PHILLIPS-VAN HEUSEN CORPORATION NET INCOME QUADRUPLES IN FOURTH QUARTER AND INCREASES 43% FOR THE YEAR ENDED JANUARY 30, 2000
Net sales from ongoing businesses for the year ended January 30, 2000 were $1,190.6 million, a 1.0% increase from the prior year's $1,179.4 million. As anticipated, net sales from ongoing businesses in the fourth quarter of 1999 were $294.0 million, a decrease of 0.9% from $296.8 million in the prior year. The improvement for the year was due to increased Apparel sales. The decrease in the fourth quarter resulted principally from an expected sales decline at Bass due to dramatically less promotional selling of clearance merchandise than occurred last year. Net sales from ongoing businesses exclude sales of the Gant division, which was sold in the first quarter of 1999, and sales of the Izod Club division due to the license of the Izod Club brand and the sale of certain related assets to Oxford Industries, Inc. in the fourth quarter of 1999. Total net sales from all businesses in 1999 were $1,271.5 million and $297.0 million for the year and fourth quarter, respectively, compared with $1,303.1 million and $326.6 million, respectively, for the comparable periods last year.
Net income for the current year increased 43% to $16.9 million, or $0.62 per share, compared with last year's $11.8 million, or $0.43 per share. In the current quarter, net income increased over 300% to $2.6 million, or $0.10 per share, compared with last year's $0.6 million, or $0.02 per share. All divisions contributed to these increases, with the Apparel divisions posting significant earnings growth and the Footwear segment continuing its earnings improvement.
Income before interest and taxes in the current year improved 11.1% to $48.3 million from last year's $43.5 million. In the current quarter, income before interest and taxes increased 29.5% to $8.8 million from last year's $6.8 million. The increases were principally attributable to higher gross margins in Apparel and to an even greater extent at Bass, where both the current year and quarter had dramatically less promotional selling of clearance merchandise than the prior year.
Interest expense reductions in the current year and quarter of $3.7 million and $2.1 million, respectively, substantially offset increases in income taxes. The decreases in interest expense were due to the significant cash flow generated in 1999 of $104 million, resulting principally from the sale of Gant, the licensing of the Izod Club brand, which freed up $15 million of working capital, and tight management of working capital. The increase in the effective tax rate to 34.8% in 1999 compared with 25.8% last year, was due principally to closing the Company's manufacturing operations in Puerto Rico, resulting in a higher percentage of pre-tax income being subject to U.S. tax.
Commenting on these results, Bruce J. Klatsky, Chairman and Chief Executive Officer, noted that "the results for both the year and fourth quarter exceeded plan. In Apparel, our Van Heusen, Geoffrey Beene and Izod brands continued their strong performance in the fourth quarter, with each significantly improving its earnings over the prior year. At Bass, operating margins improved 14% for the year and 50% in the fourth quarter, fueled by significant increases in gross profit margins.
During the year, we significantly strengthened our balance sheet, as the cash proceeds from the sale of Gant, the continued tight management of working capital and the liquidation of $15 million of working capital related to the Izod Club licensing transaction contributed to 1999 cash flow of $104 million. At year end, we have $95 million in cash and no short-term borrowings, which positions us to take advantage of strategic growth opportunities."
Klatsky concluded that "we are quite pleased with our performance in 1999, and believe that our financial flexibility, combined with the continuing strength of our brands, have laid the groundwork for a period of stable, predictable earnings growth."
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements in this press release, including, without limitation, statements relating to the Company's 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 involve risks and uncertainties, including, without limitation, the following: (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 levels of sales of the Company's apparel and footwear products, both to its wholesale customers and in its retail stores, and the extent of discounts and promotional pricing in which the Company is required to engage, all of which can be affected by weather conditions, changes in the economy, fashion trends and other factors; (iii) the Company's plans and results of operations will be affected by the Company's ability to manage its growth and inventory; and (iv) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission.
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PHILLIPS-VAN HEUSEN CORPORATION
Consolidated Income Statements
(In thousands, except per share data)
Quarter Ended Year Ended
1/30/00 1/31/99 1/30/00 1/31/99
Net sales - ongoing businesses $293,950 $296,805 $1,190,642 $1,179,437
Net sales - businesses exited* 3,010 29,752 80,848 123,648
Total net sales $296,960 $326,557 $1,271,490 $1,303,085
Gross profit $109,632 $107,291 $ 451,026 $ 446,925
Selling, general and administrative expenses 98,479 98,367 394,216 394,940
Year 2000 computer conversion costs ** 2,345 2,125 8,500 8,500
Income before interest, taxes and extraordinary item 8,808 6,799 48,310 43,485
Interest expense, net 4,563 6,618 22,430 26,112
Income before taxes and extraordinary item 4,245 181 25,880 17,373
Income tax expense (benefit) 1,613 (455) 9,007 4,486
Income before extraordinary item 2,632 636 16,873 12,887
Extraordinary loss on debt retirement, net of
tax benefit 1,060
Net income $ 2,632 $ 636 $ 16,873 $ 11,827
Net income per share $ 0.10 $ 0.02 $ 0.62 $ 0.43
* Net sales from businesses exited include sales of the Gant and Izod Club divisions. The Gant trademark was sold in the first quarter of 1999 and the U.S. operations were liquidated through the fourth quarter. In the fourth quarter of 1999, the Company entered into an agreement with Oxford Industries, Inc. to license the Izod Club brand and sell certain related assets. The finalization of these transactions in the fourth quarter of 1999 did not have a material impact on the Company's financial statements.
** The EPS effect of Year 2000 computer conversion costs, net of tax, was $0.23 in 1999 and 1998, and $0.07 in the fourth quarter of 1999 and 1998.
PHILLIPS-VAN HEUSEN CORPORATION
Consolidated Balance Sheets
(In thousands, except share data)
January 30, January 31,
2000 1999
ASSETS
Current Assets:
Cash, including cash equivalents of $94,543 and $4,399 $ 94,821 $ 10,957
Trade receivables, less allowances of $2,305 and $1,367 66,422 88,038
Inventories 222,976 232,695
Other, including deferred taxes of $23,052 and $10,611 41,751 36,327
Total Current Assets 425,970 368,017
Property, Plant and Equipment 106,122 108,846
Goodwill 83,578 113,344
Other assets, including deferred taxes of $31,800
and $52,167 58,078 84,106
$673,748 $674,313
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 20,000
Accounts payable $ 39,858 44,851
Accrued expenses 84,722 67,835
Total Current Liabilities 124,580 132,686
Long-Term Debt 248,784 248,723
Other Liabilities 58,699 64,016
Stockholders' Equity:
Preferred stock, par value $100 per share; 150,000
shares authorized; no shares outstanding
Common Stock, par value $1 per share; 100,000,000
shares authorized; shares issued 27,289,869
and 27,287,985 27,290 27,288
Additional Capital 117,697 117,683
Retained Earnings 96,698 83,917
Total Stockholders' Equity 241,685 228,888
$673,748 $674,313
PHILLIPS-VAN HEUSEN CORPORATION
Segment Data
(In thousands)
Quarter Ended Year Ended
1/30/00 1/31/99 1/30/00 1/31/99
Net sales - Apparel - ongoing businesses $205,491 $201,873 $ 804,944 $ 773,215
Net sales - Apparel - businesses exited* 3,010 29,752 80,848 123,648
Net sales - Total Apparel 208,501 231,625 885,792 896,863
Net sales - Footwear and Related Products 88,459 94,932 385,698 406,222
Total net sales $296,960 $326,557 $1,271,490 $1,303,085
Operating income - Apparel $ 15,449 $ 12,928 $ 55,626 $ 50,302
Operating income - Footwear and Related
Products 1,895 1,370 18,687 17,183
Total operating income 17,344 14,298 74,313 67,485
Corporate expenses** 8,536 7,499 26,003 24,000
Income before interest,
taxes and extraordinary item $ 8,808 $ 6,799 $ 48,310 $ 43,485
* Net sales from businesses exited include sales of the Gant and Izod Club divisions. The Gant trademark was sold in the first quarter of 1999 and the U.S. operations were liquidated through the fourth quarter. In the fourth quarter of 1999, the Company entered into an agreement with Oxford Industries, Inc. to license the Izod Club brand and sell certain related assets. The finalization of these transactions in the fourth quarter of 1999 did not have a material impact on the Company's financial statements.
** Corporate expenses include Year 2000 computer conversion costs of $2,345 and $8,500 for the quarter and year ended January 30, 2000, respectively, compared with $2,125 and $8,500 for the quarter and year ended January 31, 1999, respectively. |
