This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Warnaco Reports Third Quarter Fiscal 2012 Results

Stocks in this article: WRC

The Company encourages investors to read the section entitled "Risk Factors" and the discussion of the Company's critical accounting policies under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Discussion of Critical Accounting Policies" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, as such discussions may be modified or supplemented by subsequent reports that the Company files with the SEC. The discussion in this press release is not exhaustive but is designed to highlight important factors that may affect actual results. Forward-looking statements speak only as of the date on which they are made, and, except for the Company's ongoing obligation under the U.S. federal securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Important Additional Information Concerning the Merger with PVH Corp.

In connection with the merger, PVH will file with the SEC a Registration Statement on Form S-4 that will include a Proxy Statement of Warnaco and a Prospectus of PVH, as well as other relevant documents concerning the proposed transaction. WARNACO STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT / PROSPECTUS REGARDING THE MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about PVH and Warnaco, may be obtained at the SEC’s Internet site ( http://www.sec.gov). You will also be able to obtain these documents, free of charge, from PVH at www.pvh.com under the heading “Investors” or from Warnaco at www.warnaco.com under the heading “Investor Relations.”

PVH and Warnaco and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from Warnaco's stockholders in connection with the merger. Information about the directors and executive officers of PVH and their ownership of PVH common stock is set forth in the proxy statement for PVH’s 2012 annual meeting of stockholders, as filed with the SEC on Schedule 14A on May 10, 2012. Information about the directors and executive officers of Warnaco and their ownership of Warnaco common stock is set forth in the proxy statement for Warnaco’s 2012 annual meeting of stockholders, as filed with the SEC on Schedule 14A on April 11, 2012. Additional information regarding the interests of those participants and other persons who may be deemed participants in the merger may be obtained by reading the Proxy Statement/Prospectus regarding the merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph. This press release shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Schedule 1
THE WARNACO GROUP, INC.
 
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, excluding per share amounts)
(Unaudited)
 
  Three Months Ended   Nine Months Ended

September 29,

 

October 1,

September 29,

 

October 1,

2012

2011

2012

2011

 
 
Net revenues $ 611,538 $ 645,121 $ 1,790,990 1,898,669
Cost of goods sold   344,581  

 

  365,412     1,017,609     1,065,552  
Gross profit 266,957 279,709 773,381 833,117
Selling, general and administrative expenses 197,773 212,000 609,738 637,491
Amortization of intangible assets 2,537 3,263 12,086 9,548
Pension income   (55 )   (310 )   (164 )   (931 )
Operating income 66,702 64,756 151,721 187,009
Other loss 13 1,357 12,638 498
Interest expense 4,614 4,986 13,708 11,142
Interest income   (831 )   (986 )   (2,705 )   (2,542 )

Income from continuing operations before provision for income taxes and non-controlling interest

62,906 59,399 128,080 177,911
Provision for income taxes   21,676     10,770     44,489     39,184  
Income from continuing operations before non-controlling interest 41,230 48,629 83,591 138,727
Income (loss) from discontinued operations, net of taxes   (2 )   (4,177 )   3,023     (4,741 )
Net income 41,228 44,452 86,614 133,986
Less: Net income (loss) attributable to the non-controlling interest   100     (159 )   (46 )   (159 )
Net income attributable to Warnaco Group   41,128     44,611     86,660     134,145  
 
Amounts attributable to Warnaco Group common shareholders:
Income from continuing operations, net of taxes $ 41,130 $ 48,788 $ 83,637 $ 138,886
Income (loss) from discontinued operations, net of taxes   (2 )   (4,177 )   3,023     (4,741 )
Net income $ 41,128   $ 44,611   $ 86,660   $ 134,145  
 
Basic income per common share:
Income from continuing operations $ 0.99 $ 1.15 $ 2.02 $ 3.18
Income (loss) from discontinued operations   -     (0.10 )   0.08     (0.11 )
Net income $ 0.99   $ 1.05   $ 2.10   $ 3.07  
 
Diluted income per common share:
Income from continuing operations $ 0.98 $ 1.13 $ 1.99 $ 3.11
Income (loss) from discontinued operations   -     (0.10 )   0.07     (0.11 )
Net income $ 0.98   $ 1.03   $ 2.06   $ 3.00  
 

Weighted average number of shares outstanding used in computing income per common share:

Basic   40,908,995     41,713,958     40,800,528     43,076,120  
Diluted   41,498,354     42,581,100     41,525,805     44,023,646  
 
Schedule 2
THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
 
  September 29, 2012   December 31, 2011   October 1, 2011
 
ASSETS
Current assets:
Cash and cash equivalents $ 311,011 $ 232,531 $ 179,326
Accounts receivable, net 323,719 322,976 341,406
Inventories 388,827 350,835 392,073
Assets of discontinued operations - - -
Other current assets   166,817   158,288     174,355  
Total current assets 1,190,374 1,064,630 1,087,160
 
Property, plant and equipment, net 135,054 133,022 129,205
Intangible and other assets 527,065 550,198 596,406
     
TOTAL ASSETS $ 1,852,493 $ 1,747,850   $ 1,812,771  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 49,393 $ 47,513 $ 47,773
Accounts payable and accrued liabilities 365,715 354,452 392,359
Taxes 16,879 43,238 34,906
Liabilities of discontinued operations   -   6,797     7,048  
Total current liabilities 431,987 452,000 482,086
Long-term debt 205,299 208,477 209,552
Other long-term liabilities 171,249 174,973 206,529
Redeemable non-controlling interest 15,275 15,200 15,200
Total stockholders' equity   1,028,683   897,200     899,404  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,852,493 $ 1,747,850   $ 1,812,771  
 
NET CASH AND CASH EQUIVALENTS (NET DEBT) $ 56,319 $ (23,459 ) $ (77,999 )
 
Schedule 3
 
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY SEGMENT
(Dollars in thousands)
(Unaudited)
 
Net revenues:   Three Months Ended   Three Months Ended   Increase /   %   Constant $
September 29, 2012 October 1, 2011 (Decrease) Change % Change (a)
Sportswear Group $ 337,377 $ 357,935 $ (20,558 ) -5.7 % 0.2 %
Intimate Apparel Group 232,203 247,880 (15,677 ) -6.3 % -2.9 %
Swimwear Group   41,958     39,306     2,652   6.7 % 9.2 %
Net revenues $ 611,538   $ 645,121   $ (33,583 ) -5.2 % -0.4 %
 
Three Months Ended % of Group Three Months Ended % of Group
September 29, 2012 Net Revenues October 1, 2011 Net Revenues
Operating income (loss):
Sportswear Group (b), (c) $ 29,528 8.8 % $ 34,129 9.5 %
Intimate Apparel Group (b), (c) 41,204 17.7 % 38,620 15.6 %
Swimwear Group (b), (c) (429 ) -1.0 % (3,352 ) -8.5 %
Unallocated corporate (c), (d)   (3,601 ) na   (4,641 ) na
Operating income $ 66,702   na $ 64,756   na
 

Operating income as a percentage of total net revenues

  10.9 %   10.0 %
 
(a) Reflects the percentage increase (decrease) in net revenues for the Three Months Ended September 29, 2012, compared to the Three Months Ended October 1, 2011, assuming foreign-based net revenues for the Three Months Ended September 29, 2012 are translated into U.S. dollars using the same foreign currency exchange rates that were used in the calculation of net revenues for the Three Months Ended October 1, 2011. See Schedule 6a.
 
(b) Shared services expenses included in the operating income of the business groups are as follows:
Three Months Ended Three Months Ended
September 29, 2012 October 1, 2011
Sportswear Group $ 7,273 $ 6,970
Intimate Apparel Group $ 5,689 $ 5,086
Swimwear Group $ 2,569 $ 2,347
 
(c) Includes restructuring charges and other exit costs as follows:
Three Months Ended Three Months Ended
September 29, 2012 October 1, 2011
Sportswear Group $ 5,551 $ 3,545
Intimate Apparel Group 1,702 699
Swimwear Group (545 ) 2,988
Unallocated corporate   1,321     315  
$ 8,029   $ 7,547  
 

(d) For the Three Months Ended September 29, 2012 compared to the Three Months Ended October 1, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains, partially offset by restructuring expense as well as expense of $991 during the Three Months Ended September 29, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York.

 

Schedule 3a
 
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY SEGMENT
(Dollars in thousands)
(Unaudited)
 
Net revenues:   Nine Months Ended   Nine Months Ended   Increase /   %   Constant $
September 29, 2012

October 1, 2011

(Decrease) Change % Change (a)
Sportswear Group $ 903,208 $ 983,695 $ (80,487 ) -8.2 % -3.8 %
Intimate Apparel Group 667,206 695,317 (28,111 ) -4.0 % -1.3 %
Swimwear Group   220,576     219,657     919   0.4 % 1.7 %
Net revenues $ 1,790,990   $ 1,898,669   $ (107,679 ) -5.7 % -2.2 %
 
Nine Months Ended % of Group Nine Months Ended % of Group
September 29, 2012 Net Revenues October 1, 2011 Net Revenues
Operating income (loss):
Sportswear Group (b), (c) $ 31,828 3.5 % $ 88,686 9.0 %
Intimate Apparel Group (b), (c) 97,151 14.6 % 103,627 14.9 %
Swimwear Group (b), (c) 28,053 12.7 % 21,421 9.8 %
Unallocated corporate (c), (d)   (5,311 ) na   (26,725 ) na
Operating income $ 151,721   na $ 187,009   na
 

Operating income as a percentage of total net revenues

  8.5 %   9.8 %
 
(a) Reflects the percentage increase (decrease) in net revenues for the Nine Months Ended September 29, 2012 compared to the Nine Months Ended October 1, 2011, assuming foreign-based net revenues for the Nine Months Ended September 29, 2012 are translated into U.S. dollars using the same foreign currency exchange rates that were used in the calculation of net revenues for the Nine Months Ended October 1, 2011. See Schedule 6b.
 
(b) Shared services expenses included in the operating income of the business groups are as follows:
Nine Months Ended Nine Months Ended
September 29, 2012 October 1, 2011
Sportswear Group $ 21,862 $ 20,813
Intimate Apparel Group $ 16,559 $ 14,787
Swimwear Group $ 8,167 $ 7,572
 
(c) Includes restructuring charges and other exit costs as follows:
Nine Months Ended

Nine Months Ended

September 29, 2012 October 1, 2011
Sportswear Group $ 21,228 $ 7,169
Intimate Apparel Group 7,954 3,619
Swimwear Group 282 7,254
Unallocated corporate   1,367     948  
$ 30,831   $ 18,990  
 

(d) For the Nine Months Ended September 29, 2012 compared to the Nine Months Ended October 1, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains, partially offset by an increase in restructuring expense and expense of $1,338 during the Nine Months Ended September 29, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York.

 

Schedule 4
 
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY REGION
(Dollars in thousands)
(Unaudited)
 
By Region:   Net Revenues
 

Three Months

   

Three Months

       

Ended September

Ended October

Increase /

Constant $ %

29, 2012

1, 2011

(Decrease)

% Change

Change (a)

United States $ 237,298 $ 241,764 $ (4,466 ) -1.8 % -1.8 %
Europe 161,464 182,265 (20,801 ) -11.4 % -0.8 %
Asia 130,164 129,985 179 0.1 % 1.8 %
Mexico and Central and South America 58,812 62,848 (4,036 ) -6.4 % 7.9 %
Canada (b)   23,800     28,259     (4,459 ) -15.8 % -14.5 %
Total $ 611,538   $ 645,121   $ (33,583 ) -5.2 % -0.4 %
 
 
Operating Income (loss)
 

Three Months

Three Months

Ended September

% of Net

Ended October

% of Net

Increase /

29, 2012

 

Revenues

 

1, 2011

 

Revenues

 

(Decrease)

  % Change
United States (c) $ 27,325 11.5 % $ 21,926 9.1 % $ 5,399 24.6 %
Europe (c) 9,435 5.8 % 8,133 4.5 % 1,302 16.0 %
Asia (c) 21,987 16.9 % 24,218 18.6 % (2,231 ) -9.2 %
Mexico and Central and South America (c) 7,943 13.5 % 11,635 18.5 % (3,692 ) -31.7 %
Canada (c) 3,613 15.2 % 3,485 12.3 % 128 3.7 %
Unallocated corporate (c), (d), (e)   (3,601 ) na   (4,641 ) na   1,040   22.4 %
Total $ 66,702   10.9 % $ 64,756   10.0 % $ 1,946   3.0 %
 
(a) Reflects the percentage increase (decrease) in net revenues for the Three Months Ended September 29, 2012, compared to the Three Months Ended October 1, 2011, assuming foreign-based net revenues for the Three Months Ended September 29, 2012 are translated into U.S. dollars using the same foreign currency exchange rates in the calculation of net revenues for the Three Months Ended October 1, 2011. See Schedule 6a.
 
(b) The decrease in net revenues for the Three Months Ended September 29, 2012 compared to the Three Months Ended October 1, 2011 is primarily due to the closure of outlet stores during Fiscal 2011.
 
(c) Includes restructuring charges and other exit costs as follows:

Three Months

Three Months

Ended September

Ended October

29, 2012

1, 2011

United States $ 509 $ 3,266
Europe 5,932 3,888
Asia 210 -
Canada 3 78
Mexico and Central and South America 54 -
Unallocated corporate   1,321     315  
Total $ 8,029   $ 7,547  
 

(d) Includes expense of $991 during the Three Months Ended September 29, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York.

 

(e) For the Three Months Ended September 29, 2012 compared to the Three Months Ended October 1, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains, partially offset by restructuring expense and other expenses related to the transition of the sourcing/design/merchandising function related to Calvin Klein Jeans to New York during the Three Months Ended September 29, 2012.

 

Schedule 4a
 
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY REGION
(Dollars in thousands)
(Unaudited)
 
By Region:   Net Revenues
 

Nine Months

   

Nine Months

       

Ended September

Ended October

Increase /

Constant $ %

29, 2012

1, 2011

(Decrease)

% Change

Change (a)

United States $ 733,534 $ 777,552 $ (44,018 ) -5.7 % -5.7 %
Europe 415,504 478,827 (63,323 ) -13.2 % -5.9 %
Asia 384,359 370,546 13,813 3.7 % 4.8 %
Mexico and Central and South America 173,893 176,698 (2,805 ) -1.6 % 12.1 %
Canada (b)   83,700     95,046     (11,346 ) -11.9 % -9.5 %
Total $ 1,790,990   $ 1,898,669   $ (107,679 ) -5.7 % -2.2 %
 
 
Operating Income (loss)
 

Nine Months

Nine Months

Ended September

% of Net

Ended October

% of Net

Increase /

29, 2012

 

Revenues

 

1, 2011

 

Revenues

 

(Decrease)

  % Change
United States (c) $ 77,725 10.6 % $ 98,079 12.6 % $ (20,354 ) -20.8 %
Europe (c) (9,587 ) -2.3 % 5,621 1.2 % (15,208 ) -270.6 %
Asia (c) 62,324 16.2 % 69,264 18.7 % (6,940 ) -10.0 %
Mexico and Central and South America (c) 16,905 9.7 % 31,621 17.9 % (14,716 ) -46.5 %
Canada (c) 9,665 11.5 % 9,149 9.6 % 516 5.6 %
Unallocated corporate (c), (d), (e)   (5,311 ) na   (26,725 ) na   21,414   80.1 %
Total $ 151,721   8.5 % $ 187,009   9.8 % $ (35,288 ) -18.9 %
 
(a) Reflects the percentage increase (decrease) in net revenues for the Nine Months Ended September 29, 2012 compared to the Nine Months Ended October 1, 2011, assuming foreign-based net revenues for the Nine Months Ended September 29, 2012 are translated into U.S. dollars using the same foreign currency exchange rates that were used in the calculation of net revenues for the Nine Months Ended October 1, 2011. See Schedule 6b.
 
(b) The decrease in net revenue for the Nine Months Ended September 29, 2012 compared to the Nine Months Ended October 1, 2011 is primarily due to the closure of outlet stores during Fiscal 2011.
 
(c) Includes restructuring charges and other exit costs as follows:
 

Nine Months Ended

Nine Months Ended

September 29, 2012

October 1, 2011

United States $ 8,701 $ 7,891
Europe 17,238 5,654
Asia 305 -
Canada 2,388 4,430
Mexico and Central and South America 832 67
Unallocated corporate   1,367     948  
Total $ 30,831   $ 18,990  
 

(d) Includes expense of $1,338 during the Nine Months Ended September 29, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York.

 

(e) For the Nine Months Ended September 29, 2012 compared to the Nine Months Ended October 1, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains, partially offset by an increase in restructuring expense and other expenses related to the transition of the sourcing/design/merchandising function related to Calvin Klein Jeans to New York during the Nine Months Ended September 29, 2012.

 
Schedule 5
 
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY CHANNEL
(Dollars in thousands)
(Unaudited)
 
By Channel:   Net Revenues
 

Three Months

   

Three Months

       

Ended

Ended

September 29,

October 1,

Increase /

Constant $ %

2012

2011

(Decrease)

% Change

Change (a)

Wholesale $ 429,834 $ 458,877 $ (29,043 ) -6.3 % -2.7 %
Retail   181,704     186,244     (4,540 ) -2.4 % 5.2 %
Total $ 611,538   $ 645,121   $ (33,583 ) -5.2 % -0.4 %
 
Operating Income (loss)
 

Three Months

Three Months

Ended

Ended

September 29,

% of Net

October 1,

% of Net

Increase /

2012

 

Revenues

 

2011

 

Revenues

 

(Decrease)

  % Change
Wholesale (b), (c), (d) $ 59,154 13.8 % $ 55,980 12.2 % $ 3,174 5.7 %
Retail (b), (c), (d) 11,149 6.1 % 13,417 7.2 % (2,268 ) -16.9 %
Unallocated corporate (c), (e), (f)   (3,601 ) na   (4,641 ) na   1,040   22.4 %
Total $ 66,702   10.9 % $ 64,756   10.0 % $ 1,946   3.0 %
 
(a) Reflects the percentage increase (decrease) in net revenues for the Three Months Ended September 29, 2012, compared to the Three Months Ended October 1, 2011, assuming foreign-based net revenues for the Three Months Ended September 29, 2012 are translated into U.S. dollars using the same foreign currency exchange rates in the calculation of net revenues for the Three Months Ended October 1, 2011. See Schedule 6a.
 
(b) For the Three Months Ended September 29, 2012 and the Three Months Ended October 1, 2011, wholesale operating income includes an intercompany profit of $10,629 and $10,602, respectively, related to certain inventories sold by the retail business to end consumers. Conversely, for the Three Months Ended September 29, 2012 and the Three Months Ended October 1, 2011, retail operating income includes an intercompany charge of $10,629 and $10,602, respectively, related to these inventories.
 
(c) Includes restructuring charges and other exit costs as follows:
 

Three Months

Three Months

Ended

Ended

September 29,

October 1,

2012

2011

Wholesale $ 6,492 $ 5,388
Retail 216 1,844
Unallocated corporate   1,321     315  
Total $ 8,029   $ 7,547  
 
(d) For the Three Months Ended October 1, 2011, reflects a decrease to Wholesale and an increase to Retail of $4,200 from previously reported amounts due to the correction of an error related to royalty expense fo r Calvin Klein Jeans.
 
(e) Includes expense of $991 during the Three Months Ended September 29, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York.
 
(f) For the Three Months Ended September 29, 2012 compared to the Three Months Ended October 1, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains, partially offset by restructuring and other expenses related to the transition of the sourcing/design/merchandising function related to Calvin Klein Jeans to New York during the Three Months Ended September 29, 2012.
 
Schedule 5a
 
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY CHANNEL
(Dollars in thousands)
(Unaudited)
 
By Channel:   Net Revenues
 

Nine Months

   

Nine Months

       

Ended September

Ended October

Increase /

Constant $ %

29, 2012

1, 2011

(Decrease)

% Change

Change (a)

Wholesale $ 1,258,325 $ 1,370,212 $ (111,887 ) -8.2 % -5.5 %
Retail   532,665     528,457     4,208   0.8 % 6.4 %
Total $ 1,790,990  

 

$ 1,898,669   $ (107,679 ) -5.7 % -2.2 %
 
Operating Income (loss)
 

Nine Months

Nine Months

Ended September

% of Net

Ended October

% of Net

Increase /

29, 2012

 

Revenues

 

1, 2011

 

Revenues

 

(Decrease)

  % Change
Wholesale (b),(c) (d) $ 136,202 10.8 % $ 174,038 12.7 % $ (37,836 ) -21.7 %
Retail (b), (c), (d) 20,830 3.9 % 39,696 7.5 % (18,866 ) -47.5 %
Unallocated corporate (c), (e), (f)   (5,311 ) na   (26,725 ) na   21,414   80.1 %
Total $ 151,721   8.5 % $ 187,009   9.8 % $ (35,288 ) -18.9 %
 
(a) Reflects the percentage increase (decrease) in net revenues for the Nine Months Ended September 29, 2012, compared to the Nine Months Ended October 1, 2011, assuming foreign-based net revenues for the Nine Months Ended September 29, 2012 are translated into U.S. dollars using the same foreign currency exchange rates in the calculation of net revenues for the Nine Months Ended October 1, 2011. See Schedule 6b.
 
(b) For the Nine Months Ended September 29, 2012 and the Nine Months Ended October 1, 2011, wholesale operating income includes an intercompany profit of $27,756 and $25,821, respectively, related to certain inventories sold by the retail business to end consumers. Conversely, for the Nine Months Ended September 29, 2012 and the Nine Months Ended October 1, 2011, retail operating income includes an intercompany charge of $27,756 and $25,821, respectively, related to these inventories.
 
(c) Includes restructuring charges and other exit costs as follows:
 

Nine Months

Nine Months

Ended September

Ended October

29, 2012

1, 2011

Wholesale $ 19,257 $ 14,891
Retail 10,207 3,151
Unallocated corporate   1,367     948  
Total $ 30,831   $ 18,990  
 
(d) For the Nine Months Ended October 1, 2011, reflects a decrease to Wholesale and an increase to Retail of $4,200 from previously reported amounts due to the correction of an error related to royalty expense fo r Calvin Klein Jeans.
 
(e) Includes expense of $1,338 during the Nine Months Ended September 29, 2012 in connection with the Company's decision to consolidate its sourcing/design/merchandising functions related to Calvin Klein Jeans, which are currently located in both Europe and New York, entirely to New York.
 
(f) For the Nine Months Ended September 29, 2012 compared to the Nine Months Ended October 1, 2011, primarily reflects decreases in employee compensation, decreases in other general administrative and professional fees, and decreases in foreign exchange gains, partially offset by an increase in restructuring and other expenses related to the transition of the sourcing/design/merchandising function related to Calvin Klein Jeans to New York during the Nine Months Ended September 29, 2012.
 
Schedule 6
THE WARNACO GROUP, INC.
NON-GAAP MEASURES
(Dollars in thousands, excluding per share amounts)
(Unaudited)
 
The Warnaco Group, Inc.'s ("Warnaco Group" and, collectively with its subsidiaries, the "Company") reported financial results are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The reported operating income, income from continuing operations and diluted earnings per share from continuing operations reflect certain items which affect the comparability of those reported results. Those financial results are also presented on a non-GAAP basis, as defined by Regulation S-K Section 10(e) issued by the Securities and Exchange Commission to exclude the effect of these items. The Company’s computation of these non-GAAP measures may vary from others in its industry. These non-GAAP financial measures are not intended to be, and should not be, considered in isolation from, or as a substitute for, the most directly comparable GAAP financial measure to which they are reconciled, as presented in the following table:
 
  Three Months Ended*   Nine Months Ended*

September 29,

 

October 1,

September 29,

 

October 1,

2012

2011

2012

2011

(Dollars in thousands, except per share amounts)
 
Operating income, as reported (GAAP) $ 66,702 $ 64,756 $ 151,721 $ 187,009
Restructuring charges and other exit costs (a) 8,029 7,547 30,831 18,991
Pension income (b) (55 ) (309 ) (164 ) (931 )
Acquisition expense (c)   750     -     750    
Operating income, as adjusted (non-GAAP) (f) $ 75,426   $ 71,994   $ 183,138   $ 205,069  
 
 
Income from continuing operations attributable to Warnaco Group common shareholders, as reported (GAAP) $ 41,130 $ 48,788 $ 83,637 $ 138,886
Restructuring charges and other exit costs, net of income tax (a) 6,135 5,676 22,560 13,396
Pension income, net of income tax (b) (39 ) (190 ) (81 ) (571 )
Acquisition expense (c) 505 - 505 -
Lejaby loan receivable (d) - - 12,040 -
Taxation adjustment (e)   375     (8,202 )   (3,171 )   (16,528 )
Income from continuing operations attributable to Warnaco Group common shareholders, as adjusted (non-GAAP) (f) $ 48,106   $ 46,072   $ 115,490   $ 135,183  
 
 
Diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders, as reported (GAAP) $ 0.98 $ 1.13 $ 1.99 $ 3.11
Restructuring charges and other exit costs, net of income tax (a) 0.15 0.13 0.54 $ 0.30
Pension income, net of income tax (b) - - - (0.01 )
Acquisition expense (c) 0.01 - 0.01 -
Lejaby loan receivable (d) - - 0.29 -
Taxation adjustment (e)   0.01     (0.19 )   (0.08 )   (0.37 )
Diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders, as adjusted (non-GAAP) (f) $ 1.15   $ 1.07   $ 2.75   $ 3.03  
 
*See footnotes on following page.
 
Schedule 6 (cont.)
THE WARNACO GROUP, INC.
NON-GAAP MEASURES
(Dollars in thousands, excluding per share amounts)
(Unaudited)
 
a) For all periods presented, this adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of restructuring charges and other exit costs. The income tax rates used to compute the income tax effect related to this adjustment correspond to the local statutory tax rates of the reporting entities that incurred restructuring charges and other exit costs.
 
b) For all periods presented, this adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of pension income. The income tax rates used to compute the income tax effect related to this adjustment correspond to the local statutory tax rates of the reporting entities that recognized pension income.
 
c) For the Three and Nine Months Ended September 29,2012, this adjustment seeks to present operating income, income from continuing operations attributable to Warnaco Group common shareholders, and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of acquisition expense of $0.55 million net of tax of $0.2 million related to the Company's proposed merger with a wholly-owned subsidiary of PVH Corp. The income tax rate used to compute the income tax effect related to this adjustment corresponds to the statutory rate in the U.S.
 
d) For the Nine Months Ended September 29, 2012, this adjustment seeks to present income from continuing operations attributable to Warnaco Group common shareholders and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders without the effects of the adjustments to the loan receivable related to the Company's discontinued Lejaby business. This adjustment was recorded in other income/expense within income from continuing operations on the Company's Consolidated Condensed Financial Statements. The reporting entity that recorded this adjustment has a 0% local statutory tax rate.
 
e) For the Three and Nine Months Ended September 29, 2012 and the Three and Nine Months Ended October 1, 2011, this adjustment reflects an additional amount required in order to present income from continuing operations attributable to Warnaco Group common shareholders and diluted earnings per share from continuing operations attributable to Warnaco Group common shareholders at the Company’s forecasted normalized tax rates for the fiscal year ending December 29, 2012 ("Fiscal 2012") (32.7%) and the fiscal year ended December 31, 2011 ("Fiscal 2011") (31.1%), respectively. The Company’s forecasted normalized tax rates for both Fiscal 2012 and Fiscal 2011 exclude the effects of restructuring charges and other exits costs, pension income and certain tax adjustments related to either changes in estimates in prior period tax provisions or adjustments for certain discrete tax items. Adjustments for discrete items reflect the federal, state and foreign tax effects related to: 1) income taxes associated with legal entity reorganizations and restructurings; 2) tax provision or benefit resulting from statute expirations or the finalization of income tax examinations; and 3) other adjustments not considered part of the Company's core business activities. In addition, this adjustment for Fiscal 2011 excludes the effects of (i) a benefit of $10,900 recorded during the Three and Nine Months Ended October 1, 2011 associated with the recognition of net operating losses in a foreign jurisdiction resulting from the successful petition of that country’s taxing authority; (ii) the exclusion of a $7,300 tax benefit recorded during the Three Months Ended October 1, 2011 related to the reduction in the reserve for uncertain tax positions in certain foreign tax jurisdictions; and (iii) the exclusion of a $1,300 tax benefit recorded during the Three Months ended October 1, 2011 relating to a change in various domestic and foreign tax provision estimates for fiscal 2010 following the filing of certain of the Company's tax returns during the Three Months Ended October 1, 2011.
 
f) The Company believes it is valuable for users of its financial statements to be made aware of the non-GAAP financial information, as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis and to make operating and strategic decisions. Management believes such non-GAAP measures will also enhance users' ability to analyze trends in the Company's business. In addition, the Company uses performance targets based on non-GAAP operating income and diluted earnings per share from continuing operations as a component of the measurement of incentive compensation.
 
Schedule 6a
 
THE WARNACO GROUP, INC.
SUPPLEMENTAL SCHEDULE
NET REVENUES ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(Unaudited)
 
  Three Months Ended September 29, 2012
GAAP   Impact of Foreign   Non-GAAP (Note 1)
As Reported Currency Exchange Constant Currency
By Segment:
Sportswear Group $ 337,377 $ (21,252 ) $ 358,629
Intimate Apparel Group 232,203 (8,527 ) 240,730
Swimwear Group   41,958     (961 )   42,919  
Net revenues $ 611,538   $ (30,740 ) $ 642,278  
 
 
By Region:
United States $ 237,298 $ - $ 237,298
Europe 161,464 (19,292 ) 180,756
Asia 130,164 (2,113 ) 132,277
Mexico and Central and South America 58,812 (8,975 ) 67,787
Canada   23,800     (360 )   24,160  
Total $ 611,538   $ (30,740 ) $ 642,278  
 

Note 1:

The Company is a global company that reports financial information in U.S. dollars in accordance with GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by the Company when it translates its foreign revenues into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to the Company's reported operating results, the Company presents constant currency financial information, which is a non-GAAP financial measure. The Company uses constant currency information to provide a framework to assess how its businesses performed excluding the effects of changes in foreign currency exchange rates. Management believes this information is useful to investors to facilitate comparisons of operating results and better identify trends in the Company's businesses.
 

To calculate the increase in segment revenues on a constant currency basis, net revenues for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).

 
These constant currency performance measures should be viewed in addition to, and not in isolation from, or as a substitute for, the Company's operating performance measures calculated in accordance with GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.
 
Schedule 6b
 
THE WARNACO GROUP, INC.
SUPPLEMENTAL SCHEDULE
NET REVENUES ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(Unaudited)
 
  Nine Months Ended September 29, 2012
GAAP   Impact of Foreign   Non-GAAP*
As Reported Currency Exchange Constant Currency
By Segment:
Sportswear Group $ 903,208 $ (43,573 ) $ 946,781
Intimate Apparel Group 667,206 (19,106 ) 686,312
Swimwear Group   220,576     (2,912 )   223,488  
Net revenues $ 1,790,990   $ (65,591 ) $ 1,856,581  
 
 
By Region:
United States $ 733,534 $ - $ 733,534
Europe 415,504 (34,972 ) 450,476
Asia 384,359 (3,998 ) 388,357
Mexico and Central and South America 173,893 (24,269 ) 198,162
Canada   83,700     (2,352 )   86,052  
Total $ 1,790,990   $ (65,591 ) $ 1,856,581  
 
* See Note 1 on Schedule 6a.
 
Schedule 7
 
THE WARNACO GROUP, INC.
SUPPLEMENTAL SCHEDULE - FISCAL 2012 OUTLOOK
(Unaudited)
 
NET REVENUE GUIDANCE   Percentages
 
Estimated change in net revenues for Fiscal 2012 compared to levels in Fiscal 2011
GAAP basis -2.00 % to 0.00 %
 
 
EARNINGS PER SHARE GUIDANCE (based on recent exchange rates) U.S. Dollars
Diluted income per common share from continuing operations      
GAAP basis (assuming minimal pension expense / income) $ 2.97 to $ 3.00
Restructuring charges and other exit costs (a) 0.68 to 0.78
Adjustment of Lejaby loan receivable (b) 0.29 to 0.29
Acquisition expense (c)   0.06   to   0.08  
As adjusted (non-GAAP basis) (d) $ 4.00   to $ 4.15  
 
(a)   Reflects between $29 million to $33 million of estimated restructuring charges (net of an income tax benefit of between $10 million and $12 million) primarily related to the consolidation of certain international operations, the reorganization of the Company's management structure, the closure of facilities or retail stores, the exit of CKJ.com and the transition of the Company's CK/Calvin Klein "bridge" businesses back to Calvin Klein, Inc.
 
(b) Reflects $12.0 million of expenses related to the adjustment of the loan receivable in connection with the Company's Lejaby discontinued business. The reporting entity that recorded this adjustment has a 0% local statutory tax rate. Such adjustment was recorded in other income/expense within income from continuing operations.
 
(c) Reflects between $2.7 million to $3.4 million of acquisition costs (net of tax benefit of between $1.3 million and $1.6 million) incurred in connection with the Company's proposed merger with a wholly-owned subsidiary of PVH Corp.
 
(d) The Company believes it is useful for users of its financial statements to be made aware of the "As Adjusted" (non-GAAP) forecasted diluted income per common share from continuing operations as this is one of the measures used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis. The Company believes that this non-GAAP measure will also enhance users’ ability to analyze trends in the Company’s business. In addition, the Company uses performance targets based, in part, on this non-GAAP measure as a component of the measurement of employee incentive compensation. Management does not, nor should investors, consider this non-GAAP financial measure in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.




6 of 7

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs