NEW YORK, Nov. 2, 2016
/PRNewswire/ -- Kate Spade & Company (NYSE: KATE)
today announced results for the third quarter ended
October 1, 2016.
Craig A. Leavitt, Chief Executive
Officer of Kate Spade & Company, said: "In the third quarter,
several macroeconomic factors, including a challenging retail
environment and continuing tourist headwinds, impacted our results.
That said, we are making solid progress on several strategies that
are continuing to drive growth in our business, which is reflected
in the consumer's strong response to our collections at full-price.
We remain focused on the factors we can control as we continue to
grow our business and execute our long-term strategy, maintaining
our commitment to become a $4 billion
business at retail."
George Carrara, President and
Chief Operating Officer of Kate Spade & Company, added: "In the
third quarter, we delivered direct-to-consumer comparable sales
growth of 7% and top-line growth of 15%. While gross margin
pressures have increased in our off-price business, we were able to
offset these conditions through strong expense controls. We expect
that these efforts, which enabled us to achieve Adjusted EBITDA
margin expansion for the third quarter, will help us achieve our
2016 guidance. We remain confident in our long-term strategy."
For the first nine months of 2016 on a GAAP basis, the Company
recorded income from continuing operations of $65 million, or $0.50 per diluted share, compared to a loss from
continuing operations for the first nine months of 2015 of
$(40) million, or $(0.31) per diluted share. Diluted earnings per
share from continuing operations in the first nine months of 2016
were $0.29, using a normalized tax
rate, compared to Adjusted diluted earnings per share of
$0.15 in the first nine months of
2015. Net sales for the first nine months of 2016 were $911 million, an increase of $97 million, or 11.9%, compared to the first nine
months of 2015. Net sales for the first nine months of 2016
increased $123 million, or 15.6%,
excluding sales for wind-down operations for the first nine months
of 2015. Adjusted EBITDA was $143
million for the first nine months of 2016, compared to
Adjusted EBITDA, excluding wind-down operations of $105 million for the first nine months of
2015.
THIRD QUARTER RESULTS
Overall Results
Net sales for the third quarter of 2016 were $317 million, an increase of $39 million, or 14.1% compared to the third
quarter of 2015. Net sales for the third quarter of 2016 increased
$41 million, or 15.0%, excluding
sales for wind-down operations for the third quarter of 2015. Third
quarter 2016 direct-to-consumer comparable sales growth was 6.7%,
or flat excluding eCommerce. Comparable sales per square foot for
kate spade new york stores were $1,615 for the latest twelve months, compared to
$1,619 for the twelve month period
ended July 2, 2016.
Gross profit as a percentage of net sales was 59.4% for
the third quarter of 2016, compared to 61.2% for the third quarter
of 2015.
Selling, general & administrative expenses were
$151 million, or 47.7% of net sales
in the third quarter of 2016, compared to $157 million, or 56.8% of net sales in the third
quarter of 2015. Selling, general & administrative
expenses in the third quarter of 2015 were $150 million, or 54.3% of net sales, excluding
the results of wind-down operations and expenses associated with
streamlining activities.
Income from continuing operations was $30 million, or $0.23 per diluted share in the third quarter of
2016, compared to $5 million, or
$0.04 per diluted share, in the third
quarter of 2015. Diluted earnings per share from continuing
operations in the third quarter of 2016 using a normalized tax rate
were $0.13, compared to adjusted
diluted earnings per share of $0.06
in the third quarter of 2015.
Segment Highlights
- Kate Spade North America
net sales for the third quarter of 2016 were $260 million, an increase of $31 million, or 13.7% compared to the third
quarter of 2015. Net sales for the third quarter of 2016 increased
$31 million, or 13.8%, excluding
sales for wind-down operations for the third quarter of 2015. Kate
Spade North America Segment Adjusted EBITDA was $47 million (18.1% of net sales) for the third
quarter of 2016 compared to $31
million (13.4% of net sales) for the third quarter of 2015.
Segment Adjusted EBITDA Excluding Wind-Down Operations was
$31 million (13.5% of adjusted net
sales) for the third quarter of 2015.
- Kate Spade International net sales for the third quarter
of 2016 were $51 million, an increase
of $8 million, or 18.9% compared to
the third quarter of 2015. Net sales for the third quarter of 2016
increased $10 million, or 24.3%,
excluding sales for wind-down operations for the third quarter of
2015. Kate Spade International Segment Adjusted EBITDA was
$5 million for the third quarter of
2016 and 2015 (10.4% and 11.2% of net sales, respectively). Segment
Adjusted EBITDA Excluding Wind-Down Operations was $5 million (12.0% of adjusted net sales) for the
third quarter of 2015.
- Adelington Design Group net sales for the third quarter
of 2016 were $6 million, a decrease
of (2.2)% compared to the third quarter of 2015. Adelington Design
Group Segment Adjusted EBITDA was $1
million for the third quarter of 2016 and 2015 (18.7% and
18.9% of net sales, respectively). Segment Adjusted EBITDA
Excluding Wind-Down Operations was $1
million (15.6% of net sales) for the third quarter of
2015.
Store Count Information
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2016
|
|
|
|
|
|
Q2 2016
|
|
Net Store Openings
|
|
Q3 2016
|
|
|
North America
Owned Stores
|
|
|
|
|
|
|
|
|
Specialty
|
|
108
|
|
-
|
|
108
|
|
|
Outlet
|
|
65
|
|
2
|
|
67
|
|
|
Total North
America Owned Stores
|
|
173
|
|
2
|
|
175
|
|
|
Average Square
Feet (in '000s)
|
|
391
|
|
|
|
403
|
|
|
|
|
|
|
|
|
|
|
International
Owned Stores
|
|
|
|
|
|
|
|
|
Specialty
|
|
25
|
|
-
|
|
25
|
|
|
Outlet
|
|
14
|
|
-
|
|
14
|
|
|
Concessions
|
|
55
|
|
(1)
|
|
54
|
|
|
Total
International Owned Stores
|
|
94
|
|
(1)
|
|
93
|
|
|
Average Square
Feet (in '000s)
|
|
87
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
Total Owned Store
Count
|
|
267
|
|
1
|
|
268
|
|
|
Average Owned
Square Feet (in '000s)
|
|
478
|
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
Partner Operated
Stores
|
|
87
|
|
5
|
|
92
|
|
|
Greater China Joint
Venture Stores
|
|
43
|
|
(1)
|
|
42
|
|
|
Total Partnered
Store Count
|
|
130
|
|
4
|
|
134
|
|
|
|
|
|
|
|
|
|
|
Total Store
Count
|
|
397
|
|
5
|
|
402
|
|
|
|
|
|
|
|
|
|
|
Total Licensee
Operated Partnered Stores
|
|
29
|
|
-
|
|
29
|
|
|
|
|
|
|
|
|
|
|
Total Store
Footprint
|
|
426
|
|
5
|
|
431
|
|
2016 GUIDANCE
The Company expects the following:
|
|
|
|
Net Sales
|
|
$1.370B -
$1.400B
|
|
Adjusted EBITDA
*
|
|
$242M -
$260M
|
|
Diluted Earnings Per
Share **
|
|
$0.63 -
$0.70
|
|
DTC Comparable Sales
Growth
|
|
high single-digit to
low double-digit growth
|
|
Capital
Expenditures
|
|
$65M -
$70M
|
|
Planned Net New Store
Openings (Company Owned & Partners)
|
|
~ 40 - 45
|
|
2015 Year End NOL
Balance
|
|
$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
|
|
|
|
|
|
|
|
Range
|
|
|
In millions,
except per common share data
|
|
|
|
|
|
|
2016 Adjusted EBITDA
*
|
|
$242
|
-
|
$260
|
|
|
Less: Share-based
compensation, net **
|
|
33
|
-
|
34
|
|
|
Depreciation
and amortization, net
|
|
52
|
-
|
54
|
|
|
Interest
expense, net
|
|
21
|
-
|
21
|
|
|
Pretax
income
|
|
136
|
-
|
151
|
|
|
Provision for
income taxes at 40% rate
|
|
54
|
-
|
60
|
|
|
Income from
continuing operations
|
|
$82
|
-
|
$91
|
|
|
Diluted shares
outstanding
|
|
130
|
|
130
|
|
|
Diluted EPS assuming
40% tax rate
|
|
$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 third
quarter 2016. The dial-in number is 1-888-694-4676 with pass code
87844308. 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 third quarter 2016, to be filed with the
Securities and Exchange Commission.
The Company expects to report fourth quarter 2016 financial
results on Thursday, February 23, 2017.
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. The Company presents
the below-described Adjusted EBITDA measures, 2016 results using a
normalized tax rate and 2015 adjusted results 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.
Adjusted income (loss) from continuing operations and Adjusted
EBITDA for the third quarter and first nine months 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. 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
presentation of its 2015 results that will provide investors with a
means to compare those results 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 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
presentation of its 2015 results that will provide investors with a
means to compare those results to its 2016 results. The Company
presents non-GAAP financial measures because it uses such measures
to monitor the performance of its business on a comparable basis
and to determine certain levels of compensation. The Company
believes the presentation of these measures enhances the ability of
its investors to analyze trends in its business and provides them
with a means to compare periods that may be affected by various
items that might obscure trends or developments in its business.
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.
|
KATE SPADE &
COMPANY
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
(All amounts in
thousands, except per common share data)
|
|
|
|
Three Months
Ended
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
October 1, 2016
|
|
% of
|
|
October 3, 2015
|
|
% of
|
|
|
(13
Weeks)
|
|
Sales
|
|
(13
Weeks)
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
$
|
316,528
|
|
100.0
|
%
|
|
$
|
277,328
|
|
100.0
|
%
|
|
Cost of goods
sold
|
|
|
128,600
|
|
40.6
|
%
|
|
|
107,514
|
|
38.8
|
%
|
|
Gross
Profit
|
|
|
187,928
|
|
59.4
|
%
|
|
|
169,814
|
|
61.2
|
%
|
|
Selling, general &
administrative expenses
|
|
|
150,826
|
|
47.7
|
%
|
|
|
157,497
|
|
56.8
|
%
|
|
Operating
Income
|
|
|
37,102
|
|
11.7
|
%
|
|
|
12,317
|
|
4.4
|
%
|
|
Other expense,
net
|
|
|
(2,735)
|
|
(0.9)
|
%
|
|
|
(1,560)
|
|
(0.6)
|
%
|
|
Interest expense,
net
|
|
|
(4,920)
|
|
(1.6)
|
%
|
|
|
(5,274)
|
|
(1.9)
|
%
|
|
Income Before
(Benefit) Provision for Income Taxes
|
|
|
29,447
|
|
9.3
|
%
|
|
|
5,483
|
|
2.0
|
%
|
|
(Benefit) provision
for income taxes
|
|
|
(56)
|
|
—
|
|
|
|
973
|
|
0.4
|
%
|
|
Income from
Continuing Operations
|
|
|
29,503
|
|
9.3
|
%
|
|
|
4,510
|
|
1.6
|
%
|
|
Discontinued
operations, net of income taxes
|
|
|
123
|
|
|
|
|
|
(2,207)
|
|
|
|
|
Net
Income
|
|
$
|
29,626
|
|
|
|
|
$
|
2,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing
Operations
|
|
$
|
0.23
|
|
|
|
|
$
|
0.04
|
|
|
|
|
Net Income
|
|
$
|
0.23
|
|
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing
Operations
|
|
$
|
0.23
|
|
|
|
|
$
|
0.04
|
|
|
|
|
Net Income
|
|
$
|
0.23
|
|
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares, Basic
|
|
|
128,101
|
|
|
|
|
|
127,682
|
|
|
|
|
Weighted Average
Shares, Diluted
|
|
|
129,451
|
|
|
|
|
|
128,118
|
|
|
|
|
KATE SPADE &
COMPANY
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
(All amounts in
thousands, except per common share data)
|
|
|
|
Nine Months
Ended
|
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
October 1, 2016
|
|
% of
|
|
October 3, 2015
|
|
% of
|
|
|
(39
Weeks)
|
|
Sales
|
|
(39
Weeks)
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
$
|
910,641
|
|
100.0
|
%
|
|
$
|
813,762
|
|
100.0
|
%
|
|
Cost of goods
sold
|
|
|
362,526
|
|
39.8
|
%
|
|
|
317,743
|
|
39.0
|
%
|
|
Gross
Profit
|
|
|
548,115
|
|
60.2
|
%
|
|
|
496,019
|
|
61.0
|
%
|
|
Selling, general &
administrative expenses
|
|
|
459,245
|
|
50.4
|
%
|
|
|
503,282
|
|
61.8
|
%
|
|
Operating Income
(Loss)
|
|
|
88,870
|
|
9.8
|
%
|
|
|
(7,263)
|
|
(0.9)
|
%
|
|
Other expense,
net
|
|
|
(6,075)
|
|
(0.7)
|
%
|
|
|
(4,778)
|
|
(0.6)
|
%
|
|
Loss on settlement of
note receivable
|
|
|
—
|
|
—
|
|
|
|
(9,873)
|
|
(1.2)
|
%
|
|
Interest expense,
net
|
|
|
(14,853)
|
|
(1.6)
|
%
|
|
|
(13,982)
|
|
(1.7)
|
%
|
|
Income (Loss)
Before Provision for Income Taxes
|
|
|
67,942
|
|
7.5
|
%
|
|
|
(35,896)
|
|
(4.4)
|
%
|
|
Provision for income
taxes
|
|
|
2,964
|
|
0.3
|
%
|
|
|
3,904
|
|
0.5
|
%
|
|
Income (Loss) from
Continuing Operations
|
|
|
64,978
|
|
7.1
|
%
|
|
|
(39,800)
|
|
(4.9)
|
%
|
|
Discontinued
operations, net of income taxes
|
|
|
3,057
|
|
|
|
|
|
(4,577)
|
|
|
|
|
Net Income
(Loss)
|
|
$
|
68,035
|
|
|
|
|
$
|
(44,377)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
Continuing Operations
|
|
$
|
0.51
|
|
|
|
|
$
|
(0.31)
|
|
|
|
|
Net Income
(Loss)
|
|
$
|
0.53
|
|
|
|
|
$
|
(0.35)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
Continuing Operations
|
|
$
|
0.50
|
|
|
|
|
$
|
(0.31)
|
|
|
|
|
Net Income
(Loss)
|
|
$
|
0.53
|
|
|
|
|
$
|
(0.35)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares, Basic
|
|
|
128,011
|
|
|
|
|
|
127,611
|
|
|
|
|
Weighted Average
Shares, Diluted (a)
|
|
|
129,077
|
|
|
|
|
|
127,611
|
|
|
|
|
__________________________________
|
|
(a)
|
Because the Company
incurred a loss from continuing operations for the nine months
ended October 3, 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)
|
|
|
|
October 1, 2016
|
|
October 3, 2015
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
308,101
|
|
$
|
219,659
|
|
|
Accounts receivable -
trade, net
|
|
|
69,735
|
|
|
58,893
|
|
|
Inventories,
net
|
|
|
262,622
|
|
|
248,407
|
|
|
Other current
assets
|
|
|
36,588
|
|
|
35,524
|
|
|
Total current
assets
|
|
|
677,046
|
|
|
562,483
|
|
|
|
|
|
|
|
|
|
|
Property and
Equipment, Net
|
|
|
179,272
|
|
|
177,333
|
|
|
Goodwill
|
|
|
56,654
|
|
|
48,790
|
|
|
Intangibles,
Net
|
|
|
86,851
|
|
|
87,204
|
|
|
Other
Assets
|
|
|
51,128
|
|
|
41,491
|
|
|
Total
Assets
|
|
$
|
1,050,951
|
|
$
|
917,301
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
3,628
|
|
$
|
3,609
|
|
|
Other current
liabilities
|
|
|
240,104
|
|
|
279,159
|
|
|
Total current
liabilities
|
|
|
243,732
|
|
|
282,768
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Debt
|
|
|
390,604
|
|
|
393,017
|
|
|
Other Non-Current
Liabilities
|
|
|
71,484
|
|
|
68,100
|
|
|
Stockholders'
Equity
|
|
|
345,131
|
|
|
173,416
|
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
1,050,951
|
|
$
|
917,301
|
|
|
KATE
SPADE & COMPANY
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(All amounts in
thousands)
|
|
|
|
Nine Months
Ended
|
|
|
|
October 1, 2016
|
|
October 3, 2015
|
|
|
|
(39
Weeks)
|
|
(39 Weeks)
|
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
68,035
|
|
$
|
(44,377)
|
|
|
Adjustments to arrive
at income (loss) from continuing operations
|
|
|
(3,057)
|
|
|
4,577
|
|
|
Income (loss) from
continuing operations
|
|
|
64,978
|
|
|
(39,800)
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile income (loss) from continuing operations to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
36,404
|
|
|
36,837
|
|
|
Loss on asset
disposals and impairments, including streamlining initiatives,
net
|
|
|
2,043
|
|
|
8,631
|
|
|
Share-based
compensation
|
|
|
22,228
|
|
|
19,440
|
|
|
Loss on settlement of
note receivable
|
|
|
—
|
|
|
9,873
|
|
|
Foreign currency
transaction (gains) losses, net
|
|
|
(5,936)
|
|
|
609
|
|
|
Equity losses of
equity investees
|
|
|
5,974
|
|
|
4,111
|
|
|
Other, net
|
|
|
40
|
|
|
(248)
|
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Decrease in accounts
receivable - trade, net
|
|
|
29,202
|
|
|
30,588
|
|
|
Increase in
inventories, net
|
|
|
(65,467)
|
|
|
(98,924)
|
|
|
(Increase) decrease in
other current and non-current assets
|
|
|
(4,215)
|
|
|
7,740
|
|
|
Increase in accounts
payable
|
|
|
9,999
|
|
|
46,642
|
|
|
Decrease in accrued
expenses and other non-current liabilities
|
|
|
(34,244)
|
|
|
(7,512)
|
|
|
Net change in income
tax assets and liabilities
|
|
|
764
|
|
|
1,331
|
|
|
Net cash used in
operating activities of discontinued operations
|
|
|
(1,302)
|
|
|
(10,845)
|
|
|
Net cash provided by
operating activities
|
|
|
60,468
|
|
|
8,473
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from sales of
property and equipment
|
|
|
—
|
|
|
816
|
|
|
Purchases of property
and equipment
|
|
|
(37,031)
|
|
|
(40,775)
|
|
|
Proceeds from sales of
joint venture interests, net
|
|
|
(2,350)
|
|
|
19,874
|
|
|
Investments in and
advances to equity investees
|
|
|
(6,500)
|
|
|
(5,000)
|
|
|
Payment for joint
venture interest
|
|
|
—
|
|
|
(10,000)
|
|
|
Payments for in-store
merchandise shops
|
|
|
(1,478)
|
|
|
(4,858)
|
|
|
Net proceeds from
settlement of note receivable
|
|
|
—
|
|
|
75,128
|
|
|
Purchase of
trademarks
|
|
|
(1,200)
|
|
|
—
|
|
|
Other, net
|
|
|
—
|
|
|
347
|
|
|
Net cash provided by
investing activities of discontinued operations
|
|
|
—
|
|
|
668
|
|
|
Net cash (used in)
provided by investing activities
|
|
|
(48,559)
|
|
|
36,200
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
(3,000)
|
|
|
Principal payments
under capital lease obligations
|
|
|
(380)
|
|
|
(339)
|
|
|
Proceeds from exercise
of stock options
|
|
|
2,365
|
|
|
2,428
|
|
|
Payment of deferred
financing fees
|
|
|
(835)
|
|
|
(1,159)
|
|
|
Net cash used in
financing activities
|
|
|
(1,850)
|
|
|
(8,070)
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash and Cash Equivalents
|
|
|
191
|
|
|
(988)
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
|
|
10,250
|
|
|
35,615
|
|
|
Cash and Cash
Equivalents at Beginning of Period
|
|
|
297,851
|
|
|
184,044
|
|
|
Cash and Cash
Equivalents at End of Period
|
|
$
|
308,101
|
|
$
|
219,659
|
|
|
KATE
SPADE & COMPANY
|
|
RECONCILIATION OF
NON-GAAP FINANCIAL INFORMATION
|
|
(All amounts in
thousands, except per common share data)
|
|
|
|
Three Months
Ended
|
|
|
|
October 1, 2016
|
|
|
|
(13
Weeks)
|
|
|
|
|
|
|
|
Total Net
Sales
|
|
$
|
316,528
|
|
|
KATE SPADE North
America
|
|
|
259,734
|
|
|
KATE SPADE
International
|
|
|
50,958
|
|
|
Adelington Design
Group
|
|
|
5,836
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
187,928
|
|
|
|
|
|
|
|
SG&A
|
|
|
150,826
|
|
|
|
|
|
|
|
Operating
Income
|
|
$
|
37,102
|
|
|
|
|
|
|
|
Other expense,
net
|
|
|
(2,735)
|
|
|
Interest expense,
net
|
|
|
(4,920)
|
|
|
Benefit for income
taxes
|
|
|
(56)
|
|
|
Income from
Continuing Operations
|
|
$
|
29,503
|
|
|
|
|
|
|
|
Discontinued
operations, net of income taxes
|
|
|
123
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
29,626
|
|
|
|
|
|
|
|
Basic Earnings per
Common Share from Continuing Operations
|
|
$
|
0.23
|
|
|
Diluted Earnings per
Common Share from Continuing Operations
|
|
$
|
0.23
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Income from Continuing Operations:
|
|
|
|
|
|
Net Income, per
above
|
|
$
|
29,626
|
|
|
Less: discontinued
operations, net of income taxes
|
|
|
(123)
|
|
|
Adjustment to
provision for income taxes
|
|
|
(13,031)
|
|
|
Adjusted Income
from Continuing Operations (a)
|
|
$
|
16,472
|
|
|
|
|
|
|
|
Adjusted Basic
Earnings per Common Share from Continuing Operations
|
|
$
|
0.13
|
|
|
Adjusted Diluted
Earnings per Common Share from Continuing Operations
(b)
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA:
|
|
|
|
|
|
Net Income, per
above
|
|
$
|
29,626
|
|
|
Adjustments:
|
|
|
|
|
|
Depreciation and
amortization, asset impairments and losses on asset disposals, net
(c)
|
|
|
12,886
|
|
|
Share-based
compensation
|
|
|
6,072
|
|
|
Foreign currency
adjustments, net
|
|
|
584
|
|
|
Interest expense,
net
|
|
|
4,920
|
|
|
Benefit for income
taxes
|
|
|
56
|
|
|
Discontinued
operations, net of income taxes
|
|
|
(123)
|
|
|
Adjusted
EBITDA
|
|
$
|
53,909
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
Reportable Segments
Adjusted EBITDA (d):
|
|
|
|
|
|
KATE SPADE North
America
|
|
$
|
46,958
|
|
|
KATE SPADE
International (e)
|
|
|
5,287
|
|
|
Adelington Design
Group
|
|
|
1,089
|
|
|
Other
(f)
|
|
|
575
|
|
|
Adjusted
EBITDA
|
|
$
|
53,909
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin
|
|
|
|
|
|
KATE SPADE North
America
|
|
|
18.1
|
%
|
|
KATE SPADE
International (e)
|
|
|
10.4
|
%
|
|
Adelington Design
Group
|
|
|
18.7
|
%
|
|
Kate
Spade & Company
|
|
|
17.0
|
%
|
|
__________________________________
|
|
(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 October 1, 2016 are
based on 129,451 shares outstanding.
|
|
(c)
|
Excludes amortization
included in Interest expense, net.
|
|
(d)
|
Segment Adjusted
EBITDA excludes (i) depreciation and amortization and (ii) losses
on asset disposals and impairments. The costs of all corporate
departments that serve the respective segment are fully allocated,
other than non-cash share-based compensation expense. 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.
|
|
(e)
|
Amounts include
equity in the losses of equity method investees of
$2,726.
|
|
(f)
|
Amount is Other
expense, net as shown above, net of foreign currency transaction
adjustment of $584 and equity in the losses of equity method
investees of $2,726.
|
|
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
October 3, 2015 (13 Weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net
Sales
|
|
$
|
277,328
|
|
|
|
|
$
|
277,328
|
|
$
|
(2,058)
|
|
$
|
275,270
|
|
|
KATE SPADE North
America
|
|
|
228,493
|
|
|
|
|
|
228,493
|
|
|
(187)
|
|
|
228,306
|
|
|
KATE SPADE
International
|
|
|
42,870
|
|
|
|
|
|
42,870
|
|
|
(1,871)
|
|
|
40,999
|
|
|
Adelington Design
Group
|
|
|
5,965
|
|
|
|
|
|
5,965
|
|
|
—
|
|
|
5,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
169,814
|
|
|
|
|
|
169,814
|
|
|
(1,259)
|
|
|
168,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
|
157,497
|
|
$
|
(6,684)
|
|
|
150,813
|
|
|
(1,230)
|
|
|
149,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
$
|
12,317
|
|
$
|
6,684
|
|
$
|
19,001
|
|
$
|
(29)
|
|
$
|
18,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense,
net
|
|
|
(1,560)
|
|
|
443
|
|
|
(1,117)
|
|
|
|
|
|
(1,117)
|
|
|
Interest expense,
net
|
|
|
(5,274)
|
|
|
|
|
|
(5,274)
|
|
|
|
|
|
(5,274)
|
|
|
Provision for income
taxes (e)
|
|
|
973
|
|
|
4,137
|
|
|
5,110
|
|
|
(12)
|
|
|
5,098
|
|
|
Income from
Continuing Operations
|
|
$
|
4,510
|
|
$
|
2,990
|
|
$
|
7,500
|
|
$
|
(17)
|
|
$
|
7,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations, net of income taxes
|
|
|
(2,207)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
2,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per
Common Share from Continuing Operations
|
|
$
|
0.04
|
|
|
|
|
$
|
0.06
|
|
|
|
|
$
|
0.06
|
|
|
Diluted Earnings per
Common Share from Continuing Operations (f)
|
|
$
|
0.04
|
|
|
|
|
$
|
0.06
|
|
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income, per
above
|
|
$
|
2,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense,
net
|
|
|
1,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
5,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
(973)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations, net of income taxes
|
|
|
2,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
$
|
12,317
|
|
$
|
6,684
|
|
$
|
19,001
|
|
$
|
(29)
|
|
$
|
18,972
|
|
|
Depreciation and
amortization, asset impairments and losses on asset disposals, net
(g)
|
|
|
|
|
|
|
|
|
11,974
|
|
|
(2)
|
|
|
11,972
|
|
|
Share-based
compensation, net (h)
|
|
|
|
|
|
|
|
|
6,573
|
|
|
|
|
|
6,573
|
|
|
Other expense, net
(i)
|
|
|
|
|
|
|
|
|
(1,087)
|
|
|
|
|
|
(1,087)
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
$
|
36,461
|
|
$
|
(31)
|
|
$
|
36,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
Adjusted EBITDA (j):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North
America
|
|
|
|
|
|
|
|
$
|
30,713
|
|
$
|
52
|
|
$
|
30,765
|
|
|
KATE SPADE
International (k)
|
|
|
|
|
|
|
|
|
4,793
|
|
|
116
|
|
|
4,909
|
|
|
Adelington Design
Group
|
|
|
|
|
|
|
|
|
1,127
|
|
|
(199)
|
|
|
928
|
|
|
Other
(l)
|
|
|
|
|
|
|
|
|
(172)
|
|
|
|
|
|
(172)
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
$
|
36,461
|
|
$
|
(31)
|
|
$
|
36,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North
America
|
|
|
|
|
|
|
|
|
13.4
|
%
|
|
|
|
|
13.5
|
%
|
|
KATE SPADE
International (k)
|
|
|
|
|
|
|
|
|
11.2
|
%
|
|
|
|
|
12.0
|
%
|
|
Adelington Design
Group
|
|
|
|
|
|
|
|
|
18.9
|
%
|
|
|
|
|
15.6
|
%
|
|
Kate
Spade & Company
|
|
|
|
|
|
|
|
|
13.1
|
%
|
|
|
|
|
13.2
|
%
|
|
__________________________________
|
|
(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 $7,030; and
(ii) store closure, other brand-exiting and acquisition related
credits of $(346).
|
|
(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 October 3, 2015 are
based on 128,118 shares outstanding.
|
|
(g)
|
Excludes amortization
included in Interest expense, net.
|
|
(h)
|
Excludes $0.1 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 $30 and restructuring charges of $443
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; and (iii) losses on asset disposals and
impairments. The costs of all corporate departments that serve the
respective segment are fully allocated, other than non-cash
share-based compensation expense. 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.
|
|
(k)
|
Amounts include
equity in the adjusted losses of equity method investees of
$915.
|
|
(l)
|
Amount is reported
Other expense, net as shown above, net of foreign currency
transaction adjustment of $30 and equity in the losses of equity
method investees of $1,358.
|
|
KATE
SPADE & COMPANY
|
|
RECONCILIATION OF
NON-GAAP FINANCIAL INFORMATION
|
|
(All amounts in
thousands, except per common share data)
|
|
|
|
Nine Months
Ended
|
|
|
|
October 1, 2016
|
|
|
|
(39
Weeks)
|
|
|
|
|
|
|
|
Total Net
Sales
|
|
$
|
910,641
|
|
|
KATE SPADE North
America
|
|
|
749,789
|
|
|
KATE SPADE
International
|
|
|
143,258
|
|
|
Adelington Design
Group
|
|
|
17,594
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
548,115
|
|
|
|
|
|
|
|
SG&A
|
|
|
459,245
|
|
|
|
|
|
|
|
Operating
Income
|
|
$
|
88,870
|
|
|
|
|
|
|
|
Other expense,
net
|
|
|
(6,075)
|
|
|
Interest expense,
net
|
|
|
(14,853)
|
|
|
Provision for income
taxes
|
|
|
2,964
|
|
|
Income from
Continuing Operations
|
|
$
|
64,978
|
|
|
|
|
|
|
|
Discontinued
operations, net of income taxes
|
|
|
3,057
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
68,035
|
|
|
|
|
|
|
|
Basic Earnings per
Common Share from Continuing Operations
|
|
$
|
0.51
|
|
|
Diluted Earnings per
Common Share from Continuing Operations
|
|
$
|
0.50
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Income from Continuing Operations:
|
|
|
|
|
|
Net Income, per
above
|
|
$
|
68,035
|
|
|
Less: discontinued
operations, net of income taxes
|
|
|
(3,057)
|
|
|
Adjustment to
provision for income taxes
|
|
|
(26,907)
|
|
|
Adjusted Income
from Continuing Operations (a)
|
|
$
|
38,071
|
|
|
|
|
|
|
|
Adjusted Basic
Earnings per Common Share from Continuing Operations
|
|
$
|
0.30
|
|
|
Adjusted Diluted
Earnings per Common Share from Continuing Operations
(b)
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA:
|
|
|
|
|
|
Net Income, per
above
|
|
$
|
68,035
|
|
|
Adjustments:
|
|
|
|
|
|
Depreciation and
amortization, asset impairments and losses on asset disposals, net
(c)
|
|
|
35,887
|
|
|
Share-based
compensation
|
|
|
22,228
|
|
|
Foreign currency
adjustments, net
|
|
|
1,821
|
|
|
Interest expense,
net
|
|
|
14,853
|
|
|
Provision for income
taxes
|
|
|
(2,964)
|
|
|
Discontinued
operations, net of income taxes
|
|
|
(3,057)
|
|
|
Adjusted
EBITDA
|
|
$
|
142,731
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
Reportable Segments
Adjusted EBITDA (d):
|
|
|
|
|
|
KATE SPADE North
America
|
|
$
|
118,938
|
|
|
KATE SPADE
International (e)
|
|
|
17,877
|
|
|
Adelington Design
Group
|
|
|
4,196
|
|
|
Other
(f)
|
|
|
1,720
|
|
|
Adjusted
EBITDA
|
|
$
|
142,731
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin
|
|
|
|
|
|
KATE SPADE North
America
|
|
|
15.9
|
%
|
|
KATE SPADE
International (e)
|
|
|
12.5
|
%
|
|
Adelington Design
Group
|
|
|
23.8
|
%
|
|
Kate
Spade & Company
|
|
|
15.7
|
%
|
|
__________________________________
|
|
|
|
|
|
(a)
|
Adjusted amount
represents pretax income multiplied by a normalized tax rate of
40.0%, plus $0.3 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 nine months ended October 1, 2016 are
based on 129,077 shares outstanding.
|
|
(c)
|
Excludes amortization
included in Interest expense, net.
|
|
(d)
|
Segment Adjusted
EBITDA excludes (i) depreciation and amortization and (ii) losses
on asset disposals and impairments. The costs of all corporate
departments that serve the respective segment are fully allocated,
other than non-cash share-based compensation expense. 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.
|
|
(e)
|
Amounts include
equity in the losses of equity method investees of
$5,974.
|
|
(f)
|
Amount is Other
expense, net as shown above, net of foreign currency transaction
adjustment of $1,821 and equity in the losses of equity method
investees of $5,974.
|
|
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)
|
|
|
Nine Months Ended
October 3, 2015 (39 Weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net
Sales
|
|
$
|
813,762
|
|
|
|
|
$
|
813,762
|
|
$
|
(26,156)
|
|
$
|
787,606
|
|
|
KATE SPADE North
America
|
|
|
659,809
|
|
|
|
|
|
659,809
|
|
|
(12,980)
|
|
|
646,829
|
|
|
KATE SPADE
International
|
|
|
136,056
|
|
|
|
|
|
136,056
|
|
|
(11,459)
|
|
|
124,597
|
|
|
Adelington Design
Group
|
|
|
17,897
|
|
|
|
|
|
17,897
|
|
|
(1,717)
|
|
|
16,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
496,019
|
|
|
|
|
|
496,019
|
|
|
(11,127)
|
|
|
484,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
|
503,282
|
|
$
|
(58,744)
|
|
|
444,538
|
|
|
(14,807)
|
|
|
429,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (Loss)
Income
|
|
$
|
(7,263)
|
|
$
|
58,744
|
|
$
|
51,481
|
|
$
|
3,680
|
|
$
|
55,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense,
net
|
|
|
(4,778)
|
|
|
526
|
|
|
(4,252)
|
|
|
|
|
|
(4,252)
|
|
|
Loss on settlement of
note receivable
|
|
|
(9,873)
|
|
|
9,873
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Interest expense,
net
|
|
|
(13,982)
|
|
|
|
|
|
(13,982)
|
|
|
|
|
|
(13,982)
|
|
|
Provision for income
taxes (e)
|
|
|
3,904
|
|
|
9,603
|
|
|
13,507
|
|
|
1,472
|
|
|
14,979
|
|
|
(Loss) Income from
Continuing Operations
|
|
$
|
(39,800)
|
|
$
|
59,540
|
|
$
|
19,740
|
|
$
|
2,208
|
|
$
|
21,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations, net of income taxes
|
|
|
(4,577)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(44,377)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per
Common Share from Continuing Operations
|
|
$
|
(0.31)
|
|
|
|
|
$
|
0.15
|
|
|
|
|
$
|
0.17
|
|
|
Diluted Earnings per
Common Share from Continuing Operations (f)
|
|
$
|
(0.31)
|
|
|
|
|
$
|
0.15
|
|
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, per
above
|
|
$
|
(44,377)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense,
net
|
|
|
4,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of
note receivable
|
|
|
9,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
13,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
(3,904)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations, net of income taxes
|
|
|
4,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (Loss)
Income
|
|
$
|
(7,263)
|
|
$
|
58,744
|
|
$
|
51,481
|
|
$
|
3,680
|
|
$
|
55,161
|
|
|
Depreciation and
amortization, asset impairments and losses on
asset disposals, net (g)
|
|
|
|
|
|
|
|
|
35,480
|
|
|
(550)
|
|
|
34,930
|
|
|
Share-based
compensation, net (h)
|
|
|
|
|
|
|
|
|
19,134
|
|
|
|
|
|
19,134
|
|
|
Other expense, net
(i)
|
|
|
|
|
|
|
|
|
(3,755)
|
|
|
|
|
|
(3,755)
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
$
|
102,340
|
|
$
|
3,130
|
|
$
|
105,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
Adjusted EBITDA (j):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North
America
|
|
|
|
|
|
|
|
$
|
86,566
|
|
$
|
2,931
|
|
$
|
89,497
|
|
|
KATE SPADE
International (k)
|
|
|
|
|
|
|
|
|
13,215
|
|
|
475
|
|
|
13,690
|
|
|
Adelington Design
Group
|
|
|
|
|
|
|
|
|
2,728
|
|
|
(276)
|
|
|
2,452
|
|
|
Other
(l)
|
|
|
|
|
|
|
|
|
(169)
|
|
|
|
|
|
(169)
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
$
|
102,340
|
|
$
|
3,130
|
|
$
|
105,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North
America
|
|
|
|
|
|
|
|
|
13.1
|
%
|
|
|
|
|
13.8
|
%
|
|
KATE SPADE
International (k)
|
|
|
|
|
|
|
|
|
9.7
|
%
|
|
|
|
|
11.0
|
%
|
|
Adelington Design
Group
|
|
|
|
|
|
|
|
|
15.2
|
%
|
|
|
|
|
15.2
|
%
|
|
Kate
Spade & Company
|
|
|
|
|
|
|
|
|
12.6
|
%
|
|
|
|
|
13.4
|
%
|
|
__________________________________
|
|
(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 $33,025;
(ii) store closure, other brand-exiting and acquisition related
credits of $(281); 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 $0.2 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.
|
|
(f)
|
Adjusted diluted
earnings per share for the nine months ended October 3, 2015 are
based on 128,208 shares outstanding.
|
|
(g)
|
Excludes amortization
included in Interest expense, net.
|
|
(h)
|
Excludes $0.3 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 $497 and restructuring charges of $526
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 nine months ended
October 3, 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,
other than non-cash share-based compensation expense. 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
$3,586.
|
|
(l)
|
Amount is reported
Other expense, net as shown above, net of foreign currency
transaction adjustment of $497 and equity in the losses of equity
method investees of $4,112.
|
|
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
|
|
|
|
|
|
|
|
|
October 1, 2016
|
|
October 3, 2015
|
|
Variance
|
|
|
|
(13
Weeks)
|
|
(13
Weeks)
|
|
$
|
|
%
|
|
|
Total
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as
reported
|
|
$
|
316,528
|
|
$
|
277,328
|
|
$
|
39,200
|
|
14.1
|
%
|
|
Less: Net sales for
wind-down operations (a)
|
|
|
—
|
|
|
(2,058)
|
|
|
|
|
|
|
|
Adjusted Net
Sales
|
|
$
|
316,528
|
|
$
|
275,270
|
|
$
|
41,258
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North
America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as
reported
|
|
$
|
259,734
|
|
$
|
228,493
|
|
$
|
31,241
|
|
13.7
|
%
|
|
Less: Net sales for
wind-down operations (a)
|
|
|
—
|
|
|
(187)
|
|
|
|
|
|
|
|
Adjusted Net
Sales
|
|
$
|
259,734
|
|
$
|
228,306
|
|
$
|
31,428
|
|
13.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as
reported
|
|
$
|
50,958
|
|
$
|
42,870
|
|
$
|
8,088
|
|
18.9
|
%
|
|
Less: Net sales for
wind-down operations (a)
|
|
|
—
|
|
|
(1,871)
|
|
|
|
|
|
|
|
Adjusted Net
Sales
|
|
$
|
50,958
|
|
$
|
40,999
|
|
$
|
9,959
|
|
24.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adelington Design
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as
reported
|
|
$
|
5,836
|
|
$
|
5,965
|
|
$
|
(129)
|
|
(2.2)
|
%
|
|
Less: Net sales for
wind-down operations (a)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Adjusted Net
Sales
|
|
$
|
5,836
|
|
$
|
5,965
|
|
$
|
(129)
|
|
(2.2)
|
%
|
|
__________________________________
|
|
(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.
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
October 1, 2016
|
|
October 3, 2015
|
|
Variance
|
|
|
|
(39
Weeks)
|
|
(39
Weeks)
|
|
$
|
|
%
|
|
|
Total
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as
reported
|
|
$
|
910,641
|
|
$
|
813,762
|
|
$
|
96,879
|
|
11.9
|
%
|
|
Less: Net sales for
wind-down operations (a)
|
|
|
—
|
|
|
(26,156)
|
|
|
|
|
|
|
|
Adjusted Net
Sales
|
|
$
|
910,641
|
|
$
|
787,606
|
|
$
|
123,035
|
|
15.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE North
America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as
reported
|
|
$
|
749,789
|
|
$
|
659,809
|
|
$
|
89,980
|
|
13.6
|
%
|
|
Less: Net sales for
wind-down operations (a)
|
|
|
—
|
|
|
(12,980)
|
|
|
|
|
|
|
|
Adjusted Net
Sales
|
|
$
|
749,789
|
|
$
|
646,829
|
|
$
|
102,960
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KATE SPADE
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as
reported (b)
|
|
$
|
143,258
|
|
$
|
136,056
|
|
$
|
7,202
|
|
5.3
|
%
|
|
Less: Net sales for
wind-down operations (a)
|
|
|
—
|
|
|
(11,459)
|
|
|
|
|
|
|
|
Adjusted Net Sales
(b)
|
|
$
|
143,258
|
|
$
|
124,597
|
|
$
|
18,661
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adelington Design
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales as
reported
|
|
$
|
17,594
|
|
$
|
17,897
|
|
$
|
(303)
|
|
(1.7)
|
%
|
|
Less: Net sales for
wind-down operations (a)
|
|
|
—
|
|
|
(1,717)
|
|
|
|
|
|
|
|
Adjusted Net
Sales
|
|
$
|
17,594
|
|
$
|
16,180
|
|
$
|
1,414
|
|
8.7
|
%
|
|
__________________________________
|
|
(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 nine months ended October 3, 2015 related to
the Hong Kong, Macau and Taiwan territories, which were converted
to a joint venture in the first quarter of 2015.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/kate-spade--company-reports-third-quarter-2016-results-300355451.html
SOURCE Kate Spade & Company