Kontoor Brands Announces Third Quarter 2019 Results
Third Quarter 2019 GAAP EPS of
Restructuring and cost-savings initiatives on track, fueling gross margin gains
“Third quarter 2019 results were in line with our expectations, as we continued to execute on our strategy of setting the foundation for long-term operational success,” said
Third Quarter 2019 Income Statement Review
This release refers to “adjusted” amounts that exclude the impact of restructuring and separation costs, changes in our business model, a non-cash impairment charge related to our Rock &
Revenue decreased 9 percent year-over-year to
Revenue declines during the quarter, compared with third quarter 2018 adjusted revenues, were primarily driven by three factors:
-
Proactive strategic quality-of-sales initiatives contributed 3 points to the decline, reflecting actions taken to exit an underperforming country and other global points of distribution, including select channels in
India ;
- Impacts of a major U.S. retailer bankruptcy in the fourth quarter of 2018, which represented about 2 points of the decline; and,
- Foreign currency headwinds that impacted revenues by approximately 1 point.
During the third quarter, U.S. revenue was
Wrangler® brand global revenue decreased 7 percent to
As expected, Lee® brand global revenues sequentially moderated in the third quarter, decreasing 8 percent to
Other global revenue (including non-branded
Gross margin increased 30 basis points to 40.1 percent on a reported basis. On an adjusted basis, gross margin was up 20 basis points to 40.9 percent. Increases were primarily due to the impacts of restructuring and quality-of-sales initiatives, as well as favorable channel mix, which more than offset the negative impact of strategic actions taken in
Selling, General & Administrative (SG&A) expenses were
Non-cash impairment of intangible asset represents a
Operating income on a reported basis was
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) on a reported basis was
Earnings per share was
Balance Sheet
The Company ended third quarter 2019 with
Consistent with our capital allocation strategy, during the third quarter of 2019, we paid our first regular quarterly cash dividend of
Inventory at the end of third quarter 2019 was
Full-Year 2019 Outlook
“We’ve made great progress and our strategic actions are on track,” Baxter said. “We remain confident that we will continue to drive improved profitability and generate significant cash flow in support of achieving our long-term annualized total shareholder return goal of 8 to 10 percent.”
In the back half of the year, actions in
Kontoor Brands’ outlook for the fiscal year ended
-
Adjusted EBITDA is now expected to be in the lower half of our previously announced range of
$340 million to $360 million , reflecting a high-single digit to low-double digit decline compared with full-year 2018 adjusted EBITDA. -
Revenue is still expected to exceed
$2.5 billion , reflecting a mid-single digit decline compared with full-year 2018 adjusted revenue. Excluding the negative impact of foreign currency exchange rates, impacts of a prior year U.S. retailer bankruptcy and strategic business exits, full-year 2019 revenue is expected to be relatively consistent with full-year 2018 adjusted revenue. The Company continues to expect second half revenue to improve relative to the first half of 2019, with the fourth quarter benefiting the most from strategic actions and the fourth quarter 2018 customer bankruptcy comparison. -
Capital Expenditures are still expected to range between
$55 million and $65 million , including approximately$30 million to $40 million to support the design and implementation of a global enterprise resource planning (ERP) system. As previously announced, the global ERP system implementation is expected to require approximately$80 million to $90 million of capital investment during a two-to-three-year period and is expected to result in significant efficiencies and cost savings, once fully implemented. -
Other full-year assumptions include an effectivetax rate of approximately 24 percent. Interest expense should be approximately
$40 million in 2019, or $60million on an annualized basis. -
We anticipate the total reduction in long-term debt for fiscal 2019 will be approximately
$100 million .
Reaffirmed 2020 to 2021 Financial Roadmap
- Revenue is expected to increase at a low-single digit compound annual growth rate (CAGR) over the period.
- Adjusted EBITDA is expected to increase at a mid-single digit CAGR over the period.
-
Capital Expenditures are expected to range between
$105 million and $110 million in aggregate over the two-year period.
Webcast Information
Non-GAAP Financial Measures
Adjusted Amounts - This release refers to “adjusted” amounts that exclude the impact of restructuring and separation costs, changes in our business model, a non-cash impairment charge related to our Rock &
Constant Currency - This release refers to “reported” amounts in accordance with GAAP, which include translation and transactional impacts from changes in foreign currency exchange rates. This release also refers to “constant currency” amounts, which exclude the translation impact of changes in foreign currency exchange rates.
Reconciliations of these non-GAAP measures to the most comparable GAAP measures are presented in the supplemental financial information included with this release that identifies and quantifies all reconciling adjustments and provides management's view of why this non-GAAP information is useful to investors. While management believes that these non-GAAP measures are useful in evaluating the business, this information should be viewed in addition to, and not as an alternate for, reported results under GAAP. The non-GAAP measures used by the Company in this release may be different from similarly titled measures used by other companies.
About
Forward-Looking Statements
Certain statements included in this release and attachments are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting
KONTOOR BRANDS, INC. |
||||||||||||||||||||
Condensed Consolidated and Combined Statements of Income |
||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||
|
|
Three Months Ended
|
|
% |
|
Nine Months Ended
|
|
% |
||||||||||||
(dollars in thousands) |
|
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
||||||||
Net revenues |
|
$ |
638,138 |
|
|
$ |
704,246 |
|
|
(9)% |
|
$ |
1,896,228 |
|
|
$ |
2,037,765 |
|
|
(7)% |
Costs and operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold |
|
382,181 |
|
|
424,053 |
|
|
(10)% |
|
1,157,383 |
|
|
1,203,259 |
|
|
(4)% |
||||
Selling, general and administrative expenses |
|
192,293 |
|
|
184,909 |
|
|
4% |
|
596,466 |
|
|
571,080 |
|
|
4% |
||||
Non-cash impairment of intangible asset |
|
32,636 |
|
|
— |
|
|
* |
|
32,636 |
|
|
— |
|
|
* |
||||
Total costs and operating expenses |
|
607,110 |
|
|
608,962 |
|
|
0% |
|
1,786,485 |
|
|
1,774,339 |
|
|
1% |
||||
Operating income |
|
31,028 |
|
|
95,284 |
|
|
(67)% |
|
109,743 |
|
|
263,426 |
|
|
(58)% |
||||
Interest income from former parent, net |
|
— |
|
|
2,104 |
|
|
(100)% |
|
3,762 |
|
|
5,415 |
|
|
(31)% |
||||
Interest expense |
|
(14,140 |
) |
|
(200 |
) |
|
* |
|
(21,876 |
) |
|
(981 |
) |
|
* |
||||
Interest income |
|
712 |
|
|
1,508 |
|
|
(53)% |
|
3,543 |
|
|
4,176 |
|
|
(15)% |
||||
Other expense, net |
|
(1,456 |
) |
|
(2,084 |
) |
|
(30)% |
|
(3,797 |
) |
|
(4,522 |
) |
|
(16)% |
||||
Income before income taxes |
|
16,144 |
|
|
96,612 |
|
|
(83)% |
|
91,375 |
|
|
267,514 |
|
|
(66)% |
||||
Income taxes |
|
1,642 |
|
|
25,594 |
|
|
(94)% |
|
23,474 |
|
|
56,342 |
|
|
(58)% |
||||
Net income |
|
$ |
14,502 |
|
|
$ |
71,018 |
|
|
(80)% |
|
$ |
67,901 |
|
|
$ |
211,172 |
|
|
(68)% |
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic |
|
$ |
0.26 |
|
|
$ |
1.25 |
|
|
|
|
$ |
1.20 |
|
|
$ |
3.73 |
|
|
|
Diluted |
|
$ |
0.25 |
|
|
$ |
1.25 |
|
|
|
|
$ |
1.19 |
|
|
$ |
3.73 |
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic |
|
56,694 |
|
|
56,648 |
|
|
|
|
56,663 |
|
|
56,648 |
|
|
|
||||
Diluted |
|
57,401 |
|
|
56,648 |
|
|
|
|
56,989 |
|
|
56,648 |
|
|
|
Basis of presentation: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to
* Calculation not meaningful
KONTOOR BRANDS, INC. |
||||||||||||
Condensed Consolidated and Combined Balance Sheets |
||||||||||||
(Unaudited) |
||||||||||||
(in thousands) |
|
September 2019 |
|
December 2018 |
|
September 2018 |
||||||
ASSETS |
|
|
|
|
|
|
||||||
Current assets |
|
|
|
|
|
|
||||||
Cash and equivalents |
|
$ |
40,804 |
|
|
$ |
96,776 |
|
|
$ |
93,135 |
|
Accounts receivable, net |
|
302,582 |
|
|
252,966 |
|
|
318,071 |
|
|||
Due from former parent, current |
|
— |
|
|
547,690 |
|
|
267,605 |
|
|||
Notes receivable from former parent |
|
— |
|
|
517,940 |
|
|
546,740 |
|
|||
Inventories |
|
545,426 |
|
|
473,812 |
|
|
540,936 |
|
|||
Other current assets |
|
73,162 |
|
|
52,014 |
|
|
48,906 |
|
|||
Total current assets |
|
961,974 |
|
|
1,941,198 |
|
|
1,815,393 |
|
|||
Due from former parent, noncurrent |
|
— |
|
|
611 |
|
|
1,100 |
|
|||
Property, plant and equipment, net |
|
126,963 |
|
|
138,449 |
|
|
141,346 |
|
|||
Operating lease assets |
|
96,590 |
|
|
— |
|
|
— |
|
|||
Intangible assets, net |
|
17,530 |
|
|
53,059 |
|
|
54,186 |
|
|||
Goodwill |
|
212,834 |
|
|
214,516 |
|
|
214,587 |
|
|||
Other assets |
|
169,874 |
|
|
110,632 |
|
|
116,698 |
|
|||
TOTAL ASSETS |
|
$ |
1,585,765 |
|
|
$ |
2,458,465 |
|
|
$ |
2,343,310 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
||||||
Current liabilities |
|
|
|
|
|
|
||||||
Short-term borrowings |
|
$ |
6,028 |
|
|
$ |
3,215 |
|
|
$ |
5,617 |
|
Current portion of long-term debt |
|
7,500 |
|
|
— |
|
|
— |
|
|||
Accounts payable |
|
149,685 |
|
|
134,129 |
|
|
163,375 |
|
|||
Due to former parent, current |
|
— |
|
|
16,140 |
|
|
69,542 |
|
|||
Notes payable to former parent |
|
— |
|
|
269,112 |
|
|
269,112 |
|
|||
Accrued liabilities |
|
190,353 |
|
|
194,228 |
|
|
178,109 |
|
|||
Operating lease liabilities, current |
|
35,992 |
|
|
— |
|
|
— |
|
|||
Total current liabilities |
|
389,558 |
|
|
616,824 |
|
|
685,755 |
|
|||
Operating lease liabilities, noncurrent |
|
64,328 |
|
|
— |
|
|
— |
|
|||
Other liabilities |
|
95,701 |
|
|
118,189 |
|
|
112,393 |
|
|||
Long-term debt |
|
980,607 |
|
|
— |
|
|
— |
|
|||
Commitments and contingencies |
|
|
|
|
|
|
||||||
Total liabilities |
|
1,530,194 |
|
|
735,013 |
|
|
798,148 |
|
|||
Total equity |
|
55,571 |
|
|
1,723,452 |
|
|
1,545,162 |
|
|||
TOTAL LIABILITIES AND EQUITY |
|
$ |
1,585,765 |
|
|
$ |
2,458,465 |
|
|
$ |
2,343,310 |
|
KONTOOR BRANDS, INC. |
||||||||
Condensed Consolidated and Combined Statements of Cash Flows |
||||||||
(Unaudited) |
||||||||
|
|
Nine Months Ended September |
||||||
(in thousands) |
|
2019 |
|
2018 |
||||
OPERATING ACTIVITIES |
|
|
|
|
||||
Net income |
|
$ |
67,901 |
|
|
$ |
211,172 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
23,020 |
|
|
23,669 |
|
||
Stock-based compensation |
|
19,192 |
|
|
14,012 |
|
||
Non-cash impairment of intangible asset |
|
32,636 |
|
|
— |
|
||
Due from former parent |
|
548,301 |
|
|
(47,090 |
) |
||
Due to former parent |
|
(16,065 |
) |
|
31,525 |
|
||
Other, net |
|
(95,210 |
) |
|
(188,119 |
) |
||
Cash provided by operating activities |
|
579,775 |
|
|
45,169 |
|
||
INVESTING ACTIVITIES |
|
|
|
|
||||
Capital expenditures |
|
(11,750 |
) |
|
(17,627 |
) |
||
Collection of notes receivable from former parent |
|
517,940 |
|
|
1,000 |
|
||
Other, net |
|
729 |
|
|
3,647 |
|
||
Cash provided (used) by investing activities |
|
506,919 |
|
|
(12,980 |
) |
||
FINANCING ACTIVITIES |
|
|
|
|
||||
Proceeds from issuance of long-term debt |
|
1,050,000 |
|
|
— |
|
||
Payment of debt issuance costs |
|
(12,993 |
) |
|
— |
|
||
Principal payments of long-term debt |
|
(50,000 |
) |
|
— |
|
||
Repayment of notes payable to former parent |
|
(269,112 |
) |
|
— |
|
||
Net transfers to former parent |
|
(1,814,682 |
) |
|
(19,373 |
) |
||
Dividends paid |
|
(31,763 |
) |
|
— |
|
||
Proceeds from issuance of Common Stock, net of shares withheld for taxes |
|
(1,908 |
) |
|
— |
|
||
Other, net |
|
(10,868 |
) |
|
1,733 |
|
||
Cash used by financing activities |
|
(1,141,326 |
) |
|
(17,640 |
) |
||
Effect of foreign currency rate changes on cash and cash equivalents |
|
(1,340 |
) |
|
(2,225 |
) |
||
Net change in cash and cash equivalents |
|
(55,972 |
) |
|
12,324 |
|
||
Cash and cash equivalents – beginning of period |
|
96,776 |
|
|
80,811 |
|
||
Cash and cash equivalents – end of period |
|
$ |
40,804 |
|
|
$ |
93,135 |
|
KONTOOR BRANDS, INC. |
||||||||||||
Supplemental Financial Information |
||||||||||||
Reportable Segment Information |
||||||||||||
(Unaudited) |
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
Three Months Ended September |
|
% Change |
|
% Change
|
||||||
(dollars in thousands) |
|
2019 |
|
2018 |
|
|
||||||
Segment revenues: |
|
|
|
|
|
|
|
|
||||
Wrangler |
|
$ |
367,206 |
|
|
$ |
395,613 |
|
|
(7)% |
|
(7)% |
Lee |
|
232,221 |
|
|
251,510 |
|
|
(8)% |
|
(6)% |
||
Other (b) |
|
38,711 |
|
|
57,123 |
|
|
(32)% |
|
(32)% |
||
Total segment revenues |
|
$ |
638,138 |
|
|
$ |
704,246 |
|
|
(9)% |
|
(8)% |
Segment profit: |
|
|
|
|
|
|
|
|
||||
Wrangler |
|
$ |
61,070 |
|
|
$ |
65,104 |
|
|
(6)% |
|
(6)% |
Lee |
|
30,156 |
|
|
36,107 |
|
|
(16)% |
|
(13)% |
||
Other (b) |
|
843 |
|
|
(1,339 |
) |
|
163% |
|
163% |
||
Total segment profit |
|
$ |
92,069 |
|
|
$ |
99,872 |
|
|
(8)% |
|
(6)% |
Non-cash impairment of intangible asset (c) |
|
(32,636 |
) |
|
— |
|
|
* |
|
* |
||
Corporate and other expenses |
|
(29,861 |
) |
|
(6,672 |
) |
|
348% |
|
348% |
||
Interest income from former parent, net |
|
— |
|
|
2,104 |
|
|
(100)% |
|
(100)% |
||
Interest expense |
|
(14,140 |
) |
|
(200 |
) |
|
* |
|
* |
||
Interest income |
|
712 |
|
|
1,508 |
|
|
(53)% |
|
(53)% |
||
Income before income taxes |
|
$ |
16,144 |
|
|
$ |
96,612 |
|
|
(83)% |
|
(82)% |
|
|
|
|
|
|
|
|
|
||||
|
|
Nine Months Ended September |
|
% Change |
|
% Change
|
||||||
|
|
2019 |
|
2018 |
|
|
||||||
Segment revenues: |
|
|
|
|
|
|
|
|
||||
Wrangler |
|
$ |
1,101,133 |
|
|
$ |
1,158,341 |
|
|
(5)% |
|
(4)% |
Lee |
|
680,660 |
|
|
731,244 |
|
|
(7)% |
|
(4)% |
||
Other (b) |
|
114,435 |
|
|
148,180 |
|
|
(23)% |
|
(23)% |
||
Total segment revenues |
|
$ |
1,896,228 |
|
|
$ |
2,037,765 |
|
|
(7)% |
|
(5)% |
Segment profit: |
|
|
|
|
|
|
|
|
||||
Wrangler |
|
$ |
141,715 |
|
|
$ |
195,720 |
|
|
(28)% |
|
(34)% |
Lee |
|
61,536 |
|
|
90,161 |
|
|
(32)% |
|
(30)% |
||
Other (b) |
|
(437 |
) |
|
(1,725 |
) |
|
* |
|
* |
||
Total segment profit |
|
$ |
202,814 |
|
|
$ |
284,156 |
|
|
(29)% |
|
(33)% |
Non-cash impairment of intangible asset (c) |
|
(32,636 |
) |
|
— |
|
|
* |
|
* |
||
Corporate and other expenses |
|
(64,232 |
) |
|
(25,252 |
) |
|
154% |
|
155% |
||
Interest income from former parent, net |
|
3,762 |
|
|
5,415 |
|
|
(31)% |
|
(31)% |
||
Interest expense |
|
(21,876 |
) |
|
(981 |
) |
|
* |
|
* |
||
Interest income |
|
3,543 |
|
|
4,176 |
|
|
(15)% |
|
(15)% |
||
Income before income taxes |
|
$ |
91,375 |
|
|
$ |
267,514 |
|
|
(66)% |
|
(70)% |
(a) Refer to constant currency definition on the following pages. |
(b) Other is included for purposes of reconciliation of revenues and profit, but the Other category is not considered a reportable segment. Other includes sales of (i) VF-branded products and third-party branded merchandise at VF OutletTM stores, (ii) Rock & Republic® branded apparel, (iii) products manufactured in our plants sold to VF and VF's use of our transportation fleet and (iv) services in fulfilling a transition services agreement related to VF's sale of its Nautica® brand business in mid-2018. Sales of Wrangler®and Lee® branded products at VF Outlet™ stores are not included in Other and are reported in the respective segments above. |
(c) Represents a $32.6 million impairment charge related to the Rock & Republic® trademark recorded in the third quarter of fiscal 2019. The impairment charge was excluded from segment profit as it is not considered a component of ongoing business operations. |
* Calculation not meaningful |
KONTOOR BRANDS, INC. |
||||||||||||
Supplemental Financial Information |
||||||||||||
Reportable Segment Information – Constant Currency Basis (Non-GAAP) |
||||||||||||
(Unaudited) |
||||||||||||
|
|
Three Months Ended September 2019 |
||||||||||
(in thousands) |
|
As Reported
|
|
Adjust for Foreign
|
|
Constant Currency |
||||||
Segment revenues: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
367,206 |
|
|
$ |
2,089 |
|
|
$ |
369,295 |
|
Lee |
|
232,221 |
|
|
4,261 |
|
|
236,482 |
|
|||
Other |
|
38,711 |
|
|
3 |
|
|
38,714 |
|
|||
Total segment revenues |
|
$ |
638,138 |
|
|
$ |
6,353 |
|
|
$ |
644,491 |
|
Segment profit: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
61,070 |
|
|
$ |
334 |
|
|
$ |
61,404 |
|
Lee |
|
30,156 |
|
|
1,081 |
|
|
31,237 |
|
|||
Other |
|
843 |
|
|
— |
|
|
843 |
|
|||
Total segment profit |
|
$ |
92,069 |
|
|
$ |
1,415 |
|
|
$ |
93,484 |
|
Non-cash impairment of intangible asset |
|
(32,636 |
) |
|
— |
|
|
(32,636 |
) |
|||
Corporate and other expenses |
|
(29,861 |
) |
|
(29 |
) |
|
(29,890 |
) |
|||
Interest expense |
|
(14,140 |
) |
|
(15 |
) |
|
(14,155 |
) |
|||
Interest income |
|
712 |
|
|
1 |
|
|
713 |
|
|||
Income before income taxes |
|
$ |
16,144 |
|
|
$ |
1,372 |
|
|
$ |
17,516 |
|
|
|
|
|
|
|
|
||||||
|
|
Nine Months Ended September 2019 |
||||||||||
|
|
As Reported
|
|
Adjust for Foreign
|
|
Constant Currency |
||||||
Segment revenues: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
1,101,133 |
|
|
$ |
16,513 |
|
|
$ |
1,117,646 |
|
Lee |
|
680,660 |
|
|
18,234 |
|
|
698,894 |
|
|||
Other |
|
114,435 |
|
|
21 |
|
|
114,456 |
|
|||
Total segment revenues |
|
$ |
1,896,228 |
|
|
$ |
34,768 |
|
|
$ |
1,930,996 |
|
Segment profit: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
141,715 |
|
|
$ |
(12,413 |
) |
|
$ |
129,302 |
|
Lee |
|
61,536 |
|
|
1,380 |
|
|
62,916 |
|
|||
Other |
|
(437 |
) |
|
2 |
|
|
(435 |
) |
|||
Total segment profit |
|
$ |
202,814 |
|
|
$ |
(11,031 |
) |
|
$ |
191,783 |
|
Non-cash impairment of intangible asset |
|
(32,636 |
) |
|
— |
|
|
(32,636 |
) |
|||
Corporate and other expenses |
|
(64,232 |
) |
|
(91 |
) |
|
(64,323 |
) |
|||
Interest income from former parent, net |
|
3,762 |
|
|
— |
|
|
3,762 |
|
|||
Interest expense |
|
(21,876 |
) |
|
(340 |
) |
|
(22,216 |
) |
|||
Interest income |
|
3,543 |
|
|
19 |
|
|
3,562 |
|
|||
Income before income taxes |
|
$ |
91,375 |
|
|
$ |
(11,443 |
) |
|
$ |
79,932 |
|
Constant Currency Financial Information
The Company is a global company that reports financial information in U.S. dollars in accordance with GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by the Company from translating its foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present constant currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. We use constant currency information to provide a framework to assess how our business performed excluding the effects of changes in the rates used to calculate foreign currency translation. Management believes this information is useful to investors to facilitate comparison of operating results and better identify trends in our businesses.
To calculate foreign currency translation on a constant currency basis, operating results for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).
These constant currency performance measures should be viewed in addition to, and not as an alternative for, reported results under GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.
KONTOOR BRANDS, INC. |
||||||||
Supplemental Financial Information |
||||||||
Reconciliation of Adjusted Financial Measures by Quarter (Non-GAAP) |
||||||||
(Unaudited) |
||||||||
|
|
Three Months Ended September |
||||||
(in thousands, except for per share amounts) |
|
2019 |
|
2018 |
||||
|
|
|
|
|
||||
Net revenues - as reported under GAAP |
|
$ |
638,138 |
|
|
$ |
704,246 |
|
Business model changes(a) |
|
— |
|
|
(22,248 |
) |
||
Adjusted net revenues |
|
$ |
638,138 |
|
|
$ |
681,998 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
Cost of goods sold - as reported under GAAP |
|
$ |
382,181 |
|
|
$ |
424,053 |
|
Restructuring & separation costs(b) |
|
(4,867 |
) |
|
(129 |
) |
||
Business model changes(a) |
|
— |
|
|
(20,207 |
) |
||
Other adjustments(c) |
|
— |
|
|
631 |
|
||
Adjusted cost of goods sold |
|
$ |
377,314 |
|
|
$ |
404,348 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
Selling, general and administrative expenses - as reported under GAAP |
|
$ |
192,293 |
|
|
$ |
184,909 |
|
Restructuring & separation costs(b) |
|
(14,490 |
) |
|
(1,087 |
) |
||
Business model changes(a) |
|
— |
|
|
(4,460 |
) |
||
Other adjustments(c) |
|
— |
|
|
5,437 |
|
||
Adjusted selling, general and administrative expenses |
|
$ |
177,803 |
|
|
$ |
184,799 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
Other expense, net - as reported under GAAP |
|
$ |
(1,456 |
) |
|
$ |
(2,084 |
) |
Business model changes(a) |
|
— |
|
|
53 |
|
||
Other adjustments(c) |
|
1,183 |
|
|
1,164 |
|
||
Adjusted other expense, net |
|
$ |
(273 |
) |
|
$ |
(867 |
) |
|
|
|
|
|
||||
|
|
|
|
|
||||
Diluted earnings per share - as reported under GAAP |
|
$ |
0.25 |
|
|
$ |
1.25 |
|
Restructuring & separation costs(b) |
|
0.26 |
|
|
0.02 |
|
||
Business model changes(a) |
|
— |
|
|
0.05 |
|
||
Non-cash impairment of intangible asset(d) |
|
0.44 |
|
|
— |
|
||
Other adjustments(c) |
|
— |
|
|
(0.09 |
) |
||
Adjusted diluted earnings per share |
|
$ |
0.95 |
|
|
$ |
1.23 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
Net income - as reported under GAAP |
|
14,502 |
|
|
71,018 |
|
||
Income taxes |
|
1,642 |
|
|
25,594 |
|
||
Interest income from former parent, net |
|
— |
|
|
(2,104 |
) |
||
Interest expense |
|
14,140 |
|
|
200 |
|
||
Interest income |
|
(712 |
) |
|
(1,508 |
) |
||
EBIT |
|
$ |
29,572 |
|
|
$ |
93,200 |
|
|
|
|
|
|
||||
Depreciation and amortization |
|
6,995 |
|
|
7,581 |
|
||
|
|
|
|
|
||||
EBITDA |
|
$ |
36,567 |
|
|
$ |
100,781 |
|
Restructuring & separation costs(b) |
|
19,357 |
|
|
1,216 |
|
||
Business model changes(a) |
|
— |
|
|
2,472 |
|
||
Non-cash impairment of intangible asset(d) |
|
32,636 |
|
|
— |
|
||
Other adjustments(c) |
|
1,183 |
|
|
(4,904 |
) |
||
Adjusted EBITDA |
|
$ |
89,743 |
|
|
$ |
99,565 |
|
Basis of presentation: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to
Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on an adjusted basis. These adjusted presentations are non-GAAP measures.
Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. In addition, adjusted EBITDA is a key financial measure for the Company's shareholders and financial leaders, as the Company's current debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company's compliance with debt covenants. While management believes that these non-GAAP measures are useful in evaluating the business, this information should be considered supplemental in nature and should be viewed in addition to, and not as an alternate for, reported results under GAAP. In addition, these non-GAAP measures may be different from similarly titled measures used by other companies.
(a) Business model changes relate to the exit of unprofitable markets in select European and South American countries, and the discontinuation of manufacturing for
(b) Restructuring costs relate to strategic actions taken to achieve cost savings, and separation costs relate to the spin-off from
(c) Other adjustments have been made to revise historical corporate allocations, primarily attributable to the carve-out basis of accounting, so that adjusted EBITDA reflects the anticipated cost structure of a separate public company. Additionally, adjustments have been made to remove the funding fees related to the accounts receivable sale arrangement, as they are treated as interest expense for calculation of adjusted EBITDA for debt compliance purposes. The other adjustments resulted in a net tax benefit of $1.292 million for September 2018.
(d) Non-cash impairment of intangible asset relates to a write-down of the Rock &
KONTOOR BRANDS, INC. |
||||||||||||||||
Supplemental Financial Information |
||||||||||||||||
Summary of Select GAAP and Non-GAAP Measures |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
Three Months Ended September |
||||||||||||||
|
|
2019 |
|
2018 |
||||||||||||
(dollars in thousands) |
|
GAAP |
|
Adjusted |
|
GAAP |
|
Adjusted |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net revenues |
|
$ |
638,138 |
|
|
$ |
638,138 |
|
|
$ |
704,246 |
|
|
$ |
681,998 |
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit |
|
$ |
255,957 |
|
|
$ |
260,824 |
|
|
$ |
280,193 |
|
|
$ |
277,650 |
|
As a percentage of total net revenues |
|
40.1 |
% |
|
40.9 |
% |
|
39.8 |
% |
|
40.7 |
% |
||||
|
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative expenses |
|
$ |
192,293 |
|
|
$ |
177,803 |
|
|
$ |
184,909 |
|
|
$ |
184,799 |
|
As a percentage of total net revenues |
|
30.1 |
% |
|
27.9 |
% |
|
26.3 |
% |
|
27.1 |
% |
||||
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share - diluted |
|
$ |
0.25 |
|
|
$ |
0.95 |
|
|
$ |
1.25 |
|
|
$ |
1.23 |
|
|
|
|
|
|
|
|
|
|
||||||||
EBIT |
|
$ |
29,572 |
|
|
$ |
82,748 |
|
|
$ |
93,200 |
|
|
$ |
91,984 |
|
|
|
|
|
|
|
|
|
|
||||||||
EBITDA |
|
$ |
36,567 |
|
|
$ |
89,743 |
|
|
$ |
100,781 |
|
|
$ |
99,565 |
|
Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on an adjusted basis. These adjusted presentations are non-GAAP measures.
Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. In addition, adjusted EBITDA is a key financial measure for the Company's shareholders and financial leaders, as the Company's current debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company's compliance with debt covenants. While management believes that these non-GAAP measures are useful in evaluating the business, this information should be considered supplemental in nature and should be viewed in addition to, and not as an alternate for, reported results under GAAP. In addition, these non-GAAP measures may be different from similarly titled measures used by other companies.
KONTOOR BRANDS, INC. |
||||||||||||||||
Supplemental Financial Information |
||||||||||||||||
Reconciliation of Adjusted Net Revenue |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
Three Months Ended September 2019 |
|
||||||||||||||
|
Net Revenues - As Reported Under GAAP |
|
||||||||||||||
(in thousands) |
Wrangler |
|
Lee |
|
Other |
|
Total |
|
||||||||
Channel revenues |
|
|
|
|
|
|
|
|
||||||||
U.S. Wholesale |
$ |
283,616 |
|
|
$ |
93,931 |
|
|
$ |
5,970 |
|
|
$ |
383,517 |
|
|
Non-U.S. Wholesale |
60,523 |
|
|
99,386 |
|
|
340 |
|
|
160,249 |
|
|
||||
Branded Direct-To-Consumer |
23,067 |
|
|
38,904 |
|
|
9 |
|
|
61,980 |
|
|
||||
Other |
— |
|
|
— |
|
|
32,392 |
|
|
32,392 |
|
|
||||
Total |
$ |
367,206 |
|
|
$ |
232,221 |
|
|
$ |
38,711 |
|
|
$ |
638,138 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Geographic revenues |
|
|
|
|
|
|
|
|
||||||||
U.S. |
$ |
302,819 |
|
|
$ |
115,700 |
|
|
$ |
38,263 |
|
|
$ |
456,782 |
|
|
International |
64,387 |
|
|
116,521 |
|
|
448 |
|
|
181,356 |
|
|
||||
Total |
$ |
367,206 |
|
|
$ |
232,221 |
|
|
$ |
38,711 |
|
|
$ |
638,138 |
|
|
|
Three Months Ended September 2018 |
|
||||||||||||||
|
Net Revenues - As Reported Under GAAP |
|
||||||||||||||
(in thousands) |
Wrangler |
|
Lee |
|
Other |
|
Total |
|
||||||||
Channel revenues |
|
|
|
|
|
|
|
|
||||||||
U.S. Wholesale |
$ |
298,747 |
|
|
$ |
104,138 |
|
|
$ |
6,551 |
|
|
$ |
409,436 |
|
|
Non-U.S. Wholesale |
71,381 |
|
|
107,424 |
|
|
— |
|
|
178,805 |
|
|
||||
Branded Direct-To-Consumer |
25,485 |
|
|
39,948 |
|
|
45 |
|
|
65,478 |
|
|
||||
Other |
— |
|
|
— |
|
|
50,527 |
|
|
50,527 |
|
|
||||
Total |
$ |
395,613 |
|
|
$ |
251,510 |
|
|
$ |
57,123 |
|
|
$ |
704,246 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Geographic revenues |
|
|
|
|
|
|
|
|
||||||||
U.S. |
$ |
316,910 |
|
|
$ |
126,778 |
|
|
$ |
57,123 |
|
|
$ |
500,811 |
|
|
International |
78,703 |
|
|
124,732 |
|
|
— |
|
|
203,435 |
|
|
||||
Total |
$ |
395,613 |
|
|
$ |
251,510 |
|
|
$ |
57,123 |
|
|
$ |
704,246 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjustments for Business Model Changes (a) |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Wrangler |
|
Lee |
|
Other |
|
Total |
|
||||||||
Channel revenues |
|
|
|
|
|
|
|
|
||||||||
Non-U.S. Wholesale |
$ |
(3,225 |
) |
|
$ |
(533 |
) |
|
$ |
— |
|
|
$ |
(3,758 |
) |
|
Branded Direct-To-Consumer |
(2,965 |
) |
|
(571 |
) |
|
— |
|
|
(3,536 |
) |
|
||||
Other |
— |
|
|
— |
|
|
(14,954 |
) |
|
(14,954 |
) |
|
||||
Total |
$ |
(6,190 |
) |
|
$ |
(1,104 |
) |
|
$ |
(14,954 |
) |
|
$ |
(22,248 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||
Geographic revenues |
|
|
|
|
|
|
|
|
||||||||
U.S. |
$ |
— |
|
|
$ |
— |
|
|
$ |
(14,954 |
) |
|
$ |
(14,954 |
) |
|
International |
(6,190 |
) |
|
(1,104 |
) |
|
— |
|
|
(7,294 |
) |
|
||||
Total |
$ |
(6,190 |
) |
|
$ |
(1,104 |
) |
|
$ |
(14,954 |
) |
|
$ |
(22,248 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted Net Revenues |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Wrangler |
|
Lee |
|
Other |
|
Total |
|
||||||||
Channel revenues |
|
|
|
|
|
|
|
|
||||||||
U.S. Wholesale |
$ |
298,747 |
|
|
$ |
104,138 |
|
|
$ |
6,551 |
|
|
$ |
409,436 |
|
|
Non-U.S. Wholesale |
68,156 |
|
|
106,891 |
|
|
— |
|
|
175,047 |
|
|
||||
Branded Direct-To-Consumer |
22,520 |
|
|
39,377 |
|
|
45 |
|
|
61,942 |
|
|
||||
Other |
— |
|
|
— |
|
|
35,573 |
|
|
35,573 |
|
|
||||
Total |
$ |
389,423 |
|
|
$ |
250,406 |
|
|
$ |
42,169 |
|
|
$ |
681,998 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Geographic revenues |
|
|
|
|
|
|
|
|
||||||||
U.S. |
$ |
316,910 |
|
|
$ |
126,778 |
|
|
$ |
42,169 |
|
|
$ |
485,857 |
|
|
International |
72,513 |
|
|
123,628 |
|
|
— |
|
|
196,141 |
|
|
||||
Total |
$ |
389,423 |
|
|
$ |
250,406 |
|
|
$ |
42,169 |
|
|
$ |
681,998 |
|
|
(a) Business model changes relate to the exit of unprofitable markets in select European and South American countries, and the discontinuation of manufacturing for VF Corporation. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20191107005288/en/
Source:
Investors:
Eric Tracy, (336) 332-5205
Senior Director, Investor Relations
Eric.Tracy@kontoorbrands.com
or
Media:
Vanessa McCutchen, (336) 332-5612
Senior Director, Corporate Communications
Vanessa.McCutchen@kontoorbrands.com