Commenting on these results, Emanuel Chirico, Chairman and Chief Executive Officer, noted, “We are very pleased with our third quarter and year-to-date performance, which was primarily driven by the Tommy Hilfiger and Calvin Klein businesses continuing to exhibit strong global growth, allowing us to exceed our previous earnings guidance. The Heritage Brands business saw some modest improvement in the quarter, which we believe demonstrates that this business is on the path to return to its historic profitability levels. Taking into account the third quarter outperformance across our businesses, coupled with the impact of Hurricane Sandy, we have once again raised our full year earnings guidance, despite the uncertain global economic and market conditions.”
Mr. Chirico continued, “The worldwide consumer appeal for Calvin Klein and Tommy Hilfiger has allowed us to successfully expand our market share penetration and global reach of our designer lifestyle brands, despite the macroeconomic headwinds. We believe we can continue to grow our businesses profitably in the future by identifying and executing additional strategic opportunities for all of our brands, including the recently announced acquisition of Warnaco and formation of a joint venture in Brazil for the Tommy Hilfiger brand.”
Mr. Chirico concluded, “Both the PVH and Warnaco management teams are working diligently to consummate the Warnaco acquisition. We currently expect this transaction to close in early 2013. As we highlighted when we announced the acquisition, this is a unique opportunity to reunite the “House of Calvin Klein” to ensure a single global brand vision. This acquisition also allows us to align our strong operating platforms in North America and Europe with Warnaco’s operations in Asia and Latin America, which will give the combined company strong established operations in every major consumer market worldwide. This will pave the way for enhanced revenue and earnings growth, while also improving operating margins in the future. As we head into the important holiday selling season, we remain firm in our belief that the strength of our brands, the sound execution of our business strategies, continued investment in our world-class brands and our strong credit profile will continue to drive long-term growth and will position us to deliver strong earnings results in the fourth quarter of 2012 and beyond.”Non-GAAP Exclusions: The discussions in this release that refer to non-GAAP amounts exclude the following:
- Pre-tax costs of $69.5 million incurred in 2011 in connection with the integration of Tommy Hilfiger and the related restructuring, of which $30.5 million was incurred in the first quarter, $11.2 million was incurred in the second quarter, $9.3 million was incurred in the third quarter, and $18.6 million was incurred in the fourth quarter.
- Pre-tax costs of $16.2 million incurred in the first quarter of 2011 in connection with the amendment and restatement of the Company’s credit facility.
- Pre-tax costs of $8.1 million incurred in 2011 in connection with the Company’s negotiated early termination of its license to market sportswear under the Timberland brand and the Company’s 2012 exit from the Izod women’s wholesale sportswear business, of which $6.7 million was incurred in the second quarter, $0.5 million was incurred in the third quarter and $1.0 million was incurred in the fourth quarter.
- A pre-tax expense of $20.7 million incurred in the third quarter of 2011 in connection with the Company’s reacquisition of the rights in India to the Tommy Hilfiger trademarks that had been subject to a perpetual license, as under accounting rules, the Company was required to record an expense due to settling the preexisting license agreement, which was unfavorable to the Company.
- A tax benefit of $5.4 million recorded in the fourth quarter of 2011 resulting from revaluing certain deferred tax liabilities in connection with a decrease in the statutory tax rate in Japan.
- Pre-tax costs of approximately $15 million expected to be incurred in 2012 principally in connection with the integration of Tommy Hilfiger and the related restructuring, of which $3.3 million was incurred in the first quarter, $4.5 million was incurred in the second quarter, $6.6 million was incurred in the third quarter, and approximately $1 million is expected to be incurred in the fourth quarter.
- Pre-tax costs of approximately $36 million expected to be incurred in 2012 in connection with the acquisition of Warnaco, of which $6.4 million was incurred in the third quarter and approximately $30 million is expected to be incurred in the fourth quarter.
- A tax benefit of $4.5 million recorded in the third quarter of 2012 resulting from previously unrecognized tax credits.
- Estimated tax effects associated with the above pre-tax costs, which are based on the Company’s assessment of deductibility. In making this assessment, the Company evaluated each item that it has recorded as an acquisition, integration, restructuring or debt modification cost to determine if such cost is tax deductible, and if so, in what jurisdiction the deduction would occur. All items above were identified as either primarily tax deductible in the United States, in which case the Company assumed a combined federal and state tax rate of 38.0%, or as non-deductible, in which case the Company assumed no tax benefit.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts