Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Kate Spade & Co | kate-20160803x8k.htm |
KATE SPADE & COMPANY REPORTS SECOND QUARTER 2016 AND FIRST HALF 2016 RESULTS
|
· |
Direct-to-consumer comparable sales growth of 4% for the second quarter |
|
· |
Net sales increased $39 million, or 14% for the second quarter on a reported basis; net sales increased $47 million, or 17%, excluding wind-down operations in 2015 |
|
· |
Second quarter net income of $27 million; adjusted EBITDA of $54 million, or 17% of net sales, an increase of 30% excluding wind-down operations in the second quarter last year |
|
· |
Diluted earnings per share from continuing operations of $0.19 for the quarter on a reported basis; diluted earnings per share of $0.11 for the quarter using a normalized tax rate, an increase of 38% compared to adjusted diluted earnings per share last year |
|
· |
Updates full year 2016 guidance |
NEW YORK – AUGUST 3, 2016 – Kate Spade & Company (NYSE:KATE) today announced results for the second quarter ended July 2, 2016.
Craig A. Leavitt, Chief Executive Officer of Kate Spade & Company, said: “Several factors contributed to our second quarter results falling short of our expectations, the most impactful of which are the retail landscape and continuing tourist headwinds. As we navigate these broader industry trends, we remain very confident in our long-term growth initiatives and have a number of strategies in place to drive our business in the second half of 2016. We continue to focus on the factors we can control, executing our long-term strategy and continuing to grow as a global, multi-channel lifestyle brand.”
George Carrara, President and Chief Operating Officer of Kate Spade & Company, added: “Looking ahead to the back half of the year, we are taking a prudent approach and updating our guidance accordingly. We remain confident in our long term ability to continue to achieve robust margin expansion, both in 2016 and beyond, based primarily on our ability to scale our foundation, leverage expenses, grow our licensing business and benefit from supply chain enhancements.”
For the first half of 2016 on a GAAP basis, the Company recorded income from continuing operations of $35 million, or $0.28 per diluted share, compared to a loss from continuing operations for the first half of 2015 of $(44) million, or $(0.35) per diluted share. Diluted earnings per share from continuing operations in the first half of 2016 were $0.17, using a normalized tax rate, compared to Adjusted diluted earnings per share of $0.10 in the first half of 2015. Net sales for the first half of 2016 were $594 million, an increase of $58 million, or 10.8%, compared to the first half of 2015. Net sales for the first half of 2016 increased $82 million, or 16.0%, excluding sales for wind-down operations for the first half of 2015. Adjusted EBITDA was $89 million for the first half of 2016, compared to Adjusted EBITDA, excluding wind-down operations of $69 million for the first half of 2015.
SECOND QUARTER RESULTS
Overall Results
Net sales for the second quarter of 2016 were $320 million, an increase of $39 million, or 13.7% compared to the second quarter of 2015. Net sales for the second quarter of 2016 increased $47 million, or 17.2%, excluding sales for wind-down operations for the second quarter of 2015. Second
quarter 2016 direct-to-consumer comparable sales growth was 4%, or 1% excluding eCommerce. Comparable sales per square foot for kate spade new york stores were $1,619 for the latest twelve months, compared to $1,611 for the twelve month period ended April 2, 2016.
Gross profit as a percentage of net sales was 59.7% for the second quarter of 2016, compared to 61.0% for the second quarter of 2015. Gross profit as a percentage of net sales was 61.6%, excluding the impact of wind-down operations for the second quarter of 2015.
Selling, general & administrative expenses were $157 million, or 49.0% of net sales in the second quarter of 2016, compared to $154 million, or 54.8% of net sales in the second quarter of 2015. Selling, general & administrative expenses in the second quarter of 2015 were $143 million, or 52.3% of net sales, excluding the results of wind-down operations and expenses associated with streamlining activities.
Income from continuing operations was $25 million, or $0.19 per diluted share in the second quarter of 2016, compared to $9 million, or $0.07 per diluted share, in the second quarter of 2015. Diluted earnings per share from continuing operations in the second quarter of 2016 using a normalized tax rate were $0.11, compared to adjusted diluted earnings per share of $0.08 in the second quarter of 2015.
Segment Highlights
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· |
Kate Spade North America net sales for the second quarter of 2016 were $271 million, an increase of $36 million, or 15.1% compared to the second quarter of 2015. Net sales for the second quarter of 2016 increased $40 million, or 17.1%, excluding sales for wind-down operations for the second quarter of 2015. Kate Spade North America Segment Adjusted EBITDA was $47 million (17.5% of net sales) for the second quarter of 2016 compared to $38 million (16.0% of net sales) for the second quarter of 2015. Segment Adjusted EBITDA Excluding Wind-Down Operations was $38 million (16.6% of adjusted net sales) for the second quarter of 2015. |
|
· |
Kate Spade International net sales for the second quarter of 2016 were $43 million, an increase of $3 million, or 6.6% compared to the second quarter of 2015. Net sales for the second quarter of 2016 increased $7 million, or 19.8%, excluding sales for wind-down operations for the second quarter of 2015. Kate Spade International Segment Adjusted EBITDA was $4 million (9.3% of net sales) for the second quarter of 2016 compared to $3 million (8.4% of net sales) for the second quarter of 2015. Segment Adjusted EBITDA Excluding Wind-Down Operations was $2 million (6.5% of adjusted net sales) for the second quarter of 2015. |
|
· |
Adelington Design Group net sales for the second quarter of 2016 were $5 million, an increase of 4.8% compared to the second quarter of 2015. Adelington Design Group Segment Adjusted EBITDA was $1 million (18.8% of net sales) for the second quarter of 2016 and was flat ((1.6%) of net sales) for the second quarter of 2015. Segment Adjusted EBITDA Excluding Wind-Down Operations was flat (5.9% of net sales) for the second quarter of 2015. |
Store Count Information
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Q2 2016 |
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Q1 2016 |
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Net Store Openings |
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Q2 2016 |
|
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North America Owned Stores |
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|
|
|
|
|
|
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Specialty |
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105 |
|
3 |
|
108 |
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Outlet |
|
64 |
|
1 |
|
65 |
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Total North America Owned Stores |
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169 |
|
4 |
|
173 |
|
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Average Square Feet (in ‘000s) |
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382 |
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|
391 |
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|
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International Owned Stores |
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|
|
|
|
|
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Specialty |
|
24 |
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1 |
|
25 |
|
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Outlet |
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14 |
|
- |
|
14 |
|
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Concessions |
|
53 |
|
2 |
|
55 |
|
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Total International Owned Stores |
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91 |
|
3 |
|
94 |
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Average Square Feet (in ‘000s) |
|
81 |
|
|
|
87 |
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|
|
|
|
|
|
|
|
|
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Total Owned Store Count |
|
260 |
|
7 |
|
267 |
|
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Average Owned Square Feet (in ‘000s) |
|
463 |
|
|
|
478 |
|
|
|
|
|
|
|
|
|
|
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Partner Operated Stores |
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80 |
|
7 |
|
87 |
|
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Greater China Joint Venture Stores |
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41 |
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2 |
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43 |
|
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Total Partnered Store Count |
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121 |
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9 |
|
130 |
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|
|
|
|
|
|
|
|
|
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Total Store Count |
|
381 |
|
16 |
|
397 |
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|
|
|
|
|
|
|
|
|
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Total Licensee Operated Partnered Stores |
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28 |
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1 |
|
29 |
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Total Store Footprint |
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409 |
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17 |
|
426 |
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The Company now expects the following:
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Net Sales |
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$1.370B - $1.400B |
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Adjusted EBITDA * |
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$242M - $260M |
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Diluted Earnings Per Share ** |
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$0.63 - $0.70 |
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DTC Comparable Sales Growth |
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high single-digit to low double-digit growth |
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Capital Expenditures |
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$65M - $70M |
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Planned Net New Store Openings (Company Owned & Partners) |
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~ 40 - 45 |
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2015 Year End NOL Balance |
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$739M |
*Adjusted EBITDA, as presented in the Company’s 2016 guidance, excludes depreciation and amortization, losses on asset disposals and impairments, non-cash share-based compensation expense, income tax provision (benefit), interest expense, net and unrealized and certain realized foreign currency gains (losses).
** Diluted earnings per share estimated using a normalized tax rate of 40%.
RECONCILIATION FROM ADJUSTED EBITDA TO EPS
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Range |
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||
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In millions, except per common share data |
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2016 Adjusted EBITDA * |
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$242 |
- |
$260 |
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Less: Share-based compensation, net ** |
|
33 |
- |
34 |
|
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Depreciation and amortization, net |
|
52 |
- |
54 |
|
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Interest expense, net |
|
21 |
- |
21 |
|
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Pretax income |
|
136 |
- |
151 |
|
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Provision for income taxes at 40% rate |
|
54 |
- |
60 |
|
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Income from continuing operations |
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$82 |
- |
$91 |
|
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Diluted shares outstanding |
|
130 |
|
130 |
|
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Diluted EPS assuming 40% tax rate |
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$0.63 |
- |
$0.70 |
|
* Adjusted EBITDA includes $(7 – 8) million in Other expense, net related to the Company’s equity in the losses of its equity method investees.
** Included in SG&A, but excluded from Adjusted EBITDA.
CONFERENCE CALL INFORMATION
The Company will host a conference call at 8:30 a.m. Eastern time today to discuss its results for the second quarter 2016. The dial-in number is 1-888-694-4676 with pass code 34730320. The webcast can be accessed via the Investor Relations section of the Kate Spade & Company website at www.katespadeandcompany.com. An archive of the webcast will be available on the website. Additional information on the results of the Company’s operations is available in the Company’s Form 10-Q for the second quarter 2016, to be filed with the Securities and Exchange Commission.
The Company expects to report third quarter 2016 financial results on Wednesday, November 2, 2016.
PRESENTATION OF NON-GAAP FINANCIAL INFORMATION AND KEY OPERATING METRICS
The income (loss) from continuing operations for 2016 and 2015 is presented on a GAAP basis and also adjusted by multiplying pretax income (loss) by a normalized tax rate. Adjusted income (loss) from continuing operations and Adjusted EBITDA for the second quarter and first half of 2015 exclude the impact of expenses incurred in connection with the Company’s streamlining initiatives (such as severance costs, contract termination costs, asset write-downs and other costs) and brand-exiting activities, acquisition related costs and loss on settlement of note receivable. The adjusted results for 2015 also exclude a $26 million charge related to the termination of certain contracts with the Company’s former joint venture partner in Kate Spade China Co., Ltd. The Company believes that the adjusted measures for such periods represent a more meaningful presentation of its historical operations and financial performance since these measures provide period to period comparisons that are consistent and more easily understood. In addition to those items, the Company presents its 2015 adjusted results further adjusted to exclude the adjusted results of wind-down operations (Kate Spade Saturday, Jack Spade brick and mortar, Kate Spade Brazil and brand exits in the Adelington Design Group segment). The Company believes that the adjusted results excluding wind-down operations provide a meaningful presentation of its 2015 results on a comparable basis to its 2016 results. The attached tables, captioned “Reconciliation of Non-GAAP Financial Information,” provide a full reconciliation of actual results to the adjusted results. The Company presents Adjusted EBITDA, which it defines as income (loss) from continuing operations, adjusted to exclude income tax provision (benefit), interest expense, net, depreciation and amortization, net, expenses incurred in connection
with the Company’s streamlining initiatives, brand-exiting activities, acquisition related costs, non-cash impairment charges, losses on asset disposals, loss on settlement of note receivable, non-cash share-based compensation expense and unrealized and certain realized foreign currency transaction adjustments, net. The Company presents the above-described Adjusted EBITDA measures because it considers them important supplemental measures of its performance and believes they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. The Company also presents Adjusted EBITDA Excluding Wind-Down Operations, which the Company defines as Adjusted EBITDA further adjusted to remove the Adjusted EBITDA of Kate Spade Saturday, Jack Spade brick and mortar, Kate Spade Brazil and the brand exits in the Adelington Design Group segment. The Company believes this Adjusted EBITDA measure provides a meaningful presentation of its 2015 results on a comparable basis to its 2016 results. References to amounts “on a comparable basis” mean that those amounts exclude the impact of wind-down operations.
The Company determined that the Kate Spade Saturday, Jack Spade, Kate Spade Brazil and Adelington Design Group initiatives in 2015 did not represent a strategic shift in the Company’s operations and therefore did not present these activities as discontinued operations.
The Company evaluates comparable sales productivity based on comparable net sales per average square foot, which is defined as net sales divided by the average of beginning and end of period gross square feet and excludes e-commerce net sales. The Company’s policy regarding its calculation of comparable direct-to-consumer net sales is discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of its most recent Annual Report on Form 10-K filed with the SEC on March 1, 2016. The Company presents the above described key operating metrics because it considers them important supplemental measures of its performance and believes they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry.
ABOUT KATE SPADE & COMPANY
Kate Spade & Company (NYSE: KATE) operates principally under two global, multichannel lifestyle brands: kate spade new york and Jack Spade. The Company’s four category pillars – women’s, men’s, children’s and home – span demographics, genders and geographies. Known for crisp color, graphic prints and playful sophistication, kate spade new york aims to inspire a more interesting life. The kate spade new york collection includes the Madison Avenue, Broome Street and on purpose labels. Jack Spade offers a timeless and versatile assortment of bags, sportswear and tailored clothing founded on the aesthetic of simple, purposeful design. The Company also owns Adelington Design Group, a private brand jewelry design and development group. Visit www.katespadeandcompany.com for more information.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in, or incorporated by reference into, this press release, future filings by us with the Securities and Exchange Commission (“SEC”), and oral statements made by, or with the approval of, our authorized personnel, that relate to our plans and expectations for future periods are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Words such as “intend,” “expect,” “contemplate,” “anticipate,” “believe,” “plan,” “forecast,” “target,” “aim,” “project,” “on track,” “are positioned to,” “estimate,” “may,” “will,” “should” and variations of such words and similar expressions and phrases are intended to identify such forward-looking statements.
You should not place undue reliance on such forward-looking statements, as they are not guarantees of performance or results. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these expectations may not prove to be correct or we may not achieve the financial results, savings or other benefits anticipated in the forward-looking statements. These forward-looking statements are simply estimates reflecting the best judgment of our senior management and involve, and are subject to, a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from those suggested by the forward-looking statements. These risks are more fully discussed in the “Risk Factors” section and elsewhere in the Company’s most recent Annual Report on Form 10-K filed with the SEC on March 1, 2016 and any subsequent quarterly reports on Form 10-Q. All subsequent written and oral forward-looking statements concerning the matters addressed herein and attributable to us or any person acting on our behalf are qualified by these cautionary statements. We may change our intentions, beliefs or expectations at any time and without notice, based upon any change in our assumptions or otherwise. We undertake no obligation to publicly update or revise any forward‑looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Investor Relations Contact:
Priya Trivedi, Vice President, Finance & Treasurer, Kate Spade & Company, 201.295.6110, ptrivedi@katespade.com
Media Contact:
Emily Garbaccio, Vice President, Communications, Kate Spade & Company, 212.739.6552, egarbaccio@katespade.com
KATE SPADE & COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per common share data)
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Three Months Ended |
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|
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Three Months Ended |
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||
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July 2, 2016 |
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% of |
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July 4, 2015 |
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% of |
||||
|
|
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(13 Weeks) |
|
Sales |
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(13 Weeks) |
|
Sales |
||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
319,691 |
|
100.0 |
% |
|
$ |
281,118 |
|
100.0 |
% |
|
Cost of goods sold |
|
|
128,985 |
|
40.3 |
% |
|
|
109,640 |
|
39.0 |
% |
|
Gross Profit |
|
|
190,706 |
|
59.7 |
% |
|
|
171,478 |
|
61.0 |
% |
|
Selling, general & administrative expenses |
|
|
156,651 |
|
49.0 |
% |
|
|
153,932 |
|
54.8 |
% |
|
Operating Income |
|
|
34,055 |
|
10.7 |
% |
|
|
17,546 |
|
6.2 |
% |
|
Other expense, net |
|
|
(3,093) |
|
(1.0) |
% |
|
|
(1,823) |
|
(0.6) |
% |
|
Interest expense, net |
|
|
(4,937) |
|
(1.5) |
% |
|
|
(5,344) |
|
(1.9) |
% |
|
Income Before Provision for Income Taxes |
|
|
26,025 |
|
8.1 |
% |
|
|
10,379 |
|
3.7 |
% |
|
Provision for income taxes |
|
|
1,466 |
|
0.5 |
% |
|
|
1,130 |
|
0.4 |
% |
|
Income from Continuing Operations |
|
|
24,559 |
|
7.7 |
% |
|
|
9,249 |
|
3.3 |
% |
|
Discontinued operations, net of income taxes |
|
|
2,214 |
|
|
|
|
|
(708) |
|
|
|
|
Net Income |
|
$ |
26,773 |
|
|
|
|
$ |
8,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share: |
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|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
$ |
0.19 |
|
|
|
|
$ |
0.07 |
|
|
|
|
Net Income |
|
$ |
0.21 |
|
|
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
$ |
0.19 |
|
|
|
|
$ |
0.07 |
|
|
|
|
Net Income |
|
$ |
0.21 |
|
|
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares, Basic |
|
|
128,000 |
|
|
|
|
|
127,663 |
|
|
|
|
Weighted Average Shares, Diluted |
|
|
129,140 |
|
|
|
|
|
128,431 |
|
|
|
KATE SPADE & COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per common share data)
|
|
|
Six Months Ended |
|
|
|
|
Six Months Ended |
|
|
|
||
|
|
|
July 2, 2016 |
|
% of |
|
July 4, 2015 |
|
% of |
||||
|
|
|
(26 Weeks) |
|
Sales |
|
(26 Weeks) |
|
Sales |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
594,113 |
|
100.0 |
% |
|
$ |
536,434 |
|
100.0 |
% |
|
Cost of goods sold |
|
|
233,926 |
|
39.4 |
% |
|
|
210,229 |
|
39.2 |
% |
|
Gross Profit |
|
|
360,187 |
|
60.6 |
% |
|
|
326,205 |
|
60.8 |
% |
|
Selling, general & administrative expenses |
|
|
308,419 |
|
51.9 |
% |
|
|
345,785 |
|
64.5 |
% |
|
Operating Income (Loss) |
|
|
51,768 |
|
8.7 |
% |
|
|
(19,580) |
|
(3.7) |
% |
|
Other expense, net |
|
|
(3,340) |
|
(0.6) |
% |
|
|
(3,218) |
|
(0.6) |
% |
|
Loss on settlement of note receivable |
|
|
— |
|
— |
|
|
|
(9,873) |
|
(1.8) |
% |
|
Interest expense, net |
|
|
(9,933) |
|
(1.7) |
% |
|
|
(8,708) |
|
(1.6) |
% |
|
Income (Loss) Before Provision for Income Taxes |
|
|
38,495 |
|
6.5 |
% |
|
|
(41,379) |
|
(7.7) |
% |
|
Provision for income taxes |
|
|
3,020 |
|
0.5 |
% |
|
|
2,931 |
|
0.5 |
% |
|
Income (Loss) from Continuing Operations |
|
|
35,475 |
|
6.0 |
% |
|
|
(44,310) |
|
(8.3) |
% |
|
Discontinued operations, net of income taxes |
|
|
2,934 |
|
|
|
|
|
(2,370) |
|
|
|
|
Net Income (Loss) |
|
$ |
38,409 |
|
|
|
|
$ |
(46,680) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations |
|
$ |
0.28 |
|
|
|
|
$ |
(0.35) |
|
|
|
|
Net Income (Loss) |
|
$ |
0.30 |
|
|
|
|
$ |
(0.37) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations |
|
$ |
0.28 |
|
|
|
|
$ |
(0.35) |
|
|
|
|
Net Income (Loss) |
|
$ |
0.30 |
|
|
|
|
$ |
(0.37) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares, Basic |
|
|
127,966 |
|
|
|
|
|
127,576 |
|
|
|
|
Weighted Average Shares, Diluted (a) |
|
|
128,888 |
|
|
|
|
|
127,576 |
|
|
|
|
(a) |
Because the Company incurred a loss from continuing operations for the six months ended July 4, 2015, all potentially dilutive shares are antidilutive. Accordingly, basic and diluted weighted average shares outstanding are equal for such period. |
KATE SPADE & COMPANY
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
|
|
|
July 2, 2016 |
|
July 4, 2015 |
|
||
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
306,536 |
|
$ |
231,437 |
|
|
Accounts receivable - trade, net |
|
|
64,440 |
|
|
65,300 |
|
|
Inventories, net |
|
|
217,441 |
|
|
188,385 |
|
|
Other current assets |
|
|
36,169 |
|
|
36,231 |
|
|
Total current assets |
|
|
624,586 |
|
|
521,353 |
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, Net |
|
|
177,978 |
|
|
171,340 |
|
|
Goodwill |
|
|
56,338 |
|
|
47,841 |
|
|
Intangibles, Net |
|
|
86,058 |
|
|
87,237 |
|
|
Other Assets |
|
|
52,129 |
|
|
38,950 |
|
|
Total Assets |
|
$ |
997,089 |
|
$ |
866,721 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Short-term borrowings |
|
$ |
3,592 |
|
$ |
3,595 |
|
|
Other current liabilities |
|
|
223,700 |
|
|
236,590 |
|
|
Total current liabilities |
|
|
227,292 |
|
|
240,185 |
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt |
|
|
390,463 |
|
|
393,863 |
|
|
Other Non-Current Liabilities |
|
|
72,162 |
|
|
68,659 |
|
|
Stockholders’ Equity |
|
|
307,172 |
|
|
164,014 |
|
|
Total Liabilities and Stockholders’ Equity |
|
$ |
997,089 |
|
$ |
866,721 |
|
KATE SPADE & COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
|
|
|
Six Months Ended |
|
||||
|
|
|
July 2, 2016 |
|
July 4, 2015 |
|
||
|
|
|
(26 Weeks) |
|
(26 Weeks) |
|
||
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
38,409 |
|
$ |
(46,680) |
|
|
Adjustments to arrive at income (loss) from continuing operations |
|
|
(2,934) |
|
|
2,370 |
|
|
Income (loss) from continuing operations |
|
|
35,475 |
|
|
(44,310) |
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
23,908 |
|
|
24,240 |
|
|
Loss on asset disposals and impairments, including streamlining initiatives, net |
|
|
844 |
|
|
8,309 |
|
|
Share-based compensation |
|
|
16,156 |
|
|
12,756 |
|
|
Loss on settlement of note receivable |
|
|
— |
|
|
9,873 |
|
|
Foreign currency transaction (gains) losses, net |
|
|
(5,354) |
|
|
1,620 |
|
|
Equity losses of equity investees |
|
|
3,248 |
|
|
2,754 |
|
|
Other, net |
|
|
(135) |
|
|
(186) |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease in accounts receivable - trade, net |
|
|
34,220 |
|
|
23,971 |
|
|
Increase in inventories, net |
|
|
(20,254) |
|
|
(39,140) |
|
|
(Increase) decrease in other current and non-current assets |
|
|
(1,725) |
|
|
8,015 |
|
|
(Decrease) increase in accounts payable |
|
|
(3,841) |
|
|
14,362 |
|
|
Decrease in accrued expenses and other non-current liabilities |
|
|
(34,434) |
|
|
(14,210) |
|
|
Net change in income tax assets and liabilities |
|
|
1,834 |
|
|
1,684 |
|
|
Net cash used in operating activities of discontinued operations |
|
|
(720) |
|
|
(10,057) |
|
|
Net cash provided by (used in) operating activities |
|
|
49,222 |
|
|
(319) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Proceeds from sales of property and equipment |
|
|
— |
|
|
816 |
|
|
Purchases of property and equipment |
|
|
(25,200) |
|
|
(28,163) |
|
|
Proceeds from sales of joint venture interests, net |
|
|
(2,350) |
|
|
19,874 |
|
|
Investments in and advances to equity investees |
|
|
(6,500) |
|
|
— |
|
|
Payment for joint venture interest |
|
|
— |
|
|
(10,000) |
|
|
Payments for in-store merchandise shops |
|
|
(807) |
|
|
(2,094) |
|
|
Net proceeds from settlement of note receivable |
|
|
— |
|
|
75,128 |
|
|
Purchase of trademarks |
|
|
(1,200) |
|
|
— |
|
|
Other, net |
|
|
(57) |
|
|
368 |
|
|
Net cash provided by investing activities of discontinued operations |
|
|
— |
|
|
348 |
|
|
Net cash (used in) provided by investing activities |
|
|
(36,114) |
|
|
56,277 |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from borrowings under revolving credit agreement |
|
|
— |
|
|
2,000 |
|
|
Repayment of borrowings under revolving credit agreement |
|
|
— |
|
|
(8,000) |
|
|
Repayment of Term Loan |
|
|
(3,000) |
|
|
(2,000) |
|
|
Principal payments under capital lease obligations |
|
|
(250) |
|
|
(223) |
|
|
Proceeds from exercise of stock options |
|
|
258 |
|
|
2,428 |
|
|
Payment of deferred financing fees |
|
|
(741) |
|
|
(870) |
|
|
Net cash used in financing activities |
|
|
(3,733) |
|
|
(6,665) |
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
|
|
(690) |
|
|
(1,900) |
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents |
|
|
8,685 |
|
|
47,393 |
|
|
Cash and Cash Equivalents at Beginning of Period |
|
|
297,851 |
|
|
184,044 |
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
306,536 |
|
$ |
231,437 |
|
KATE SPADE & COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(All amounts in thousands, except per common share data)
|
|
|
Three Months Ended |
|
|
|
|
|
July 2, 2016 |
|
|
|
|
|
(13 Weeks) |
|
|
|
|
|
|
|
|
|
Total Net Sales |
|
$ |
319,691 |
|
|
KATE SPADE North America |
|
|
271,378 |
|
|
KATE SPADE International |
|
|
43,417 |
|
|
Adelington Design Group |
|
|
4,896 |
|
|
|
|
|
|
|
|
Gross Profit |
|
|
190,706 |
|
|
|
|
|
|
|
|
SG&A |
|
|
156,651 |
|
|
|
|
|
|
|
|
Operating Income |
|
$ |
34,055 |
|
|
|
|
|
|
|
|
Other expense, net |
|
|
(3,093) |
|
|
Interest expense, net |
|
|
(4,937) |
|
|
Provision for income taxes |
|
|
1,466 |
|
|
Income from Continuing Operations |
|
$ |
24,559 |
|
|
|
|
|
|
|
|
Discontinued operations, net of income taxes |
|
|
2,214 |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
26,773 |
|
|
|
|
|
|
|
|
Basic Earnings per Common Share from Continuing Operations |
|
$ |
0.19 |
|
|
Diluted Earnings per Common Share from Continuing Operations |
|
$ |
0.19 |
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Income from Continuing Operations: |
|
|
|
|
|
Net Income, per above |
|
$ |
26,773 |
|
|
Less: discontinued operations, net of income taxes |
|
|
(2,214) |
|
|
Adjustment to provision for income taxes |
|
|
(9,848) |
|
|
Adjusted Income from Continuing Operations (a) |
|
$ |
14,711 |
|
|
|
|
|
|
|
|
Adjusted Basic Earnings per Common Share from Continuing Operations |
|
$ |
0.11 |
|
|
Adjusted Diluted Earnings per Common Share from Continuing Operations (b) |
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
Operating income, per above |
|
$ |
34,055 |
|
|
Depreciation and amortization and losses on asset disposals, net (c) |
|
|
12,074 |
|
|
Share-based compensation |
|
|
8,246 |
|
|
Other expense, net (d) |
|
|
(721) |
|
|
Adjusted EBITDA |
|
$ |
53,654 |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
Reportable Segments Adjusted EBITDA (e): |
|
|
|
|
|
KATE SPADE North America |
|
$ |
47,393 |
|
|
KATE SPADE International (f) |
|
|
4,053 |
|
|
Adelington Design Group |
|
|
922 |
|
|
Other (g) |
|
|
1,286 |
|
|
Adjusted EBITDA |
|
$ |
53,654 |
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin |
|
|
|
|
|
KATE SPADE North America |
|
|
17.5 |
% |
|
KATE SPADE International (f) |
|
|
9.3 |
% |
|
Adelington Design Group |
|
|
18.8 |
% |
|
Kate Spade & Company |
|
|
16.8 |
% |
|
(a) |
Adjusted amount represents pretax income multiplied by a normalized tax rate of 40.0%, plus $0.1 million for interest and penalties on uncertain tax positions. The normalized tax rate was derived by reference to statutory tax rates in the regions in which the Company operates, without giving effect to the Company’s valuation allowance or potential use of its net operating loss carryforwards. |
|
(b) |
Adjusted diluted earnings per share for the three months ended July 2, 2016 are based on 129,140 shares outstanding. |
|
(c) |
Excludes amortization included in Interest expense, net. |
|
(d) |
Amount is Other expense, net as shown above, net of foreign currency transaction adjustment of $2,372. |
|
(e) |
Segment Adjusted EBITDA excludes depreciation and amortization and losses on asset disposals. The costs of all corporate departments that serve the respective segment are fully allocated. The Company does not allocate amounts reported below Operating income to its reportable segments, other than equity loss in its equity method investees. The Company’s definition of Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. |
|
(f) |
Amounts include equity in the losses of equity method investees of $2,007. |
|
(g) |
Amount is Other expense, net as shown above, net of foreign currency transaction adjustment of $2,372 and equity in the losses of equity method investees of $2,007. |
KATE SPADE & COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(All amounts in thousands, except per common share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Results |
|
|
|
|
|
|
|
|
Streamlining |
|
|
|
|
Results of Wind-Down |
|
(Excluding Wind- |
|
|||
|
|
|
Reported (a) |
|
Initiatives (b) |
|
Adjusted Results |
|
Operations (c) |
|
Down Operations) (d) |
|
|||||
|
Three Months Ended July 4, 2015 (13 Weeks) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Sales |
|
$ |
281,118 |
|
|
|
|
$ |
281,118 |
|
$ |
(8,413) |
|
$ |
272,705 |
|
|
KATE SPADE North America |
|
|
235,730 |
|
|
|
|
|
235,730 |
|
|
(3,944) |
|
|
231,786 |
|
|
KATE SPADE International |
|
|
40,718 |
|
|
|
|
|
40,718 |
|
|
(4,469) |
|
|
36,249 |
|
|
Adelington Design Group |
|
|
4,670 |
|
|
|
|
|
4,670 |
|
|
— |
|
|
4,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
171,478 |
|
|
|
|
|
171,478 |
|
|
(3,624) |
|
|
167,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A |
|
|
153,932 |
|
$ |
(7,512) |
|
|
146,420 |
|
|
(3,718) |
|
|
142,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
$ |
17,546 |
|
$ |
7,512 |
|
$ |
25,058 |
|
$ |
94 |
|
$ |
25,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net |
|
|
(1,823) |
|
|
83 |
|
|
(1,740) |
|
|
|
|
|
(1,740) |
|
|
Interest expense, net |
|
|
(5,344) |
|
|
|
|
|
(5,344) |
|
|
|
|
|
(5,344) |
|
|
Provision for income taxes (e) |
|
|
1,130 |
|
|
6,131 |
|
|
7,261 |
|
|
38 |
|
|
7,299 |
|
|
Income from Continuing Operations |
|
$ |
9,249 |
|
$ |
1,464 |
|
$ |
10,713 |
|
$ |
56 |
|
$ |
10,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of income taxes |
|
|
(708) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
8,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Common Share from Continuing Operations |
|
$ |
0.07 |
|
|
|
|
$ |
0.08 |
|
|
|
|
$ |
0.08 |
|
|
Diluted Earnings per Common Share from Continuing Operations (f) |
|
$ |
0.07 |
|
|
|
|
$ |
0.08 |
|
|
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating income, per above |
|
|
|
|
|
|
|
$ |
25,058 |
|
$ |
94 |
|
$ |
25,152 |
|
|
Depreciation and amortization, asset impairments and losses on asset disposals, net (g) |
|
|
|
|
|
|
|
|
11,228 |
|
|
(184) |
|
|
11,044 |
|
|
Share-based compensation |
|
|
|
|
|
|
|
|
6,784 |
|
|
|
|
|
6,784 |
|
|
Other expense, net (h) |
|
|
|
|
|
|
|
|
(1,774) |
|
|
|
|
|
(1,774) |
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
$ |
41,296 |
|
$ |
(90) |
|
$ |
41,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments Adjusted EBITDA (i): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North America |
|
|
|
|
|
|
|
$ |
37,781 |
|
$ |
638 |
|
$ |
38,419 |
|
|
KATE SPADE International (j) |
|
|
|
|
|
|
|
|
3,433 |
|
|
(1,082) |
|
|
2,351 |
|
|
Adelington Design Group |
|
|
|
|
|
|
|
|
(77) |
|
|
354 |
|
|
277 |
|
|
Other (k) |
|
|
|
|
|
|
|
|
159 |
|
|
|
|
|
159 |
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
$ |
41,296 |
|
$ |
(90) |
|
$ |
41,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North America |
|
|
|
|
|
|
|
|
16.0 |
% |
|
|
|
|
16.6 |
% |
|
KATE SPADE International (j) |
|
|
|
|
|
|
|
|
8.4 |
% |
|
|
|
|
6.5 |
% |
|
Adelington Design Group |
|
|
|
|
|
|
|
|
(1.6) |
% |
|
|
|
|
5.9 |
% |
|
Kate Spade & Company |
|
|
|
|
|
|
|
|
14.7 |
% |
|
|
|
|
15.1 |
% |
|
(a) |
Represents the results of Kate Spade & Company in accordance with accounting principles generally accepted in the US. |
|
(b) |
Represents charges due to streamlining initiatives comprised of: (i) payroll, contract termination costs, asset write-downs and other costs of $7,121; and (ii) store closure, other brand-exiting and acquisition related costs of $391. |
|
(c) |
Represents adjustments to remove the adjusted results of KATE SPADE SATURDAY, JACK SPADE brick and mortar, Kate Spade Brazil and Adelington Design Group exiting brands (Trifari, Trina Turk and Kensie). |
|
(d) |
Represents the adjusted results of the Company excluding the results of KATE SPADE SATURDAY, JACK SPADE brick and mortar, Kate Spade Brazil and Adelington Design Group exiting brands. This is presented in order to provide adjusted results on a comparable basis to its 2016 results. |
|
(e) |
Adjusted amounts represent adjusted pretax income multiplied by a normalized tax rate of 40.0%, plus $0.1 million for interest and penalties on uncertain tax positions. The normalized tax rate was derived by reference to statutory tax rates in the regions in which the Company operates, without giving effect to the Company's valuation allowance or potential use of its net operating loss carryforwards. |
|
(f) |
Adjusted diluted earnings per share for the three months ended July 4, 2015 are based on 128,431 shares outstanding. |
|
(g) |
Excludes amortization included in Interest expense, net. |
|
(h) |
Amount is reported Other expense, net as shown above, net of foreign currency transaction adjustment of $(34) and restructuring charges of $83 included in equity in the losses of equity method investees. |
|
(i) |
Segment adjusted EBITDA excludes: (i) depreciation and amortization; (ii) charges due to streamlining initiatives, brand-exiting activities and acquisition related costs; and (iii) losses on asset disposals and impairments. The costs of all corporate departments that serve the respective segment are fully allocated. The Company does not allocate amounts reported below Operating income to its reportable segments, other than adjusted equity loss in its equity method investees. The Company’s definition of Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. |
|
(j) |
Amounts include equity in the adjusted losses of equity method investees of $1,933. |
|
(k) |
Amount is reported Other expense, net as shown above, net of foreign currency transaction adjustment of $(34) and equity in the losses of equity method investees of $2,016. |
KATE SPADE & COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(All amounts in thousands, except per common share data)
|
|
|
Six Months Ended |
|
|
|
|
|
July 2, 2016 |
|
|
|
|
|
(26 Weeks) |
|
|
|
|
|
|
|
|
|
Total Net Sales |
|
$ |
594,113 |
|
|
KATE SPADE North America |
|
|
490,055 |
|
|
KATE SPADE International |
|
|
92,300 |
|
|
Adelington Design Group |
|
|
11,758 |
|
|
|
|
|
|
|
|
Gross Profit |
|
|
360,187 |
|
|
|
|
|
|
|
|
SG&A |
|
|
308,419 |
|
|
|
|
|
|
|
|
Operating Income |
|
$ |
51,768 |
|
|
|
|
|
|
|
|
Other expense, net |
|
|
(3,340) |
|
|
Interest expense, net |
|
|
(9,933) |
|
|
Provision for income taxes |
|
|
3,020 |
|
|
Income from Continuing Operations |
|
$ |
35,475 |
|
|
|
|
|
|
|
|
Discontinued operations, net of income taxes |
|
|
2,934 |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
38,409 |
|
|
|
|
|
|
|
|
Basic Earnings per Common Share from Continuing Operations |
|
$ |
0.28 |
|
|
Diluted Earnings per Common Share from Continuing Operations |
|
$ |
0.28 |
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Income from Continuing Operations: |
|
|
|
|
|
Net Income, per above |
|
$ |
38,409 |
|
|
Less: discontinued operations, net of income taxes |
|
|
(2,934) |
|
|
Adjustment to provision for income taxes |
|
|
(13,876) |
|
|
Adjusted Income from Continuing Operations (a) |
|
$ |
21,599 |
|
|
|
|
|
|
|
|
Adjusted Basic Earnings per Common Share from Continuing Operations |
|
$ |
0.17 |
|
|
Adjusted Diluted Earnings per Common Share from Continuing Operations (b) |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
Operating income, per above |
|
$ |
51,768 |
|
|
Depreciation and amortization and losses on asset disposals, net (c) |
|
|
23,001 |
|
|
Share-based compensation |
|
|
16,156 |
|
|
Other expense, net (d) |
|
|
(2,103) |
|
|
Adjusted EBITDA |
|
$ |
88,822 |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
Reportable Segments Adjusted EBITDA (e): |
|
|
|
|
|
KATE SPADE North America |
|
$ |
71,980 |
|
|
KATE SPADE International (f) |
|
|
12,590 |
|
|
Adelington Design Group |
|
|
3,107 |
|
|
Other (g) |
|
|
1,145 |
|
|
Adjusted EBITDA |
|
$ |
88,822 |
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin |
|
|
|
|
|
KATE SPADE North America |
|
|
14.7 |
% |
|
KATE SPADE International (f) |
|
|
13.6 |
% |
|
Adelington Design Group |
|
|
26.4 |
% |
|
Kate Spade & Company |
|
|
15.0 |
% |
|
|
|
|
|
|
(a)Adjusted amount represents pretax income multiplied by a normalized tax rate of 40.0%, plus $0.2 million for interest and penalties on uncertain tax positions. The normalized tax rate was derived by reference to statutory tax rates in the regions in which the Company operates, without giving effect to the Company’s valuation allowance or potential use of its net operating loss carryforwards.
(b)Adjusted diluted earnings per share for the six months ended July 2, 2016 are based on 128,888 shares outstanding.
(c)Excludes amortization included in Interest expense, net.
(d)Amount is Other expense, net as shown above, net of foreign currency transaction adjustment of $1,237.
(e)Segment Adjusted EBITDA excludes depreciation and amortization and losses on asset disposals. The costs of all corporate departments that serve the respective segment are fully allocated. The Company does not allocate amounts reported below Operating income to its reportable segments, other than equity loss in its equity method investees. The Company’s definition of Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
(f)Amounts include equity in the losses of equity method investees of $3,248.
(g)Amount is Other expense, net as shown above, net of foreign currency transaction adjustment of $1,237 and equity in the losses of equity method investees of $3,248.
KATE SPADE & COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(All amounts in thousands, except per common share data)
|
|
|
|
|
|
Streamlining |
|
|
|
|
|
|
|
Adjusted Results |
|
||
|
|
|
|
|
|
Initiatives and JV |
|
|
|
|
Results of Wind-Down |
|
(Excluding Wind- |
|
|||
|
|
|
Reported (a) |
|
Termination Fee (b) |
|
Adjusted Results |
|
Operations (c) |
|
Down Operations) (d) |
|
|||||
|
Six Months Ended July 4, 2015 (26 Weeks) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Sales |
|
$ |
536,434 |
|
|
|
|
$ |
536,434 |
|
$ |
(24,098) |
|
$ |
512,336 |
|
|
KATE SPADE North America |
|
|
431,316 |
|
|
|
|
|
431,316 |
|
|
(12,793) |
|
|
418,523 |
|
|
KATE SPADE International |
|
|
93,186 |
|
|
|
|
|
93,186 |
|
|
(9,588) |
|
|
83,598 |
|
|
Adelington Design Group |
|
|
11,932 |
|
|
|
|
|
11,932 |
|
|
(1,717) |
|
|
10,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
326,205 |
|
|
|
|
|
326,205 |
|
|
(9,868) |
|
|
316,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A |
|
|
345,785 |
|
$ |
(52,060) |
|
|
293,725 |
|
|
(13,577) |
|
|
280,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (Loss) Income |
|
$ |
(19,580) |
|
$ |
52,060 |
|
$ |
32,480 |
|
$ |
3,709 |
|
$ |
36,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net |
|
|
(3,218) |
|
|
83 |
|
|
(3,135) |
|
|
|
|
|
(3,135) |
|
|
Loss on settlement of note receivable |
|
|
(9,873) |
|
|
9,873 |
|
|
— |
|
|
|
|
|
— |
|
|
Interest expense, net |
|
|
(8,708) |
|
|
|
|
|
(8,708) |
|
|
|
|
|
(8,708) |
|
|
Provision for income taxes (e) |
|
|
2,931 |
|
|
5,466 |
|
|
8,397 |
|
|
1,484 |
|
|
9,881 |
|
|
(Loss) Income from Continuing Operations |
|
$ |
(44,310) |
|
$ |
56,550 |
|
$ |
12,240 |
|
$ |
2,225 |
|
$ |
14,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of income taxes |
|
|
(2,370) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(46,680) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Common Share from Continuing Operations |
|
$ |
(0.35) |
|
|
|
|
$ |
0.10 |
|
|
|
|
$ |
0.11 |
|
|
Diluted Earnings per Common Share from Continuing Operations (f) |
|
$ |
(0.35) |
|
|
|
|
$ |
0.10 |
|
|
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating income, per above |
|
|
|
|
|
|
|
$ |
32,480 |
|
$ |
3,709 |
|
$ |
36,189 |
|
|
Depreciation and amortization, asset impairments and losses on asset disposals, net (g) |
|
|
|
|
|
|
|
|
23,506 |
|
|
(548) |
|
|
22,958 |
|
|
Share-based compensation, net (h) |
|
|
|
|
|
|
|
|
12,561 |
|
|
|
|
|
12,561 |
|
|
Other expense, net (i) |
|
|
|
|
|
|
|
|
(2,668) |
|
|
|
|
|
(2,668) |
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
$ |
65,879 |
|
$ |
3,161 |
|
$ |
69,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments Adjusted EBITDA (j): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North America |
|
|
|
|
|
|
|
$ |
55,853 |
|
$ |
2,879 |
|
$ |
58,732 |
|
|
KATE SPADE International (k) |
|
|
|
|
|
|
|
|
8,422 |
|
|
359 |
|
|
8,781 |
|
|
Adelington Design Group |
|
|
|
|
|
|
|
|
1,601 |
|
|
(77) |
|
|
1,524 |
|
|
Other (l) |
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
3 |
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
$ |
65,879 |
|
$ |
3,161 |
|
$ |
69,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North America |
|
|
|
|
|
|
|
|
12.9 |
% |
|
|
|
|
14.0 |
% |
|
KATE SPADE International (k) |
|
|
|
|
|
|
|
|
9.0 |
% |
|
|
|
|
10.5 |
% |
|
Adelington Design Group |
|
|
|
|
|
|
|
|
13.4 |
% |
|
|
|
|
14.9 |
% |
|
Kate Spade & Company |
|
|
|
|
|
|
|
|
12.3 |
% |
|
|
|
|
13.5 |
% |
|
(a) |
Represents the results of Kate Spade & Company in accordance with accounting principles generally accepted in the US. |
|
(b) |
Represents charges due to streamlining initiatives comprised of: (i) payroll, contract termination costs, asset write-downs and other costs of $25,995; (ii) store closure, other brand-exiting and acquisition related costs of $65; and (iii) a $26,000 charge related to the termination of certain contracts with the Company’s former joint venture partner in China. |
|
(c) |
Represents adjustments to remove the adjusted results of KATE SPADE SATURDAY, JACK SPADE brick and mortar, Kate Spade Brazil and Adelington Design Group exiting brands (Trifari, Trina Turk and Kensie). |
|
(d) |
Represents the adjusted results of the Company excluding the results of KATE SPADE SATURDAY, JACK SPADE brick and mortar, Kate Spade Brazil and Adelington Design Group exiting brands. This is presented in order to provide adjusted results on a comparable basis to its 2016 results. |
|
(e) |
Adjusted amounts represent adjusted pretax income multiplied by a normalized tax rate of 40.0%, plus $0.1 million for interest and penalties on uncertain tax positions. The normalized tax rate was derived by reference to statutory tax rates in the regions in which the Company operates, without giving effect to the Company's valuation allowance or potential use of its net operating loss carryforwards. |
|
(f) |
Adjusted diluted earnings per share for the six months ended July 4, 2015 are based on 128,253 shares outstanding. |
|
(g) |
Excludes amortization included in Interest expense, net. |
|
(h) |
Excludes $0.2 million of share-based compensation expense that was classified as restructuring. |
|
(i) |
Amount is reported Other expense, net as shown above, net of foreign currency transaction adjustment of $467 and restructuring charges of $83 included in equity in the losses of equity method investees. |
|
(j) |
Segment adjusted EBITDA excludes: (i) depreciation and amortization; (ii) charges due to streamlining initiatives, brand-exiting activities and acquisition related costs; (iii) losses on asset disposals and impairments; and (iv) a $26,000 charge in the six months ended July 4, 2015 to terminate contracts with the Company’s former joint venture partner in China. The costs of all corporate departments that serve the respective segment are fully allocated. The Company does not allocate amounts reported below Operating (loss) income to its reportable segments, other than adjusted equity loss in its equity method investees. The Company’s definition of Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. |
|
(k) |
Amounts include equity in the adjusted losses of equity method investees of $2,671. |
|
(l) |
Amount is reported Other expense, net as shown above, net of foreign currency transaction adjustment of $467 and equity in the losses of equity method investees of $2,754. |
KATE SPADE & COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(Dollars in thousands)
The following table provides reconciliations of Net Sales as reported to Net Sales excluding wind-down operations(a) in 2015.
|
|
|
Three Months Ended |
|
|
|
|
|
|
||||
|
|
|
July 2, 2016 |
|
July 4, 2015 |
|
Variance |
|
|||||
|
|
|
(13 Weeks) |
|
(13 Weeks) |
|
$ |
|
% |
|
|||
|
Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as reported |
|
$ |
319,691 |
|
$ |
281,118 |
|
$ |
38,573 |
|
13.7 |
% |
|
Less: Net sales for wind-down operations (a) |
|
|
— |
|
|
(8,413) |
|
|
|
|
|
|
|
Adjusted Net Sales |
|
$ |
319,691 |
|
$ |
272,705 |
|
$ |
46,986 |
|
17.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as reported |
|
$ |
271,378 |
|
$ |
235,730 |
|
$ |
35,648 |
|
15.1 |
% |
|
Less: Net sales for wind-down operations (a) |
|
|
— |
|
|
(3,944) |
|
|
|
|
|
|
|
Adjusted Net Sales |
|
$ |
271,378 |
|
$ |
231,786 |
|
$ |
39,592 |
|
17.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE International |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as reported |
|
$ |
43,417 |
|
$ |
40,718 |
|
$ |
2,699 |
|
6.6 |
% |
|
Less: Net sales for wind-down operations (a) |
|
|
— |
|
|
(4,469) |
|
|
|
|
|
|
|
Adjusted Net Sales |
|
$ |
43,417 |
|
$ |
36,249 |
|
$ |
7,168 |
|
19.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adelington Design Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as reported |
|
$ |
4,896 |
|
$ |
4,670 |
|
$ |
226 |
|
4.8 |
% |
|
Less: Net sales for wind-down operations (a) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Adjusted Net Sales |
|
$ |
4,896 |
|
$ |
4,670 |
|
$ |
226 |
|
4.8 |
% |
(a) Represents net sales for KATE SPADE SATURDAY, JACK SPADE brick and mortar, Kate Spade Brazil and Adelington Design Group exiting brands (Trifari, Trina Turk and Kensie).
KATE SPADE & COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(Dollars in thousands)
The following table provides reconciliations of Net Sales as reported to Net Sales excluding wind-down operations(a) in 2015.
|
|
|
Six Months Ended |
|
|
|
|
|
|
||||
|
|
|
July 2, 2016 |
|
July 4, 2015 |
|
Variance |
|
|||||
|
|
|
(26 Weeks) |
|
(26 Weeks) |
|
$ |
|
% |
|
|||
|
Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as reported |
|
$ |
594,113 |
|
$ |
536,434 |
|
$ |
57,679 |
|
10.8 |
% |
|
Less: Net sales for wind-down operations (a) |
|
|
— |
|
|
(24,098) |
|
|
|
|
|
|
|
Adjusted Net Sales |
|
$ |
594,113 |
|
$ |
512,336 |
|
$ |
81,777 |
|
16.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as reported |
|
$ |
490,055 |
|
$ |
431,316 |
|
$ |
58,739 |
|
13.6 |
% |
|
Less: Net sales for wind-down operations (a) |
|
|
— |
|
|
(12,793) |
|
|
|
|
|
|
|
Adjusted Net Sales |
|
$ |
490,055 |
|
$ |
418,523 |
|
$ |
71,532 |
|
17.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE International |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as reported (b) |
|
$ |
92,300 |
|
$ |
93,186 |
|
$ |
(886) |
|
(1.0) |
% |
|
Less: Net sales for wind-down operations (a) |
|
|
— |
|
|
(9,588) |
|
|
|
|
|
|
|
Adjusted Net Sales (b) |
|
$ |
92,300 |
|
$ |
83,598 |
|
$ |
8,702 |
|
10.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adelington Design Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as reported |
|
$ |
11,758 |
|
$ |
11,932 |
|
$ |
(174) |
|
(1.5) |
% |
|
Less: Net sales for wind-down operations (a) |
|
|
— |
|
|
(1,717) |
|
|
|
|
|
|
|
Adjusted Net Sales |
|
$ |
11,758 |
|
$ |
10,215 |
|
$ |
1,543 |
|
15.1 |
% |
(a) Represents net sales for KATE SPADE SATURDAY, JACK SPADE brick and mortar, Kate Spade Brazil and Adelington Design Group exiting brands (Trifari, Trina Turk and Kensie).
(b) Includes $6.4 million of net sales for the six months ended July 4, 2015 related to the Hong Kong, Macau and Taiwan territories, which were converted to a joint venture in the first quarter of 2015.
KATE SPADE & COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands)
The following table provides reconciliations of Segment Adjusted EBITDA to: (i) Adjusted EBITDA and (ii) Net Income (Loss).
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
July 2, 2016 |
|
July 4, 2015 |
|
July 2, 2016 |
|
July 4, 2015 |
||||
|
|
|
(13 Weeks) |
|
(13 Weeks) |
|
(26 Weeks) |
|
(26 Weeks) |
||||
|
Reportable Segments Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North America |
|
$ |
47,393 |
|
$ |
37,781 |
|
$ |
71,980 |
|
$ |
55,853 |
|
KATE SPADE International |
|
|
4,053 |
|
|
3,433 |
|
|
12,590 |
|
|
8,422 |
|
Adelington Design Group |
|
|
922 |
|
|
(77) |
|
|
3,107 |
|
|
1,601 |
|
Total Reportable Segments Adjusted EBITDA |
|
|
52,368 |
|
|
41,137 |
|
|
87,677 |
|
|
65,876 |
|
Other expense (income) (a) |
|
|
(1,086) |
|
|
193 |
|
|
(92) |
|
|
(464) |
|
Less: Foreign currency adjustments, net |
|
|
2,372 |
|
|
(34) |
|
|
1,237 |
|
|
467 |
|
Adjusted EBITDA |
|
|
53,654 |
|
|
41,296 |
|
|
88,822 |
|
|
65,879 |
|
Foreign currency transaction adjustments, net |
|
|
(2,372) |
|
|
34 |
|
|
(1,237) |
|
|
(467) |
|
Depreciation and amortization, net (b) |
|
|
(11,436) |
|
|
(10,872) |
|
|
(22,157) |
|
|
(22,418) |
|
Charges due to streamlining initiatives, brand-exiting activities, acquisition related costs and loss on asset disposals and impairments, net (c) |
|
|
(638) |
|
|
(7,982) |
|
|
(844) |
|
|
(27,036) |
|
Joint venture contract termination fee |
|
|
— |
|
|
— |
|
|
— |
|
|
(26,000) |
|
Share-based compensation (d) |
|
|
(8,246) |
|
|
(6,753) |
|
|
(16,156) |
|
|
(12,756) |
|
Loss on settlement of note receivable |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,873) |
|
Interest expense, net |
|
|
(4,937) |
|
|
(5,344) |
|
|
(9,933) |
|
|
(8,708) |
|
Provision for income taxes |
|
|
1,466 |
|
|
1,130 |
|
|
3,020 |
|
|
2,931 |
|
Discontinued operations, net of income taxes |
|
|
2,214 |
|
|
(708) |
|
|
2,934 |
|
|
(2,370) |
|
Net Income (Loss) |
|
$ |
26,773 |
|
$ |
8,541 |
|
$ |
38,409 |
|
$ |
(46,680) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Amounts do not include equity in the losses of equity method investees of $2,007 and $2,016 for the three months ended July 2, 2016 and July 4, 2015, respectively, and equity in the losses of equity method investees of $3,248 and $2,754 for the six months ended July 2, 2016 and July 4, 2015, respectively. |
|
(b) |
Excludes amortization included in Interest expense, net. |
|
(c) |
Includes $0.1 million of joint venture restructuring expense included in equity losses for the three and six months ended July 4, 2015. |
|
(d) |
Includes share-based compensation expense of $0.2 million for the six months ended July 4, 2015, that was classified as restructuring. |