• | Impacts of a major U.S. retailer bankruptcy in Q4 2018, which represented about 2 points of the decline; |
• | Actions to exit an underperforming country in Europe and to change business models in select markets, which contributed an additional 2 points to the decline; and, |
• | Foreign currency headwinds that impacted revenues by approximately 1 point. |
• | Revenue is expected to exceed $2.5 billion, reflecting a mid-single digit decline compared with full year 2018 adjusted revenue. Excluding the negative impact of foreign currency exchange rates, impacts of a prior year U.S. retailer bankruptcy, and strategic business exits, full year 2019 revenue is expected to be relatively consistent with full year 2018 adjusted revenue. First half reported revenue declined mid-single digits and the company expects second half revenue to improve, with the fourth quarter benefiting the most from strategic actions and the Q4 2018 customer bankruptcy comparison. |
• | Adjusted EBITDA is expected to range between $340 million and $360 million, reflecting a mid-single digit to low double-digit decline compared with full year 2018 adjusted EBITDA. As anticipated, the impacts of strategic actions and the prior year U.S. retailer bankruptcy weighed on our second quarter performance. We expect to see improved second half performance as benefits from restructuring and cost savings initiatives begin to more fully manifest. As planned, inventory levels are expected to remain elevated during the third quarter of the year due to the inventory built during the second quarter in anticipation of plants closed. The company expects second half adjusted EBITDA to be more weighted to the fourth quarter. |
• | Capital Expenditures are expected to range between $55 million and $65 million, including approximately $30 million to $40 million to support the design and implementation of a global enterprise resource planning (ERP) system. As previously announced, the global ERP system implementation is expected to require approximately $80 million to $90 million of capital investment during a two-to-three year period and is expected to result in significant efficiencies and cost savings, once fully implemented. |
• | Other full year assumptions include an effective tax rate of approximately 24 percent. Interest expense should be approximately $40 million in 2019, or $60 million on an annualized basis. |
• | Revenue is expected to increase at a low-single digit compound annual growth rate (CAGR) over the period. |
• | Adjusted EBITDA is expected to increase at a mid-single digit CAGR over the period. |
• | Capital Expenditures are expected to range between $105 million and $110 million in aggregate over the period. |
Three Months Ended June | % | Six Months Ended June | % | |||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||
Net revenues | $ | 609,746 | $ | 663,856 | (8)% | $ | 1,258,090 | $ | 1,333,519 | (6)% | ||||||||||
Costs and operating expenses | ||||||||||||||||||||
Cost of goods sold | 374,177 | 396,785 | (6)% | 775,202 | 779,206 | (1)% | ||||||||||||||
Selling, general and administrative expenses | 182,049 | 191,337 | (5)% | 404,173 | 386,171 | 5% | ||||||||||||||
Total costs and operating expenses | 556,226 | 588,122 | (5)% | 1,179,375 | 1,165,377 | 1% | ||||||||||||||
Operating income | 53,520 | 75,734 | (29)% | 78,715 | 168,142 | (53)% | ||||||||||||||
Interest income from former parent, net | 1,423 | 1,660 | (14)% | 3,762 | 3,311 | 14% | ||||||||||||||
Interest expense | (7,638 | ) | (416 | ) | * | (7,736 | ) | (781 | ) | * | ||||||||||
Interest income | 1,408 | 1,386 | 2% | 2,831 | 2,668 | 6% | ||||||||||||||
Other expense, net | (1,370 | ) | (1,241 | ) | 10% | (2,341 | ) | (2,438 | ) | (4)% | ||||||||||
Income before income taxes | 47,343 | 77,123 | (39)% | 75,231 | 170,902 | (56)% | ||||||||||||||
Income taxes | 9,357 | 16,665 | (44)% | 21,832 | 30,748 | (29)% | ||||||||||||||
Net income | $ | 37,986 | $ | 60,458 | (37)% | $ | 53,399 | $ | 140,154 | (62)% | ||||||||||
Earnings per share | ||||||||||||||||||||
Basic | $ | 0.67 | $ | 1.07 | $ | 0.94 | $ | 2.47 | ||||||||||||
Diluted | $ | 0.67 | $ | 1.07 | $ | 0.94 | $ | 2.47 | ||||||||||||
Basis of presentation: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 each year. For presentation purposes herein, all references to periods ended June 2019 and June 2018 relate to the 13-week and 26-week fiscal periods ended June 29, 2019 and June 30, 2018, respectively. References to December 2018 relate to the balance sheet as of December 29, 2018. | ||||||||||||||||||||
* Calculation not meaningful |
June 2019 | December 2018 | June 2018 | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and equivalents | $ | 76,687 | $ | 96,776 | $ | 86,356 | ||||||
Accounts receivable | 254,049 | 252,966 | 262,525 | |||||||||
Due from related parties, current | — | 547,690 | 553,976 | |||||||||
Related party notes receivable | — | 517,940 | 546,740 | |||||||||
Inventories | 538,168 | 473,812 | 491,836 | |||||||||
Other current assets | 79,397 | 52,014 | 45,202 | |||||||||
Total current assets | 948,301 | 1,941,198 | 1,986,635 | |||||||||
Due from related parties, noncurrent | — | 611 | — | |||||||||
Property, plant and equipment, net | 131,727 | 138,449 | 142,263 | |||||||||
Operating lease assets | 90,416 | — | — | |||||||||
Intangible assets, net | 50,953 | 53,059 | 55,263 | |||||||||
Goodwill | 213,761 | 214,516 | 216,080 | |||||||||
Other assets | 153,044 | 110,632 | 120,439 | |||||||||
TOTAL ASSETS | $ | 1,588,202 | $ | 2,458,465 | $ | 2,520,680 | ||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Short-term borrowings | $ | 2,829 | $ | 3,215 | $ | 5,062 | ||||||
Current portion of long-term debt | 26,250 | — | — | |||||||||
Accounts payable | 159,214 | 134,129 | 136,620 | |||||||||
Due to related parties, current | — | 16,140 | 59,424 | |||||||||
Related party notes payable | — | 269,112 | 269,112 | |||||||||
Accrued liabilities | 177,582 | 194,228 | 166,881 | |||||||||
Operating lease liabilities, current | 34,439 | — | — | |||||||||
Total current liabilities | 400,314 | 616,824 | 637,099 | |||||||||
Operating lease liabilities, noncurrent | 58,594 | — | — | |||||||||
Other liabilities | 86,189 | 118,189 | 115,894 | |||||||||
Long-term debt | 960,937 | — | — | |||||||||
Commitments and contingencies | ||||||||||||
Total liabilities | 1,506,034 | 735,013 | 752,993 | |||||||||
Total equity | 82,168 | 1,723,452 | 1,767,687 | |||||||||
TOTAL LIABILITIES AND EQUITY | $ | 1,588,202 | $ | 2,458,465 | $ | 2,520,680 |
Six Months Ended June | ||||||||
2019 | 2018 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 53,399 | $ | 140,154 | ||||
Depreciation and amortization | 16,025 | 16,089 | ||||||
Stock-based compensation | 11,473 | 5,552 | ||||||
Other, net | 499,254 | (426,793 | ) | |||||
Cash provided (used) by operating activities | 580,151 | (264,998 | ) | |||||
INVESTING ACTIVITIES | ||||||||
Capital expenditures | (9,300 | ) | (13,035 | ) | ||||
Repayments from related party notes receivable | 517,940 | — | ||||||
Other, net | 1,081 | 6,050 | ||||||
Cash provided (used) by investing activities | 509,721 | (6,985 | ) | |||||
FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of long-term debt | 1,050,000 | — | ||||||
Other, net (including transfers to former parent) | (2,160,956 | ) | 280,534 | |||||
Cash (used) provided by financing activities | (1,110,956 | ) | 280,534 | |||||
Effect of foreign currency rate changes on cash and cash equivalents | 995 | (3,006 | ) | |||||
Net change in cash and cash equivalents | (20,089 | ) | 5,545 | |||||
Cash and cash equivalents – beginning of period | 96,776 | 80,811 | ||||||
Cash and cash equivalents – end of period | $ | 76,687 | $ | 86,356 |
Three Months Ended June | % Change Constant Currency (a) | |||||||||||
2019 | 2018 | % Change | ||||||||||
Segment revenues: | ||||||||||||
Wrangler | $ | 363,992 | $ | 397,745 | (8)% | (7)% | ||||||
Lee | 206,908 | 217,773 | (5)% | (3)% | ||||||||
Other (b) | 38,846 | 48,338 | (20)% | (20)% | ||||||||
Total segment revenues | $ | 609,746 | $ | 663,856 | (8)% | (7)% | ||||||
Segment profit: | ||||||||||||
Wrangler | $ | 56,980 | $ | 67,670 | (16)% | (18)% | ||||||
Lee | 13,747 | 18,065 | (24)% | (21)% | ||||||||
Other (b) | 1,805 | 1,363 | 32% | 33% | ||||||||
Total segment profit | 72,532 | 87,098 | (17)% | (18)% | ||||||||
Corporate and other expenses | (20,382 | ) | (12,605 | ) | 62% | 62% | ||||||
Interest income from former parent, net | 1,423 | 1,660 | (14)% | (14)% | ||||||||
Interest expense | (7,638 | ) | (416 | ) | * | * | ||||||
Interest income | 1,408 | 1,386 | 2% | 2% | ||||||||
Income before income taxes | $ | 47,343 | $ | 77,123 | (39)% | (40)% | ||||||
Six Months Ended June | % Change Constant Currency (a) | |||||||||||
2019 | 2018 | % Change | ||||||||||
Segment revenues: | ||||||||||||
Wrangler | $ | 733,927 | $ | 762,728 | (4)% | (2)% | ||||||
Lee | 448,439 | 479,734 | (7)% | (4)% | ||||||||
Other (b) | 75,724 | 91,057 | (17)% | (17)% | ||||||||
Total segment revenues | $ | 1,258,090 | $ | 1,333,519 | (6)% | (4)% | ||||||
Segment profit: | ||||||||||||
Wrangler | $ | 80,645 | $ | 130,616 | (38)% | (48)% | ||||||
Lee | 31,380 | 54,054 | (42)% | (41)% | ||||||||
Other (b) | (1,280 | ) | (387 | ) | (231)% | (230)% | ||||||
Total segment profit | 110,745 | 184,283 | (40)% | (47)% | ||||||||
Corporate and other expenses | (34,371 | ) | (18,579 | ) | 85% | 85% | ||||||
Interest income from former parent, net | 3,762 | 3,311 | 14% | 14% | ||||||||
Interest expense | (7,736 | ) | (781 | ) | * | * | ||||||
Interest income | 2,831 | 2,668 | 6% | 7% | ||||||||
Income before income taxes | $ | 75,231 | $ | 170,902 | (56)% | (63)% | ||||||
(a) Refer to constant currency definition on the following pages. | ||||||||||||
(b) Other is included for purposes of reconciliation of revenues and profit, but it is not considered a reportable segment. Other includes sales (i) of VF-branded products (other than Wrangler® and Lee® branded products which are reported in the respective segments above) and third-party branded merchandise at VF Outlet™ stores, (ii) of Rock and Republic® branded apparel, (iii) to VF for products manufactured in our plants and use of our transportation fleet and, (iv) from fulfilling a transition services agreement related to VF's sale of its Nautica® brand business in mid-2018. | ||||||||||||
* Calculation not meaningful |
Three Months Ended June 2019 | ||||||||||||
As Reported | Adjust for Foreign | |||||||||||
under GAAP | Currency Exchange | Constant Currency | ||||||||||
Segment revenues: | ||||||||||||
Wrangler | $ | 363,992 | $ | 5,452 | $ | 369,444 | ||||||
Lee | 206,908 | 4,462 | 211,370 | |||||||||
Other | 38,846 | 17 | 38,863 | |||||||||
Total segment revenues | $ | 609,746 | $ | 9,931 | $ | 619,677 | ||||||
Segment profit: | ||||||||||||
Wrangler | $ | 56,980 | $ | (1,356 | ) | $ | 55,624 | |||||
Lee | 13,747 | 603 | 14,350 | |||||||||
Other | 1,805 | 3 | 1,808 | |||||||||
Total segment profit | 72,532 | (750 | ) | 71,782 | ||||||||
Corporate and other expenses | (20,382 | ) | (62 | ) | (20,444 | ) | ||||||
Interest income from former parent, net | 1,423 | — | 1,423 | |||||||||
Interest expense | (7,638 | ) | (375 | ) | (8,013 | ) | ||||||
Interest income | 1,408 | 9 | 1,417 | |||||||||
Income before income taxes | $ | 47,343 | $ | (1,178 | ) | $ | 46,165 | |||||
Six Months Ended June 2019 | ||||||||||||
As Reported | Adjust for Foreign | |||||||||||
under GAAP | Currency Exchange | Constant Currency | ||||||||||
Segment revenues: | ||||||||||||
Wrangler | $ | 733,927 | $ | 14,424 | $ | 748,351 | ||||||
Lee | 448,439 | 13,973 | 462,412 | |||||||||
Other | 75,724 | 18 | 75,742 | |||||||||
Total segment revenues | $ | 1,258,090 | $ | 28,415 | $ | 1,286,505 | ||||||
Segment profit: | ||||||||||||
Wrangler | $ | 80,645 | $ | (12,747 | ) | $ | 67,898 | |||||
Lee | 31,380 | 299 | 31,679 | |||||||||
Other | (1,280 | ) | 2 | (1,278 | ) | |||||||
Total segment profit | 110,745 | (12,446 | ) | 98,299 | ||||||||
Corporate and other expenses | (34,371 | ) | (62 | ) | (34,433 | ) | ||||||
Interest income from former parent, net | 3,762 | — | 3,762 | |||||||||
Interest expense | (7,736 | ) | (325 | ) | (8,061 | ) | ||||||
Interest income | 2,831 | 18 | 2,849 | |||||||||
Income before income taxes | $ | 75,231 | $ | (12,815 | ) | $ | 62,416 | |||||
Constant Currency Financial Information | ||||||||||||
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 from translating its foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present constant currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. We use constant currency information to provide a framework to assess how our business performed excluding the effects of changes in the rates used to calculate foreign currency translation. Management believes this information is useful to investors to facilitate comparison of operating results and better identify trends in our businesses. | ||||||||||||
To calculate foreign currency translation on a constant currency basis, operating results 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 as an alternative for, reported results under GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies. |
2018 | ||||||||||||||||||||
March | June | September | December | Full Year | ||||||||||||||||
Net revenues | $ | 669,663 | $ | 663,856 | $ | 704,246 | $ | 726,233 | $ | 2,763,998 | ||||||||||
Costs and operating expenses | ||||||||||||||||||||
Cost of goods sold | 382,421 | 396,785 | 424,053 | 446,176 | 1,649,435 | |||||||||||||||
Selling, general and administrative expenses | 194,834 | 191,337 | 184,909 | 210,441 | 781,521 | |||||||||||||||
Total costs and operating expenses | 577,255 | 588,122 | 608,962 | 656,617 | 2,430,956 | |||||||||||||||
Operating income | 92,408 | 75,734 | 95,284 | 69,616 | 333,042 | |||||||||||||||
Interest income from former parent, net | 1,651 | 1,660 | 2,104 | 2,323 | 7,738 | |||||||||||||||
Interest expense | (365 | ) | (416 | ) | (200 | ) | (2,755 | ) | (3,736 | ) | ||||||||||
Interest income | 1,282 | 1,386 | 1,508 | 4,127 | 8,303 | |||||||||||||||
Other expense, net | (1,197 | ) | (1,241 | ) | (2,084 | ) | (746 | ) | (5,269 | ) | ||||||||||
Income before income taxes | 93,779 | 77,123 | 96,612 | 72,565 | 340,078 | |||||||||||||||
Income taxes | 14,083 | 16,665 | 25,594 | 20,663 | 77,005 | |||||||||||||||
Net income | $ | 79,696 | $ | 60,458 | $ | 71,018 | $ | 51,902 | $ | 263,073 | ||||||||||
Basis of presentation: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to the March, June, September and December quarters of 2018 relate to the 13-week fiscal periods ended March 31, 2018, June 30, 2018, September 29, 2018, and December 29, 2018, respectively. The Company presented its 2018 unaudited condensed combined statements of income by quarter in its press release dated June 20, 2019 in order to provide investors with comparable financial information. Selling, general and administrative expenses in the June and September 2018 quarters presented above have been revised to correct the allocation of a $3.5 million pre-tax pension curtailment charge from the September 2018 quarter to the June 2018 quarter. | ||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||
March | June | March | June | September | December | Full Year | |||||||||||||||||||||
Net revenues - as reported under GAAP | $ | 648,344 | $ | 609,746 | $ | 669,663 | $ | 663,856 | $ | 704,246 | $ | 726,233 | $ | 2,763,998 | |||||||||||||
Business model changes(a) | (18,416 | ) | (7,389 | ) | (21,694 | ) | (21,027 | ) | (22,248 | ) | (16,363 | ) | (81,332 | ) | |||||||||||||
Adjusted net revenues | $ | 629,928 | $ | 602,357 | $ | 647,969 | $ | 642,829 | $ | 681,998 | $ | 709,870 | $ | 2,682,666 | |||||||||||||
Cost of goods sold - as reported under GAAP | $ | 401,025 | $ | 374,177 | $ | 382,421 | $ | 396,785 | $ | 424,053 | $ | 446,176 | $ | 1,649,435 | |||||||||||||
Restructuring & separation costs(b) | (12,847 | ) | (4,807 | ) | — | (1,662 | ) | (129 | ) | (10,731 | ) | (12,522 | ) | ||||||||||||||
Business model changes(a) | (17,831 | ) | (6,363 | ) | (15,443 | ) | (16,489 | ) | (20,207 | ) | (13,934 | ) | (66,073 | ) | |||||||||||||
Other adjustments(c) | (186 | ) | (1,618 | ) | (2,968 | ) | 281 | 631 | (19 | ) | (2,075 | ) | |||||||||||||||
Adjusted cost of goods sold | $ | 370,161 | $ | 361,389 | $ | 364,010 | $ | 378,915 | $ | 404,348 | $ | 421,492 | $ | 1,568,765 | |||||||||||||
Selling, general and administrative expenses - as reported under GAAP | $ | 222,124 | $ | 182,049 | $ | 194,834 | $ | 191,337 | $ | 184,909 | $ | 210,441 | $ | 781,521 | |||||||||||||
Restructuring & separation costs(b) | (23,734 | ) | (7,954 | ) | (1,936 | ) | (355 | ) | (1,087 | ) | (12,715 | ) | (16,093 | ) | |||||||||||||
Business model changes(a) | (3,724 | ) | (2,410 | ) | (6,175 | ) | (6,203 | ) | (4,460 | ) | (4,787 | ) | (21,625 | ) | |||||||||||||
Other adjustments(c) | (2,638 | ) | (4,602 | ) | 2,290 | (4,216 | ) | 5,437 | 11,765 | 15,276 | |||||||||||||||||
Adjusted selling, general and administrative expenses | $ | 192,028 | $ | 167,083 | $ | 189,013 | $ | 180,563 | $ | 184,799 | $ | 204,704 | $ | 759,079 | |||||||||||||
Other expense, net - as reported under GAAP | $ | (971 | ) | $ | (1,370 | ) | $ | (1,197 | ) | $ | (1,241 | ) | $ | (2,084 | ) | $ | (746 | ) | $ | (5,269 | ) | ||||||
Business model changes(a) | 61 | (204 | ) | 20 | (216 | ) | 53 | (10 | ) | (153 | ) | ||||||||||||||||
Other adjustments(c) | 1,368 | 1,524 | 1,115 | 1,341 | 1,164 | 1,558 | 5,178 | ||||||||||||||||||||
Adjusted other expense, net | $ | 458 | $ | (50 | ) | $ | (62 | ) | $ | (116 | ) | $ | (867 | ) | $ | 802 | $ | (244 | ) | ||||||||
Diluted earnings per share - as reported under GAAP | $ | 0.27 | $ | 0.67 | $ | 1.41 | $ | 1.07 | $ | 1.25 | $ | 0.92 | $ | 4.64 | |||||||||||||
Restructuring & separation costs(b) | 0.59 | 0.18 | 0.03 | 0.03 | 0.02 | 0.33 | 0.40 | ||||||||||||||||||||
Business model changes(a) | 0.06 | 0.02 | — | 0.03 | 0.05 | 0.04 | 0.12 | ||||||||||||||||||||
Other adjustments(c) | 0.04 | 0.08 | 0.01 | 0.05 | (0.09 | ) | (0.17 | ) | (0.19 | ) | |||||||||||||||||
Adjusted diluted earnings per share | $ | 0.96 | $ | 0.96 | $ | 1.45 | $ | 1.18 | $ | 1.23 | $ | 1.12 | $ | 4.98 | |||||||||||||
Net income - as reported under GAAP | $ | 15,413 | $ | 37,986 | 79,696 | 60,458 | 71,018 | 51,902 | 263,073 | ||||||||||||||||||
Income taxes | 12,475 | 9,357 | 14,083 | 16,665 | 25,594 | 20,663 | 77,005 | ||||||||||||||||||||
Interest income from former parent, net | (2,339 | ) | (1,423 | ) | (1,651 | ) | (1,660 | ) | (2,104 | ) | (2,323 | ) | (7,738 | ) | |||||||||||||
Interest expense | 98 | 7,638 | 365 | 416 | 200 | 2,755 | 3,736 | ||||||||||||||||||||
Interest income | (1,423 | ) | (1,408 | ) | (1,282 | ) | (1,386 | ) | (1,508 | ) | (4,127 | ) | (8,303 | ) | |||||||||||||
EBIT | $ | 24,224 | $ | 52,150 | $ | 91,211 | $ | 74,493 | $ | 93,200 | $ | 68,870 | $ | 327,773 | |||||||||||||
Depreciation and amortization | 7,703 | 7,761 | 8,310 | 7,780 | 7,581 | 7,361 | 31,032 | ||||||||||||||||||||
EBITDA | $ | 31,927 | $ | 59,911 | $ | 99,521 | $ | 82,273 | $ | 100,781 | $ | 76,231 | $ | 358,805 | |||||||||||||
Restructuring & separation costs(b) | 36,581 | 12,761 | 1,936 | 2,017 | 1,216 | 23,446 | 28,615 | ||||||||||||||||||||
Business model changes(a) | 3,200 | 1,180 | (57 | ) | 1,449 | 2,472 | 2,348 | 6,212 | |||||||||||||||||||
Other adjustments(c) | 4,192 | 7,744 | 1,793 | 5,276 | (4,904 | ) | (10,188 | ) | (8,023 | ) | |||||||||||||||||
Adjusted EBITDA | $ | 75,900 | $ | 81,596 | $ | 103,193 | $ | 91,015 | $ | 99,565 | $ | 91,837 | $ | 385,609 | |||||||||||||
Basis of presentation: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to the March 2019, June 2019, March 2018, June 2018, September 2018 and December 2018 quarters relate to the 13-week fiscal periods ended March 30, 2019, June 29, 2019, March 31, 2018, June 30, 2018, September 29, 2018, and December 29, 2018, respectively. The Company has presented its 2018 financial information by quarter in order to provide investors with comparable financial information. | |||||||||||||||||||||||||||
Non-GAAP Financial Information | |||||||||||||||||||||||||||
The financial information above has been presented on a GAAP basis and on an adjusted basis. These adjusted presentations are non-GAAP measures. | |||||||||||||||||||||||||||
Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. In addition, Adjusted EBITDA is a key financial measure for the Company's shareholders and financial leaders, since the Company's current debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company's compliance with debt covenants. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not as an alternate for, reported results under GAAP. In addition, these non-GAAP measures may be different from similarly titled measures used by other companies. | |||||||||||||||||||||||||||
(a) Business model changes relate to the exit of unprofitable markets in select European and South American countries, and the discontinuation of manufacturing for VF Corporation. The business model change costs resulted in a net tax benefit of $0.023 million, $0.052 million, $0.247 million, $0.080 million, $0.129 million and $0.120 million for March 2019, June 2019, March 2018, June 2018, September 2018 and December 2018, respectively. | |||||||||||||||||||||||||||
(b) Restructuring costs relate to strategic actions taken to achieve cost savings, and separation costs relate to the spin-off from VF Corporation and establishment of Kontoor as a separate public company. The restructuring costs resulted in a net tax expense of $3.184 million, $2.702 million, $0.457 million, $0.277 million, $0.236 million and $5.033 million for March 2019, June 2019, March 2018, June 2018, September 2018 and December 2018, respectively. | |||||||||||||||||||||||||||
(c) Other adjustments have been made to revise historical corporate allocations, primarily attributable to the carve-out basis of accounting, so that Adjusted EBITDA reflects the anticipated cost structure of a separate public company. Additionally, adjustments have been made to remove the funding fees related to the accounts receivable sale arrangement, as they are treated as interest expense for calculation of Adjusted EBITDA for debt compliance purposes. The other adjustments resulted in a net tax expense/(benefit) of $0.378 million, $1.457 million, ($0.075 million), $0.950 million, ($1,292 million) and ($2.134 million) for March 2019, June 2019, March 2018, June 2018, September 2018 and December 2018, respectively. |
Three Months Ended June | ||||||||||||||||
2019 | 2018 | |||||||||||||||
GAAP | Adjusted | GAAP | Adjusted | |||||||||||||
Net revenues | $ | 609,746 | $ | 602,357 | $ | 663,856 | $ | 642,829 | ||||||||
Gross profit | $ | 235,569 | $ | 240,968 | $ | 267,071 | $ | 263,914 | ||||||||
As a percentage of total net revenues | 38.6 | % | 40.0 | % | 40.2 | % | 41.1 | % | ||||||||
Selling, general and administrative expenses | $ | 182,049 | $ | 167,083 | $ | 191,337 | $ | 180,563 | ||||||||
As a percentage of total net revenues | 29.9 | % | 27.7 | % | 28.8 | % | 28.1 | % | ||||||||
Earnings per share - diluted | $ | 0.67 | $ | 0.96 | $ | 1.07 | $ | 1.18 | ||||||||
EBIT | $ | 52,150 | $ | 73,835 | $ | 74,493 | $ | 83,235 | ||||||||
EBITDA | $ | 59,911 | $ | 81,596 | $ | 82,273 | $ | 91,015 | ||||||||
Non-GAAP Financial Information | ||||||||||||||||
The financial information above has been presented on a GAAP basis and on an adjusted basis. These adjusted presentations are non-GAAP measures. | ||||||||||||||||
Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. In addition, Adjusted EBITDA is a key financial measure for the Company's shareholders and financial leaders, since the Company's current debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company's compliance with debt covenants. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not as an alternate for, reported results under GAAP. In addition, these non-GAAP measures may be different from similarly titled measures used by other companies. |
Three Months Ended June 2019 | ||||||||||||||||
Net Revenues-As Reported Under GAAP | ||||||||||||||||
Wrangler | Lee | Other | Total | |||||||||||||
Channel revenues | ||||||||||||||||
U.S. Wholesale | $ | 299,040 | $ | 108,757 | $ | 4,710 | $ | 412,507 | ||||||||
Non-U.S. Wholesale | 40,569 | 56,845 | 633 | 98,047 | ||||||||||||
Branded Direct-To-Consumer | 24,383 | 41,306 | 14 | 65,703 | ||||||||||||
Other | — | — | 33,489 | 33,489 | ||||||||||||
Total | $ | 363,992 | $ | 206,908 | $ | 38,846 | $ | 609,746 | ||||||||
Geographic revenues | ||||||||||||||||
U.S. | $ | 317,831 | $ | 130,795 | $ | 38,002 | $ | 486,628 | ||||||||
International | 46,161 | 76,113 | 844 | 123,118 | ||||||||||||
Total | $ | 363,992 | $ | 206,908 | $ | 38,846 | $ | 609,746 | ||||||||
Adjustments for Business Model Changes(a) | ||||||||||||||||
Wrangler | Lee | Other | Total | |||||||||||||
Channel revenues | ||||||||||||||||
U.S. Wholesale | $ | — | $ | — | $ | — | $ | — | ||||||||
Non-U.S. Wholesale | (1,484 | ) | (184 | ) | — | (1,668 | ) | |||||||||
Branded Direct-To-Consumer | (1,936 | ) | (336 | ) | — | (2,272 | ) | |||||||||
Other | — | — | (3,449 | ) | (3,449 | ) | ||||||||||
Total | $ | (3,420 | ) | $ | (520 | ) | $ | (3,449 | ) | $ | (7,389 | ) | ||||
Geographic revenues | ||||||||||||||||
U.S. | $ | — | $ | — | $ | (3,449 | ) | $ | (3,449 | ) | ||||||
International | (3,420 | ) | (520 | ) | — | (3,940 | ) | |||||||||
Total | $ | (3,420 | ) | $ | (520 | ) | $ | (3,449 | ) | $ | (7,389 | ) | ||||
Adjusted Net Revenues | ||||||||||||||||
Wrangler | Lee | Other | Total | |||||||||||||
Channel revenues | ||||||||||||||||
U.S. Wholesale | $ | 299,040 | $ | 108,757 | $ | 4,710 | $ | 412,507 | ||||||||
Non-U.S. Wholesale | 39,085 | 56,661 | 633 | 96,379 | ||||||||||||
Branded Direct-To-Consumer | 22,447 | 40,970 | 14 | 63,431 | ||||||||||||
Other | — | — | 30,040 | 30,040 | ||||||||||||
Total | $ | 360,572 | $ | 206,388 | $ | 35,397 | $ | 602,357 | ||||||||
Geographic revenues | ||||||||||||||||
U.S. | $ | 317,831 | $ | 130,795 | $ | 34,553 | $ | 483,179 | ||||||||
International | 42,741 | 75,593 | 844 | 119,178 | ||||||||||||
Total | $ | 360,572 | $ | 206,388 | $ | 35,397 | $ | 602,357 | ||||||||
Non-GAAP Financial Information | ||||||||||||||||
The financial information above has been presented on a GAAP basis and on an adjusted basis. These adjusted presentations are non-GAAP measures. | ||||||||||||||||
Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. In addition, Adjusted EBITDA is a key financial measure for the Company's shareholders and financial leaders, since the Company's current debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company's compliance with debt covenants. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not as an alternate for, reported results under GAAP. In addition, these non-GAAP measures may be different from similarly titled measures used by other companies. | ||||||||||||||||
(a) Business model changes relate to the exit of unprofitable markets in select European and South American countries, and the discontinuation of manufacturing for VF Corporation. |
Three Months Ended June 2018 | ||||||||||||||||
Net Revenues-As Reported Under GAAP | ||||||||||||||||
Wrangler | Lee | Other | Total | |||||||||||||
Channel revenues | ||||||||||||||||
U.S. Wholesale | $ | 311,222 | $ | 100,674 | $ | 7,094 | $ | 418,990 | ||||||||
Non-U.S. Wholesale | 59,624 | 73,076 | 26 | 132,726 | ||||||||||||
Branded Direct-To-Consumer | 26,899 | 44,023 | 27 | 70,949 | ||||||||||||
Other | — | — | 41,191 | 41,191 | ||||||||||||
Total | $ | 397,745 | $ | 217,773 | $ | 48,338 | $ | 663,856 | ||||||||
Geographic revenues | ||||||||||||||||
U.S. | $ | 329,166 | $ | 122,655 | $ | 48,312 | $ | 500,133 | ||||||||
International | 68,579 | 95,118 | 26 | 163,723 | ||||||||||||
Total | $ | 397,745 | $ | 217,773 | $ | 48,338 | $ | 663,856 | ||||||||
Adjustments for Business Model Changes(a) | ||||||||||||||||
Wrangler | Lee | Other | Total | |||||||||||||
Channel revenues | ||||||||||||||||
U.S. Wholesale | $ | — | $ | — | $ | — | $ | — | ||||||||
Non-U.S. Wholesale | (3,338 | ) | (335 | ) | — | (3,673 | ) | |||||||||
Branded Direct-To-Consumer | (4,450 | ) | (764 | ) | — | (5,214 | ) | |||||||||
Other | — | — | (12,140 | ) | (12,140 | ) | ||||||||||
Total | $ | (7,788 | ) | $ | (1,099 | ) | $ | (12,140 | ) | $ | (21,027 | ) | ||||
Geographic revenues | ||||||||||||||||
U.S. | $ | — | $ | — | $ | (12,140 | ) | $ | (12,140 | ) | ||||||
International | (7,788 | ) | (1,099 | ) | — | (8,887 | ) | |||||||||
Total | $ | (7,788 | ) | $ | (1,099 | ) | $ | (12,140 | ) | $ | (21,027 | ) | ||||
Adjusted Net Revenues | ||||||||||||||||
Wrangler | Lee | Other | Total | |||||||||||||
Channel revenues | ||||||||||||||||
U.S. Wholesale | $ | 311,222 | $ | 100,674 | $ | 7,094 | $ | 418,990 | ||||||||
Non-U.S. Wholesale | 56,286 | 72,741 | 26 | 129,053 | ||||||||||||
Branded Direct-To-Consumer | 22,449 | 43,259 | 27 | 65,735 | ||||||||||||
Other | — | — | 29,051 | 29,051 | ||||||||||||
Total | $ | 389,957 | $ | 216,674 | $ | 36,198 | $ | 642,829 | ||||||||
Geographic revenues | ||||||||||||||||
U.S. | $ | 329,166 | $ | 122,655 | $ | 36,172 | $ | 487,993 | ||||||||
International | 60,791 | 94,019 | 26 | 154,836 | ||||||||||||
Total | $ | 389,957 | $ | 216,674 | $ | 36,198 | $ | 642,829 |