Exhibit 99.2
Kontoor
Brands, Inc. Announces Filing of Quarterly Report on Form 10-Q
| · | Reaffirms
full year 2019 outlook and three-year financial roadmap; |
| · | Reaffirms annual dividend plan of $2.24 per share; |
| · | Outlines
near-term progress of restructuring and cost savings actions; and, |
| · | Provides
select supplemental financial information for first quarter 2019 and full year ended
December 2018, by quarter. |
Greensboro, N.C. - June 20,
2019 – Kontoor Brands, Inc. (NYSE: KTB), a global lifestyle apparel company, with a portfolio led by two of the
world’s most iconic consumer brands, Wrangler® and Lee®, today announced that
it has filed its Form 10-Q with the Securities and Exchange Commission (SEC), reporting results for its first quarter ended March
30, 2019.
Kontoor Brands became a
publicly traded, independent company on May 23, 2019, following its planned separation from VF Corporation. The Form 10-Q
reflects carve-out accounting under U.S. generally accepted accounting principles (“GAAP”) for the newly created
company. The 10-Q can also be found on the Kontoor Brands website at: https://www.kontoorbrands.com/investors/sec-filings.
Additionally, Kontoor Brands
today reaffirmed its full year 2019 outlook and three-year financial roadmap and provided an update regarding the
company’s actions associated with its restructuring and cost savings program, both of which were announced via a VF
Corporation news release on April 26, 2019. The company also provided select supplemental financial information for first
quarter 2019 and full year ended December 2018, on a quarterly basis.
Restructuring and Cost
Savings Programs
Kontoor Brands’
previously announced restructuring and cost savings program is on track, targeting more than $50 million in total savings. We
believe Phase 1 actions will reduce costs by $20 million to $25 million on an annualized basis, which we expect will
accelerate in the second half of 2019 and be complete by the end of 2020. Phase 2, beginning in 2021, is expected to further
leverage improved global processes and systems generating additional savings.
Actions already completed include:
Exited unprofitable markets in select European and South American countries; streamlined and rightsized supply chain operations,
including closing three owned manufacturing facilities in Mexico; consolidated and relocated select facilities and operations;
and redesigned commercial organizations in the U.S. and Asia.
“Consistent with our previously
announced plans, we’ve taken significant actions in all regions of the world to simplify, stabilize and strengthen the company’s
global results and deliver improved profitability,” said Scott Baxter, President and Chief Executive Officer, Kontoor Brands.
Full Year 2019 Outlook
Kontoor Brands’ outlook
for fiscal year ended December 28, 2019, remains unchanged:
| • | Revenue is expected
to exceed $2.5 billion, reflecting a mid-single digit decline compared with full year
2018 adjusted revenue. The company’s 2019 revenue outlook includes an approximate
1 to 2 percentage point negative impact from foreign currency exchange rates. Excluding
the negative impact of foreign currency exchange rates, impacts of prior year customer bankruptcies,
and strategic business exits, full year 2019 revenue is expected to be relatively consistent
with full year 2018 adjusted revenue. The negative impacts of foreign currency, proactive
strategic actions and prior year customer bankruptcies should be more pronounced in the first half
of 2019, particularly in the second quarter. The benefits of strategic initiatives begin
to improve revenues in the second half of the year and beyond.
|
| • | Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization (“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. We anticipate
the impacts of strategic actions and prior year customer bankruptcies will weigh on our second quarter
performance. However, we do expect to see improved second-half performance based on early
benefits from restructuring and cost savings initiatives. As planned, inventory levels
are expected to remain elevated during the second and third quarters of the year, until
the full benefits of capacity adjustments associated with the closure of the manufacturing
facilities in Mexico are achieved.
|
| • | 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, and approximately $60
million of interest expense.
|
| • | As previously communicated in our Registration Statement on Form 10, Kontoor intends to
pay a quarterly dividend, in cash, at an annual rate initially equal to $2.24
per share of our common stock (representing a quarterly rate initially equal to $0.56
per share). The dividend declaration will be at the discretion of Kontoor Brands’ Board of Directors and will depend
upon many factors, including our financial condition, earnings, cash flows, capital requirements
of our business, covenants associated with our debt obligations, legal requirements,
regulatory constraints, industry practice and any other factors the Board of Directors
deems relevant. |
2020 to 2021 Financial
Roadmap Reaffirmed
| • | Revenue is expected
to increase at a low-single digit compound annual growth rate (CAGR) over the time 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. |
“Our financial model is
based on durable and consistent free cash flow and a commitment to improved operational performance,” Baxter said. “An
essential element of that model is a compelling dividend yield, supported by a 60 percent target-payout ratio. Our approach to
business success is and will remain fully aligned with our sharp focus on Total Shareholder Return.”
Non-GAAP Financial Measures
Constant Currency - This release
refers to “reported” amounts in accordance with U.S. GAAP,
which include translation and transactional impacts from changes in foreign currency exchange rates. This release also refers
to “constant currency” amounts, which exclude the translation impact of changes in foreign currency exchange rates.
Adjusted Amounts - This release
refers to adjusted amounts that exclude the impact of restructuring and separations costs, changes in our business model and other
adjustments.
Reconciliations of these non-GAAP
measures to the most comparable GAAP measures are presented in the supplemental financial information included with this release
that identifies and quantifies all reconciling adjustments
and provides management’s view of why this information is useful
to investors. Such non-GAAP measures should be viewed in addition to, and not as an alternative for, reported results under
GAAP. The non-GAAP measures used by Kontoor Brands in this press release may be different from the measures used by other companies.
About Kontoor Brands
Kontoor Brands, Inc. (NYSE: KTB)
is a global lifestyle apparel company, with a portfolio led by some of the world’s most iconic denim brands: Wrangler®,
Lee® and Rock & Republic®. Kontoor designs, manufactures and distributes superior
high-quality products that look good and fit right, giving people around the world the freedom and confidence to express themselves.
Kontoor Brands is focused on leveraging its global platform, strategic sourcing model and best-in-class supply chain to drive
brand growth and deliver long-term value for its stakeholders.
For more information about Kontoor
Brands, please visit www.KontoorBrands.com.
Forward-Looking Statements
Certain statements included in
this release and attachments are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking
statements are made based on our expectations and beliefs concerning future events impacting Kontoor Brands and therefore involve
several risks and uncertainties. You can identify these statements by the fact that they use words such as “will,”
“anticipate,” “estimate,” “expect,” “should,” and “may” and other
words and terms of similar meaning or use of future dates. We caution that forward-looking statements are not guarantees and that
actual results could differ materially from those expressed or implied in the forward-looking statements. Potential risks and
uncertainties that could cause the actual results of operations or financial condition of Kontoor to differ materially from those
expressed or implied by forward-looking statements in this release include, but are not limited to: risks associated with Kontoor
Brands’ spin-off from VF Corporation, including the risk of disruption to Kontoor’s business in connection with the
spin-off and that Kontoor could lose revenue as a result of such disruption; the risk that Kontoor does not realize all of the
expected benefits of the spin-off; the risk that the spin-off will not be tax-free for U.S. federal income tax purposes; and the
risk that there will be a loss of synergies from separating the businesses that could negatively impact the balance sheet, profit
margins or earnings of Kontoor. Other risks for Kontoor includes foreign currency fluctuations; the level of consumer demand for
apparel; disruption to distribution systems; reliance on a small number of large customers; the financial strength of customers;
fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the
global capital and credit markets; response to changing fashion trends, evolving consumer preferences and changing patterns of
consumer behavior, intense competition from online retailers, manufacturing and product innovation; increasing pressure on margins;
ability to implement their business strategy; ability to grow their international and direct-to-consumer businesses; each company
and its vendors’ ability to maintain the strength and security of information technology systems; the risk that facilities
and systems and those of third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches
and data or financial loss; ability to properly collect, use, manage and secure consumer and employee data; stability of manufacturing
facilities and foreign suppliers; continued use by suppliers of ethical business practices; ability to accurately forecast demand
for products; continuity of members of management; ability to protect trademarks and other intellectual property rights; possible
goodwill and other asset impairment; maintenance by licensees and distributors of the value of Kontoor’s brands; ability
to execute and integrate acquisitions; changes in tax laws and liabilities; legal, regulatory, political and economic risks; the
risk of economic uncertainty associated with the pending exit of the United Kingdom from the European Union ("Brexit")
or any other similar referendums that may be held; and adverse or unexpected weather conditions. More information on potential
factors that could affect Kontoor’s financial results is included from time to time in Kontoor’s public reports filed
with the SEC and Kontoor Brands’ Registration Statement on Form 10 also filed with the SEC.
KONTOOR
BRANDS, INC.
Condensed
Combined Statements of Income
(Unaudited)
(In thousands)
| |
|
Three
Months Ended March |
|
% |
|
| |
|
2019 |
|
2018 |
|
Change |
|
| Net revenues |
|
$ |
648,344 |
|
|
$ |
669,663 |
|
|
(3)% |
|
| Costs and operating expenses |
|
|
|
|
|
|
|
| Cost of goods sold |
|
401,025 |
|
|
382,421 |
|
|
5% |
|
| Selling, general and administrative expenses |
|
222,124 |
|
|
194,834 |
|
|
14% |
|
| Total costs and operating expenses |
|
623,149 |
|
|
577,255 |
|
|
8% |
|
| Operating income |
|
25,195 |
|
|
92,408 |
|
|
(73)% |
|
| Related party interest income, net |
|
2,339 |
|
|
1,651 |
|
|
42% |
|
| Other interest income, net |
|
1,325 |
|
|
917 |
|
|
44% |
|
| Other expense, net |
|
(971 |
) |
|
(1,197 |
) |
|
(19)% |
|
| Income before income taxes |
|
27,888 |
|
|
93,779 |
|
|
(70)% |
|
| Income taxes |
|
12,475 |
|
|
14,083 |
|
|
(11)% |
|
| Net income |
|
$ |
15,413 |
|
|
$ |
79,696 |
|
|
(81)% |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
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 March 2019 and March 2018 relate
to the 13-week fiscal periods ended March 30, 2019 and March 31, 2018, respectively. References to December 2018 relate
to the balance sheet as of December 29, 2018. Amounts herein may not recalculate due to the use of unrounded numbers.
|
| |
|
|
|
|
|
|
|
|
|
|
|
KONTOOR
BRANDS, INC.
Condensed
Combined Balance Sheets
(Unaudited)
(In thousands)
| |
|
March
2019 |
|
December
2018 |
|
March
2018 |
| ASSETS |
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
| Cash and equivalents |
|
$ |
102,945 |
|
|
$ |
96,776 |
|
|
$ |
88,234 |
|
| Accounts receivable |
|
299,328 |
|
|
252,966 |
|
|
318,480 |
|
| Due from related parties, current |
|
291,127 |
|
|
547,690 |
|
|
274,368 |
|
| Related party notes receivable |
|
517,940 |
|
|
517,940 |
|
|
546,740 |
|
| Inventories |
|
519,006 |
|
|
473,812 |
|
|
499,849 |
|
| Other current assets |
|
50,671 |
|
|
52,014 |
|
|
51,783 |
|
| Total current assets |
|
1,781,017 |
|
|
1,941,198 |
|
|
1,779,454 |
|
| Due from related parties, noncurrent |
|
370 |
|
|
611 |
|
|
1,576 |
|
| Property, plant and equipment, net |
|
138,972 |
|
|
138,449 |
|
|
142,958 |
|
| Operating lease assets |
|
77,305 |
|
|
— |
|
|
— |
|
| Intangible assets, net |
|
51,913 |
|
|
53,059 |
|
|
56,638 |
|
| Goodwill |
|
213,623 |
|
|
214,516 |
|
|
220,233 |
|
| Other assets |
|
122,210 |
|
|
110,632 |
|
|
125,106 |
|
| TOTAL ASSETS |
|
$ |
2,385,410 |
|
|
$ |
2,458,465 |
|
|
$ |
2,325,965 |
|
| LIABILITIES AND EQUITY |
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
| Short-term borrowings |
|
$ |
8,368 |
|
|
$ |
3,215 |
|
|
$ |
12,103 |
|
| Accounts payable |
|
147,403 |
|
|
134,129 |
|
|
131,667 |
|
| Due to related parties, current |
|
3,865 |
|
|
16,140 |
|
|
60,424 |
|
| Related party notes payable |
|
241,867 |
|
|
269,112 |
|
|
269,112 |
|
| Accrued liabilities |
|
206,517 |
|
|
194,228 |
|
|
171,501 |
|
| Operating lease liabilities, current |
|
29,156 |
|
|
— |
|
|
— |
|
| Total current liabilities |
|
637,176 |
|
|
616,824 |
|
|
644,807 |
|
| Operating lease liabilities, noncurrent |
|
51,533 |
|
|
— |
|
|
|
— |
|
| Other liabilities |
|
117,719 |
|
|
118,189 |
|
|
117,376 |
|
| Commitments and contingencies |
|
|
|
|
|
|
| Total liabilities |
|
806,428 |
|
|
735,013 |
|
|
762,183 |
|
| Equity |
|
|
|
|
|
|
| Parent company investment |
|
1,723,406 |
|
|
1,868,634 |
|
|
1,676,563 |
|
| Accumulated other comprehensive income (loss) |
|
(144,424 |
) |
|
(145,182 |
) |
|
(112,781 |
) |
| Total equity |
|
1,578,982 |
|
|
1,723,452 |
|
|
1,563,782 |
|
| TOTAL LIABILITIES AND EQUITY |
|
$ |
2,385,410 |
|
|
$ |
2,458,465 |
|
|
$ |
2,325,965 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
KONTOOR
BRANDS, INC.
Condensed
Combined Statements of Cash Flows
(Unaudited)
(In thousands)
| |
|
Three
Months Ended March |
| |
|
2019 |
|
2018 |
| OPERATING ACTIVITIES |
|
|
|
|
| Net
income |
|
$ |
15,413 |
|
|
$ |
79,696 |
|
| Depreciation and
amortization |
|
7,703 |
|
|
8,310 |
|
| Stock-based compensation |
|
7,685 |
|
|
3,740 |
|
| Provision for
doubtful accounts |
|
2,730 |
|
|
(10 |
) |
| Other adjustments |
|
172,956 |
|
|
(206,101 |
) |
| Cash provided
(used) by operating activities |
|
206,487 |
|
|
(114,365 |
) |
| INVESTING ACTIVITIES |
|
|
|
|
| Capital expenditures |
|
(5,300 |
) |
|
(6,528 |
) |
| Repayments received
from related party notes receivable |
|
— |
|
|
1,000 |
|
| Other, net |
|
(20 |
) |
|
6,428 |
|
| Cash (used) provided
by investing activities |
|
(5,320 |
) |
|
900 |
|
| FINANCING ACTIVITIES |
|
|
|
|
| Net increase in
short-term borrowings |
|
5,081 |
|
|
7,565 |
|
| Repayments of
related party notes payable |
|
(27,245 |
) |
|
— |
|
| Net transfers
(to) from Parent |
|
(173,485 |
) |
|
109,705 |
|
| Cash (used) provided
by financing activities |
|
(195,649 |
) |
|
117,270 |
|
| Effect of foreign
currency rate changes on cash and cash equivalents |
|
651 |
|
|
3,618 |
|
| Net change
in cash and cash equivalents |
|
6,169 |
|
|
7,423 |
|
| Cash and cash
equivalents – beginning of year |
|
96,776 |
|
|
80,811 |
|
| Cash and cash
equivalents – end of period |
|
$ |
102,945 |
|
|
$ |
88,234 |
|
KONTOOR
BRANDS, INC.
Supplemental
Financial Information
Reportable
Segment Information
(Unaudited)
(Dollars
in thousands)
| |
|
|
|
|
|
% Change
Constant
Currency(a) |
| |
|
|
|
|
|
| |
|
Three Months Ended March |
|
% Change |
|
| |
|
2019 |
|
2018 |
|
|
|
|
| Segment revenues: |
|
|
|
|
|
|
|
|
| Wrangler |
|
$ |
369,935 |
|
|
$ |
364,983 |
|
|
1% |
|
4% |
| Lee |
|
241,531 |
|
|
261,961 |
|
|
(8)% |
|
(4)% |
| Other (b) |
|
36,878 |
|
|
42,719 |
|
|
(14)% |
|
(14)% |
| Total segment revenues |
|
$ |
648,344 |
|
|
$ |
669,663 |
|
|
(3)% |
|
* |
| Segment profit: |
|
|
|
|
|
|
|
|
| Wrangler |
|
$ |
23,665 |
|
|
$ |
62,946 |
|
|
(62)% |
|
(81)% |
| Lee |
|
17,633 |
|
|
35,989 |
|
|
(51)% |
|
(52)% |
| Other (b) |
|
(3,085 |
) |
|
(1,749 |
) |
|
(76)% |
|
(76)% |
| Total segment profit |
|
38,213 |
|
|
97,186 |
|
|
(61)% |
|
(73)% |
| Corporate and other expenses |
|
(13,989 |
) |
|
(5,975 |
) |
|
134% |
|
134% |
| Related party interest income, net |
|
2,339 |
|
|
1,651 |
|
|
42% |
|
42% |
| Other interest income, net |
|
1,325 |
|
|
917 |
|
|
44% |
|
51% |
| Income before income taxes |
|
$ |
27,888 |
|
|
$ |
93,779 |
|
|
(70)% |
|
(83)% |
| |
|
|
|
|
|
|
|
|
| |
| (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 |
KONTOOR
BRANDS, INC.
Supplemental
Financial Information
Reportable
Segment Information – Constant Currency Basis (Non-GAAP)
(Unaudited)
(Dollars
in thousands)
| |
|
Three
Months Ended March 2019 |
| |
|
As
Reported |
|
Adjust
for Foreign |
|
|
| |
|
under
GAAP |
|
Currency
Exchange |
|
Constant
Currency |
| Segment revenues: |
|
|
|
|
|
|
| Wrangler |
|
$ |
369,935 |
|
|
$ |
8,972 |
|
|
$ |
378,907 |
|
| Lee |
|
241,531 |
|
|
9,511 |
|
|
251,042 |
|
| Other |
|
36,878 |
|
|
1 |
|
|
36,879 |
|
| Total segment
revenues |
|
$ |
648,344 |
|
|
$ |
18,484 |
|
|
$ |
666,828 |
|
| Segment profit: |
|
|
|
|
|
|
| Wrangler |
|
$ |
23,665 |
|
|
$ |
(11,391 |
) |
|
$ |
12,274 |
|
| Lee |
|
17,633 |
|
|
(304 |
) |
|
17,329 |
|
| Other |
|
(3,085 |
) |
|
(1 |
) |
|
(3,086 |
) |
| Total segment
profit |
|
38,213 |
|
|
(11,696 |
) |
|
26,517 |
|
| Corporate and
other expenses |
|
(13,989 |
) |
|
— |
|
|
(13,989 |
) |
| Related party
interest income, net |
|
2,339 |
|
|
— |
|
|
2,339 |
|
| Other interest
income, net |
|
1,325 |
|
|
59 |
|
|
1,384 |
|
| Income before
income taxes |
|
$ |
27,888 |
|
|
$ |
(11,637 |
) |
|
$ |
16,251 |
|
| |
|
|
|
|
|
|
| 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. |
KONTOOR
BRANDS, INC.
Condensed
Combined Statements of Income by Quarter
(Unaudited)
(In thousands)
| |
|
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 |
|
|
187,835 |
|
|
188,411 |
|
|
210,441 |
|
|
781,521 |
|
| Total costs and operating expenses |
|
577,255 |
|
|
584,620 |
|
|
612,464 |
|
|
656,617 |
|
|
2,430,956 |
|
| Operating income |
|
92,408 |
|
|
79,236 |
|
|
91,782 |
|
|
69,616 |
|
|
333,042 |
|
| Related party interest income, net |
|
1,651 |
|
|
1,660 |
|
|
2,104 |
|
|
2,323 |
|
|
7,738 |
|
| Other interest income, net |
|
917 |
|
|
970 |
|
|
1,308 |
|
|
1,372 |
|
|
4,567 |
|
| Other expense, net |
|
(1,197 |
) |
|
(1,241 |
) |
|
(2,084 |
) |
|
(746 |
) |
|
(5,269 |
) |
| Income before income taxes |
|
93,779 |
|
|
80,625 |
|
|
93,110 |
|
|
72,565 |
|
|
340,078 |
|
| Income taxes |
|
14,083 |
|
|
17,392 |
|
|
24,867 |
|
|
20,663 |
|
|
77,005 |
|
| Net income |
|
$ |
79,696 |
|
|
$ |
63,233 |
|
|
$ |
68,243 |
|
|
$ |
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 has
presented its 2018 unaudited condensed combined statements of income by quarter in order to provide investors with comparable
financial information. Amounts herein may not recalculate due to the use of unrounded numbers.
|
| |
KONTOOR
BRANDS, INC.
Supplemental
Financial Information
Reconciliation
of Adjusted Net Revenues, EBIT, EBITDA and Adjusted EBITDA by Quarter (Non-GAAP)
(Unaudited)
(In thousands)
| |
2019 |
|
2018 |
|
|
| |
March |
|
March |
|
June |
|
September |
|
December |
|
Full
Year |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net revenues as reported
under GAAP |
$ |
648,344 |
|
|
$ |
669,663 |
|
|
$ |
663,856 |
|
|
$ |
704,246 |
|
|
$ |
726,233 |
|
|
$ |
2,763,998 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Business model changes(a) |
(18,416 |
) |
|
(21,694 |
) |
|
(21,027 |
) |
|
(22,248 |
) |
|
(16,363 |
) |
|
(81,332 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Adjusted net revenues |
$ |
629,928 |
|
|
$ |
647,969 |
|
|
$ |
642,829 |
|
|
$ |
681,998 |
|
|
$ |
709,870 |
|
|
$ |
2,682,666 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Net income as reported under GAAP |
$ |
15,413 |
|
|
$ |
79,696 |
|
|
$ |
63,233 |
|
|
$ |
68,243 |
|
|
$ |
51,902 |
|
|
$ |
263,073 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Income taxes |
12,475 |
|
|
14,083 |
|
|
17,392 |
|
|
24,867 |
|
|
20,663 |
|
|
77,005 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Related party interest income, net |
(2,339 |
) |
|
(1,651 |
) |
|
(1,660 |
) |
|
(2,104 |
) |
|
(2,323 |
) |
|
(7,738 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Other interest income, net |
(1,325 |
) |
|
(917 |
) |
|
(970 |
) |
|
(1,308 |
) |
|
(1,372 |
) |
|
(4,567 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| EBIT |
24,224 |
|
|
91,211 |
|
|
77,994 |
|
|
89,698 |
|
|
68,870 |
|
|
327,773 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
7,703 |
|
|
8,310 |
|
|
7,780 |
|
|
7,581 |
|
|
7,361 |
|
|
31,032 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| EBITDA |
31,927 |
|
|
99,521 |
|
|
85,774 |
|
|
97,279 |
|
|
76,231 |
|
|
358,805 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Restructuring and separation costs(b) |
36,580 |
|
|
1,936 |
|
|
2,017 |
|
|
1,216 |
|
|
23,446 |
|
|
28,615 |
|
| Business model changes(a) |
3,201 |
|
|
(57 |
) |
|
1,449 |
|
|
2,472 |
|
|
2,348 |
|
|
6,212 |
|
| Other adjustments(c) |
4,192 |
|
|
1,793 |
|
|
1,774 |
|
|
(1,402 |
) |
|
(10,188 |
) |
|
(8,023 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA |
$ |
75,900 |
|
|
$ |
103,193 |
|
|
$ |
91,014 |
|
|
$ |
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, 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 has presented its 2018 financial information by quarter in order to provide investors with comparable financial
information. Amounts herein may not recalculate due to the use of unrounded numbers.
|
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 lenders. 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.
|
(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.
|
| (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. |
| |
| |
Contacts:
Investors:
Eric Tracy, (336) 332-5205
Senior Director, Investor Relations
Eric.Tracy@kontoorbrands.com
or
Media:
Vanessa McCutchen, (336) 332-5612
Senior Director, Corporate Communications
Vanessa.McCutchen@kontoorbrands.com
