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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) August 8, 2006
POLO RALPH LAUREN CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation)
001-13057 13-2622036
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(Commission File Number) (IRS Employer Identification No.)
650 MADISON AVENUE, NEW YORK, NEW YORK 10022
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(Address of Principal Executive Offices) (Zip Code)
(212) 318-7000
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(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
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(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))
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ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On August 8, 2006, Polo Ralph Lauren Corporation (the "Company")
reported its results of operations for the first fiscal quarter of 2007. A copy
of the press release issued by the Company concerning the foregoing 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 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable
(b) Pro forma financial information.
Not applicable
(c) Shell company transactions.
Not applicable
(d) Exhibits.
EXHIBIT NO. DESCRIPTION
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99.1 Press release
2
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
Date: August 8, 2006 By: /s/ Tracey T. Travis
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Name: Tracey T. Travis
Title: Senior Vice President and
Chief Financial Officer
3
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 Press release
EXHIBIT 99.1
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Contact: Nancy Murray 212.813.7862
M E D I A R E L E A S E
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POLO RALPH LAUREN REPORTS FIRST QUARTER FY2007 RESULTS
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- Operating Income Increased 66%
- Earnings per Share Increased 54%
- Company Raises Full Year Guidance to Range of $3.25 to $3.35
New York (August 8, 2006) - Polo Ralph Lauren Corporation (NYSE: RL) today
reported net income of $80 million, or $0.74 per diluted share, for the
first quarter of Fiscal 2007 compared to net income of $51 million, or
$0.48 per diluted share, for the first quarter of Fiscal 2006.
Net revenues for the first quarter of Fiscal 2007 increased 27% to $954
million, compared to $752 million in the first quarter last year. Excluding
the impact of the footwear and Polo Jeans Co. acquisitions, net revenues
increased 19%. Operating income, reflecting higher revenues and margin
improvement, increased 66% to $133 million compared to $80 million last
year. Operating income as a percent of revenue improved 330 basis points to
14% from 10.7% last year.
"We are extremely pleased by the continuing demand for our brand and its
worldwide growth as evidenced by these strong results. One of the keys to
our success is our passion and our clear point of view in all we do. That
vision is represented in all of our brands and in every product category
whether it is menswear, womenswear, childrenswear, accessories or home,"
said Ralph Lauren, Chairman and chief Executive Officer. "We have enjoyed
tremendous success in the U.S., and we are carrying the best of what we do
to Europe and Asia. In addition, we continue to grow our business on many
different levels - from expanding our retail presence to extending our
brands."
Mr. Lauren added, "We have a powerful organization that is focused on the
success of our brand long-term. I have never been more excited about our
company and its future. I believe this will be another outstanding year as
we continue to expand globally."
"The first quarter represents outstanding performances by all of our
ongoing businesses across all areas of wholesale and retail. The high
quality of our sales translated into solid margin expansion this quarter,
resulting in a substantial 66% increase in operating income. Concurrently,
our integration plans for our new footwear and jeans businesses are
proceeding as we expected," said Roger Farah, President and Chief Operating
Officer.
Looking to the balance of the year, Mr. Farah said, "We will continue to
focus our management efforts and investments on long-term initiatives to
accelerate our retail expansion, to further elevate our brand through all
appropriate channels of distribution and to build and leverage our global
infrastructure. In the near-term, the execution of these strategies
continues to produce powerful results. Because of the ongoing appeal of our
brand and the strong performance we are driving, we are raising our
expectations for Fiscal 2007 earnings."
FIRST QUARTER FISCAL 2007 INCOME STATEMENT REVIEW
NET REVENUES Net revenues for the first quarter of Fiscal 2007 increased
27% as reported, or 19% excluding the effects of acquisitions, to $954
million compared to $752 million in the first quarter last year. The
increase was driven by a 46% increase in reported wholesale sales, or 26%
excluding the effects of acquisitions, and a 15% increase in retail sales,
slightly offset by a 12% decrease in licensing revenues. Excluding the
effect of the prior-year acquisitions, the wholesale increase was primarily
driven by the launch of the new Chaps lines, menswear, Lauren women's and
the children's lines. In addition, Europe drove strong sales across all
brands. Retail sales were driven by strong comparable sales in all of the
company's retail formats, including Polo.com. Licensing was down compared
to the first quarter last year due primarily to the loss of licensing
revenues of Polo Jeans Co. and footwear which are now owned.
GROSS PROFIT Gross Profit for the first quarter increased 28% to $532
million compared to $414 million in the first quarter of Fiscal 2006. Gross
profit rate improved 60 basis points in the first quarter to 55.7% compared
to 55.1% during the same period last year. Improvements in gross profit for
the first quarter were driven primarily by increases in full-price
sell-throughs in the wholesale and retail segments, strong inventory
management and the effects of ongoing sourcing initiatives.
SG&A EXPENSES SG&A expenses were $398 million, including incremental stock
compensation expense of $2.6 million, compared to $334 million in the first
quarter of Fiscal 2006. Expenses as a percent of revenues were 41.7%
compared to 44.4% in the first quarter last year, representing a 270 basis
point improvement. The expense rate improved primarily from the leveraging
of incremental sales volume over existing infrastructure.
The first quarter Fiscal 2007 expenses also include a $2.2 million
restructuring charge related to the intended closure of all eight of Club
Monaco's Caban stores and $2.6 million of incremental cost related to the
expensing of all stock-based compensation as a result of the effect of the
first time application of SFAS 123R.
OPERATING INCOME Operating income increased 66% to $133 million compared to
$80 million in the first quarter last year. Operating margin was 14%,
compared to 10.7% in the first quarter last year, an increase of 330 basis
points.
NET INCOME Net income for the first quarter was $80 million, or $0.74 per
diluted share, compared to net income of $51 million, or $0.48 per diluted
share, for the first quarter of Fiscal 2006.
FIRST QUARTER FISCAL 2007 SEGMENT REVIEW
WHOLESALE Wholesale sales in the first quarter were $491 million, up 46%,
compared to $337 million in the first quarter last year. Excluding the
effect of the acquisitions, revenues increased 26% primarily due to a
successful spring season for the Chaps for women and Chaps for boy's lines,
and increased sales in the domestic menswear, Lauren women's, and
children's lines. In addition, Europe experienced increased sales across
all brands. Wholesale operating income in the first quarter was $90
million, compared to $46 million in the first quarter last year. Wholesale
operating margin was 18.4% in the first quarter compared to 13.7% in the
first quarter last year, an improvement of 470 basis points. The gain was
driven primarily by improvement in gross profit and strong expense leverage
in the core product lines slightly offset by lower operating margins in
newly acquired Polo Jeans Co. and footwear.
RETAIL Retail sales were $412 million in the first quarter, up 15%,
compared to $357 million in the first quarter last year, reflecting
increased sales in all of the company's retail formats, including Polo.com.
Total company comparable store sales increased 7.2%, reflecting an increase
of 9.4% at Club Monaco stores, 8.4% in our factory stores and 3.7% at Ralph
Lauren stores. The factory stores increases were partially related to
higher seasonal sales associated with the Easter holiday that fell in the
first quarter of fiscal 2007. The Polo.com sales grew 49% over the
comparable period last year. Retail operating income was $65 million
compared to $36 million in the first quarter last year. Retail operating
margin was 15.7% in the first quarter compared to 10% last year, an
improvement of 570 basis points. The gain was driven by stronger full price
sell-throughs and solid expense management offset by the initial
investments for the Tokyo flagship and the Rugby retail concept.
At the end of the first quarter, we operated 295 stores, with approximately
2.3 million square feet, compared to 282 stores, with approximately 2.2
million square feet, at the end of the first quarter last year. Our retail
group consists of 70 Ralph Lauren stores, seven Rugby stores, 72 Club
Monaco stores and 146 Polo factory stores.
LICENSING Licensing revenues in the first quarter were $50 million,
compared to $57 million in the first quarter last year. Operating income
was $26 million, compared to $35 million in the first quarter last year.
Licensing revenues and operating income were down compared to last year
primarily due to the elimination of royalties from the former Polo Jeans
Co. and footwear licenses.
FIRST QUARTER FISCAL 2007 BALANCE SHEET REVIEW
We ended the first quarter with $429 million in cash, or $138 million cash
net of debt. We ended the first quarter with $526 million in inventory, up
from $468 million last year, primarily due to the inclusion of Polo Jeans
Co. and footwear. We continue to carefully manage our inventory and we
generated a 30% increase in wholesale and retail sales on a 12% increase in
inventory. During the quarter, the company invested $35 million in capital
expenditures, compared to $33 million in the prior year's quarter.
During the first quarter, the Company invested approximately $68 million to
repurchase 1.2 million shares of Class A common stock. The repurchase is
part of the $100 million share repurchase authorization, of which
approximately $32 million is left.
FISCAL 2007 FULL YEAR OUTLOOK
o Consolidated revenue growth is projected to be low to mid-teen percent.
o Operating margins are expected to increase slightly compared to Fiscal
2006. Fiscal 2007 forecasts include an incremental stock compensation
expense of approximately $18 million to $25 million.
o Earnings per share are expected to be in the range of $3.25 to $3.35. This
earnings projection includes an estimate of stock compensation dilution in
the range of $0.10 to $0.15 per share.
FISCAL 2007 SECOND QUARTER OUTLOOK
o Consolidated revenue growth is projected to be low double digits,
reflecting mid-teen percent growth in wholesale, low double-digit percent
growth in retail and a mid-single percent decrease in licensing.
o Operating margins are expected to be slightly lower than the comparable
quarter last year including incremental stock compensation expense of
approximately $6 to $8 million.
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 (719) 457-2645.
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 38 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 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.
# # # #
Tables Follow
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
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July 1, July 2,
2006 2005
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Wholesale Net Sales $ 491.2 $ 337.2
Retail Net Sales 412.1 357.4
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NET SALES 903.3 694.6
LICENSING REVENUE 50.3 57.3
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NET REVENUES 953.6 751.9
Cost of Goods Sold (a) (422.1) (337.5)
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GROSS PROFIT 531.5 414.4
Selling General & Adminstrative Expenses (a) (390.3) (333.2)
Amortization of Intangible Assets (5.6) (1.0)
Restructuring Charges (2.2) -
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TOTAL SG&A EXPENSES (398.1) (334.2)
OPERATING INCOME 133.4 80.2
Foreign Currency Gains (Losses) (1.1) -
Interest Expense (4.4) (2.5)
Interest Income 3.8 2.9
Equity Income on Equity-Method Investees 0.8 1.8
Minority Interest Expense (4.0) (1.4)
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Income Before Provision for Income Taxes 128.5 81.0
Provision for Income Taxes (48.3) (30.3)
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NET INCOME $ 80.2 $ 50.7
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NET INCOME PER SHARE - BASIC $ 0.76 $ 0.49
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NET INCOME PER SHARE - DILUTED $ 0.74 $ 0.48
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Weighted Average Shares Outstanding - Basic 105.1 103.0
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Weighted Average Shares Outstanding - Diluted 108.1 105.5
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Dividends declared per share $ 0.05 $ 0.05
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(a) Includes total depreciation expense of: $ (32.2) $ (27.7)
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POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
JULY 1, APRIL 1, JULY 2,
2006 2006 2005
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ASSETS
Current assets
Cash and cash equivalents $ 429.2 $ 285.7 522.3
Accounts receivable, net of allowances 349.7 484.2 275.6
Inventories 525.6 485.5 467.6
Deferred tax assets 33.6 32.4 70.7
Prepaid expenses and other 102.3 90.7 111.3
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Total current assets 1,440.4 1,378.5 1,447.5
Property and equipment, net 541.6 548.8 488.7
Deferred tax assets 9.9 - 34.6
Goodwill 705.4 699.7 547.8
Intangibles, net 253.1 258.5 46.0
Other assets 234.2 203.2 179.2
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TOTAL ASSETS $ 3,184.6 $ 3,088.7 2,743.8
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 203.6 $ 202.2 160.3
Income tax payable 86.0 46.6 55.7
Accrued expenses and other 308.2 314.3 375.7
Current maturities of debt 291.0 280.4 -
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Total current liabilities 888.8 843.5 591.7
Deferred tax liabilities 20.5 20.8 -
Other non-current liabilities 183.5 174.8 139.8
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Total liabilities 1,092.8 1,039.1 1,000.6
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Stockholders' equity
Common Stock 1.1 1.1 1.1
Additional paid-in-capital 760.4 783.6 715.8
Retained earnings 1,454.2 1,379.2 1,133.1
Treasury Stock, Class A, at cost (156.1) (87.1) (81.6)
Accumulated other comprehensive income 32.2 15.5 19.3
Unearned compensation - (42.7) (44.5)
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Total stockholders' equity 2,091.8 2,049.6 1,743.2
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,184.6 $ 3,088.7 2,743.8
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POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
OTHER INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
SEGMENT INFORMATION
The net revenues and operating income for the periods ended July 1, 2006 and
July 2, 2005 for each segment were as follows:
THREE MONTHS ENDED
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July 1, July 2,
2006 2005
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Net revenues:
Wholesale $ 491.2 $ 337.2
Retail 412.1 357.4
Licensing 50.3 57.3
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$ 953.6 $ 751.9
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Operating Income (Loss):
Wholesale $ 90.3 $ 46.3
Retail 64.6 35.6
Licensing 26.4 35.2
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$ 181.3 $ 117.1
Less:
Unallocated Corporate Expenses (45.7) (36.9)
Unallocated Restructuring Charges (2.2) -
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$ 133.4 $ 80.2
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