-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WrxR5FJgAOr7Oz2Qin9TzlonJGSmGHQk6ibubKe3Gu8Tsdcp8zbc+vn/l0zc6cXr LE486qfOYDj6L2/eYCb8Ow== 0000898822-97-000723.txt : 19970806 0000898822-97-000723.hdr.sgml : 19970806 ACCESSION NUMBER: 0000898822-97-000723 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970805 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILFIGER TOMMY CORP CENTRAL INDEX KEY: 0000888747 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 000000000 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11226 FILM NUMBER: 97651865 BUSINESS ADDRESS: STREET 1: 6/F PRECIOUS INDUSTRIAL CENTRE STREET 2: 18 CHEUNG YUE ST CITY: CHEUNG SHA WAN KOWLO STATE: K3 BUSINESS PHONE: 2128408888 MAIL ADDRESS: STREET 1: 25 WEST 39TH STREET CITY: NEW YORK STATE: NY ZIP: 10018 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 COMMISSION FILE NUMBER 1-11226 TOMMY HILFIGER CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) BRITISH VIRGIN ISLANDS NOT APPLICABLE (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.) OF INCORPORATION OR ORGANIZATION) 6/F, PRECIOUS INDUSTRIAL CENTRE, 18 CHEUNG YUE STREET, CHEUNG SHA WAN, KOWLOON, HONG KONG (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 852-2745-7798 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ORDINARY SHARES, $0.01 PAR VALUE PER SHARE, OUTSTANDING AS OF JUNE 30, 1997: 37,339,054 TOMMY HILFIGER CORPORATION INDEX TO FORM 10-Q June 30, 1997 PART I - FINANCIAL INFORMATION Page Item 1 Financial Statements Condensed Consolidated Balance Sheets as of June 30, 1997 and March 31, 1997...................................... 3 Condensed Consolidated Statements of Operations for the three months ended June 30, 1997 and 1996............... 4 Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 1997 and 1996............... 5 Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended June 30, 1997 and the year ended March 31, 1997......... 6 Notes to Condensed Consolidated Financial Statements.... 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 8 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K........................ 11 Signatures........................................................ 12 2 PART I ITEM 1 - FINANCIAL STATEMENTS TOMMY HILFIGER CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) AS OF JUNE 30, AS OF MARCH 31, 1997 1997 ASSETS Current assets Cash and cash equivalents.................. $87,871 $109,908 Accounts receivable........................ 94,116 79,984 Inventories................................ 155,414 123,847 Investments................................ 20,000 -- Other current assets....................... 18,030 18,614 ------ ------ Total current assets................... 375,431 332,353 Property and equipment, at cost, less accumulated depreciation and amortization.............. 125,707 121,540 Other assets................................... 7,953 9,192 Total Assets........................... $509,091 $463,085 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short-term borrowings...................... $33,207 $5,980 Accounts payable........................... 6,033 5,996 Accrued expenses and other current liabilities.............................. 47,813 49,710 ------ ------ Total current liabilities.............. 87,053 61,686 Other liabilities.............................. 2,601 2,425 Long-term debt................................. 1,442 1,510 Shareholders' equity Preference Shares, $0.01 par value-shares authorized 5,000,000; none issued........ -- -- Ordinary Shares, $0.01 par value-shares authorized 50,000,000, issued and outstanding 37,339,054 and 37,249,529, respectively.. 373 372 Capital in excess of par value............. 168,060 165,032 Retained earnings.......................... 249,522 232,015 Cumulative translation adjustment.......... 40 45 -------- ------- Total shareholders' equity............. 417,995 397,464 ------- ------- Commitments and contingencies Total Liabilities and Shareholders' Equity............................... $509,091 $463,085 ======== ======== See Accompanying Notes to Condensed Consolidated Financial Statements 3 TOMMY HILFIGER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 1997 1996 Net revenue................................... $173,735 $124,129 Cost of goods sold............................ 92,032 66,010 --------- -------- Gross profit.................................. 81,703 58,119 Selling, general and administrative expenses.. 56,644 40,388 -------- -------- Income from operations........................ 25,059 17,731 Interest expense ............................. 179 203 Interest income .............................. 1,749 1,588 -------- -------- Income before income taxes.................... 26,629 19,116 Provision for income taxes ................... 9,122 6,538 -------- -------- Net income.................................... $ 17,507 $ 12,578 ======== ======== Earnings per share: Earnings per share and share equivalents...... $ .46 $ .34 ======== ======== Weighted average shares and share equivalents outstanding................................. 37,880 37,500 ======== ======== See Accompanying Notes to Condensed Consolidated Financial Statements 4 TOMMY HILFIGER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 1997 1996 Cash flows from operating activities Net income................................... $17,507 $12,578 Adjustments to reconcile net income to cash from operating activities Depreciation and amortization............ 7,128 4,347 Changes in operating assets and liabilities Decrease (increase) in assets Accounts receivable..................... (14,132) 11,300 Inventories............................. (31,567) (21,590) Other assets............................ 1,680 1,956 Increase (decrease) in liabilities Accounts payable........................ 37 2,972 Accrued expenses and other liabilities.......................... (1,721) (11,589) -------- -------- Net cash used in investing activities... (21,068) (26) -------- -------- Cash flows from investing activities Purchases of property and equipment.......... (11,152) (36,772) Purchases of investments..................... (20,000) -- ------- ------- Net cash used in investing activities... (31,152) (36,772) ------- ------- Cash flows from financing activities Proceeds from the exercise of employee stock options..................... 2,441 1,551 Tax benefit from exercise of stock options... 588 2,426 Short-term bank borrowings................... 27,227 2,206 Payments on long-term debt................... (68) (71) Other ....................................... (5) 1 ------ ----- Net Cash provided by financing activities........................... 30,183 6,113 ------ ----- Net decrease in cash................... (22,037) (30,685) Cash and cash equivalents, beginning of period...................................... 109,908 127,743 ------- ------- Cash and cash equivalents, end of period...... $87,871 $97,058 ======= ======= See Accompanying Notes to Condensed Consolidated Financial Statements 5 TOMMY HILFIGER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (IN THOUSANDS)
CAPITAL IN EXCESS CUMULATIVE TOTAL ORDINARY OF PAR RETAINED TRANSLATION SHAREHOLDERS' SHARES VALUE EARNINGS ADJUSTMENT EQUITY Balance, March 31, 1996 $369 $155,294 $145,633 $42 $301,338 Net income......................... 86,382 86,382 Exercise of employee stock options.......................... 3 3,926 3,929 Tax benefits from exercise of stock options.......................... 5,812 5,812 Translation adjustment............. 3 3 ---- -------- -------- --- -------- Balance, March 31, 1997 372 165,032 232,015 45 397,464 Net income......................... 17,507 17,507 Exercise of employee stock options.......................... 1 2,440 2,441 Tax benefits from exercise of stock options.......................... 588 588 Translation adjustment............. (5) (5) ---- -------- -------- --- -------- Balance, June 30, 1997 (Unaudited)... $373 $168,060 $249,522 $40 $417,995 ==== ======== ======== === ========
See Accompanying Notes to Condensed Consolidated Financial Statements 6 TOMMY HILFIGER CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared by Tommy Hilfiger Corporation (the "Company") in a manner consistent with that used in the preparation of the consolidated financial statements included in the Company's 1997 Annual Report as filed with the Securities and Exchange Commission on Form 10-K (the "Form 10-K"). Certain items contained in these statements are based on estimates. In the opinion of management, the accompanying financial statements reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the financial position and results of operations and cash flows for the periods presented. All significant intercompany accounts and transactions have been eliminated. Operating results for the three month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 1998. These unaudited financial statements should be read in conjunction with the financial statements included in the Form 10-K. The financial statements as of and for the three month periods ended June 30, 1997 and 1996 are unaudited. The Condensed Consolidated Balance Sheet as of March 31, 1997, as presented, has been prepared from the Consolidated Balance Sheet as of March 31, 1997 included in the Company's Form 10-K. NOTE 2 - INVENTORIES Inventories are summarized as follows: June 30, 1997 March 31, 1997 Finished Goods................. $153,423,000 $122,237,000 Raw Materials.................. 1,991,000 1,610,000 ------------ ------------ $155,414,000 $123,847,000 ============ ============ 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table sets forth, for the periods indicated, the percentage relationship to net revenue of certain items in the Company's Condensed Consolidated Statements of Operations: THREE MONTHS ENDED JUNE 30, 1997 1996 Net revenue............................... 100.0% 100.0% Cost of goods sold........................ 53.0 53.2 ----- ----- Gross profit.............................. 47.0 46.8 Selling, general and administrative expenses................................ 32.6 32.5 ---- ---- Income from operations.................... 14.4 14.3 Interest expense.......................... 0.1 0.2 Investment income........................ 1.0 1.3 ---- ---- Income before income taxes................ 15.3 15.4 Provision for income taxes................ 5.2 5.3 ---- ---- Net income................................ 10.1 10.1 ==== ==== Three months ended June 30, 1997 compared to three months ended June 30, 1996 The Company's net income increased 39.2% to $17,507,000, or $.46 per share, in the quarter ended June 30, 1997 from $12,578,000, or $.34 per share, in the corresponding quarter last year. Net revenue increased to $173,735,000 in the first quarter of fiscal 1998 from $124,129,000 in the first quarter of fiscal 1997, an improvement of $49,606,000, or 40.0%. This increase is a result of improvements in each of the Company's wholesale, retail, and licensing and buying agency divisions, as outlined below. Wholesale net revenue increased to $125,444,000 in the first quarter of fiscal 1998 from $93,945,000 in the first quarter of fiscal 1997, an improvement of 33.5%. This improvement consists of a menswear wholesale sales increase of 27.4% and a boyswear wholesale sales increase of 75.3%. During the quarter ended June 30, 1997, menswear wholesale sales were $104,281,000 while boyswear wholesale sales were $21,163,000. In the corresponding quarter last year, menswear wholesale sales were $81,874,000 while boyswear wholesale sales totaled $12,071,000. Substantially all of theses increases were due to increases in volume which resulted primarily from increased sales to existing customers. The increased sales to existing customers were partially the result of the Company's in-store shop and fixtured area expansion program, whereby certain of the Company's customers have increased the amount of square footage where the Company's products are featured. Net revenue in the Company's retail division increased 45.5% to $36,153,000 during the first quarter of fiscal 1998 from $24,843,000 in the first quarter of fiscal 1997. The increase in the number of stores as well as an increase in sales at existing stores contributed to the improved revenue. Of the total increase of $11,310,000, $5,367,000 was attributable to retail stores opened since June 30, 1996. A total of 57 stores were open as of June 30, 1997 compared to 49 stores as of June 30, 1996. Revenue from royalties and buying agency commissions increased 127.3% to $12,138,000 in the first quarter of fiscal 1998 from $5,341,000 in the corresponding quarter of fiscal 1997. This increase reflects the incremental revenue associated with newly licensed products and a general increase in sales of existing licensed products and buying agency services. Of this increase, approximately 36.5% was due to products introduced under licenses entered into since June 30, 1996. 8 Gross profit as a percentage of net revenue increased to 47.0% in the first quarter of fiscal 1998 from 46.8% in the first quarter of fiscal 1997. The increase was attributable to the increases in retail operations and royalties and buying agency commissions, each of which had higher percentage revenue increases, and which produce higher margins, than wholesale operations, partially offset by lower margins in men's wholesale operations. Selling, general and administrative expenses increased to $56,644,000 in the first quarter of fiscal 1998 from $40,388,000 in the corresponding period of fiscal 1997. The overall increase is primarily due to increased volume-related expenses of the Company's wholesale and retail operations to support the higher revenue. In addition, depreciation and amortization increased due to the greater number of in-store shops and marketing and advertising expense increased to promote brand awareness. As a percentage of net revenue, selling, general and administrative expenses increased slightly to 32.6% in fiscal 1998 from 32.5% in fiscal 1997. The provision for income taxes increased to 34.3% of income before taxes in the first quarter of fiscal 1998 from 34.2% in the corresponding period of fiscal 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's primary funding requirements are to finance working capital and the continued growth of its business. Primarily, this includes the purchase of inventory in anticipation of increased sales of the wholesale and retail divisions as well as capital expenditures related to the expansion of the menswear in-store shop and boyswear fixtured area programs and additional retail stores. The Company's sources of liquidity are cash on hand, cash from operations and available credit. At June 30, 1997, the Company had approximately $87,871,000 of cash and cash equivalents and $20,000,000 of short-term investments compared to a year-end balance of $109,908,000 of cash and cash equivalents. This represented an overall decrease of $2,037,000 due to cash used in operating and investing activities, partially offset by cash provided by financing activities. A detailed analysis of the changes in cash and cash equivalents is presented in the Consolidated Statements of Cash Flows. Net cash used in operating activities during the first quarter of fiscal 1998 was $21,068,000, an increase of $21,042,000 over the June 30, 1996 amount of $26,000. This amount is primarily made up of an increase in working capital offset, in part, by cash generated from net earnings. The increase in working capital is principally due to a higher inventory level and an increase in accounts receivable. The Company's inventories increased 25.5% to $155,414,000 at June 30, 1997 from $123,847,000 at March 31, 1997. Higher inventory levels at June 30, 1997 were attributable to a planned build-up of inventory in anticipation of the fall and holiday seasons of fiscal 1997 and increased retail division inventory due to the greater number of stores. Capital expenditures were $11,152,000 for the three months ended June 30, 1997, compared with $36,772,000 for the three months ended June 30, 1996. Significant capital expenditures in the first quarter of fiscal 1998 include additions related to the Company's first flagship store in Beverly Hills and the expansion of certain of the Company's in-store shops. The fiscal 1997 amount includes the purchase of the property which houses the Company's executive offices along with its primary sales, marketing and licensing offices and its main licensees' showrooms for approximately $25,875,000. In July 1996, the Company entered into an amended and restated revolving credit agreement (the "Credit Agreement") effective April 1, 1996. The Credit Agreement, which expires in June 1999, provides for direct borrowings, bankers acceptances and letters of credit of amounts ranging from $100,000,000 in fiscal 1997 to $150,000,000 in fiscal 1999. Available borrowings under the Credit Agreement are subject to the timed increase of availability under the Credit Agreement and are based upon eligible accounts receivable, inventory and open letters of credit. As of June 30, 1997, $125,000,000 was available for utilization under the Credit Agreement. Obligations under the Credit Agreement are collateralized by substantially all the assets of the Company's U.S. operations. Direct borrowings under the Credit Agreement, which were limited to $75,000,000 as of June 30, 1997, accrue interest at varying interest rates. At June 30, 1997, total short-term borrowings of $33,207,000 consisted of $7,400,000 of borrowings under the credit agreement, open letters of credit for inventory purchased of $25,532,000 and the current portion of mortgage debt payable of $275,000. Additionally, at June 30, 1997, Tommy Hilfiger U.S.A., Inc. ("TH USA"), a wholly owned subsidiary of the Company, was contingently liable for unexpired bank letters of credit of $57,746,000 related to commitments of TH USA to suppliers for the purchase of inventories. 9 The Credit Agreement contains various covenants and, among other matters, includes certain restrictions upon capital expenditures, investments, indebtedness, loans and advances and transactions with related parties. In addition, the Credit Agreement prohibits certain of the Company's operating subsidiaries which are borrowers or guarantors under the Credit Agreement from paying any dividends. Because Tommy Hilfiger Corporation is a holding company, dividends or other advances from its subsidiaries will be required to fund any cash dividends to holders of Ordinary Shares. Such dividend restrictions are not expected to have an adverse impact on the Company. The Credit Agreement also requires the maintenance of minimum tangible net worth and interest coverage ratios. The Company was in compliance with all covenants under the Credit Agreement as of, and for the period ended, June 30, 1997. Cash requirements in fiscal 1998 will primarily include capital expenditures relating to the in-store shop and fixtured area programs and the opening of additional retail stores, as well as flagship stores. The Company believes the amount of capital expenditures in fiscal 1998 will be consistent with fiscal 1997 and the Company intends to fund its cash requirements for fiscal 1998 and future years from available cash balances, internally generated funds and borrowings available under the Credit Agreement. The Company believes that these resources will be sufficient to fund its cash requirements for such periods. SAFE HARBOR STATEMENT Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. In addition to the historical information contained herein, there are matters discussed which are hereby identified as "forward-looking statements" for purposes of the Safe Harbor Statement. These forward-looking statements involve risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices. 10 PART II ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11. Computation of Net Income Per Ordinary Share 27. Financial Data Schedule (b) Reports on Form 8-K The Registrant did not file any Current Reports on Form 8-K during the three months ended June 30, 1997. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: Tommy Hilfiger Corporation Date: August 5, 1997 By: /s/ Joel J. Horowitz Joel J. Horowitz Chief Executive Officer and President Tommy Hilfiger Corporation Date: August 5, 1997 By: /s/ Steven A. Sorrillo Steven A. Sorrillo Principal Accounting Officer Tommy Hilfiger Corporation 12 EXHIBIT INDEX Exhibit Page Number Description Number 11. Computation of Net Income Per Ordinary Share. 14 27. Financial Data Schedule 15 13 EX-11 2 EXHIBIT 11 - COMPUTATION OF NET INCOME EXHIBIT 11 TOMMY HILFIGER CORPORATION COMPUTATION OF NET INCOME PER ORDINARY SHARE (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED JUNE 30, 1997 1996 FINANCIAL STATEMENT PRESENTATION PRIMARY Average shares outstanding 37,262 36,911 Net effect of dilutive stock options based on the treasury stock method using average market price 618 589 ------- ------- Total 37,880 37,500 ======= ======= Net Income $17,507 $12,578 ======= ======= Per share amount $ .46 $ .34 ======= ======= FULLY DILUTED Average shares outstanding 37,262 36,911 Net effect of dilutive stock options based on the treasury stock method using the greater of the average or ending market price 618 1,079 ------- ------- Total 37,880 37,990 ======= ======= Net Income $17,507 $12,578 ======= ======= Per share amount $ .46 $ .33 ======= ======= 14 EX-27 3 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Tommy Hilfiger Corporation Condensed Consolidated Balance Sheet as of June 30, 1997 and Condensed Consolidated Statement of Operations for the three months then ended and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS MAR-31-1998 JUN-30-1997 87,871 0 94,116 0 155,414 375,431 125,707 0 509,091 87,053 1,442 0 0 373 417,622 417,995 0 173,735 0 92,032 58,572 0 0 26,629 9,122 0 0 0 0 17,507 46 0
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