- Second quarter revenue increased 1% (increased 3% on a constant
currency basis) compared to the prior year period and exceeded
guidance
- Second quarter EPS was:
- GAAP basis: $2.58 compared to guidance of $2.75 to $2.80
- Non-GAAP basis: $2.10 compared to guidance of $1.85 to
$1.90
- EPS included a negative impact of $0.06 per share related to
foreign currency translation, in line with guidance
- Conservative approach taken for second half. Full year 2019 EPS
outlook lowered:
- Reflects current trends and includes latest proposed U.S.
tariffs
- GAAP basis: $7.95 to $8.05 compared to $9.05 to $9.15
previously
- Non-GAAP basis: $9.30 to $9.40 compared to $10.20 to $10.30
previously
- EPS outlook includes a negative impact of $0.35 per share
related to foreign currency translation, compared to $0.32
previously
- Planned stock repurchases for 2019 increased to $300 million
from $200 million previously
PVH Corp. (NYSE: PVH) reported its 2019 second
quarter results.
Non-GAAP Amounts:
Amounts stated to be on a non-GAAP basis exclude the items that
are described below under the heading “Non-GAAP Exclusions.”
Amounts stated on a constant currency basis are also deemed to be
on a non-GAAP basis. Reconciliations of amounts on a GAAP basis to
amounts on a non-GAAP basis are presented later in this release and
identify and quantify all excluded items.
CEO Comments:
Commenting on these results, Emanuel Chirico, Chairman and Chief
Executive Officer, noted, “We are pleased to report our second
quarter results, which saw continued outperformance by our European
businesses. However, our businesses in North America and across
China experienced weak traffic trends, including the impact of
protests in Hong Kong, resulting in a more promotional
environment.
Although we are pleased with our second quarter and first half
results, we have taken a conservative approach to our second half
outlook. As such, we lowered our annual revenue and EPS outlook
based on our current trends and our expectation that the volatility
in the macro environment, the global retail landscape and the
continuing escalation of the trade tensions between the U.S. and
China will cause our business to remain under pressure, as will the
ongoing impact of protests in Hong Kong.
We have great confidence in our diversified business model and
the underlying power of CALVIN KLEIN and TOMMY HILFIGER, and
believe we are positioning our businesses to succeed in the
ever-changing consumer landscape. As we execute on our strategic
priorities, our ongoing data and digital transformation, together
with delivering the best product and consumer experience, should
allow us to capture the heart of the consumer. We believe that with
our two greatest assets, our people and our brands, we will unlock
the long term brand growth opportunities we see and deliver
sustainable long term returns for our stockholders.”
Second Quarter Business Review:
The Company completed two previously announced acquisitions in
the second quarter of 2019. The first was the Company’s acquisition
of the approximately 78% interest in Gazal Corporation Limited
(“Gazal”) that it did not already own (the “Australia
acquisition”), which closed on May 31, 2019. The Company and Gazal
jointly owned and managed a joint venture, PVH Brands Australia
Pty. Limited (“PVH Australia”), which licensed and operated
businesses under the “TOMMY HILFIGER,” “CALVIN KLEIN” and “Van
Heusen” brands, along with other licensed and owned brands. PVH
Australia came under the Company’s full control as a result of the
Australia acquisition. The second was the Company’s acquisition of
the Tommy Hilfiger retail business in Central and Southeast Asia
from the Company’s previous licensee in that market (the “TH CSAP
acquisition”), which closed on July 1, 2019.
In addition, the Company entered into agreements in the second
quarter of 2019 to terminate early the licenses for the global
Calvin Klein and Tommy Hilfiger North America socks and hosiery
businesses (the “Socks and hosiery transaction”) in conjunction
with the Company’s plan to consolidate the socks and hosiery
business for all Company brands in North America in a newly formed
joint venture, which is expected to begin operations in December
2019, and to bring in-house the international Calvin Klein socks
and hosiery business.
Tommy Hilfiger
Revenue in the Tommy Hilfiger business for the quarter increased
8% to $1.1 billion (increased 10% on a constant currency basis)
compared to the prior year period. Tommy Hilfiger International
revenue increased 18% to $697 million (increased 22% on a constant
currency basis) compared to the prior year period, primarily driven
by outperformance experienced in Europe and the addition of revenue
resulting from the Australia acquisition. International comparable
store sales increased 9%. Tommy Hilfiger North America revenue
decreased 5% to $413 million (decreased 5% on a constant currency
basis) compared to the prior year period, driven by an 8% decline
in North America comparable store sales due to weakness in traffic
and consumer spending trends, especially in stores located in
international tourist locations.
Earnings before interest and taxes on a GAAP basis for the
quarter increased to $148 million, inclusive of a $3 million
negative impact due to foreign currency translation, from $134
million in the prior year period. Included in earnings before
interest and taxes for the current quarter were costs of (i) $8
million in connection with the Socks and hosiery transaction and
(ii) $2 million related to the portion of the Australia acquisition
costs attributable to the Tommy Hilfiger business and the TH CSAP
acquisition costs, primarily consisting of noncash valuation
adjustments. Included in earnings before interest and taxes for the
prior year period were costs of $7 million related to the April
2016 acquisition of the 55% interest in the Company’s former Tommy
Hilfiger joint venture in China that it did not already own (the
“TH China acquisition”), consisting of noncash amortization of
short-lived assets. Earnings before interest and taxes on a
non-GAAP basis for these periods, as discussed below, exclude these
amounts.
Earnings before interest and taxes on a non-GAAP basis for the
quarter increased to $158 million, inclusive of a $3 million
negative impact due to foreign currency translation, from $141
million in the prior year period. The earnings increase was
principally driven by strong outperformance in Europe offset, in
part, by the revenue decline and gross margin pressure experienced
in North America.
Calvin Klein
Revenue in the Calvin Klein business for the quarter decreased
6% to $873 million (decreased 4% on a constant currency basis)
compared to the prior year period, which includes an aggregate net
reduction of approximately 2% resulting from (i) the winding down
of the Company’s directly operated women’s jeanswear wholesale
business in the U.S. and Canada in connection with the licensing of
this business to G-III Apparel Group, Ltd. (the “G-III license”),
(ii) the closure of the CALVIN KLEIN 205 W39 NYC brand (formerly
Calvin Klein Collection) (the “CK Collection closure”) and (iii)
the addition of revenue resulting from the Australia acquisition.
Calvin Klein International revenue increased 1% to $465 million
(increased 5% on a constant currency basis) compared to the prior
year period, driven by continued solid growth in Europe and revenue
from the Australia acquisition, partially offset by a reduction of
revenue as a result of the CK Collection closure and softness
experienced across China. International comparable store sales were
flat. Calvin Klein North America revenue decreased 13% to $409
million (decreased 12% on a constant currency basis) compared to
the prior year period, principally due to the effect of the G-III
license and a 3% decline in North America comparable store sales
due to weakness in traffic and consumer spending trends, especially
in stores located in international tourist locations.
Earnings before interest and taxes on a GAAP basis for the
quarter decreased to $18 million, inclusive of a $2 million
negative impact due to foreign currency translation, from $105
million in the prior year period. Included in earnings before
interest and taxes for the current quarter were costs of (i) $52
million in connection with the Socks and hosiery transaction, (ii)
$29 million in connection with the restructuring associated with
the strategic changes for the Calvin Klein business announced in
January 2019 (the “Calvin Klein restructuring”), consisting of $11
million of inventory markdowns, $9 million of contract termination
and other costs, $6 million of severance, and $3 million of noncash
asset impairments, and (iii) $1 million related to the portion of
the Australia acquisition costs attributable to the Calvin Klein
business, primarily consisting of noncash valuation adjustments.
Earnings before interest and taxes on a non-GAAP basis for the
period, as discussed below, excludes these amounts.
Earnings before interest and taxes on a non-GAAP basis for the
quarter decreased to $101 million, inclusive of a $2 million
negative impact due to foreign currency translation, from $105
million on a GAAP basis in the prior year period (there were no
non-GAAP exclusions in the prior year period). The earnings decline
was principally due to the revenue decrease noted above.
Heritage Brands
Revenue in the Heritage Brands business for the quarter of $381
million was flat compared to the prior year period. Comparable
store sales declined 2%.
Earnings before interest and taxes on a GAAP basis for the
quarter decreased to $17 million from $33 million in the prior year
period, principally due to gross margin pressure in both the
wholesale and retail businesses attributable to a more promotional
U.S. retail environment.
Second Quarter Consolidated Results:
Second quarter revenue increased 1% to $2.4 billion (increased
3% on a constant currency basis) compared to the prior year
period.
Earnings per share on a GAAP basis was $2.58 for the second
quarter of 2019 compared to $2.12 in the prior year period. These
results include the amounts for the applicable period described
under the heading “Non-GAAP Exclusions” later in this release.
Earnings per share on a non-GAAP basis for these periods, as
discussed below, exclude these amounts.
Earnings per share on a non-GAAP basis was $2.10 for the second
quarter of 2019 compared to $2.18 in the prior year period.
Earnings per share on both a GAAP and non-GAAP basis for the second
quarter of 2019 included a $0.06 negative impact related to foreign
currency translation.
Earnings before interest and taxes on a GAAP basis for the
quarter increased to $250 million, inclusive of a $5 million
negative impact due to foreign currency translation, from $231
million in the prior year period. Included in earnings before
interest and taxes for the current quarter was an aggregate net
gain of $17 million consisting of (i) a noncash gain of $113
million to write up the Company’s equity investments in Gazal and
PVH Australia to fair value in connection with the Australia
acquisition, (ii) costs of $60 million in connection with the Socks
and hosiery transaction, (iii) costs of $29 million related to the
Calvin Klein restructuring and (iv) costs of $7 million related to
the Australia and TH CSAP acquisitions. Included in earnings before
interest and taxes for the prior year period were costs of $7
million related to the TH China acquisition. Earnings before
interest and taxes on a non-GAAP basis for these periods, as
discussed below, exclude these amounts.
Earnings before interest and taxes on a non-GAAP basis for the
quarter decreased to $232 million, inclusive of a $5 million
negative impact due to foreign currency translation, compared to
$238 million in the prior year period, as growth in the Tommy
Hilfiger business was more than offset by earnings declines in the
Calvin Klein and Heritage Brands businesses and a $4 million
increase in corporate expenses.
Net interest expense decreased to $27 million from $29 million
in the prior year period. The effective tax rate on a GAAP basis
was 13.3% as compared to 18.6% in the prior year period. The
decrease includes the favorable impact in the current year period
of the tax-exempt noncash gain recorded to write up the Company’s
equity investments in Gazal and PVH Australia to fair value in
connection with the Australia acquisition. The effective tax rate
on a non-GAAP basis was 23.5% as compared to 18.8% in the prior
year period.
Six Months Consolidated Results:
Revenue for the first six months of 2019 increased 2% to $4.7
billion (increased 5% on a constant currency basis) compared to the
prior year period. The revenue increase was due to:
- A 6% increase (10% increase on a constant currency basis) in
the Tommy Hilfiger business compared to the prior year period,
driven principally by outperformance in Europe and the addition of
revenue resulting from the Australia acquisition. International
comparable store sales increased 9%. North America comparable store
sales decreased 6% due to weakness in traffic and consumer spending
trends, especially in stores located in international tourist
locations.
- A 3% decrease (flat on a constant currency basis) in the Calvin
Klein business compared to the prior year period, as solid growth
in Europe and the addition of revenue resulting from the Australia
acquisition were more than offset by the negative impacts of
foreign currency translation, softness experienced across China,
the reduction of revenue resulting from the CK Collection closure
and the effect of the G-III license. International comparable store
sales decreased 2%. North America comparable store sales decreased
4% due to weakness in traffic and consumer spending trends,
especially in stores located in international tourist
locations.
- A 1% increase in the Heritage Brands business compared to the
prior year period. Comparable store sales decreased 4%.
Earnings per share on a GAAP basis was $3.65 for the first six
months of 2019 compared to $4.42 in the prior year period. These
results include the amounts for the applicable period described
under the heading “Non-GAAP Exclusions” later in this release.
Earnings per share on a non-GAAP basis for these periods, as
discussed below, exclude these amounts.
Earnings per share on a non-GAAP basis was $4.56 for the first
six months of 2019 compared to $4.55 in the prior year period.
Earnings per share on both a GAAP and non-GAAP basis for the first
six months of 2019 included a $0.21 negative impact related to
foreign currency translation.
Earnings before interest and taxes on a GAAP basis for the first
six months of 2019 decreased to $385 million, inclusive of a $19
million negative impact due to foreign currency translation, from
$476 million in the prior year period. These results include the
amounts for the applicable period described under the heading
“Non-GAAP Exclusions” later in this release. Earnings before
interest and taxes on a non-GAAP basis for these periods, as
discussed below, exclude these amounts.
Earnings before interest and taxes on a non-GAAP basis for the
first six months of 2019 was $499 million, inclusive of a $19
million negative impact due to foreign currency translation,
compared to $489 million in the prior year period. The improvement
in earnings was principally driven by earnings growth in the Tommy
Hilfiger and Calvin Klein businesses, partially offset by an
earnings decline in the Heritage Brands business and a $5 million
increase in corporate expenses.
Net interest expense for the first six months of 2019 decreased
to $57 million from $58 million in the prior year period. The
effective tax rate on a GAAP basis for the first six months of 2019
was 16.3% as compared to 17.8% in the prior year period. The
effective tax rate on a non-GAAP basis for the first six months of
2019 was 22.4% as compared to 18.0% in the prior year period.
Inventory levels increased 8% as compared to the prior year
period, in part due to inventory acquired as part of the Australia
and TH CSAP acquisitions, as well as an acceleration of the receipt
of goods in advance of tariff increases on goods imported into the
U.S. from China.
Stock Repurchase Program:
During the first six months of 2019, the Company repurchased
approximately 1.2 million shares of its common stock for $127
million (10.2 million shares for $1.1 billion since inception)
under the $2.0 billion stock repurchase program authorized by the
Board of Directors through June 3, 2023. Stock repurchases under
the program may be made from time to time over the period through
open market purchases, accelerated share repurchase programs,
privately negotiated transactions or other methods, as the Company
deems appropriate. Purchases are made based on a variety of
factors, such as price, corporate requirements and overall market
conditions, applicable legal requirements and limitations,
restrictions under the Company’s debt arrangements, trading
restrictions under the Company’s insider trading policy and other
relevant factors. The program may be modified by the Board,
including to increase or decrease the repurchase limitation or
extend, suspend, or terminate the program, at any time, without
prior notice.
2019 Outlook:
The Company’s revised 2019 guidance is based on the assumption
that current trends in the business continue for the remainder of
the year. Specifically, the reductions in revenue and margins
reflect the trade tensions between the U.S. and China, the ongoing
protests in Hong Kong and the increasingly promotional U.S. retail
environment.
The 2019 guidance incorporates the impact on certain of the
Company’s products of tariffs imposed and expected to be imposed by
the U.S. on goods imported from China into the U.S., including (i)
$250 billion of total goods imported from China into the U.S.
(Tranches 1, 2 and 3) currently at 25%, with an expected increase
to 30% in October 2019, and (ii) $300 billion of total goods
imported from China into the U.S. (Tranche 4) at 15% expected to be
imposed in September 2019 and December 2019. These tariffs are
expected to have a negative impact of approximately $0.20 per share
in 2019.
The Company’s 2019 guidance also reflects the Australia
acquisition and the TH CSAP acquisition that closed in the second
quarter of 2019, and the impact of the CK Collection closure and
the G-III license. These transactions are expected to result in a
net addition to revenue of approximately $75 million in 2019.
Please see the section entitled “Full Year and Quarterly
Reconciliations of GAAP to Non-GAAP Amounts” at the end of this
release for further detail and reconciliations of GAAP to non-GAAP
amounts discussed in this section.
Full Year Guidance
The Company currently projects that 2019 earnings per share on a
GAAP basis will be in a range of $7.95 to $8.05 compared to $9.65
in 2018. The Company currently projects that 2019 earnings per
share on a non-GAAP basis will be in a range of $9.30 to $9.40
compared to $9.60 in 2018. Both the GAAP and non-GAAP projections
include the estimated negative impact of approximately $0.35 per
share related to foreign currency translation.
Revenue in 2019 is projected to increase approximately 1%
(increase approximately 3% on a constant currency basis) as
compared to 2018. Revenue for the Tommy Hilfiger business is
projected to increase approximately 5% (increase approximately 8%
on a constant currency basis). Revenue for the Calvin Klein
business is projected to decrease approximately 2% (flat on a
constant currency basis). Revenue for the Heritage Brands business
is projected to decrease approximately 1%.
Net interest expense in 2019 is projected to decrease to
approximately $110 million compared to $116 million in 2018. The
Company estimates that the 2019 effective tax rate will be in a
range of 11.5% to 12.5% on a GAAP basis and in a range of 14% to
15% on a non-GAAP basis.
The Company’s estimate of 2019 earnings per share on a non-GAAP
basis excludes approximately $138 million of pre-tax net costs,
consisting of (i) $105 million of pre-tax costs expected to be
incurred in connection with the Calvin Klein restructuring,
consisting of a noncash lease asset impairment resulting from the
closure of the Company’s flagship store on Madison Avenue in New
York, New York, severance, contract termination and other costs,
other noncash asset impairments, and inventory markdowns, (ii) $60
million of pre-tax costs incurred in connection with the Socks and
hosiery transaction, (iii) $55 million of pre-tax costs incurred in
connection with the closure of the Company’s TOMMY HILFIGER
flagship and anchor stores in the United States (the “TH U.S. store
closures”), primarily consisting of noncash lease asset
impairments, (iv) $6 million of pre-tax costs incurred in
connection with the refinancing of the Company’s senior credit
facilities, (v) a pre-tax gain of $113 million recorded to write up
the Company's equity investments in Gazal and PVH Australia to fair
value in connection with the Australia acquisition and (vi) $25
million of pre-tax costs expected to be incurred in connection with
the Australia and TH CSAP acquisitions, primarily consisting of
noncash valuation adjustments, and the resulting estimated tax
effects of these pre-tax items.
Third Quarter Guidance
The Company currently projects that third quarter 2019 earnings
per share on a GAAP basis will be in a range of $2.70 to $2.75
compared to $3.15 in the prior year period. The Company currently
projects that third quarter 2019 earnings per share on a non-GAAP
basis will be in a range of $2.95 to $3.00 compared to $3.21 in the
prior year period. Both the GAAP and non-GAAP projections include
an estimated negative impact of approximately $0.09 per share
related to foreign currency translation.
Revenue in the third quarter of 2019 is projected to increase
approximately 1% (increase approximately 3% on a constant currency
basis) compared to the prior year period. Revenue for the Tommy
Hilfiger business in the third quarter is projected to increase
approximately 5% (increase approximately 8% on a constant currency
basis). Revenue for the Calvin Klein business in the third quarter
is projected to be flat (increase approximately 2% on a constant
currency basis). Revenue for the Heritage Brands business in the
third quarter is projected to decrease approximately 10%.
Net interest expense in the third quarter of 2019 is projected
to decrease to approximately $27 million compared to $29 million in
the prior year period. The Company estimates that the third quarter
2019 effective tax rate will be in a range of 8% to 9% on a GAAP
basis and in a range of 6.5% to 7.5% on a non-GAAP basis.
The Company’s estimate of third quarter 2019 earnings per share
on a non-GAAP basis excludes approximately $16 million of pre-tax
costs, consisting of (i) $12 million of pre-tax costs expected to
be incurred in connection with the Australia and TH CSAP
acquisitions, and (ii) $4 million of pre-tax costs expected to be
incurred in connection with the Calvin Klein restructuring, and the
resulting estimated tax effects of these pre-tax costs.
Non-GAAP Exclusions:
The discussions in this release that refer to non-GAAP amounts
exclude the following:
- Pre-tax costs of approximately $105 million incurred and
expected to be incurred in 2019 related to the Calvin Klein
restructuring, consisting of a noncash lease asset impairment
resulting from the closure of the Company’s flagship store on
Madison Avenue in New York, New York, other noncash asset
impairments, severance, contract termination and other costs, and
inventory markdowns, of which $70 million was incurred in the first
quarter, $29 million was incurred in the second quarter and $4
million is expected to be incurred in the third quarter.
- Pre-tax costs of $55 million incurred in the first quarter of
2019 in connection with the TH U.S. store closures, primarily
consisting of noncash lease asset impairments.
- Pre-tax costs of $60 million incurred in the second quarter of
2019 in connection with the Socks and hosiery transaction.
- Pre-tax costs of $6 million incurred in the first quarter of
2019 in connection with the refinancing of the Company’s senior
credit facilities.
- Pre-tax noncash gain of $113 million recorded in the second
quarter of 2019 to write up the Company's equity investments in
Gazal and PVH Australia to fair value in connection with the
Australia acquisition.
- Pre-tax costs of $25 million incurred and expected to be
incurred in 2019 in connection with the Australia and TH CSAP
acquisitions, primarily consisting of noncash valuation
adjustments, of which $7 million was incurred in the second quarter
and approximately $12 million is expected to be incurred in the
third quarter.
- Pre-tax costs of $41 million incurred in the fourth quarter of
2018 related to the Calvin Klein restructuring, consisting of $27
million of severance, $7 million of noncash asset impairments, $4
million of contract termination and other costs, and $2 million of
inventory markdowns.
- Pre-tax costs of $24 million incurred in 2018 related to the TH
China acquisition, consisting of noncash amortization of
short-lived assets, of which $7 million was incurred in the first
quarter, $7 million was incurred in the second quarter, $6 million
was incurred in the third quarter and $4 million was incurred in
the fourth quarter.
- Pre-tax loss of $15 million recorded in the fourth quarter of
2018 related to the recognized actuarial loss on retirement
plans.
- Discrete tax benefit of $41 million recorded in the fourth
quarter of 2018 related to the remeasurement of certain of the
Company’s net deferred tax liabilities in connection with the
enactment of legislation in the Netherlands known as the “2019
Dutch Tax Plan.”
- Discrete net tax benefit of $25 million recorded in the fourth
quarter of 2018 to adjust the provisional net tax benefit recorded
in 2017 in connection with the U.S. Tax Cuts and Jobs Act of 2017,
primarily consisting of the release of a valuation allowance on the
Company’s foreign tax credits.
- Estimated tax effects associated with the above pre-tax items,
which are based on the Company’s assessment of deductibility. In
making this assessment, the Company evaluated each item that it had
identified above as a non-GAAP exclusion to determine if such item
is taxable or tax deductible, and if so, in what jurisdiction the
tax expense or tax deduction would occur. All items above were
identified as either primarily taxable or tax deductible, with the
tax effect taken at the statutory income tax rate of the local
jurisdiction, or as non-taxable or non-deductible, in which case
the Company assumed no tax effect.
As a supplement to the Company’s GAAP results, the Company
presents constant currency revenue information, which is a non-GAAP
financial measure. The Company presents results in this manner
because it is a global company that transacts business in multiple
currencies but reports financial information in U.S. dollars.
Foreign currency exchange rate fluctuations affect the amounts
reported by the Company in U.S. dollars with respect to its foreign
revenues. Exchange rate fluctuations can have a significant effect
on reported revenues. The Company believes presenting constant
currency revenue information provides useful information to
investors, as it provides information to assess how its businesses
performed excluding the effects of changes in foreign currency
exchange rates and assists investors in evaluating the
effectiveness of the Company’s operations and underlying business
trends in a manner that is consistent with management’s evaluation
of business performance.
The Company calculates constant currency revenue information by
translating its foreign revenues for the current year period into
U.S. dollars at the average exchange rates in effect during the
comparable prior year period (rather than at the actual exchange
rates in effect during the current year period).
Constant currency performance should be viewed in addition to,
and not in lieu of or as superior to, the Company’s operating
performance calculated in accordance with GAAP. The constant
currency revenue information presented may not be comparable to
similarly described measures reported by other companies.
Please see Tables 1 through 9 and the sections entitled
“Reconciliations of 2019 Constant Currency Revenue” and “Full Year
and Quarterly Reconciliations of GAAP to Non-GAAP Amounts” later in
this release for reconciliations of GAAP to non-GAAP amounts.
The Company webcasts its conference calls to review its earnings
releases. The Company’s conference call to review its second
quarter earnings release is scheduled for Thursday, August 29, 2019
at 9:00 a.m. EDT. Please log on to the Company’s web site at
www.PVH.com and go to the Events page included in the
Investors section to listen to the live webcast of the conference
call. The webcast will be available for replay for one year after
it is held, commencing approximately two hours after the live
broadcast ends. Please log on to www.PVH.com as described above to
listen to the replay. In addition, an audio replay of the
conference call is available for 48 hours starting approximately
two hours after it is held. The replay of the conference call can
be accessed by calling (domestic) 888-203-1112 and (international)
719-457-0820 and using passcode 9138953. The conference call and
webcast consist of copyrighted material. They may not be
re-recorded, reproduced, re-transmitted, rebroadcast or otherwise
used without the Company’s express written permission. Your
participation represents your consent to these terms and
conditions, which are governed by New York law.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995: Forward-looking statements in this press
release and made during the conference call/webcast, including,
without limitation, statements relating to the Company’s future
revenue and earnings, plans, strategies, objectives, expectations
and intentions are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are
cautioned that such forward-looking statements are inherently
subject to risks and uncertainties, many of which cannot be
predicted with accuracy and some of which might not be anticipated,
including, without limitation, (i) the Company’s plans, strategies,
objectives, expectations and intentions are subject to change at
any time at the discretion of the Company; (ii) the Company may be
considered to be highly leveraged and uses a significant portion of
its cash flows to service its indebtedness, as a result of which
the Company might not have sufficient funds to operate its
businesses in the manner it intends or has operated in the past;
(iii) the levels of sales of the Company’s apparel, footwear and
related products, both to its wholesale customers and in its retail
stores, the levels of sales of the Company’s licensees at wholesale
and retail, and the extent of discounts and promotional pricing in
which the Company and its licensees and other business partners are
required to engage, all of which can be affected by weather
conditions, changes in the economy, fuel prices, reductions in
travel, fashion trends, consolidations, repositionings and
bankruptcies in the retail industries, repositionings of brands by
the Company’s licensors, and other factors; (iv) the Company’s
ability to manage its growth and inventory, including the Company’s
ability to realize benefits from acquisitions, such as the
acquisitions referenced in this press release; (v) quota
restrictions, the imposition of safeguard controls and the
imposition of duties or tariffs on goods from the countries where
the Company or its licensees produce goods under its trademarks,
such as the recently imposed tariffs and threatened increased
tariffs on goods imported into the U.S. from China, any of which,
among other things, could limit the ability to produce products in
cost-effective countries or in countries that have the labor and
technical expertise needed, or require the Company to absorb costs
or try to pass costs onto consumers, which could materially impact
the Company’s revenue and profitability; (vi) the availability and
cost of raw materials; (vii) the Company’s ability to adjust timely
to changes in trade regulations and the migration and development
of manufacturers (which can affect where the Company’s products can
best be produced); (viii) changes in available factory and shipping
capacity, wage and shipping cost escalation, civil conflict, war or
terrorist acts, the threat of any of the foregoing, or political or
labor instability in any of the countries where the Company’s or
its licensees’ or other business partners’ products are sold,
produced or are planned to be sold or produced; (ix) disease
epidemics and health related concerns, which could result in closed
factories, reduced workforces, scarcity of raw materials and
scrutiny or embargoing of goods produced in infected areas, as well
as reduced consumer traffic and purchasing, as consumers become ill
or limit or cease shopping in order to avoid exposure; (x)
acquisitions and divestitures and issues arising with acquisitions,
divestitures and proposed transactions, including, without
limitation, the ability to integrate an acquired entity or business
into the Company with no substantial adverse effect on the acquired
entity’s, the acquired business’s or the Company’s existing
operations, employee relationships, vendor relationships, customer
relationships or financial performance, and the ability to operate
effectively and profitably the Company’s continuing businesses
after the sale or other disposal of a subsidiary, business or the
assets thereof; (xi) the failure of the Company’s licensees to
market successfully licensed products or to preserve the value of
the Company’s brands, or their misuse of the Company’s brands;
(xii) significant fluctuations of the U.S. dollar against foreign
currencies in which the Company transacts significant levels of
business; (xiii) the Company’s retirement plan expenses recorded
throughout the year are calculated using actuarial valuations that
incorporate assumptions and estimates about financial market,
economic and demographic conditions, and differences between
estimated and actual results give rise to gains and losses, which
can be significant, that are recorded immediately in earnings,
generally in the fourth quarter of the year; (xiv) the impact of
new and revised tax legislation and regulations, particularly the
U.S. Tax Cuts and Jobs Act of 2017 that might disproportionately
affect the Company as compared to some of its peers due to the
specific tax structure of the Company and its greater percentage of
revenues and income generated outside of the U.S., and the
legislation enacted in the Netherlands known as the “2019 Dutch Tax
Plan”; and (xv) other risks and uncertainties indicated from time
to time in the Company’s filings with the Securities and Exchange
Commission (“SEC”).
This press release includes, and the conference call/webcast
will include, certain non-GAAP financial measures, as defined under
SEC rules. Reconciliations of these measures are included in the
financial information later in this release, as well as in the
Company’s Current Report on Form 8-K furnished to the SEC in
connection with this earnings release, which is available on the
Company’s website at www.PVH.com and on the SEC’s website at
www.sec.gov.
The Company does not undertake any obligation to update publicly
any forward-looking statement, including, without limitation, any
estimate regarding revenue or earnings, whether as a result of the
receipt of new information, future events or otherwise.
PVH CORP. Consolidated GAAP Income Statements
(In millions, except per share data)
Quarter Ended
Six Months Ended
8/4/19
8/5/18
8/4/19
8/5/18
Net sales
$
2,249.0
$
2,223.2
$
4,486.3
$
4,416.7
Royalty revenue
85.8
81.5
175.2
170.9
Advertising and other revenue
29.4
29.0
59.0
60.7
Total revenue
$
2,364.2
$
2,333.7
$
4,720.5
$
4,648.3
Gross profit on net sales
$
1,173.2
$
1,186.5
$
2,350.1
$
2,356.4
Gross profit on royalty, advertising and
other revenue
115.2
110.5
234.2
231.6
Total gross profit
1,288.4
1,297.0
2,584.3
2,588.0
Selling, general and administrative
expenses
1,154.5
1,071.5
2,316.0
2,124.5
Non-service related pension and
postretirement income
1.9
2.6
4.1
5.1
Debt modification and extinguishment
costs
5.2
Other noncash gain
113.1
113.1
Equity in net income of unconsolidated
affiliates
0.9
3.3
4.6
7.1
Earnings before interest and taxes
249.8
231.4
384.9
475.7
Interest expense, net
27.0
29.1
56.9
57.5
Pre-tax income
222.8
202.3
328.0
418.2
Income tax expense
29.7
37.6
53.3
74.6
Net income
193.1
164.7
274.7
343.6
Less: Net loss attributable to redeemable
non-controlling interest (1)
(0.4
)
(0.5
)
(0.8
)
(1.0
)
Net income attributable to PVH Corp.
$
193.5
$
165.2
$
275.5
$
344.6
Diluted net income per common share
attributable to PVH Corp. (2)
$
2.58
$
2.12
$
3.65
$
4.42
Quarter Ended
Six Months Ended
8/4/19
8/5/18
8/4/19
8/5/18
Depreciation and amortization expense
$
78.4
$
83.0
$
154.9
$
166.2
Please see following pages for information related to non-GAAP
measures discussed in this release.
(1)
The Company and Arvind Limited have a
joint venture in Ethiopia in which the Company owns a 75%
interest.
(2)
Please see Note A in Notes to Consolidated
GAAP Income Statements for the reconciliations of GAAP diluted net
income per common share to diluted net income per common share on a
non-GAAP basis.
PVH CORP. Non-GAAP Measures (In millions,
except per share data)
The Company believes it is useful to investors to present its
results for the periods ended August 4, 2019 and August 5, 2018 on
a non-GAAP basis by excluding (i) the costs incurred in the first
and second quarters of 2019 related to the restructuring associated
with the strategic changes for its Calvin Klein business announced
in January 2019 (the “Calvin Klein restructuring”), consisting of a
noncash lease asset impairment resulting from the closure of the
Company’s flagship store on Madison Avenue in New York, New York;
other noncash asset impairments; severance; contract termination
and other costs; and inventory markdowns; (ii) the costs incurred
in the first quarter of 2019 in connection with the closure of the
Company’s TOMMY HILFIGER flagship and anchor stores in the United
States (the “TH U.S. store closures”), primarily consisting of
noncash lease asset impairments; (iii) the costs incurred in the
first quarter of 2019 in connection with the refinancing of the
Company’s senior credit facilities; (iv) the noncash gain recorded
in the second quarter of 2019 to write up the Company’s equity
investments in Gazal Corporation Limited (“Gazal”) and PVH Brands
Australia Pty. Limited (“PVH Australia”) to fair value in
connection with the acquisition of the approximately 78% interest
in Gazal that it did not already own (the “Australia acquisition”);
(v) the costs incurred in the second quarter of 2019 related to the
Australia acquisition and the acquisition of the Tommy Hilfiger
retail business in Central and Southeast Asia from the Company’s
previous licensee in that market (the “TH CSAP acquisition”),
primarily consisting of noncash valuation adjustments; (vi) the
one-time costs recorded in the second quarter of 2019 on the
Company’s equity investments in Gazal and PVH Australia prior to
the Australia acquisition closing; (vii) the costs incurred in the
second quarter of 2019 in connection with the agreements to
terminate early the licenses for the global Calvin Klein and Tommy
Hilfiger North America socks and hosiery businesses (the “Socks and
hosiery transaction”) in conjunction with the Company’s plan to
consolidate the socks and hosiery business for all Company brands
in North America in a newly formed joint venture, which is expected
to begin operations in December 2019, and to bring in-house the
international Calvin Klein socks and hosiery business; (viii) the
costs incurred in the first and second quarters of 2018 related to
the acquisition of the 55% interest in TH Asia, Ltd., its former
joint venture for TOMMY HILFIGER in China, that it did not already
own (the “TH China acquisition”), consisting of noncash
amortization of short-lived assets; and (ix) the tax effects
associated with the foregoing pre-tax items. The Company excludes
these amounts because it deems them to be non-recurring or
non-operational and believes that their exclusion (i) facilitates
comparing current results against past and future results by
eliminating amounts that it believes are not comparable between
periods, thereby permitting management to evaluate performance and
investors to make decisions based on the ongoing operations of the
Company, and (ii) assists investors in evaluating the effectiveness
of the Company’s operations and underlying business trends in a
manner that is consistent with management’s evaluation of business
performance. The Company believes that investors often look at
ongoing operations of an enterprise as a measure of assessing
performance. The Company uses its results excluding these amounts
to evaluate its operating performance and to discuss its business
with investment institutions, the Company’s Board of Directors and
others. The Company’s results excluding the items described above
are also the basis for certain incentive compensation calculations.
The non-GAAP measures should be viewed in addition to, and not in
lieu of or superior to, the Company’s operating performance
measures calculated in accordance with GAAP. The information
presented on a non-GAAP basis may not be comparable to similarly
titled measures reported by other companies.
PVH CORP. Non-GAAP Measures (continued) (In
millions, except per share data)
The following table presents the non-GAAP measures that are
discussed in this release. Please see Tables 1 through 9 for the
reconciliations of the GAAP amounts to amounts on a non-GAAP
basis.
Quarter Ended
Six Months Ended
8/4/19
8/5/18
8/4/19
8/5/18
Non-GAAP Measures
Total gross profit (1)
$
1,303.7
$
2,601.3
Selling, general and administrative
expenses (2)
1,076.1
$
1,064.8
2,113.1
$
2,110.9
Debt modification and extinguishment costs
(3)
—
Other noncash gain (4)
—
—
Equity in net income of unconsolidated
affiliates (5)
3.0
6.7
Earnings before interest and taxes (6)
232.5
238.1
499.0
489.3
Income tax expense (7)
48.3
39.4
98.9
77.9
Net income attributable to PVH Corp.
(8)
157.6
170.1
344.0
354.9
Diluted net income per common share
attributable to PVH Corp. (9)
$
2.10
$
2.18
$
4.56
$
4.55
Depreciation and amortization expense
(10)
$
76.3
$
152.6
(1)
Please see Table 3 for the reconciliations
of GAAP gross profit to gross profit on a non-GAAP basis.
(2)
Please see Table 4 for the reconciliations
of GAAP selling, general and administrative (“SG&A”) expenses
to SG&A expenses on a non-GAAP basis.
(3)
Please see Table 5 for the reconciliation
of GAAP debt modification and extinguishment costs to debt
modification and extinguishment costs on a non-GAAP basis.
(4)
Please see Table 6 for the reconciliations
of GAAP other noncash gain to other noncash gain on a non-GAAP
basis.
(5)
Please see Table 7 for the reconciliations
of GAAP equity in net income of unconsolidated affiliates to equity
in net income of unconsolidated affiliates on a non-GAAP basis.
(6)
Please see Table 2 for the reconciliations
of GAAP earnings before interest and taxes to earnings before
interest and taxes on a non-GAAP basis.
(7)
Please see Table 8 for the reconciliations
of GAAP income tax expense to income tax expense on a non-GAAP
basis and an explanation of the calculation of the tax effects
associated with the pre-tax items identified as non-GAAP
exclusions.
(8)
Please see Table 1 for the reconciliations
of GAAP net income to net income on a non-GAAP basis.
(9)
Please see Note A in Notes to Consolidated
GAAP Income Statements for the reconciliations of GAAP diluted net
income per common share to diluted net income per common share on a
non-GAAP basis.
(10)
Please see Table 9 for the reconciliations
of GAAP depreciation and amortization expense to depreciation and
amortization expense on a non-GAAP basis.
PVH CORP. Reconciliations of GAAP to Non-GAAP
Amounts (In millions, except per share data)
Table 1 - Reconciliations of GAAP net income
to net income on a non-GAAP basis
Quarter Ended
Six Months Ended
8/4/19
8/5/18
8/4/19
8/5/18
Net income attributable to PVH Corp.
$
193.5
$
165.2
$
275.5
$
344.6
Diluted net income per common share attributable to PVH Corp.(1)
$
2.58
$
2.12
$
3.65
$
4.42
Pre-tax items excluded:
Gross profit charges associated with the Calvin Klein restructuring
(inventory markdowns)
11.2
12.9
Gross profit charges associated with the Australia and TH CSAP
acquisitions (short-lived noncash inventory valuation adjustments)
4.1
4.1
SG&A expenses associated with the Calvin Klein restructuring
17.9
86.5
SG&A expenses associated with the Socks and hosiery transaction
59.8
59.8
SG&A expenses associated with the TH U.S. store closures
54.9
SG&A expenses associated with the Australia and TH CSAP
acquisitions
0.7
0.7
SG&A expenses associated with the refinancing of the Company’s
senior credit facilities
1.0
SG&A expenses associated with the TH China acquisition
6.7
13.6
Debt modification and extinguishment costs
5.2
Noncash gain to write up the Company’s equity investments in Gazal
and PVH Australia to fair value (recorded in other noncash gain)
(113.1
)
(113.1
)
One-time expenses recorded on the Company’s equity investments in
Gazal and PVH Australia (recorded in equity in net income of
unconsolidated affiliates)
2.1
2.1
Tax effects of the above pre-tax items(2)
(18.6
)
(1.8
)
(45.6
)
(3.3
)
Net income on a non-GAAP basis attributable to PVH Corp.
$
157.6
$
170.1
$
344.0
$
354.9
Diluted net income per common share on a non-GAAP basis
attributable to PVH Corp.(1)
$
2.10
$
2.18
$
4.56
$
4.55
(1)
Please see Note A in Notes to the
Consolidated GAAP Income Statements for the reconciliations of GAAP
diluted net income per common share to diluted net income per
common share on a non-GAAP basis.
(2)
Please see Table 8 for an explanation of
the calculation of the tax effects of the above items.
PVH CORP. Reconciliations of GAAP to Non-GAAP Amounts
(continued) (In millions)
Table 2 -
Reconciliations of GAAP earnings before interest and taxes to
earnings before interest and taxes on a non-GAAP basis
Quarter Ended
Six Months Ended
8/4/19
8/5/18
8/4/19
8/5/18
Earnings before interest and taxes
$
249.8
$
231.4
$
384.9
$
475.7
Items excluded:
Gross profit charges associated with the
Calvin Klein restructuring (inventory markdowns)
11.2
12.9
Gross profit charges associated with the
Australia and TH CSAP acquisitions (short-lived noncash inventory
valuation adjustments)
4.1
4.1
SG&A expenses associated with the
Calvin Klein restructuring
17.9
86.5
SG&A expenses associated with the
Socks and hosiery transaction
59.8
59.8
SG&A expenses associated with the TH
U.S. store closures
54.9
SG&A expenses associated with the
Australia and TH CSAP acquisitions
0.7
0.7
SG&A expenses associated with the
refinancing of the Company’s senior credit facilities
1.0
SG&A expenses associated with the TH
China acquisition
6.7
13.6
Debt modification and extinguishment
costs
5.2
Noncash gain to write up the Company’s
equity investments in Gazal and PVH Australia to fair value
(recorded in other noncash gain)
(113.1
)
(113.1
)
One-time expenses recorded on the
Company’s equity investments in Gazal and PVH Australia (recorded
in equity in net income of unconsolidated affiliates)
2.1
2.1
Earnings before interest and taxes on a
non-GAAP basis
$
232.5
$
238.1
$
499.0
$
489.3
Table 3 -
Reconciliations of GAAP gross profit to gross profit on a non-GAAP
basis
Quarter Ended
Six Months Ended
8/4/19
8/4/19
Gross profit
$
1,288.4
$
2,584.3
Items excluded:
Gross profit charges associated with the
Calvin Klein restructuring (inventory markdowns)
11.2
12.9
Gross profit charges associated with the
Australia and TH CSAP acquisitions (short-lived noncash inventory
valuation adjustments)
4.1
4.1
Gross profit on a non-GAAP basis
$
1,303.7
$
2,601.3
PVH CORP. Reconciliations of GAAP to Non-GAAP Amounts
(continued) (In millions)
Table 4 -
Reconciliations of GAAP SG&A expenses to SG&A expenses on a
non-GAAP basis
Quarter Ended
Six Months Ended
8/4/19
8/5/18
8/4/19
8/5/18
SG&A expenses
$
1,154.5
$
1,071.5
$
2,316.0
$
2,124.5
Items excluded:
Expenses associated with the Calvin Klein
restructuring
(17.9
)
(86.5
)
Expenses associated with the Socks and
hosiery transaction
(59.8
)
(59.8
)
Expenses associated with the TH U.S. store
closures
(54.9
)
Expenses associated with the Australia and
TH CSAP acquisitions
(0.7
)
(0.7
)
Expenses associated with the refinancing
of the Company’s senior credit facilities
(1.0
)
Expenses associated with the TH China
acquisition
(6.7
)
(13.6
)
SG&A expenses on a non-GAAP basis
$
1,076.1
$
1,064.8
$
2,113.1
$
2,110.9
Table 5 - Reconciliation of GAAP debt
modification and extinguishment costs to debt modification and
extinguishment costs on a non-GAAP basis
Six Months Ended
8/4/19
Debt modification and extinguishment
costs
$
5.2
Item excluded:
Costs incurred associated with the
refinancing of the Company’s senior credit facilities
(5.2
)
Debt modification and extinguishment costs
on a non-GAAP basis
$
—
Table 6 -
Reconciliations of GAAP other noncash gain to other noncash gain on
a non-GAAP basis
Quarter Ended
Six Months Ended
8/4/19
8/4/19
Other noncash gain
$
113.1
$
113.1
Item excluded:
Noncash gain to write up the Company’s
equity investments in Gazal and PVH Australia to fair value
(113.1
)
(113.1
)
Other noncash gain on a non-GAAP basis
$
—
$
—
PVH CORP. Reconciliations of GAAP to Non-GAAP Amounts
(continued) (In millions)
Table 7 - Reconciliations of GAAP equity
in net income of unconsolidated affiliates to equity in net income
of unconsolidated affiliates
on a non-GAAP basis
Quarter Ended
Six Months Ended
8/4/19
8/4/19
Equity in net income of unconsolidated
affiliates
$
0.9
$
4.6
Item excluded:
One-time expenses recorded on the
Company’s equity investments in Gazal and PVH Australia
2.1
2.1
Equity in net income of unconsolidated
affiliates on a non-GAAP basis
$
3.0
$
6.7
Table 8 -
Reconciliations of GAAP income tax expense to income tax expense on
a non-GAAP basis
Quarter Ended
Six Months Ended
8/4/19
8/5/18
8/4/19
8/5/18
Income tax expense
$
29.7
$
37.6
$
53.3
$
74.6
Item excluded:
Tax effects of pre-tax items identified as
non-GAAP exclusions (1)
18.6
1.8
45.6
3.3
Income tax expense on a non-GAAP basis
$
48.3
$
39.4
$
98.9
$
77.9
(1)
The estimated tax effects associated with
the Company’s exclusions on a non-GAAP basis are based on the
Company’s assessment of deductibility. In making this assessment,
the Company evaluated each pre-tax item that it had identified
above as a non-GAAP exclusion to determine if such item is taxable
or tax deductible and, if so, in what jurisdiction the tax expense
or tax deduction would occur. All of the pre-tax items identified
as non-GAAP exclusions were identified as either primarily taxable
or tax deductible, with the tax effect taken at the statutory
income tax rate of the local jurisdiction, or as non-taxable or
non-deductible, in which case the Company assumed no tax
effect.
Table 9 - Reconciliations of GAAP depreciation and
amortization expense to depreciation and amortization expense on a
non-GAAP basis
Quarter Ended
Six Months Ended
8/5/18
8/5/18
Depreciation and amortization expense
$
83.0
$
166.2
Item excluded:
Amortization of short-lived assets
associated with the TH China acquisition
(6.7
)
(13.6
)
Depreciation and amortization expense on a
non-GAAP basis
$
76.3
$
152.6
PVH CORP. Notes to Consolidated GAAP Income
Statements (In millions, except per share data)
A. The Company computed its diluted net income per common share
as follows:
Quarter Ended
Quarter Ended
8/4/19
8/5/18
GAAP
Non-GAAP
GAAP
Non-GAAP
Results
Adjustments
(1)
Results
Results
Adjustments
(2)
Results
Net income attributable to PVH Corp.
$
193.5
$
35.9
$
157.6
$
165.2
$
(4.9
)
$
170.1
Weighted average common shares
74.8
74.8
77.0
77.0
Weighted average dilutive securities
0.3
0.3
0.9
0.9
Total shares
75.1
75.1
77.9
77.9
Diluted net income per common share
attributable to PVH Corp.
$
2.58
$
2.10
$
2.12
$
2.18
Six Months Ended
Six Months Ended
8/4/19
8/5/18
GAAP
Non-GAAP
GAAP
Non-GAAP
Results
Adjustments
(1)
Results
Results
Adjustments
(2)
Results
Net income attributable to PVH Corp.
$
275.5
$
(68.5
)
$
344.0
$
344.6
$
(10.3
)
$
354.9
Weighted average common shares
75.0
75.0
77.0
77.0
Weighted average dilutive securities
0.5
0.5
1.0
1.0
Total shares
75.5
75.5
78.0
78.0
Diluted net income per common share
attributable to PVH Corp.
$
3.65
$
4.56
$
4.42
$
4.55
(1)
Represents the impact on net income in the
periods ended August 4, 2019 from the elimination of (i) the costs
related to the Calvin Klein restructuring; (ii) the costs in
connection with the TH U.S. store closures; (iii) the costs in
connection with the refinancing of the Company’s senior credit
facilities; (iv) the noncash gain recorded to write up the
Company’s equity investments in Gazal and PVH Australia to fair
value in connection with the Australia acquisition; (v) the costs
related to the Australia and TH CSAP acquisitions, primarily
consisting of noncash valuation adjustments; (vi) the one-time
costs recorded on the Company’s equity investments in Gazal and PVH
Australia prior to the Australia acquisition closing; (vii) the
costs in connection with the Socks and hosiery transaction; and
(viii) the tax effects associated with the foregoing pre-tax items.
Please see Table 1 for the reconciliation of GAAP net income to net
income on a non-GAAP basis.
(2)
Represents the impact on net income in the
periods ended August 5, 2018 from the elimination of the costs
related to the TH China acquisition, consisting of noncash
amortization of short-lived assets, and the resulting tax effect.
Please see Table 1 for the reconciliation of GAAP net income to net
income on a non-GAAP basis.
PVH CORP. Consolidated Balance Sheets (In
millions)
8/4/19
8/5/18
ASSETS
Current Assets:
Cash and Cash Equivalents
$
433.5
$
431.1
Receivables
808.9
731.6
Inventories
1,862.1
1,731.0
Other
294.1
272.3
Total Current Assets
3,398.6
3,166.0
Property, Plant and Equipment
973.4
881.3
Operating Lease Right-of-Use Assets
(1)
1,660.7
Goodwill and Other Intangible Assets
7,461.1
7,284.6
Other Assets
327.1
365.8
$
13,820.9
$
11,697.7
LIABILITIES, REDEEMABLE NON-CONTROLLING
INTEREST AND STOCKHOLDERS’ EQUITY
Accounts Payable and Accrued Expenses
$
1,858.1
$
1,750.3
Current Portion of Operating Lease
Liabilities (1)
345.2
Short-Term Borrowings
183.2
85.4
Current Portion of Long-Term Debt
41.2
—
Other Liabilities
1,243.6
1,402.1
Long-Term Portion of Operating Lease
Liabilities (1)
1,535.5
Long-Term Debt
2,743.0
2,893.5
Redeemable Non-Controlling Interest
(0.6
)
1.0
Stockholders’ Equity
5,871.7
5,565.4
$
13,820.9
$
11,697.7
Note: Year over year balances are impacted by changes in foreign
currency exchange rates.
(1) Operating Lease Right-of-Use Assets, Current Portion of
Operating Lease Liabilities and Long-Term Portion of Operating
Lease Liabilities as of August 4, 2019 reflect the impact of the
adoption of the new lease accounting standard in the first quarter
of 2019.
PVH CORP.
Segment Data
(In millions)
REVENUE BY
SEGMENT
Quarter Ended
Quarter Ended
8/4/19
8/5/18
Tommy Hilfiger North
America
Net sales
$
390.1
$
417.8
Royalty revenue
18.1
14.5
Advertising and other revenue
4.8
4.3
Total
413.0
436.6
Tommy Hilfiger
International
Net sales
679.0
572.3
Royalty revenue
12.4
13.0
Advertising and other revenue
5.8
6.7
Total
697.2
592.0
Total Tommy
Hilfiger
Net sales
1,069.1
990.1
Royalty revenue
30.5
27.5
Advertising and other revenue
10.6
11.0
Total
1,110.2
1,028.6
Calvin Klein North
America
Net sales
366.1
425.0
Royalty revenue
31.5
32.0
Advertising and other revenue
11.2
10.5
Total
408.8
467.5
Calvin Klein
International
Net sales
440.4
435.3
Royalty revenue
17.9
16.0
Advertising and other revenue
6.2
6.3
Total
464.5
457.6
Total Calvin
Klein
Net sales
806.5
860.3
Royalty revenue
49.4
48.0
Advertising and other revenue
17.4
16.8
Total
873.3
925.1
Heritage Brands
Wholesale
Net sales
304.4
302.0
Royalty revenue
5.0
5.0
Advertising and other revenue
1.2
1.1
Total
310.6
308.1
Heritage Brands
Retail
Net sales
69.0
70.8
Royalty revenue
0.9
1.0
Advertising and other revenue
0.2
0.1
Total
70.1
71.9
Total Heritage
Brands
Net sales
373.4
372.8
Royalty revenue
5.9
6.0
Advertising and other revenue
1.4
1.2
Total
380.7
380.0
Total
Revenue
Net sales
2,249.0
2,223.2
Royalty revenue
85.8
81.5
Advertising and other revenue
29.4
29.0
Total
$
2,364.2
$
2,333.7
PVH CORP.
Segment Data (continued)
(In millions)
EARNINGS BEFORE
INTEREST AND TAXES BY SEGMENT
Quarter Ended
Quarter Ended
8/4/19
8/5/18
Results
Results
Under
Non-GAAP
Under
Non-GAAP
GAAP
Adjustments(1)
Results
GAAP
Adjustments(2)
Results
Tommy Hilfiger North America
$
48.3
$
(7.5
)
$
55.8
$
74.2
$
74.2
Tommy Hilfiger International
99.8
(2.5
)
102.3
59.8
$
(6.7
)
66.5
Total Tommy Hilfiger
148.1
(10.0
)
158.1
134.0
(6.7
)
140.7
Calvin Klein North America
11.3
(39.7
)
51.0
59.8
59.8
Calvin Klein International
6.6
(43.2
)
49.8
45.2
45.2
Total Calvin Klein
17.9
(82.9
)
100.8
105.0
105.0
Heritage Brands Wholesale
14.0
(0.4
)
14.4
26.5
26.5
Heritage Brands Retail
3.1
3.1
6.1
6.1
Total Heritage Brands
17.1
(0.4
)
17.5
32.6
32.6
Corporate
66.7
110.6
(43.9
)
(40.2
)
(40.2
)
Total earnings before interest and
taxes
$
249.8
$
17.3
$
232.5
$
231.4
$
(6.7
)
$
238.1
(1)
The adjustments for the quarter ended
August 4, 2019 represent the elimination of (i) the costs related
to the Calvin Klein restructuring; (ii) the noncash gain recorded
to write up the Company’s equity investments in Gazal and PVH
Australia to fair value in connection with the Australia
acquisition; (iii) the costs related to the Australia and TH CSAP
acquisitions, primarily consisting of noncash valuation
adjustments; (iv) the one-time costs recorded on the Company’s
equity investments in Gazal and PVH Australia prior to the
Australia acquisition closing; and (v) the costs in connection with
the Socks and hosiery transaction.
(2)
The adjustment for the quarter ended
August 5, 2018 represents the elimination of the costs related to
the TH China acquisition, consisting of noncash amortization of
short-lived assets.
PVH CORP.
Segment Data (continued)
(In millions)
REVENUE BY
SEGMENT
Six Months Ended
Six Months Ended
8/4/19
8/5/18
Tommy Hilfiger North
America
Net sales
$
737.9
$
756.7
Royalty revenue
36.8
32.9
Advertising and other revenue
10.1
8.2
Total
784.8
797.8
Tommy Hilfiger
International
Net sales
1,341.7
1,209.5
Royalty revenue
25.6
25.0
Advertising and other revenue
10.2
12.1
Total
1,377.5
1,246.6
Total Tommy
Hilfiger
Net sales
2,079.6
1,966.2
Royalty revenue
62.4
57.9
Advertising and other revenue
20.3
20.3
Total
2,162.3
2,044.4
Calvin Klein North
America
Net sales
744.5
792.3
Royalty revenue
64.9
66.0
Advertising and other revenue
23.4
23.7
Total
832.8
882.0
Calvin Klein
International
Net sales
881.5
884.1
Royalty revenue
35.8
34.5
Advertising and other revenue
12.8
14.5
Total
930.1
933.1
Total Calvin
Klein
Net sales
1,626.0
1,676.4
Royalty revenue
100.7
100.5
Advertising and other revenue
36.2
38.2
Total
1,762.9
1,815.1
Heritage Brands
Wholesale
Net sales
654.7
642.8
Royalty revenue
10.1
10.4
Advertising and other revenue
2.2
2.0
Total
667.0
655.2
Heritage Brands
Retail
Net sales
126.0
131.3
Royalty revenue
2.0
2.1
Advertising and other revenue
0.3
0.2
Total
128.3
133.6
Total Heritage
Brands
Net sales
780.7
774.1
Royalty revenue
12.1
12.5
Advertising and other revenue
2.5
2.2
Total
795.3
788.8
Total
Revenue
Net sales
4,486.3
4,416.7
Royalty revenue
175.2
170.9
Advertising and other revenue
59.0
60.7
Total
$
4,720.5
$
4,648.3
PVH CORP.
Segment Data (continued)
(In millions)
EARNINGS BEFORE
INTEREST AND TAXES BY SEGMENT
Six Months Ended
Six Months Ended
8/4/19
8/5/18
Results
Results
Under
Non-GAAP
Under
Non-GAAP
GAAP
Adjustments(1)
Results
GAAP
Adjustments(2)
Results
Tommy Hilfiger North America
$
33.6
$
(62.4
)
$
96.0
$
115.0
$
115.0
Tommy Hilfiger International
206.6
(2.5
)
209.1
151.0
$
(13.6
)
164.6
Total Tommy Hilfiger
240.2
(64.9
)
305.1
266.0
(13.6
)
279.6
Calvin Klein North America
12.7
(90.6
)
103.3
103.3
103.3
Calvin Klein International
53.5
(62.6
)
116.1
110.3
110.3
Total Calvin Klein
66.2
(153.2
)
219.4
213.6
213.6
Heritage Brands Wholesale
53.0
(0.4
)
53.4
66.3
66.3
Heritage Brands Retail
4.1
4.1
7.9
7.9
Total Heritage Brands
57.1
(0.4
)
57.5
74.2
74.2
Corporate
21.4
104.4
(83.0
)
(78.1
)
(78.1
)
Total earnings before interest and
taxes
$
384.9
$
(114.1
)
$
499.0
$
475.7
$
(13.6
)
$
489.3
(1)
The adjustments for the six months ended
August 4, 2019 represent the elimination of (i) the costs related
to the Calvin Klein restructuring; (ii) the costs in connection
with the TH U.S. store closures; (iii) the costs in connection with
the refinancing of the Company’s senior credit facilities; (iv) the
noncash gain recorded to write up the Company’s equity investments
in Gazal and PVH Australia to fair value in connection with the
Australia acquisition; (v) the costs related to the Australia and
TH CSAP acquisitions, primarily consisting of noncash valuation
adjustments; (vi) the one-time costs recorded on the Company’s
equity investments in Gazal and PVH Australia prior to the
Australia acquisition closing; and (vii) the costs in connection
with the Socks and hosiery transaction.
(2)
The adjustment for the six months ended
August 5, 2018 represents the elimination of the costs related to
the TH China acquisition, consisting of noncash amortization of
short-lived assets.
PVH CORP. Reconciliations of 2019 Constant Currency
Revenue (In millions)
As a supplement to the Company’s reported operating results, the
Company presents constant currency revenue information, which is a
non-GAAP financial measure. The Company presents results in this
manner because it is a global company that transacts business in
multiple currencies but reports financial information in U.S.
dollars. Foreign currency exchange rate fluctuations affect the
amounts reported by the Company in U.S. dollars with respect to its
foreign revenues. Exchange rate fluctuations can have a significant
effect on reported revenues. The Company believes presenting
constant currency revenue information provides useful information
to investors, as it provides information to assess how its
businesses performed excluding the effects of changes in foreign
currency exchange rates and assists investors in evaluating the
effectiveness of the Company’s operations and underlying business
trends in a manner that is consistent with management’s evaluation
of business performance.
The Company calculates constant currency revenue information by
translating its foreign revenues for the current year period into
U.S. dollars at the average exchange rates in effect during the
comparable prior year period (rather than at the actual exchange
rates in effect during the current year period).
Constant currency performance should be viewed in addition to,
and not in lieu of or as superior to, the Company’s operating
performance calculated in accordance with GAAP. The constant
currency revenue information presented may not be comparable to
similarly described measures reported by other companies.
GAAP Revenue
% Change
Quarter Ended
GAAP
Negative Impact of Foreign
Exchange
Constant Currency
8/4/19
8/5/18
Tommy Hilfiger North America
$
413.0
$
436.6
(5.4
)%
(0.2
)%
(5.2
)%
Tommy Hilfiger International
697.2
592.0
17.8
%
(4.2
)%
22.0
%
Total Tommy Hilfiger
1,110.2
1,028.6
7.9
%
(2.5
)%
10.4
%
Calvin Klein North America
$
408.8
$
467.5
(12.6
)%
(0.2
)%
(12.4
)%
Calvin Klein International
464.5
457.6
1.4
%
(3.9
)%
5.3
%
Total Calvin Klein
873.3
925.1
(5.6
)%
(2.0
)%
(3.6
)%
Total Revenue
$
2,364.2
$
2,333.7
1.3
%
(1.9
)%
3.2
%
GAAP Revenue
% Change
Six Months Ended
GAAP
Negative Impact of Foreign
Exchange
Constant Currency
8/4/19
8/5/18
Total Tommy Hilfiger
$
2,162.3
$
2,044.4
5.8
%
(4.0
)%
9.8
%
Total Calvin Klein
$
1,762.9
$
1,815.1
(2.9
)%
(3.0
)%
0.1
%
Total Revenue
$
4,720.5
$
4,648.3
1.6
%
(2.9
)%
4.5
%
PVH CORP. Full Year and Quarterly Reconciliations of
GAAP to Non-GAAP Amounts
The Company is presenting its 2019 estimated results on a
non-GAAP basis by excluding (i) the costs incurred and expected to
be incurred related to the Calvin Klein restructuring, consisting
of a noncash lease asset impairment resulting from the closure of
the Company’s flagship store on Madison Avenue in New York, New
York; other noncash asset impairments; severance; contract
termination and other costs; and inventory markdowns; (ii) the
costs incurred in connection with the TH U.S. store closures,
primarily consisting of noncash lease asset impairments; (iii) the
costs incurred in connection with the refinancing of the Company’s
senior credit facilities; (iv) the noncash gain recorded to write
up the Company's equity investments in Gazal and PVH Australia to
fair value in connection with the Australia acquisition; (v) the
costs incurred and expected to be incurred related to the Australia
and TH CSAP acquisitions, primarily consisting of noncash valuation
adjustments; (vi) the one-time costs recorded on the Company’s
equity investments in Gazal and PVH Australia prior to the
Australia acquisition closing, (vii) the costs incurred in
connection with the Socks and hosiery transaction; and (viii) the
estimated tax effects associated with the foregoing pre-tax items.
The Company has provided the reconciliations set forth below to
present its estimates on a GAAP basis and excluding the foregoing
amounts.
The 2019 estimated results are presented on both a GAAP and
non-GAAP basis. The Company believes presenting these results on a
non-GAAP basis provides useful additional information to investors.
The Company excludes such amounts that it deems to be non-recurring
or non-operational and believes that excluding them (i) facilitates
comparing current results against past and future results by
eliminating amounts that it believes are not comparable between
periods, thereby permitting management to evaluate performance and
investors to make decisions based on the ongoing operations of the
Company, and (ii) assists investors in evaluating the effectiveness
of the Company’s operations and underlying business trends in a
manner that is consistent with management’s evaluation of business
performance. The Company uses its results excluding these amounts
to evaluate its operating performance and to discuss its business
with investment institutions, the Company’s Board of Directors and
others. The Company’s results excluding the items described above
are also the basis for certain incentive compensation calculations.
The non-GAAP measures should be viewed in addition to, and not in
lieu of or as superior to, the Company’s operating performance
measures calculated in accordance with GAAP. The information
presented on a non-GAAP basis may not be comparable to similarly
titled measures reported by other companies.
The estimated tax effects associated with the above pre-tax
items are based on the Company’s assessment of deductibility. In
making this assessment, the Company evaluated each pre-tax item
identified above as a non-GAAP exclusion to determine if such item
is taxable or tax deductible, and, if so, in what jurisdiction the
tax expense or tax deduction would occur. All of the pre-tax items
identified as non-GAAP exclusions were identified as either
primarily taxable or tax deductible, with the tax effect taken at
the statutory income tax rate of the local jurisdiction, or as
non-taxable or non-deductible, in which case the Company assumed no
tax effect.
2019 Net Income
Per Common Share Reconciliations
Current Guidance
Previous Guidance
Full Year 2019 (Estimated)
Third Quarter 2019
(Estimated)
Full Year 2019 (Estimated)
Second Quarter 2019
(Estimated)
GAAP net income per common share
attributable to PVH Corp.
$7.95 - $8.05
$2.70 - $2.75
$9.05 - $9.15
$2.75 - $2.80
Estimated per common share impact of items
identified as non-GAAP exclusions
$(1.35)
$(0.25)
$(1.15)
$0.90
Net income per common share attributable
to PVH Corp. on a non-GAAP basis
$9.30 - $9.40
$2.95 - $3.00
$10.20 - $10.30
$1.85 - $1.90
2019 Tax Rate
Reconciliations
Full Year 2019 (Estimated)
Third Quarter 2019
(Estimated)
GAAP tax rate
11.5% - 12.5%
8% - 9%
Estimated tax rate impacts from items
identified as non-GAAP exclusions
(2.5)%
1.5%
Tax rate on a non-GAAP basis
14% - 15%
6.5% - 7.5%
The GAAP net income per common share attributable to PVH Corp.
amounts presented in the above table, as well as the amounts
excluded in providing non-GAAP earnings guidance, would be expected
to change as a result of (i) acquisition, restructuring, divestment
or similar transactions or activities, (ii) the timing and strategy
of restructuring and integration initiatives or other one-time
events, if any, that the Company engages in or suffers during the
period, (iii) any market or other changes affecting the Company’s
expected actuarial gain or loss on retirement plans, (iv) the
imposition of significant tariffs, or a significant increase to
existing tariffs, on apparel, footwear and accessories imported
from China or any of the Company’s other significant sourcing
countries, or (v) any discrete tax events including changes in tax
rates or tax law and events arising from audits or the resolution
of uncertain tax positions. The Company has no current
understanding or agreement regarding any such transaction or
definitive plans regarding any such activity identified in clause
(i) or (ii) that has not been announced or completed.
2019 Constant
Currency Revenue Reconciliations
Full Year 2019 (Estimated)
(Consolidated)
Full Year 2019 (Estimated) (Tommy
Hilfiger)
Full Year 2019
(Estimated) (Calvin Klein)
Third Quarter 2019 (Estimated)
(Consolidated)
Third Quarter 2019 (Estimated)
(Tommy Hilfiger)
Third Quarter 2019 (Estimated)
(Calvin Klein)
GAAP revenue increase (decrease)
1
%
5
%
(2
)%
1
%
5
%
—
%
Negative impact of foreign exchange
(2
)%
(3
)%
(2
)%
(2
)%
(3
)%
(2
)%
Non-GAAP revenue increase on a constant
currency basis
3
%
8
%
—
%
3
%
8
%
2
%
Please refer to the section entitled “Reconciliations of 2019
Constant Currency Revenue” for a description of the presentation of
constant currency amounts.
Reconciliations
of GAAP Diluted Net Income Per Common Share to Diluted Net Income
Per Common Share on a Non-GAAP Basis
Full Year 2018
Third Quarter 2018
(Actual)
(Actual)
(In millions, except
per share data)
Results Under GAAP
Adjustments
(1)
Non- GAAP Results
Results Under GAAP
Adjustments
(2)
Non- GAAP Results
Net income
$
746.4
$
4.0
$
742.4
$
243.1
$
(4.7
)
$
247.8
Total weighted average shares
77.3
77.3
77.1
77.1
Diluted net income per common share
$
9.65
$
9.60
$
3.15
$
3.21
(1)
Represents the impact on net income in the
year ended February 3, 2019 from the elimination of (i) a $15.0
million recognized actuarial loss on retirement plans; (ii) $23.6
million of costs related to the TH China acquisition, consisting of
noncash amortization of short-lived assets; (iii) $40.7 million of
costs related to the Calvin Klein restructuring, primarily
consisting of severance, noncash asset impairments, contract
termination and other costs, and inventory markdowns; (iv) $17.5
million of tax benefits associated with the foregoing pre-tax
items; (v) a $24.7 million discrete net tax benefit associated with
the U.S. Tax Cuts and Jobs Act of 2017; and (vi) a $41.1 million
discrete tax benefit related to the remeasurement of certain of the
Company’s net deferred tax liabilities in connection with the
enactment of legislation in the Netherlands known as the “2019
Dutch Tax Plan.”
(2)
Represents the impact on net income in the
quarter ended November 4, 2018 from the elimination of $6.3 million
of costs related to the TH China acquisition, consisting of noncash
amortization of short-lived assets, and the resulting $1.6 million
tax benefit.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190828005720/en/
Dana Perlman Treasurer, Senior Vice President,
Business Development and Investor Relations (212)
381-3502 investorrelations@pvh.com
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