EX-99 2 ex99-1form8k_052504.txt EXHIBIT 99.1 EXHIBIT 99.1 ------------ Investor Contact: Denise Gillen 212.318.7516 Media Contact: Nancy Murray 212.813.7862 POLO RALPH LAUREN REPORTS FOURTH QUARTER AND FISCAL YEAR 2004 RESULTS Fourth Quarter Revenues Driven by Successful Re-Launch of Lauren by Ralph Lauren Line and 10.1% Comparable Retail Store Sales; Retail Operating Margins Increased 810 Basis Points Company Confirms EPS Outlook for Fiscal Year 2005 in Range of $2.35 to $2.45 Company to Acquire Childrenswear Licensee New York (May 26, 2004) - Polo Ralph Lauren Corporation (NYSE: RL) today reported net income of $76.5 million, or $0.75 per diluted share, for fourth quarter Fiscal 2004 compared to net income of $73.2 million, or $0.74 per diluted share, for fourth quarter Fiscal 2003. For Fiscal Year 2004, net income was $171.0 million, or $1.69 per diluted share, compared to net income of $174.2 million, or $1.76 per diluted share for Fiscal Year 2003. Adjusted net income was $80.4 million, or $0.79 per diluted share, for the fourth quarter Fiscal 2004 compared to $76.1 million, or $0.77 per diluted share, for the fourth quarter Fiscal 2003. Adjusted net income was $184.6 million, or $1.83 per diluted share, for Fiscal Year 2004 compared to $183.7 million, or $1.85 per diluted share, for Fiscal Year 2003. Outstanding diluted shares increased due to the inclusion of more stock options as a result of the higher stock price during the year. Adjusted results exclude restructuring charges and foreign currency gains and losses resulting from certain balance sheet transactions. For a full analysis of the adjustments, please refer to the table reconciliation of GAAP results to adjusted results. "We ended the year stronger than ever," said Ralph Lauren, Chairman and Chief Executive officer. "We produced continued success in our retail group, we took back Lauren by Ralph Lauren and quickly built it into an even stronger brand, and we made remarkable progress on our long-term global strategies. I am proud of the 13,000 employees of this company who accomplished this while delivering growth and increasing our overall financial strength." "Over the past few years, we have taken important steps to establish more control over our valuable brand on a worldwide basis. Today we announced another milestone for our company with the acquisition of our childrenswear business. We believe we can continue to expand and develop it into a substantial global business," Mr. Lauren said. "Fiscal 2004 was a year of many accomplishments. Our specialty retail business continues to meet our expectations. The strength of our retail stores sales this year shows that we are providing our customers with a unique shopping experience. And we are very pleased with the successful re-launch of the Lauren by Ralph Lauren line. We completed our European consolidation and we expect to see the benefits of this initiative beginning in Fiscal 2005 and well into the future. Our supply chain and systems enhancements have resulted in more efficient and cost effective processes," said Roger Farah, President and Chief Operating Officer. Mr. Farah added, "The investments we've made to support our multi-year initiatives have begun to deliver the appropriate return. Our infrastructure can support our current businesses and our future growth plans. We are poised to deliver solid top and bottom line growth in Fiscal Year 2005." RECENT ACHIEVEMENTS o We signed a definitive agreement to acquire RL Childrenswear LLC, our licensee for childrenswear in the United States, Canada and Mexico, and expect that the transaction will close in June 2004. (Please refer to our separate announcement issued today.) o Comparable retail store sales, based on a 13-week fourth quarter, were 11.4% at Ralph Lauren stores, 23.8% at Club Monaco stores, and 7.7% in our outlet stores, with an overall 810 basis point improvement in margins. o The Lauren by Ralph Lauren Spring line was successfully delivered to approximately 900 department store doors on plan throughout the quarter, with strong sell-throughs. In addition, we launched distribution of the Lauren line on Polo.com. o We increased the strength of our Board of Directors with the addition of Myron E. (Mike) Ullman, III, retired Directeur General and Group Managing Director of LVMH Moet Hennessy Louis Vuitton. o We successfully completed a secondary offering for Goldman Sachs of their total holdings of approximately 10.6 million shares. While we did not receive any proceeds from this offering, it did increase the number of Class A shares outstanding to 56.4 million shares, bringing approximately 75 new institutional investors to our shareholder base. o We have a strong balance sheet and ended the quarter with $66.1 million in cash, net of debt. We continue to make progress in managing our inventory levels. At the end of the fourth quarter inventory was $363.7 million, which included the Lauren line and the effect of the strengthening Euro and Canadian dollar, compared to $363.8 million last year. o We completed the consolidation of our European businesses into one centralized headquarters location in Geneva, Switzerland, and one primary distribution center in Parma, Italy. We also completed the logistics and systems integration of Club Monaco into the Polo Ralph Lauren systems. o We extended the company's share repurchase program to April 1, 2006. This program was originally authorized in March 1998 for the repurchase of up to $100 million. To date the company has used $77.5 million. No shares were repurchased in Fiscal 2004. FOURTH QUARTER FISCAL 2004 INCOME STATEMENT REVIEW NET REVENUES Net revenues for the fourth quarter increased 18.3% to $818.8 million compared to $692.3 million in the fourth quarter last year. Our wholesale revenues were $493.5 million, up 17.0% over last year, driven by the inclusion of the Lauren by Ralph Lauren line in our wholesale segment. Wholesale revenues also reflect a decrease in our menswear as we strategically reposition the Polo brand into more appropriate distribution channels and reduce sales into the secondary market. Based on a 14-week fourth quarter in Fiscal 2004, reported retail sales grew 32.6% to $259.9 million compared to $195.9 million in the 13-week fourth quarter last year, with comparable store sales up 20.2%. We believe it is more relevant to discuss comparable store sales excluding this year's 14th week and on that basis comparable store sales rose 10.1%, driven by positive performance in all of our retail formats. Licensing revenues decreased, as expected, because of the absence of royalty income associated with the previously licensed Lauren business. The increase in Fiscal 2004 net revenues also reflects the favorable impact of the strengthening Euro and Canadian dollar. GROSS PROFIT For the fourth quarter, gross profit was $391.0 million, an increase of 13.1%, compared to $345.8 million in the fourth quarter of Fiscal 2003. The increased gross profit was generated by the addition of the Lauren line to our wholesale business and strong retail sales performance in our Ralph Lauren and Club Monaco stores, partially offset by a decrease in licensing. Gross margin was 47.8% of net revenues compared to 50.0% last year, reflecting the change in mix of businesses. The increase in Fiscal 2004 gross profit also reflects the favorable impact of the strengthening Euro and Canadian dollar. SG&A EXPENSES In the fourth quarter, SG&A expenses, excluding restructuring charges, were $262.5 million, an increase of $39.7 million or 17.8%, compared to $222.8 million in the fourth quarter of Fiscal 2003. The increase was driven primarily by the change in business mix as a result of increased retail sales, the start-up costs associated with the operations of the Lauren line, and the inclusion of expenses of our Japanese master license. The increase in Fiscal 2004 SG&A also reflects the negative impact of foreign currency exchange rate fluctuations, as a result of the strengthening Euro and Canadian dollar. FOURTH QUARTER RESTRUCTURING CHARGE AND FOREIGN CURRENCY GAINS AND LOSSES Adjusted fourth quarter Fiscal 2004 results exclude a $3.6 million pre-tax restructuring charge, consisting of $4.2 million for additional contract termination and severance costs related to the consolidation of our European business operations, as well as $1.3 million for lease termination and asset write-offs associated with the closure of two stores in the United States, partially offset by a $1.9 million reduction in liabilities related to the Fiscal 2001 Club Monaco charge. Adjusted fourth quarter Fiscal 2004 results also exclude $2.4 million in foreign currency losses primarily related to transaction losses on cash and receivable balances and on unhedged inventory purchases in Europe. Adjusted fourth quarter Fiscal 2003 results exclude a $6.4 million pre-tax restructuring charge and foreign currency gains of $2.0 million. STORE COUNT At the end of the fourth quarter, we operated 263 stores, with 1.86 million square feet, compared to 255 stores, with 1.82 million square feet, at the end of the fourth quarter last year. Our retail group consisted of 55 Ralph Lauren stores, 61 Club Monaco stores, 118 Polo outlet stores, 22 Polo Jeans Co. outlet stores, and seven Club Monaco outlet stores. During the fourth quarter we opened two stores and closed four. EARNINGS OUTLOOK The company reiterated that for Fiscal Year 2005 earnings per share are expected to be in the range of $2.35 to $2.45. These projected results anticipate high-single digit percent consolidated revenue growth and approximately 150 basis points improvement in operating margins. The Company expects revenues to reflect high-teen percent growth in wholesale sales and mid-single digit percent growth in retail revenues, partially offset by a mid-single digit percent decrease in licensing revenue as a result of the elimination of the U.S. and Canadian Lauren and Ralph license royalties. The Company expects the earnings results of each quarter in Fiscal 2005 to exceed the comparable quarter in Fiscal 2004 with quarterly profit flows similar to Fiscal 2004. As a percentage of annual profits, the first quarter of the year, or the June end quarter, is the smallest due to less wholesale shipments for the summer. The second quarter will now include the Lauren fall shipments, and the Company expects the profits in this quarter to be the second largest in the year. The third quarter would be the third largest quarter as a result from the retail business, with the fourth quarter again producing the largest quarterly profits due to strong wholesale shipments in the U.S. and Europe. For the first quarter of Fiscal 2005, the Company expects earnings per share to be in the range of $0.09 to $0.12, compared to $0.04 in the first quarter of Fiscal 2004. Revenues should increase mid-teens percent with operating margin expansion of approximately 150 basis points. While the company will continue to give quarterly earnings guidance with details about business operations and trends, it will discontinue quarterly earnings per share guidance after the first quarter guidance given above. CONFERENCE CALL As previously announced, we will host a conference call and live online broadcast today, May 26, 2004 at 9:00 A.M. Eastern. The dial-in number is 1-973-317-5319. The online broadcast is accessible at HTTP://INVESTOR.POLO.COM. Polo Ralph Lauren Corporation is a leader in the design, marketing and distribution of premium lifestyle products in four categories: apparel, home, accessories and fragrances. For more than 35 years, Polo's reputation and distinctive image have been consistently developed across an expanding number of products, brands and international markets. The Company's brand names, which include "Polo", "Polo by Ralph Lauren", "Ralph Lauren Purple Label", "Polo Sport", "Ralph Lauren", "Blue Label", "Lauren", "Polo Jeans Co.", "RL", "Chaps", and "Club Monaco" among others, constitute one of the world's most widely recognized families of consumer brands. For more information, go to HTTP://INVESTOR.POLO.COM. THIS PRESS RELEASE AND ORAL STATEMENTS MADE FROM TIME TO TIME BY REPRESENTATIVES OF THE COMPANY CONTAIN CERTAIN "FORWARD-LOOKING STATEMENTS" CONCERNING EXPECTATIONS FOR SALES, STORE OPENINGS, GROSS MARGINS, EXPENSES AND EARNINGS. ACTUAL RESULTS MIGHT DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. AMONG THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO MATERIALLY DIFFER INCLUDE, AMONG OTHERS, CHANGES IN THE COMPETITIVE MARKETPLACE, INCLUDING THE INTRODUCTION OF NEW PRODUCTS OR PRICING CHANGES BY OUR COMPETITORS, CHANGES IN THE ECONOMY AND OTHER EVENTS LEADING TO A REDUCTION IN DISCRETIONARY CONSUMER SPENDING; RISKS ASSOCIATED WITH THE COMPANY'S DEPENDENCE ON SALES TO A LIMITED NUMBER OF LARGE DEPARTMENT STORE CUSTOMERS, INCLUDING RISKS RELATED TO EXTENDING CREDIT TO CUSTOMERS; RISKS ASSOCIATED WITH THE COMPANY'S DEPENDENCE ON ITS LICENSING PARTNERS FOR A SUBSTANTIAL PORTION OF ITS NET INCOME AND RISKS ASSOCIATED WITH A LACK OF OPERATIONAL AND FINANCIAL CONTROL OVER LICENSED BUSINESSES; RISKS ASSOCIATED WITH CHANGES IN SOCIAL, POLITICAL, ECONOMIC AND OTHER CONDITIONS AFFECTING FOREIGN OPERATIONS OR SOURCING (INCLUDING FOREIGN EXCHANGE FLUCTUATIONS)AND THE POSSIBLE ADVERSE IMPACT OF CHANGES IN IMPORT RESTRICTIONS; RISKS ASSOCIATED WITH UNCERTAINTY RELATING TO THE COMPANY'S ABILITY TO IMPLEMENT ITS GROWTH STRATEGIES AS WELL AS THE OTHER RISK FACTORS SET FORTH IN THE COMPANY'S FORM 10-K, 10-Q AND 8-K REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS TO REFLECT SUBSEQUENT EVENTS OR CIRCUMSTANCES. Attached are the Consolidated Statements of Income and Net Revenues and Income from Operations for the three-month and twelve-month periods ended April 3, 2004 and March 29, 2003 and the Consolidated Balance Sheets as of April 3, 2004 and March 29, 2003. # # # # Tables Follow # # # POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (AUDITED)
THREE MONTHS ENDED --------------------------- APRIL 3, MARCH 29, 2004 2003 ------------ ------------ Wholesale Net Sales $ 493,520 $ 421,669 Retail Net Sales 259,863 195,929 ------------ ------------ NET SALES 753,383 617,598 Licensing Revenue 65,398 74,733 ------------ ------------ NET REVENUES 818,781 692,331 Cost of Goods Sold 427,782 346,510 ------------ ------------ GROSS PROFIT 390,999 345,821 Depreciation and Amortization 24,086 21,295 Other SG&A Expenses 238,418 201,521 Restructuring Charge 3,636 6,443 ------------ ------------ TOTAL SG&A EXPENSES 266,140 229,259 Income From Operations 124,859 116,562 Foreign Currency (Gains) Losses 2,395 (1,961) Interest Expense, net 2,376 3,217 ------------ ------------ Income Before Income Taxes and Other Expense 120,088 115,306 Provision for Income Taxes 43,282 42,087 ------------ ------------ Income after Tax 76,806 73,219 Other Expense, net (A) 275 -- ------------ ------------ NET INCOME $ 76,531 $ 73,219 ============ ============ NET INCOME PER SHARE - BASIC $ 0.77 $ 0.74 ============ ============ NET INCOME PER SHARE - DILUTED $ 0.75 $ 0.74 ============ ============ Weighted Average Shares Outstanding - Basic 99,699,000 98,450,000 ============ ============ Weighted Average Shares & Share Equivalents Outstanding - Diluted 102,265,000 99,343,000 ============ ============ DIVIDENDS DECLARED PER SHARE $ 0.05 $ -- ============ ============ (A) Includes Equity Investment Income of $20 net of Minority Interest Expense of $295.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (AUDITED)
The following is a reconciliation of Net Income to Net Income Before Restructuring Charge and Foreign Currency (Gains) Losses: THREE MONTHS ENDED --------------------------- APRIL 3, MARCH 29, 2004 2003 ------------ ------------ Net Income $ 76,531 $ 73,219 Other Expense, net 275 -- Provision for Income Taxes 43,282 42,087 ------------ ------------ Income before Income Taxes and Other Expense 120,088 115,306 Restructuring Charge (B) 3,636 6,443 Foreign Currency (Gains) Losses (C) 2,395 (1,961) ------------ ------------ Income Before Income Taxes, Other Expense, Restructuring Charge and Foreign Currency (Gains) Losses 126,119 119,788 Provision for Income Taxes 45,438 43,723 Other Expense, net 275 -- ------------ ------------ Net Income Before Restructuring Charge and Foreign Currency (Gains) Losses $ 80,406 $ 76,065 ============ ============ NET INCOME PER SHARE BEFORE RESTRUCTURING CHARGE AND FOREIGN CURRENCY (GAINS) LOSSES - BASIC $ 0.81 $ 0.77 ============ ============ NET INCOME PER SHARE BEFORE RESTRUCTURING CHARGE AND FOREIGN CURRENCY (GAINS) LOSSES - DILUTED $ 0.79 $ 0.77 ============ ============ (B) Fourth quarter Fiscal 2004 results include a pre-tax $3.6 million restructuring charge. This charge is comprised of $4.2 million for additional contract termination and severance costs related to the consolidation of our European business operations and $1.3 million for lease termination and asset write-offs associated with the March 2004 decision to close our RRL stores. This charge was partially offset by a $1.9 million reduction in liabilities related to the Fiscal 2001 Club Monaco charge. Fourth quarter Fiscal 2003 results include a pre-tax $6.4 million restructuring charge for operational consolidation efforts in Europe associated with severance and contract termination costs included in the Company's 2003 Restructuring Plan. (C) For the three months ended April 3, 2004, the foreign currency losses primarily relate to transaction losses on cash and receivable balances, unhedged inventory purchases in Europe resulting from the variability in the value of the Euro compared to the US dollar during beginning of this period. In the prior period, the Foreign Currency gains primarily related to Japanese forward contracts, which we entered into in November 2002.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
APRIL 3, MARCH 29, 2004 2003 ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 343,477 $ 343,606 Accounts receivable, net of allowances 441,724 375,823 Inventories 363,691 363,771 Deferred tax assets 21,565 15,735 Prepaid expenses and other 100,862 63,615 ----------- ----------- 1,271,319 1,162,550 Property and equipment, net 397,328 354,996 Deferred tax assets 61,579 54,386 Goodwill, net 341,603 315,559 Intangibles, net 17,640 11,400 Other assets 180,772 139,931 ----------- ----------- $ 2,270,241 $ 2,038,822 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term bank borrowings $ 0 $ 100,943 Accounts payable 187,355 181,392 Income taxes payable 77,736 55,501 Deferred tax liabilities 1,821 -- Accrued expenses and other 234,218 162,511 ----------- ----------- 501,130 500,347 Long-term debt 277,345 248,494 Other noncurrent liabilities 69,693 81,214 Stockholders' equity Common Stock 1,053 1,028 Additional paid-in-capital 563,457 504,700 Retained earnings 927,390 776,359 Treasury Stock, Class A, at cost (4,145,800 and 4,105,932 shares) (78,975) (77,928) Accumulated other comprehensive income (loss) 23,942 10,787 Unearned compensation (14,794) (6,179) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 1,422,073 1,208,767 ----------- ----------- $ 2,270,241 $ 2,038,822 =========== ===========
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES NET REVENUES AND INCOME FROM OPERATIONS (IN THOUSANDS) (UNAUDITED)
The net revenues and income from operations for the three and twelve months ended April 3, 2004 and March 29, 2003 for each segment were as follows: THREE MONTHS ENDED TWELVE MONTHS ENDED ------------------ ------------------- APRIL 3, MARCH 29, APRIL 3, MARCH 29, 2004 2003 2004 2003 ---------- ------- --------- --------- NET REVENUES: Wholesale $ 493,520 421,669 1,210,397 1,187,363 Retail 259,863 195,929 1,170,447 1,001,958 Licensing 65,398 74,733 268,810 250,019 ---------- ------- --------- --------- $ 818,781 692,331 2,649,654 2,439,340 ========== ======= ========= ========= INCOME (LOSS) FROM OPERATIONS: Wholesale $ 102,049 92,572 93,128 124,476 Retail (4,816) (19,517) 72,915 40,366 Licensing 31,262 49,950 127,319 138,018 ---------- ------- --------- --------- $ 128,495 123,005 293,362 302,860 Less: Restructuring Charge 3,636 6,443 19,566 14,443 ---------- ------- --------- --------- 124,859 116,562 273,796 288,417 ========== ======= ========= =========