Donna Karan International Inc. Announces 1996 Fourth Quarter And Year End Results
PR Newswire, Tuesday, March 25, 1997 at 18:20
NEW YORK, March 25 /PRNewswire/ -- Donna Karan International Inc.
(NYSE:DK) today announced pro forma and historical financial results for the
fourth quarter and fiscal year ended December 29, 1996.
Revenues for the fourth quarter increased 20.8% to $162.2 million compared
to $134.3 million for the fourth quarter of fiscal 1995. Gross profit margin
increased to 34.1%, up from pro forma gross margin of 33.0% achieved in the
fourth quarter of 1995 due to the increase in sales of the Company's beauty
products, which have a higher gross margin than apparel and accessories.
Selling, general and administrative expenses increased to 35.5% of net sales
in the fourth quarter of 1996 from 27.8% on a pro forma basis in the same
period in 1995. Pro forma results assume the Company's initial public
offering, which closed on July 3, 1996, had been completed on the first day of
fiscal 1995 and give effect to the reorganization, the offering and certain
other adjustments.
Components of the dollar increase in 1996 fourth quarter selling, general
and administrative expenses include $3.2 million incurred in connection with
the termination of the DKNY Jeanswear license with Designer Holdings Ltd.,
$2.2 million for an advertising campaign featuring Bruce Willis and Demi
Moore, and approximately $8.2 million in increased expenses compared to the
prior period related to the continued growth of the Company's beauty division.
The balance of the increase includes expenses to support the growth of the
Company's apparel and accessories businesses.
In the fourth quarter of 1996, the Company had an operating loss
of $2.4 million compared to pro forma operating income of $7.0 million in
1995. The Company incurred a pro forma net loss of $1.7 million, or a loss of
$0.08 per share, in the fourth quarter of 1996 compared to pro forma net
income of $4.0 million, or $0.19 per share, in 1995.
Excluding the $3.2 million pre-tax expense related to the termination of
the Jeanswear license, fourth quarter pro forma net income results would have
been $0.1 million. Per share amounts are calculated using the Company's
21,468,034 shares outstanding following the Company's initial public offering.
On a historical basis, in the fourth quarter of 1996, the Company had an
operating loss of $2.4 million compared to operating income of $10.0 million
in 1995. The Company had net income of $1.0 million in the fourth quarter of
1996 after an additional tax benefit of approximately $2.8 million was
recognized in connection with the Company becoming subject to Federal and
additional state income taxes. Net income for the same period in 1995 amounted
to $8.3 million.
On a pro forma basis, revenues for fiscal 1996 increased 21.4% to $612.8
million compared to $504.6 million for fiscal 1995. 1996 pro forma gross
profit margin increased slightly to 32.3%, up from 31.7% achieved in fiscal
1995, due to the increase in sales of the Company's beauty products, which
have a higher gross margin than apparel and accessories. Pro forma selling,
general and administrative expenses increased to 29.1% of net sales in fiscal
1996 from 25.7% in fiscal 1995.
Components of the dollar increase in fiscal 1996 selling, general
and administrative expenses include $3.2 million incurred in connection with
the termination of the DKNY Jeanswear license with Designer Holdings Ltd.,
$5.0 million for an advertising campaign featuring Bruce Willis and Demi
Moore, and approximately $12.9 million in increased expenses compared to the
prior period related to the continued growth of the Company's beauty division.
The balance of the increase includes expenses to support the increase in sales
of the Company's apparel and accessories businesses.
On a pro forma basis, net income decreased 31.7% to $12.6 million, or
$0.59 per share, compared to $18.4 million, or $0.86 per share for 1995. On a
historical basis, the Company had operating income of $13.3 million in fiscal
1996 compared to $42.5 million in fiscal 1995. 1996 net income decreased to
$25.0 million from $53.7 million in 1995.
In connection with the termination of the DKNY Jeans license, the
Company's third quarter earnings were restated to reflect the return of the $6
million upfront payment received from Designer Holdings Ltd. in connection
with the license agreement. Excluding the $6 million, pro forma earnings per
share for the third quarter ended September 29, 1996 were $0.45, as compared
with $0.61, as originally stated.
Stephen L. Ruzow, President and Chief Operating Officer, stated, "We
continue to experience double digit revenue increases in our DKNY men's and
women's collections and Donna Karan New York collection for men. Much of the
revenue growth is driven by the continued success of our international
division. In addition to the growth in our apparel collections, we experienced
an increase of 22.5% in revenues from outlet stores and licensing."
As of December 29, 1996 there were 41 licensed international free-standing
stores opened, as compared to 31 in 1995. The Company anticipates that
approximately 15 new licensed international free-standing stores will be
opened in 1997. In addition, the Company operated 37 outlet stores in 1996, as
compared to 31 in 1995, and anticipates that there will be approximately 48
outlet stores in operation by the end of 1997.
Mr. Ruzow also noted, "Although we were able to continue the strong top
line growth in many of our divisions, 1996 was a big disappointment in terms
of profitability. Our top priority is to address the issue of the bottom line
in 1997. We will take immediate action to better focus our resources on our
core businesses and control our expenses."
Donna Karan, Chairman and Chief Executive Officer of Donna Karan
International, noted, "While we are pleased with the revenue growth of our
businesses and the international acceptance of our apparel, accessories and
beauty products, our financial performance is unacceptable. We are
immediately applying our creativity as a company and as individuals to
implement solutions to improve our profitability while maintaining the
philosophy, vision, integrity and quality of the Donna Karan brands and
products."
Certain statements contained herein are forward-looking statements that
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the Company's actual results
in future periods or plans for future periods to differ materially from
what is currently anticipated. Those risks include, among others, risks
associated with the timing, terms and consummation of a joint-venture, sale or
licensing of the Company's beauty division, timing and costs associated with
new store openings, general competitive factors and a softening of retailer or
consumer acceptance of the Company's products.
Donna Karan International Inc. is one of the world's leading fashion
design houses. The Company designs, markets and distributes "designer" and
"bridge" collections of women's and men's apparel, sportswear, accessories and
shoes under the Donna Karan New York(R) and DKNY(R) brand names, respectively.
Its beauty division offers fragrance, bath and body and treatment products
under the Donna Karan New York(R) and DK Men(TM) brand names. The Company has
selectively granted licenses for the manufacture and distribution of hosiery,
intimate apparel, eyewear and children's apparel in Europe and the
Middle East.
DONNA KARAN INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
On a Pro Forma Basis
Quarter Ended Year Ended
December 29, December 31, December 29, December 31,
1996 (A) 1995 1996 1995
Net sales $162,199 $134,313 $612,840 $504,605
Cost of sales 106,935 89,952 414,677 344,788
Gross profit 55,264 44,361 198,163 159,817
Selling, general and
admin. expenses 57,645 37,388 178,105 129,761
Operating income (2,381) 7,023 20,058 30,056
Other income (expense)
Equity in earnings
of affiliate 300 312 3,089 2,913
Interest expense, net 237 (349) 155 (839)
Income (loss) before
provision (benefit) for
income taxes (1,844) 6,986 23,302 32,130
Provision (benefit) for
income taxes (191) 2,970 10,719 13,705
Net income $(1,653) $4,016 $12,583 $18,425
Per share information $(0.08) $0.19 $0.59 $0.86
Common shares outstanding
after initial public
offering 21,468,034 21,468,034 21,468,034 21,468,034
(A) Represents operating results on a historical basis.
DONNA KARAN INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
On a Historical Basis
Quarter Ended Year Ended
December 29, December 31, December 29, December 31,
1996 1995 1996 1995
(Unaudited)
Net sales $162,199 $134,313 $612,840 $510,126
Cost of sales 106,935 86,353 412,064 330,689
Gross profit 55,264 47,960 200,776 179,437
Selling, general and
admin. expenses 57,645 37,918 187,474 136,906
Operating income (2,381) 10,042 13,302 42,531
Other income (expense)
Equity in earnings
of affiliate 300 312 3,089 2,519
Interest expense, net 237 (1,799) (6,577) (7,650)
Interest expense on
distribution notes -- -- (1,957) --
Gain on sale of interests
in affiliates -- -- -- 18,673
Income (loss) before
provision (benefit)
for income taxes (1,844) 8,555 7,857 56,073
Provision (benefit) for
income taxes (2,887) 303 (17,179) 2,398
Net income $1,043 $8,252 $25,036 $53,675
Note: The statement of operations of Donna Karan International Inc. for
the year ended December 29, 1996 includes the combined results of operations
of the Predecessor group through July 2, 1996.
DONNA KARAN INTERNATIONAL INC.
BALANCE SHEETS
(In thousands)
(Predecessor)
ASSETS December 29, December 31,
1996 1995
Current assets:
Cash $40,550 $12,153
Accounts receivable, net 73,770 62,231
Inventories 100,680 85,655
Deferred income taxes 25,207 1,302
Prepaid expenses and other
current assets 14,466 8,644
Total current assets 254,673 169,985
Property and equipment, at cost - net 32,402 22,505
Deferred income taxes 6,106 380
Deposits and other non current assets 18,514 11,105
Total $311,695 $203,975
LIABILITIES AND STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $73,394 $53,825
Accrued expenses and other
current liabilities 34,192 15,766
Current portion of long-term debt 282 7,759
Total current liabilities 107,868 77,350
Long-term debt 36 45,779
Stockholders' equity and partners' capital:
Common stock 215 1,146
Additional paid-in capital 186,899 --
Retained earnings and
partners' capital 17,487 79,748
Cumulative translation adjustment (331) (48)
Total 204,270 80,846
Less common stock held in treasury (479) --
Total stockholders' equity and
partners' capital 203,791 80,846
Total $311,695 $203,975
SOURCE Donna Karan International
-0- 3/25/97
/CONTACT: Dewey K. Shay, Investors, or Patti Cohen, Media, of Donna Karan
International Inc., 212-789-1500/ |
