PVH Corp. Reports 2012 Fourth Quarter And Full Year Results

PVH Corp. [NYSE: PVH] reported 2012 fourth quarter and full year results.

Non-GAAP Amounts:

The discussions of historical results in this release that refer to non-GAAP amounts exclude the items which are described in this release under the heading “Non-GAAP Exclusions.” Reconciliations of GAAP to non-GAAP amounts are presented later in this release and identify and quantify all excluded items.

Overview of Fourth Quarter Results:
  • Earnings per share was $1.60 on a non-GAAP basis, which includes a favorable impact related to the change in the Company’s method of accounting for retirement plans and represents a 34% increase over the prior year period’s non-GAAP earnings per share of $1.19 (as adjusted for the change). Absent the change in accounting method, non-GAAP earnings per share would have been $1.54 for the fourth quarter, which exceeds the top end of the Company’s previous guidance by $0.05, and compares to $1.18 for the fourth quarter of 2011.
  • GAAP earnings per share was $1.09, which includes a negative impact related to the change in the Company’s method of accounting for retirement plans and represents a 127% increase over the prior year period’s GAAP earnings per share of $0.48 (as adjusted for the change). The negative impact of the change was $0.17 in 2012 and $0.63 in 2011.
  • Revenue of $1.636 billion increased 7% as compared to the prior year, including a 3% negative impact attributable to the exit from the Izod women’s and Timberland wholesale sportswear businesses and foreign currency translation and a 3% benefit from an additional week of revenue, as the 2012 fiscal year included 53 weeks of operations.
  • Operating margin on a non-GAAP basis increased 250 basis points due to a 320 basis point gross margin increase, driven by continued faster growth in the higher-margin Calvin Klein and Tommy Hilfiger businesses, combined with decreased product costs across all of the Company’s businesses. GAAP operating margin increased 440 basis points due to the gross margin increase discussed above, combined with a decrease in pension expense.

Change in Method of Accounting for Retirement Plans:

During the fourth quarter of 2012, the Company changed its method of accounting for its retirement plans to (i) calculate expected return on plan assets using the fair value of plan assets; and (ii) immediately recognize actuarial gains and losses in its operating results in the year in which they occur. The Company believes this change improves the transparency of its operational performance by recognizing the effects of current economic and interest rate trends on plan investments and assumptions in current period earnings, thus allowing the Company to highlight this impact to investors. In addition, this change aligns the Company’s method of accounting for its retirement plans with the method used by The Warnaco Group, Inc. (“Warnaco”), which the Company acquired on February 13, 2013. This change avoids the post-acquisition Company having two methods of accounting for its retirement plans. The financial data for all prior periods presented has been retrospectively adjusted to reflect the effect of this accounting change. Refer to Appendix A later in this release for a summary of the impact of this change and the adjusted prior period quarterly financial results.

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