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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) November 4, 2005
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 November 4, 2005, Polo Ralph Lauren Corporation (the "Company")
reported its results of operations for the fiscal quarter ended October 1, 2005.
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) Exhibits.
EXHIBIT NO. DESCRIPTION
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99.1 Press release, dated November 4, 2005
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: November 4, 2005 By: /s/ Tracey T. Travis
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Name: Tracey T. Travis
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 Press release, dated November 4, 2005
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 SECOND QUARTER FISCAL 2006 RESULTS
SECOND QUARTER REVENUES UP 15%; OPERATING INCOME INCREASED 45%
COMPANY CONFIRMS EPS OUTLOOK FOR FISCAL 2006 IN RANGE OF $2.85 TO $2.92
New York (November 4, 2005) - Polo Ralph Lauren Corporation (NYSE: RL) today
reported net income of $104 million, or $0.97 per diluted share, for the second
quarter of Fiscal 2006 compared to net income of $79 million, or $0.77 per
diluted share, for the second quarter of Fiscal 2005.
Net revenues for the second quarter of Fiscal 2006 increased 15% to $1.027
billion compared to $896 million in the second quarter last year. Operating
income increased 45% to $177 million compared to $122 million last year.
Operating income as a percent of revenue improved 350 basis points to 17.2%.
For the first half of Fiscal 2006, net income was $155 million, or $1.46 per
diluted share, compared to net income of $92 million, or $0.89 per diluted share
for the comparable period last year. First half net revenues increased 18% to
$1.779 billion, compared to $1.502 billion last year. Operating income for the
first half was $257 million, an 81% increase over $142 million in the same
period last year. Operating income as a percent of revenue improved 500 basis
points to 14.5%, reflecting improved gross margin and improvements in operating
expenses as a percent of revenues.
"Our business is strong and we continue to solidify our leadership position as
the largest luxury apparel company in the world," said Ralph Lauren, Chairman
and Chief Executive Officer. "Over the past few years our sales have doubled and
our profits have more than doubled. Our focus on building new brands, such as
Rugby and luxury accessories, expanding our retail and extending our
international business has proven to be the right investment for our company."
"Our wholesale and retail businesses performed very well this quarter, and we
were particularly pleased that our operating margins continued to expand," said
Roger Farah, President and Chief Operating Officer. "We completed our footwear
acquisition this quarter, providing a foundation for our accessories business
and enhancing our luxury portfolio overall. We also made important strides in
advancing our retail strategy, both in terms of expanding profit margins as well
as new store openings, and continued to pursue opportunities to take advantage
of the strong demand for our brand internationally."
SECOND QUARTER AND FIRST HALF FISCAL 2006 INCOME STATEMENT REVIEW
NET REVENUES Net revenues for the second quarter of Fiscal 2006 increased 15%
to $1.027 billion compared to $896 million in the second quarter last year,
reflecting a 17% increase in retail sales and a 15% increase in wholesale sales.
First half net revenues increased 18% to $1.779 billion compared to $1.502
billion, reflecting a 23% increase in wholesale sales and a 16% increase in
retail sales.
GROSS PROFIT Gross Profit for the second quarter was $552 million, an increase
of 24%, compared to $446 million in the second quarter of Fiscal 2005. Gross
margin rate improved 390 basis points in the second quarter to 53.7% of revenues
compared to 49.8% last year. Gross Profit for the first half was $966 million,
an increase of 27%, compared to $762 million in the first half of Fiscal 2005.
Gross margin rate improved 360 basis points in the first half to 54.3% of
revenues compared to 50.7% last year. Improvements in gross margin for the
second quarter and the first half reflect improvements in both our wholesale and
retail segments from increases in full-price sell-throughs and sourcing
efficiencies.
SG&A EXPENSES SG&A expenses were $375 million in the second quarter compared to
$324 million in the second quarter of Fiscal 2005. SG&A expenses as a percent of
revenues were 36.5% in the second quarter compared to 36.1% for the second
quarter last year. SG&A expenses in the first half were $709 million compared to
$620 million last year. SG&A expenses as a percent of revenues improved 150
basis points to 39.8% in the first half compared to 41.3% for the first half
last year.
OPERATING INCOME Operating income for the second quarter was $177 million, an
increase of 45% compared to $122 million last year. Operating margin was 17.2%
compared to 13.7%, an increase of 350 basis points. For the first half,
operating income was $257 million compared to $142 million, an increase of 81%.
Operating margin for the first half was 14.5%, an increase of 500 basis points
compared to 9.5% last year.
SECOND QUARTER AND FIRST HALF FISCAL 2006 SEGMENT REVIEW
WHOLESALE Wholesale sales in the second quarter were $578 million, up 15%,
compared to $503 million last year. The increase in wholesale sales came
primarily from menswear, childrenswear and our European business, as well as a
small increase from the inclusion of our newly acquired footwear business.
During the quarter, we completed the acquisition of Ralph Lauren Footwear Co.,
Inc., our worldwide footwear licensee for men and women. Wholesale operating
income in the second quarter was $143 million compared to $100 million last
year.
Wholesale sales in the first half were $915 million, up 23%, compared to $742
million last year. The increase in sales came primarily from childrenswear,
menswear, better womenswear, our European business and our newly acquired
footwear business. We acquired our childrenswear business in the second quarter
of Fiscal 2005, therefore the first half of Fiscal 2006 reflects the inclusion
of childrenswear sales in the first quarter. Wholesale operating income in the
first half was $189 million compared to $97 million last year with improvement
in all businesses.
RETAIL Retail sales were $387 million in the second quarter, up 17%,
compared to $331 million last year, reflecting increases in all our retail
formats. Total company comparable store sales increased 6.2% reflecting an
increase of 3.6% at Ralph Lauren stores, 7.6% in our factory stores and 2.4% at
Club Monaco stores. Ralph Lauren Media revenues increased 52%. Retail operating
income was $39 million compared to $19 million in the same period last year.
Retail operating margin improved 440 basis points to 10.2% in the second
quarter, reflecting significant increases in gross margin.
Retail sales in the first half were $745 million, up 16% from last year,
reflecting increases in all our retail formats. Total company comparable store
sales increased 6.7%, reflecting an increase of 5.5% at Ralph Lauren stores,
7.1% in our factory stores and 7.5% at Club Monaco stores. Ralph Lauren Media
revenues increased 36%. Retail operating income in the first half was $75
million compared to $44 million in the same period last year. Retail operating
margins improved 330 basis points to 10.1% in the first half, reflecting
significant increases in gross margin.
At the end of the second quarter, we operated 294 stores, with 2.3 million
square feet, compared to 268 stores, with 2.1 million square feet, at the end of
the second quarter last year. Our retail group consists of 64 Ralph Lauren
stores, four Rugby stores, 73 Club Monaco stores, 135 Polo factory stores, 13
Polo Jeans Co. factory stores, and five Club Monaco factory stores.
LICENSING Licensing revenues in the second quarter were $63 million, up
slightly from last year, reflecting strength domestically in our Chaps for men
lines as well as improved performance in Asia. Operating income was $40 million
compared to $43 million in the comparable quarter last year. Licensing revenues
in the first half were $120 million, up slightly from last year, and operating
income was $75 million, up slightly from last year.
SECOND QUARTER FISCAL 2006 BALANCE SHEET
We continue to have a strong balance sheet and ended the quarter with $383
million in cash, or $115 million cash net of debt. We continue to make progress
in managing our inventory and generated a 16% sales increase in our wholesale
and retail businesses in the second quarter with a 12% increase in inventory.
FISCAL 2006 FULL YEAR AND SECOND HALF OUTLOOK AS COMPARED TO FISCAL 2005 GAAP
RESULTS
FULL YEAR FISCAL 2006 OUTLOOK
o Earnings per share are expected to be in the range of $2.85 to
$2.92, consistent with prior expectations.
o Consolidated revenue growth is projected to be low double digits
percent, reflecting high single digit percent growth in wholesale
sales, low double digit percent growth in retail sales, and
licensing royalty flat compared to last year.
o Operating margins are expected to increase in a range of 400 to 450
basis points, reflecting expansion in our wholesale and retail
segments and lower margins in our licensing segment.
SECOND HALF FISCAL 2006 OUTLOOK
o Consolidated revenue growth is projected to be mid-single digit
percent, reflecting low single digit percent growth in wholesale
sales, low double digit percent growth in retail sales, and
licensing royalty slightly down compared to last year.
o Operating margins are expected to increase in a range of 425 to 450
basis points.
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 1-719-457-2692. 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 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
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POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
(In thousands, except share and per share data)
(UNAUDITED)
THREE MONTHS ENDED
---------------------------------
OCTOBER 1, OCTOBER 2,
2005 2004
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(AS RESTATED
SEE NOTE A)
Wholesale Net Sales $ 577,561 $ 502,563
Retail Net Sales 387,187 330,912
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NET SALES 964,748 833,475
Licensing Revenue 62,636 62,139
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NET REVENUES 1,027,384 895,614
Cost of Goods Sold 475,839 449,580
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GROSS PROFIT 551,545 446,034
Depreciation and Amortization Expense 29,570 24,088
Other SG&A Expenses 344,992 298,780
Restructuring Charges -- 897
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TOTAL SG&A EXPENSES 374,562 323,765
Income From Operations 176,983 122,269
Foreign Currency (Gains) Losses 6,025 (3,145)
Interest (Income) Expense, net (115) 2,042
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Income Before Income Taxes and Other Income 171,073 123,372
Provision for Income Taxes 64,281 43,391
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Income after Tax 106,792 79,981
Other (Income) Expense, net (B) 2,587 713
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NET INCOME $ 104,205 $ 79,268
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NET INCOME PER SHARE - BASIC $ 1.00 $ 0.78
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NET INCOME PER SHARE - DILUTED $ 0.97 $ 0.77
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Weighted Average Shares Outstanding - Basic 104,198,000 101,192,000
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Weighted Average Shares & Share Equivalents Outstanding - Diluted 107,416,000 103,571,000
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Dividends declared per share $ 0.05 $ 0.05
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(A) Restated for change in lease accounting and the consolidation of RL
Media.
(B) FY 06 includes Minority Interest Expense of $3,847, partially offset
by Equity Investment Income of $1,260. FY05 (as restated) includes
Minority Interest Expense of $1,901, partially offset by Equity
Investment Income of $1,188.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
(In thousands, except share and per share data)
(UNAUDITED)
SIX MONTHS ENDED
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OCTOBER 1, OCTOBER 2,
2005 2004
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(AS RESTATED
SEE NOTE A)
Wholesale Net Sales $ 914,760 $ 741,587
Retail Net Sales 744,591 640,952
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NET SALES 1,659,351 1,382,539
Licensing Revenue 119,975 119,081
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NET REVENUES 1,779,326 1,501,620
Cost of Goods Sold 813,353 740,058
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GROSS PROFIT 965,973 761,562
Depreciation and Amortization Expense 58,232 46,921
Other SG&A Expenses 650,537 570,990
Restructuring Charges -- 1,628
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TOTAL SG&A EXPENSES 708,769 619,539
Income From Operations 257,204 142,023
Foreign Currency (Gains) Losses 5,984 (2,934)
Interest (Income) Expense, net (548) 3,669
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Income Before Income Taxes and Other Income 251,768 141,288
Provision for Income Taxes 94,624 49,707
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Income after Tax 157,144 91,581
Other (Income) Expense, net (B) 2,232 (412)
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NET INCOME $ 154,912 $ 91,993
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NET INCOME PER SHARE - BASIC $ 1.50 $ 0.91
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NET INCOME PER SHARE - DILUTED $ 1.46 $ 0.89
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Weighted Average Shares Outstanding - Basic 103,620,000 100,837,000
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Weighted Average Shares & Share Equivalents Outstanding - Diluted 106,450,000 103,186,000
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Dividends declared per share $ 0.10 $ 0.10
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(A) Restated for change in lease accounting and the consolidation of RL
Media.
(B) FY 06 includes Minority Interest Expense of $5,287, partially offset
by Equity Investment Income of $3,055. FY05 (as restated) includes
Equity Investment Income of $3,176, partially offset by Minority
Interest Expense of $2,764.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
OCTOBER 1, OCTOBER 2,
2005 2004
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(AS RESTATED
SEE NOTE A)
ASSETS
Current assets
Cash and cash equivalents $ 383,156 $ 158,196
Accounts receivable, net of allowances 458,651 429,344
Inventories 513,101 457,761
Deferred tax assets 70,947 22,269
Prepaid expenses and other 101,372 75,826
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1,527,227 1,143,396
Property and equipment, net 494,144 453,603
Deferred tax assets 36,073 66,915
Goodwill, net 569,997 579,216
Intangibles, net 105,416 19,028
Other assets 180,456 178,295
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$ 2,913,313 $ 2,440,453
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 192,868 $ 166,793
Income tax payable 41,240 80,723
Accrued expenses and other 384,755 253,505
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618,863 501,021
Long-term debt 267,657 280,948
Other noncurrent liabilities 147,865 126,288
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Total liabilities 1,034,385 908,257
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Stockholders' equity
Common Stock 1,091 1,060
Additional paid-in-capital 747,349 619,885
Retained earnings 1,232,021 1,002,134
Treasury Stock, Class A, at cost (4,249,230 and 4,177,600 shares) (83,280) (80,026)
Accumulated other comprehensive income 27,146 26,016
Unearned compensation (45,399) (36,873)
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TOTAL STOCKHOLDERS' EQUITY 1,878,928 1,532,196
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$ 2,913,313 $ 2,440,453
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(A) Restated for change in lease accounting, the consolidation of RL
Media and certain other reclassifications.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
NET REVENUES AND INCOME FROM OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
The net revenues and income from operations for the periods ended October 1,
2005 and October 2, 2004 for each segment were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------- --------------------------------
October 1, October 2, October 1, October 2,
2005 2004 2005 2004
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(AS RESTATED (AS RESTATED
SEE NOTE A) SEE NOTE A)
Net revenues:
Wholesale $ 577,561 $ 502,563 $ 914,760 $ 741,587
Retail 387,187 330,912 744,591 640,952
Licensing 62,636 62,139 119,975 119,081
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$ 1,027,384 $ 895,614 $ 1,779,326 $ 1,501,620
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Income (Loss) from operations:
Wholesale $ 143,119 $ 99,874 $ 189,388 $ 97,241
Retail 39,341 19,251 74,991 43,695
Licensing 40,255 42,637 75,467 74,484
Corporate (45,732) (38,596) (82,642) (71,769)
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$ 176,983 $ 123,166 $ 257,204 $ 143,651
Less: Unallocated Restructuring Charges -- (897) -- (1,628)
----------- ----------- ----------- -----------
$ 176,983 $ 122,269 $ 257,204 $ 142,023
=========== =========== =========== ===========
(A) Restated for change in lease accounting and the consolidation of RL
Media.