, we have taken important steps to establish more
control over our valuable brand on a worldwide basis. Today we announced another
milestone for our company with the acquisition of our childrenswear business. We
believe we can continue to expand and develop it into a substantial global
business," Mr. Lauren said.
"Fiscal 2004 was a year of many accomplishments. Our specialty retail business
continues to meet our expectations. The strength of our retail stores sales this
year shows that we are providing our customers with a unique shopping
experience. And we are very pleased with the successful re-launch of the Lauren
by Ralph Lauren line. We completed our European consolidation and we expect to
see the benefits of this initiative beginning in Fiscal 2005 and well into the
future. Our supply chain and systems enhancements have resulted in more
efficient and cost effective processes," said Roger Farah, President and Chief
Operating Officer.
Mr. Farah added, "The investments we've made to support our multi-year
initiatives have begun to deliver the appropriate return. Our infrastructure can
support our current businesses and our future growth plans. We are poised to
deliver solid top and bottom line growth in Fiscal Year 2005."
RECENT ACHIEVEMENTS
o We signed a definitive agreement to acquire RL Childrenswear
LLC, our licensee for childrenswear in the United States,
Canada and Mexico, and expect that the transaction will close
in June 2004. (Please refer to our separate announcement
issued today.)
o Comparable retail store sales, based on a 13-week fourth
quarter, were 11.4% at Ralph Lauren stores, 23.8% at Club
Monaco stores, and 7.7% in our outlet stores, with an overall
810 basis point improvement in margins.
o The Lauren by Ralph Lauren Spring line was successfully
delivered to approximately 900 department store doors on plan
throughout the quarter, with strong sell-throughs. In
addition, we launched distribution of the Lauren line on
Polo.com.
o We increased the strength of our Board of Directors with the
addition of Myron E. (Mike) Ullman, III, retired Directeur
General and Group Managing Director of LVMH Moet Hennessy
Louis Vuitton.
o We successfully completed a secondary offering for Goldman
Sachs of their total holdings of approximately 10.6 million
shares. While we did not receive any proceeds from this
offering, it did increase the number of Class A shares
outstanding to 56.4 million shares, bringing approximately 75
new institutional investors to our shareholder base.
o We have a strong balance sheet and ended the quarter with
$66.1 million in cash, net of debt. We continue to make
progress in managing our inventory levels. At the end of the
fourth quarter inventory was $363.7 million, which included
the Lauren line and the effect of the strengthening Euro and
Canadian dollar, compared to $363.8 million last year.
o We completed the consolidation of our European businesses into
one centralized headquarters location in Geneva, Switzerland,
and one primary distribution center in Parma, Italy. We also
completed the logistics and systems integration of Club Monaco
into the Polo Ralph Lauren systems.
o We extended the company's share repurchase program to April 1,
2006. This program was originally authorized in March 1998 for
the repurchase of up to $100 million. To date the company has
used $77.5 million. No shares were repurchased in Fiscal 2004.
FOURTH QUARTER FISCAL 2004 INCOME STATEMENT REVIEW
NET REVENUES Net revenues for the fourth quarter increased 18.3% to $818.8
million compared to $692.3 million in the fourth quarter last year. Our
wholesale revenues were $493.5 million, up 17.0% over last year, driven by the
inclusion of the Lauren by Ralph Lauren line in our wholesale segment. Wholesale
revenues also reflect a decrease in our menswear as we strategically reposition
the Polo brand into more appropriate distribution channels and reduce sales into
the secondary market. Based on a 14-week fourth quarter in Fiscal 2004, reported
retail sales grew 32.6% to $259.9 million compared to $195.9 million in the
13-week fourth quarter last year, with comparable store sales up 20.2%. We
believe it is more relevant to discuss comparable store sales excluding this
year's 14th week and on that basis comparable store sales rose 10.1%, driven by
positive performance in all of our retail formats. Licensing revenues decreased,
as expected, because of the absence of royalty income associated with the
previously licensed
Lauren business. The increase in Fiscal 2004 net revenues also reflects the
favorable impact of the strengthening Euro and Canadian dollar.
GROSS PROFIT For the fourth quarter, gross profit was $391.0 million, an
increase of 13.1%, compared to $345.8 million in the fourth quarter of Fiscal
2003. The increased gross profit was generated by the addition of the Lauren
line to our wholesale business and strong retail sales performance in our Ralph
Lauren and Club Monaco stores, partially offset by a decrease in licensing.
Gross margin was 47.8% of net revenues compared to 50.0% last year, reflecting
the change in mix of businesses. The increase in Fiscal 2004 gross profit also
reflects the favorable impact of the strengthening Euro and Canadian dollar.
SG&A EXPENSES In the fourth quarter, SG&A expenses, excluding restructuring
charges, were $262.5 million, an increase of $39.7 million or 17.8%, compared to
$222.8 million in the fourth quarter of Fiscal 2003. The increase was driven
primarily by the change in business mix as a result of increased retail sales,
the start-up costs associated with the operations of the Lauren line, and the
inclusion of expenses of our Japanese master license. The increase in Fiscal
2004 SG&A also reflects the negative impact of foreign currency exchange rate
fluctuations, as a result of the strengthening Euro and Canadian dollar.
FOURTH QUARTER RESTRUCTURING CHARGE AND FOREIGN CURRENCY GAINS AND LOSSES
Adjusted fourth quarter Fiscal 2004 results exclude a $3.6 million pre-tax
restructuring charge, consisting of $4.2 million for additional contract
termination and severance costs related to the consolidation of our European
business operations, as well as $1.3 million for lease termination and asset
write-offs associated with the closure of two stores in the United States,
partially offset by a $1.9 million reduction in liabilities related to the
Fiscal 2001 Club Monaco charge. Adjusted fourth quarter Fiscal 2004 results also
exclude $2.4 million in foreign currency losses primarily related to transaction
losses on cash and receivable balances and on unhedged inventory purchases in
Europe. Adjusted fourth quarter Fiscal 2003 results exclude a $6.4 million
pre-tax restructuring charge and foreign currency gains of $2.0 million.
STORE COUNT
At the end of the fourth quarter, we operated 263 stores, with 1.86 million
square feet, compared to 255 stores, with 1.82 million square feet, at the end
of the fourth quarter last year. Our retail group consisted of 55 Ralph Lauren
stores, 61 Club Monaco stores, 118 Polo outlet stores, 22 Polo Jeans Co. outlet
stores, and seven Club Monaco outlet stores. During the fourth quarter we opened
two stores and closed four.
EARNINGS OUTLOOK
The company reiterated that for Fiscal Year 2005 earnings per share are expected
to be in the range of $2.35 to $2.45. These projected results anticipate
high-single digit percent consolidated revenue growth and approximately 150
basis points improvement in operating margins. The Company expects revenues to
reflect high-teen percent growth in wholesale sales and mid-single digit percent
growth in retail revenues, partially offset by a mid-single digit percent
decrease in licensing revenue as a result of the elimination of the U.S. and
Canadian Lauren and Ralph license royalties.
The Company expects the earnings results of each quarter in Fiscal 2005 to
exceed the comparable quarter in Fiscal 2004 with quarterly profit flows similar
to Fiscal 2004. As a percentage of annual profits, the first quarter of the
year, or the June end quarter, is the smallest due to less wholesale shipments
for the summer. The second quarter will now include the Lauren fall shipments,
and the Company expects the profits in this quarter to be the second largest in
the year. The third quarter would be the third largest quarter as a result from
the retail business, with the fourth quarter again producing the largest
quarterly profits due to strong wholesale shipments in the U.S. and Europe.
For the first quarter of Fiscal 2005, the Company expects earnings per share to
be in the range of $0.09 to $0.12, compared to $0.04 in the first quarter of
Fiscal 2004. Revenues should increase mid-teens percent with operating margin
expansion of approximately 150 basis points. While the company will continue to
give quarterly earnings guidance with details about business operations and
trends, it will discontinue quarterly earnings per share guidance after the
first quarter guidance given above.
CONFERENCE CALL
As previously announced, we will host a conference call and live online
broadcast today, May 26, 2004 at 9:00 A.M. Eastern. The dial-in number is
1-973-317-5319. 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 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 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.
THIS PRESS RELEASE AND ORAL STATEMENTS MADE FROM TIME TO TIME BY REPRESENTATIVES
OF THE COMPANY CONTAIN CERTAIN "FORWARD-LOOKING STATEMENTS" CONCERNING
EXPECTATIONS FOR 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 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 AS WELL AS THE OTHER
RISK FACTORS SET FORTH 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 3, 2004
and March 29, 2003 and the Consolidated Balance Sheets as of April 3, 2004 and
March 29, 2003.
# # # #
Tables Follow
# # #
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(AUDITED)
THREE MONTHS ENDED
---------------------------
APRIL 3, MARCH 29,
2004 2003
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Wholesale Net Sales $ 493,520 $ 421,669
Retail Net Sales 259,863 195,929
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NET SALES 753,383 617,598
Licensing Revenue 65,398 74,733
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NET REVENUES 818,781 692,331
Cost of Goods Sold 427,782 346,510
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GROSS PROFIT 390,999 345,821
Depreciation and Amortization 24,086 21,295
Other SG&A Expenses 238,418 201,521
Restructuring Charge 3,636 6,443
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TOTAL SG&A EXPENSES 266,140 229,259
Income From Operations 124,859 116,562
Foreign Currency (Gains) Losses 2,395 (1,961)
Interest Expense, net 2,376 3,217
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Income Before Income Taxes and Other Expense 120,088 115,306
Provision for Income Taxes 43,282 42,087
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Income after Tax 76,806 73,219
Other Expense, net (A) 275 --
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NET INCOME $ 76,531 $ 73,219
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NET INCOME PER SHARE - BASIC $ 0.77 $ 0.74
============ ============
NET INCOME PER SHARE - DILUTED $ 0.75 $ 0.74
============ ============
Weighted Average Shares Outstanding - Basic 99,699,000 98,450,000
============ ============
Weighted Average Shares & Share Equivalents Outstanding - Diluted 102,265,000 99,343,000
============ ============
DIVIDENDS DECLARED PER SHARE $ 0.05 $ --
============ ============
(A) Includes Equity Investment Income of $20 net of Minority Interest Expense of $295.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(AUDITED)
The following is a reconciliation of Net Income to Net Income Before Restructuring Charge and Foreign
Currency (Gains) Losses:
THREE MONTHS ENDED
---------------------------
APRIL 3, MARCH 29,
2004 2003
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Net Income $ 76,531 $ 73,219
Other Expense, net 275 --
Provision for Income Taxes 43,282 42,087
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Income before Income Taxes and Other Expense 120,088 115,306
Restructuring Charge (B) 3,636 6,443
Foreign Currency (Gains) Losses (C) 2,395 (1,961)
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Income Before Income Taxes, Other Expense, Restructuring Charge
and Foreign Currency (Gains) Losses 126,119 119,788
Provision for Income Taxes 45,438 43,723
Other Expense, net 275 --
------------ ------------
Net Income Before Restructuring Charge and Foreign Currency (Gains) Losses $ 80,406 $ 76,065
============ ============
NET INCOME PER SHARE BEFORE RESTRUCTURING CHARGE
AND FOREIGN CURRENCY (GAINS) LOSSES - BASIC $ 0.81 $ 0.77
============ ============
NET INCOME PER SHARE BEFORE RESTRUCTURING CHARGE
AND FOREIGN CURRENCY (GAINS) LOSSES - DILUTED $ 0.79 $ 0.77
============ ============
(B) Fourth quarter Fiscal 2004 results include a pre-tax $3.6 million restructuring charge. This
charge is comprised of $4.2 million for additional contract termination and severance costs related to
the consolidation of our European business operations and $1.3 million for lease termination and asset
write-offs associated with the March 2004 decision to close our RRL stores. This charge was partially
offset by a $1.9 million reduction in liabilities related to the Fiscal 2001 Club Monaco charge. Fourth
quarter Fiscal 2003 results include a pre-tax $6.4 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 April 3, 2004, the foreign currency losses primarily relate to
transaction losses on cash and receivable balances, unhedged inventory purchases in Europe resulting from
the variability in the value of the Euro compared to the US dollar during beginning of this period. 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 BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
APRIL 3, MARCH 29,
2004 2003
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ASSETS
Current assets
Cash and cash equivalents $ 343,477 $ 343,606
Accounts receivable, net of allowances 441,724 375,823
Inventories 363,691 363,771
Deferred tax assets 21,565 15,735
Prepaid expenses and other 100,862 63,615
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1,271,319 1,162,550
Property and equipment, net 397,328 354,996
Deferred tax assets 61,579 54,386
Goodwill, net 341,603 315,559
Intangibles, net 17,640 11,400
Other assets 180,772 139,931
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$ 2,270,241 $ 2,038,822
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank borrowings $ 0 $ 100,943
Accounts payable 187,355 181,392
Income taxes payable 77,736 55,501
Deferred tax liabilities 1,821 --
Accrued expenses and other 234,218 162,511
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501,130 500,347
Long-term debt 277,345 248,494
Other noncurrent liabilities 69,693 81,214
Stockholders' equity
Common Stock 1,053 1,028
Additional paid-in-capital 563,457 504,700
Retained earnings 927,390 776,359
Treasury Stock, Class A, at cost (4,145,800 and 4,105,932 shares) (78,975) (77,928)
Accumulated other comprehensive income (loss) 23,942 10,787
Unearned compensation (14,794) (6,179)
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TOTAL STOCKHOLDERS' EQUITY 1,422,073 1,208,767
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$ 2,270,241 $ 2,038,822
=========== ===========
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 twelve months ended
April 3, 2004 and March 29, 2003 for each segment were as follows:
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------ -------------------
APRIL 3, MARCH 29, APRIL 3, MARCH 29,
2004 2003 2004 2003
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NET REVENUES:
Wholesale $ 493,520 421,669 1,210,397 1,187,363
Retail 259,863 195,929 1,170,447 1,001,958
Licensing 65,398 74,733 268,810 250,019
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$ 818,781 692,331 2,649,654 2,439,340
========== ======= ========= =========
INCOME (LOSS) FROM OPERATIONS:
Wholesale $ 102,049 92,572 93,128 124,476
Retail (4,816) (19,517) 72,915 40,366
Licensing 31,262 49,950 127,319 138,018
---------- ------- --------- ---------
$ 128,495 123,005 293,362 302,860
Less: Restructuring Charge 3,636 6,443 19,566 14,443
---------- ------- --------- ---------
124,859 116,562 273,796 288,417
========== ======= ========= =========