Kontoor Brands Reports 2024 Second Quarter Results; Raises Full Year Outlook
Second Quarter 2024 Highlights
-
Revenue of
$607 million decreased 1 percent compared to prior year - Reported gross margin was 44.7 percent. Adjusted gross margin was 45.2 percent and increased 420 basis points compared to prior year
-
Reported EPS was
$0.92 . Adjusted EPS of$0.98 increased 27 percent compared to prior year - Inventory decreased 22 percent compared to prior year
-
The Company repurchased
$25 million of shares and made a$25 million voluntary term loan payment -
The Company’s Board of Directors declared a regular quarterly cash dividend of
$0.50 per share
Updated Full Year 2024 Financial Outlook
-
Revenue is expected to be in the range of
$2.57 to$2.63 billion , representing a decrease of 1 percent to an increase of 1 percent, consistent with the prior outlook - Adjusted gross margin is now expected to approximate 44.8 percent (44.6 percent prior), representing an increase of 230 basis points compared to the prior year on an adjusted basis, excluding the out-of-period duty charge in that period
-
Adjusted operating income is now expected to be at the higher end of the prior range of
$377 to$387 million , representing an increase of 10 to 11 percent compared to the prior year on an adjusted basis, excluding the out-of-period duty charge in that period. Adjusted operating income includes$6 million of incremental demand creation investment in both the Wrangler® and Lee® brands compared to the prior outlook -
Adjusted EPS is now expected to approximate
$4.80 ($4.70 to$4.80 prior), representing an increase of 8 percent compared to the prior year on an adjusted basis, excluding the out-of-period duty charge in that period. Adjusted EPS includes an$0.08 impact from incremental demand creation investment compared to the prior outlook -
Cash from operations is now expected to exceed
$350 million (exceed$335 million prior)
“We delivered second quarter results that exceeded our expectations driven by higher revenue, stronger gross margin expansion and cash flow generation,” said
Second Quarter 2024 Income Statement Review
Revenue was
International revenue was
Wrangler brand global revenue was
Lee brand global revenue was
Gross margin increased 410 basis points to 44.7 percent on a reported basis and increased 420 basis points to 45.2 percent on an adjusted basis compared to the prior year. Adjusted gross margin expansion was driven by the benefits from lower product costs, improved product mix and proactive supply chain efficiencies, partially offset by lower pricing.
Selling, General & Administrative (SG&A) expenses were
Operating income was
Earnings per share (EPS) was
Balance Sheet and Liquidity Review
The Company ended the second quarter with
Inventory at the end of the second quarter was
As of the end of the second quarter, the Company had no outstanding borrowings under the Revolving Credit Facility and
As previously announced, the Company’s Board of Directors declared a regular quarterly cash dividend of
Consistent with a commitment to return cash to shareholders, the Company repurchased
Updated 2024 Outlook
“We are raising our full year outlook driven by better-than-expected second quarter results and increased confidence in the balance of the year,” said
The Company’s updated 2024 outlook includes the following:
-
Revenue is expected to be in the range of
$2.57 to$2.63 billion , reflecting a decrease of 1 percent to an increase of 1 percent compared to the prior year, consistent with the prior outlook. The Company continues to expect market share gains, growth from channel and category expansion, and expanded distribution to be offset by conservative retailer inventory management and macroeconomic pressures on consumer spending around the globe.
The Company continues to expect second half revenue to increase at a mid-single digit rate compared to the prior year, excluding the approximate 2-point impact from the earlier timing of shipments from the third quarter into the second quarter. In the third quarter, the Company expects revenue of approximately$660 million , reflecting growth of 1 percent. The Company expects mid-single digit revenue growth in the fourth quarter.
-
Adjusted gross margin is now expected to approximate 44.8 percent, representing an increase of 230 basis points compared to adjusted gross margin in the prior year, excluding the out-of-period duty expense in that period. This compares to the prior outlook of approximately 44.6 percent. Gross margin expansion is driven by the benefits of favorable mix, lower product costs and proactive supply chain efficiencies.
In the third quarter, the Company expects adjusted gross margin of approximately 44.3 percent, representing an increase of approximately 100 basis points compared to the prior year, excluding the out-of-period duty expense in that period. The Company expects fourth quarter adjusted gross margin to approximate 44.3 percent, representing an increase of approximately 120 basis points compared to prior year adjusted gross margin, excluding the out-of-period duty expense in that period.
-
Adjusted SG&A is expected to increase approximately 4 percent compared to adjusted SG&A in the prior year, including an incremental
$6 million demand creation investment compared with the prior outlook. The Company will continue to invest in its brands and capabilities in support of long-term profitable growth, including demand creation, direct-to-consumer and international expansion.
-
Adjusted operating income is now expected to be at the higher end of the prior range of
$377 to$387 million , including an incremental$6 million demand creation investment, reflecting an increase of between 10 and 11 percent compared to adjusted operating income in the prior year, excluding the out-of-period duty expense in that period.
The Company expects adjusted operating income of approximately$210 million in the second half of the year, including an incremental$5 million of demand creation investment, representing a double-digit increase compared to adjusted operating income in the prior year, excluding the out-of-period duty expense in that period.
-
Adjusted EPS is now expected to approximate
$4.80 compared to the prior outlook of$4.70 to$4.80 , including an incremental$0.08 impact from demand creation investment compared with the prior outlook. Excluding the out-of-period duty expense in the prior year, adjusted EPS is now expected to increase 8 percent compared to the prior outlook of a 6 to 8 percent increase.
Full year 2024 adjusted EPS includes an approximate 5-percentage point headwind from a higher tax rate, including a 12-percentage point headwind in the second half of the year.
In the third quarter, the Company expects adjusted EPS of approximately$1.25 .
-
Capital Expenditures are now expected to be approximately
$35 million .
-
For the full year, the Company expects an effective tax rate of approximately 20 percent. Interest expense is expected to approximate
$35 million . Other Expense is expected to be in the range of$12 million to$14 million . Average shares outstanding are expected to be approximately 57 million, excluding the impact of any future share repurchases.
-
The Company now expects cash flow from operations to exceed
$350 million driven by the combination of accelerated earnings growth and a continued normalization of inventory. This compares to the prior outlook of cash flow from operations to exceed$335 million .
- The Company’s outlook does not yet reflect the anticipated impact of Project Jeanius.
This release refers to “adjusted” amounts from 2024 and 2023 and “constant currency” amounts, which are further described in the Non-GAAP Financial Measures section below. Unless otherwise noted, “reported” and “constant currency” amounts are the same. As previously disclosed, full year 2023 results included a
Webcast Information
Non-GAAP Financial Measures
Adjusted Amounts - This release refers to “adjusted” amounts. Adjustments during 2024 represent charges related to business optimization activities and actions to streamline and transfer select production within our internal manufacturing network. Adjustments during 2023 represent charges related to strategic actions taken by the Company to drive efficiencies in our operations, which included reducing our global workforce, streamlining and transferring select production within our internal manufacturing network and globalizing our operating model. Additional information regarding adjusted amounts is provided in notes to the supplemental financial information included with this release.
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.
For forward-looking non-GAAP measures included in this filing, the Company does not provide a reconciliation to the most comparable GAAP financial measures because the information needed to reconcile these measures is unavailable due to the inherent difficulty of forecasting the timing and/or amount of various items that have not yet occurred and have been excluded from adjusted measures. Additionally, estimating such GAAP measures and providing a meaningful reconciliation consistent with the Company’s accounting policies for future periods requires a level of precision that is unavailable for these future periods and cannot be accomplished without unreasonable effort.
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 the Company and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” “may” and other words and terms of similar meaning or use of future dates. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as required under the
More information on potential factors that could affect the Company's financial results are described in detail in the Company’s most recent Annual Report on Form 10-K and in other reports and statements that the Company files with the
|
||||||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||
|
|
|||||||||||||||||||
|
|
Three Months Ended June |
|
% |
|
Six Months Ended June |
|
% |
||||||||||||
(Dollars and shares in thousands, except per share amounts) |
|
2024 |
|
2023 |
|
Change |
|
2024 |
|
2023 |
|
Change |
||||||||
Net revenues |
|
$ |
606,898 |
|
|
$ |
616,009 |
|
|
(1)% |
|
$ |
1,238,100 |
|
|
$ |
1,283,132 |
|
|
(4)% |
Costs and operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold |
|
|
335,538 |
|
|
|
365,748 |
|
|
(8)% |
|
|
681,596 |
|
|
|
746,170 |
|
|
(9)% |
Selling, general and administrative expenses |
|
|
196,117 |
|
|
|
186,864 |
|
|
5% |
|
|
396,831 |
|
|
|
378,616 |
|
|
5% |
Total costs and operating expenses |
|
|
531,655 |
|
|
|
552,612 |
|
|
(4)% |
|
|
1,078,427 |
|
|
|
1,124,786 |
|
|
(4)% |
Operating income |
|
|
75,243 |
|
|
|
63,397 |
|
|
19% |
|
|
159,673 |
|
|
|
158,346 |
|
|
1% |
Interest expense |
|
|
(10,382 |
) |
|
|
(9,663 |
) |
|
7% |
|
|
(19,674 |
) |
|
|
(19,936 |
) |
|
(1)% |
Interest income |
|
|
2,616 |
|
|
|
691 |
|
|
279% |
|
|
5,041 |
|
|
|
1,110 |
|
|
354% |
Other expense, net |
|
|
(3,021 |
) |
|
|
(3,152 |
) |
|
(4)% |
|
|
(5,904 |
) |
|
|
(5,378 |
) |
|
10% |
Income before income taxes |
|
|
64,456 |
|
|
|
51,273 |
|
|
26% |
|
|
139,136 |
|
|
|
134,142 |
|
|
4% |
Income taxes |
|
|
12,687 |
|
|
|
14,877 |
|
|
(15)% |
|
|
27,860 |
|
|
|
31,450 |
|
|
(11)% |
Net income |
|
$ |
51,769 |
|
|
$ |
36,396 |
|
|
42% |
|
$ |
111,276 |
|
|
$ |
102,692 |
|
|
8% |
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic |
|
$ |
0.93 |
|
|
$ |
0.65 |
|
|
|
|
$ |
2.00 |
|
|
$ |
1.84 |
|
|
|
Diluted |
|
$ |
0.92 |
|
|
$ |
0.64 |
|
|
|
|
$ |
1.97 |
|
|
$ |
1.80 |
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic |
|
|
55,810 |
|
|
|
56,089 |
|
|
|
|
|
55,772 |
|
|
|
55,868 |
|
|
|
Diluted |
|
|
56,456 |
|
|
|
56,846 |
|
|
|
|
|
56,597 |
|
|
|
56,893 |
|
|
|
Basis of presentation for all financial tables within this release: The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to
|
|||||||||
Condensed Consolidated Balance Sheets |
|||||||||
(Unaudited) |
|||||||||
(In thousands) |
|
|
|
|
|
|
|||
ASSETS |
|
|
|
|
|
|
|||
Current assets |
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
224,296 |
|
$ |
215,050 |
|
$ |
82,418 |
Accounts receivable, net |
|
|
205,019 |
|
|
217,673 |
|
|
186,024 |
Inventories |
|
|
488,340 |
|
|
500,353 |
|
|
626,885 |
Prepaid expenses and other current assets |
|
|
104,357 |
|
|
110,808 |
|
|
114,345 |
Total current assets |
|
|
1,022,012 |
|
|
1,043,884 |
|
|
1,009,672 |
Property, plant and equipment, net |
|
|
108,150 |
|
|
112,045 |
|
|
106,878 |
Operating lease assets |
|
|
55,850 |
|
|
54,812 |
|
|
65,388 |
Intangible assets, net |
|
|
11,854 |
|
|
12,497 |
|
|
12,941 |
|
|
|
209,493 |
|
|
209,862 |
|
|
209,969 |
Other assets |
|
|
205,080 |
|
|
212,339 |
|
|
203,469 |
TOTAL ASSETS |
|
$ |
1,612,439 |
|
$ |
1,645,439 |
|
$ |
1,608,317 |
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|||
Current liabilities |
|
|
|
|
|
|
|||
Short-term borrowings |
|
$ |
— |
|
$ |
— |
|
$ |
62 |
Current portion of long-term debt |
|
|
— |
|
|
20,000 |
|
|
15,000 |
Accounts payable |
|
|
196,460 |
|
|
180,220 |
|
|
195,282 |
Accrued and other current liabilities |
|
|
153,903 |
|
|
171,414 |
|
|
156,766 |
Operating lease liabilities, current |
|
|
22,714 |
|
|
21,003 |
|
|
21,899 |
Total current liabilities |
|
|
373,077 |
|
|
392,637 |
|
|
389,009 |
Operating lease liabilities, noncurrent |
|
|
35,911 |
|
|
36,753 |
|
|
42,044 |
Other liabilities |
|
|
86,646 |
|
|
80,215 |
|
|
80,743 |
Long-term debt |
|
|
749,654 |
|
|
763,921 |
|
|
773,270 |
Total liabilities |
|
|
1,245,288 |
|
|
1,273,526 |
|
|
1,285,066 |
Commitments and contingencies |
|
|
|
|
|
|
|||
Total equity |
|
|
367,151 |
|
|
371,913 |
|
|
323,251 |
TOTAL LIABILITIES AND EQUITY |
|
$ |
1,612,439 |
|
$ |
1,645,439 |
|
$ |
1,608,317 |
|
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(Unaudited) |
||||||||
|
|
Six Months Ended June |
||||||
(In thousands) |
|
2024 |
|
2023 |
||||
OPERATING ACTIVITIES |
|
|
|
|
||||
Net income |
|
$ |
111,276 |
|
|
$ |
102,692 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
|
19,530 |
|
|
|
18,219 |
|
Stock-based compensation |
|
|
13,669 |
|
|
|
7,023 |
|
Other, including working capital changes |
|
|
8,196 |
|
|
|
(16,258 |
) |
Cash provided by operating activities |
|
|
152,671 |
|
|
|
111,676 |
|
INVESTING ACTIVITIES |
|
|
|
|
||||
Property, plant and equipment expenditures |
|
|
(8,122 |
) |
|
|
(13,277 |
) |
Capitalized computer software |
|
|
(2,045 |
) |
|
|
(6,756 |
) |
Other |
|
|
(1,265 |
) |
|
|
(10 |
) |
Cash used by investing activities |
|
|
(11,432 |
) |
|
|
(20,043 |
) |
FINANCING ACTIVITIES |
|
|
|
|
||||
Borrowings under revolving credit facility |
|
|
— |
|
|
|
268,000 |
|
Repayments under revolving credit facility |
|
|
— |
|
|
|
(268,000 |
) |
Repayments of term loan |
|
|
(35,000 |
) |
|
|
(5,000 |
) |
Repurchases of Common Stock |
|
|
(45,271 |
) |
|
|
— |
|
Dividends paid |
|
|
(55,732 |
) |
|
|
(53,756 |
) |
Shares withheld for taxes, net of proceeds from issuance of Common Stock |
|
|
(1,037 |
) |
|
|
(3,057 |
) |
Other |
|
|
— |
|
|
|
(7,236 |
) |
Cash used by financing activities |
|
|
(137,040 |
) |
|
|
(69,049 |
) |
Effect of foreign currency rate changes on cash and cash equivalents |
|
|
5,047 |
|
|
|
655 |
|
Net change in cash and cash equivalents |
|
|
9,246 |
|
|
|
23,239 |
|
Cash and cash equivalents – beginning of period |
|
|
215,050 |
|
|
|
59,179 |
|
Cash and cash equivalents – end of period |
|
$ |
224,296 |
|
|
$ |
82,418 |
|
|
||||||||||||
Supplemental Financial Information |
||||||||||||
Business Segment Information |
||||||||||||
(Unaudited) |
||||||||||||
|
|
Three Months Ended June |
|
% Change |
|
% Change
|
||||||
(Dollars in thousands) |
|
2024 |
|
2023 |
|
|
||||||
Segment revenues: |
|
|
|
|
|
|
|
|
||||
Wrangler |
|
$ |
429,245 |
|
|
$ |
425,485 |
|
|
1% |
|
1% |
Lee |
|
|
175,299 |
|
|
|
188,008 |
|
|
(7)% |
|
(6)% |
Total reportable segment revenues |
|
|
604,544 |
|
|
|
613,493 |
|
|
(1)% |
|
(1)% |
Other revenues (b) |
|
|
2,354 |
|
|
|
2,516 |
|
|
(6)% |
|
(6)% |
Total net revenues |
|
$ |
606,898 |
|
|
$ |
616,009 |
|
|
(1)% |
|
(1)% |
Segment profit: |
|
|
|
|
|
|
|
|
||||
Wrangler |
|
$ |
88,339 |
|
|
$ |
70,976 |
|
|
24% |
|
24% |
Lee |
|
|
13,367 |
|
|
|
17,165 |
|
|
(22)% |
|
(21)% |
Total reportable segment profit |
|
$ |
101,706 |
|
|
$ |
88,141 |
|
|
15% |
|
16% |
Corporate and other expenses |
|
|
(28,378 |
) |
|
|
(27,660 |
) |
|
3% |
|
3% |
Interest expense |
|
|
(10,382 |
) |
|
|
(9,663 |
) |
|
7% |
|
7% |
Interest income |
|
|
2,616 |
|
|
|
691 |
|
|
279% |
|
270% |
Loss related to other revenues (b) |
|
|
(1,106 |
) |
|
|
(236 |
) |
|
* |
|
* |
Income before income taxes |
|
$ |
64,456 |
|
|
$ |
51,273 |
|
|
26% |
|
26% |
|
|
|
|
|
|
|
|
|
||||
|
|
Six Months Ended June |
|
% Change |
|
% Change
|
||||||
(Dollars in thousands) |
|
2024 |
|
2023 |
|
|
||||||
Segment revenues: |
|
|
|
|
|
|
|
|
||||
Wrangler |
|
$ |
838,739 |
|
|
$ |
848,632 |
|
|
(1)% |
|
(1)% |
Lee |
|
|
394,742 |
|
|
|
428,657 |
|
|
(8)% |
|
(8)% |
Total reportable segment revenues |
|
|
1,233,481 |
|
|
|
1,277,289 |
|
|
(3)% |
|
(3)% |
Other revenues (b) |
|
|
4,619 |
|
|
|
5,843 |
|
|
(21)% |
|
(21)% |
Total net revenues |
|
$ |
1,238,100 |
|
|
$ |
1,283,132 |
|
|
(4)% |
|
(4)% |
Segment profit: |
|
|
|
|
|
|
|
|
||||
Wrangler |
|
$ |
163,005 |
|
|
$ |
142,083 |
|
|
15% |
|
14% |
Lee |
|
|
48,461 |
|
|
|
56,738 |
|
|
(15)% |
|
(14)% |
Total reportable segment profit |
|
$ |
211,466 |
|
|
$ |
198,821 |
|
|
6% |
|
6% |
Corporate and other expenses |
|
|
(56,438 |
) |
|
|
(45,724 |
) |
|
23% |
|
24% |
Interest expense |
|
|
(19,674 |
) |
|
|
(19,936 |
) |
|
(1)% |
|
(1)% |
Interest income |
|
|
5,041 |
|
|
|
1,110 |
|
|
354% |
|
351% |
Loss related to other revenues (b) |
|
|
(1,259 |
) |
|
|
(129 |
) |
|
* |
|
* |
Income before income taxes |
|
$ |
139,136 |
|
|
$ |
134,142 |
|
|
4% |
|
3% |
(a) Refer to constant currency definition on the following pages. |
(b) We report an "Other" category to reconcile segment revenues and segment profit to the Company's operating results, but the Other category does not meet the criteria to be considered a reportable segment. Other includes sales and licensing of Rock & Republic®, other company-owned brands and private label apparel. |
* Calculation not meaningful. |
|
||||||||||||
Supplemental Financial Information |
||||||||||||
Business Segment Information – Constant Currency Basis (Non-GAAP) |
||||||||||||
(Unaudited) |
||||||||||||
|
|
Three Months Ended |
||||||||||
|
|
As Reported |
|
Adjust for Foreign |
|
|
||||||
(In thousands) |
|
under GAAP |
|
Currency Exchange |
|
Constant Currency |
||||||
Segment revenues: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
429,245 |
|
|
$ |
173 |
|
|
$ |
429,418 |
|
Lee |
|
|
175,299 |
|
|
|
920 |
|
|
|
176,219 |
|
Total reportable segment revenues |
|
|
604,544 |
|
|
|
1,093 |
|
|
|
605,637 |
|
Other revenues |
|
|
2,354 |
|
|
|
— |
|
|
|
2,354 |
|
Total net revenues |
|
$ |
606,898 |
|
|
$ |
1,093 |
|
|
$ |
607,991 |
|
Segment profit: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
88,339 |
|
|
$ |
(13 |
) |
|
$ |
88,326 |
|
Lee |
|
|
13,367 |
|
|
|
145 |
|
|
|
13,512 |
|
Total reportable segment profit |
|
$ |
101,706 |
|
|
$ |
132 |
|
|
$ |
101,838 |
|
Corporate and other expenses |
|
|
(28,378 |
) |
|
|
(41 |
) |
|
|
(28,419 |
) |
Interest expense |
|
|
(10,382 |
) |
|
|
— |
|
|
|
(10,382 |
) |
Interest income |
|
|
2,616 |
|
|
|
(58 |
) |
|
|
2,558 |
|
Loss related to other revenues |
|
|
(1,106 |
) |
|
|
— |
|
|
|
(1,106 |
) |
Income before income taxes |
|
$ |
64,456 |
|
|
$ |
33 |
|
|
$ |
64,489 |
|
|
|
|
|
|
|
|
||||||
|
|
Six Months Ended |
||||||||||
|
|
As Reported |
|
Adjust for Foreign |
|
|
||||||
(In thousands) |
|
under GAAP |
|
Currency Exchange |
|
Constant Currency |
||||||
Segment revenues: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
838,739 |
|
|
$ |
(1,421 |
) |
|
$ |
837,318 |
|
Lee |
|
|
394,742 |
|
|
|
585 |
|
|
|
395,327 |
|
Total reportable segment revenues |
|
|
1,233,481 |
|
|
|
(836 |
) |
|
|
1,232,645 |
|
Other revenues |
|
|
4,619 |
|
|
|
— |
|
|
|
4,619 |
|
Total net revenues |
|
$ |
1,238,100 |
|
|
$ |
(836 |
) |
|
$ |
1,237,264 |
|
Segment profit: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
163,005 |
|
|
$ |
(520 |
) |
|
$ |
162,485 |
|
Lee |
|
|
48,461 |
|
|
|
173 |
|
|
|
48,634 |
|
Total reportable segment profit |
|
$ |
211,466 |
|
|
$ |
(347 |
) |
|
$ |
211,119 |
|
Corporate and other expenses |
|
|
(56,438 |
) |
|
|
(90 |
) |
|
|
(56,528 |
) |
Interest expense |
|
|
(19,674 |
) |
|
|
— |
|
|
|
(19,674 |
) |
Interest income |
|
|
5,041 |
|
|
|
(36 |
) |
|
|
5,005 |
|
Loss related to other revenues |
|
|
(1,259 |
) |
|
|
— |
|
|
|
(1,259 |
) |
Income before income taxes |
|
$ |
139,136 |
|
|
$ |
(473 |
) |
|
$ |
138,663 |
|
Constant Currency Financial Information
The Company is a global company that reports financial information in
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
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.
|
||||||||
Supplemental Financial Information |
||||||||
Reconciliation of Adjusted Financial Measures - Quarter-to-Date (Non-GAAP) |
||||||||
(Unaudited) |
||||||||
|
|
Three Months Ended June |
||||||
(Dollars in thousands, except per share amounts) |
|
2024 |
|
2023 |
||||
|
|
|
|
|
||||
Cost of goods sold - as reported under GAAP |
|
$ |
335,538 |
|
|
$ |
365,748 |
|
Restructuring and transformation costs (a) |
|
|
(3,173 |
) |
|
|
(2,354 |
) |
Adjusted cost of goods sold |
|
$ |
332,365 |
|
|
$ |
363,394 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
Selling, general and administrative expenses - as reported under GAAP |
|
$ |
196,117 |
|
|
$ |
186,864 |
|
Restructuring and transformation costs (a) |
|
|
(1,290 |
) |
|
|
(6,439 |
) |
Adjusted selling, general and administrative expenses |
|
$ |
194,827 |
|
|
$ |
180,425 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
Diluted earnings per share - as reported under GAAP |
|
$ |
0.92 |
|
|
$ |
0.64 |
|
Restructuring and transformation costs (a) |
|
|
0.06 |
|
|
|
0.13 |
|
Adjusted diluted earnings per share |
|
$ |
0.98 |
|
|
$ |
0.77 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
Net income - as reported under GAAP |
|
$ |
51,769 |
|
|
$ |
36,396 |
|
Income taxes |
|
|
12,687 |
|
|
|
14,877 |
|
Interest expense |
|
|
10,382 |
|
|
|
9,663 |
|
Interest income |
|
|
(2,616 |
) |
|
|
(691 |
) |
EBIT |
|
$ |
72,222 |
|
|
$ |
60,245 |
|
Depreciation and amortization |
|
|
10,025 |
|
|
|
9,092 |
|
EBITDA |
|
$ |
82,247 |
|
|
$ |
69,337 |
|
Restructuring and transformation costs (a) |
|
|
4,463 |
|
|
|
8,793 |
|
Adjusted EBITDA |
|
$ |
86,710 |
|
|
$ |
78,130 |
|
As a percentage of total net revenues |
|
|
14.3 |
% |
|
|
12.7 |
% |
Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on an adjusted basis. EBIT, EBITDA and adjusted presentations are non-GAAP measures. See “Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures" at the end of this document. Amounts herein may not recalculate due to the use of unrounded numbers.
(a) See Note 1 of “Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures" at the end of this document. |
|
||||||||||||||||
Supplemental Financial Information |
||||||||||||||||
Summary of Select GAAP and Non-GAAP Measures |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
Three Months Ended June |
||||||||||||||
|
|
2024 |
|
2023 |
||||||||||||
(Dollars in thousands, except per share amounts) |
|
GAAP |
|
Adjusted |
|
GAAP |
|
Adjusted |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net revenues |
|
$ |
606,898 |
|
|
$ |
606,898 |
|
|
$ |
616,009 |
|
|
$ |
616,009 |
|
|
|
|
|
|
|
|
|
|
||||||||
Gross margin |
|
$ |
271,360 |
|
|
$ |
274,533 |
|
|
$ |
250,261 |
|
|
$ |
252,615 |
|
As a percentage of total net revenues |
|
|
44.7 |
% |
|
|
45.2 |
% |
|
|
40.6 |
% |
|
|
41.0 |
% |
|
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative expenses |
|
$ |
196,117 |
|
|
$ |
194,827 |
|
|
$ |
186,864 |
|
|
$ |
180,425 |
|
As a percentage of total net revenues |
|
|
32.3 |
% |
|
|
32.1 |
% |
|
|
30.3 |
% |
|
|
29.3 |
% |
|
|
|
|
|
|
|
|
|
||||||||
Operating income |
|
$ |
75,243 |
|
|
$ |
79,706 |
|
|
$ |
63,397 |
|
|
$ |
72,190 |
|
As a percentage of total net revenues |
|
|
12.4 |
% |
|
|
13.1 |
% |
|
|
10.3 |
% |
|
|
11.7 |
% |
Earnings per share - diluted |
|
$ |
0.92 |
|
|
$ |
0.98 |
|
|
$ |
0.64 |
|
|
$ |
0.77 |
|
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. See “Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures" at the end of this document.
|
||||||||||||
Supplemental Financial Information |
||||||||||||
Disaggregation of Revenue |
||||||||||||
(Unaudited) |
||||||||||||
|
|
Three Months Ended |
||||||||||
|
|
Revenues - As Reported |
||||||||||
(In thousands) |
|
Wrangler |
|
Lee |
|
Other |
|
Total |
||||
Channel revenues |
|
|
|
|
|
|
|
|
||||
|
|
$ |
353,376 |
|
$ |
96,613 |
|
$ |
2,162 |
|
$ |
452,151 |
Non- |
|
|
40,294 |
|
|
41,662 |
|
|
— |
|
|
81,956 |
Direct-to-Consumer |
|
|
35,575 |
|
|
37,024 |
|
|
192 |
|
|
72,791 |
Total |
|
$ |
429,245 |
|
$ |
175,299 |
|
$ |
2,354 |
|
$ |
606,898 |
|
|
|
|
|
|
|
|
|
||||
Geographic revenues |
|
|
|
|
|
|
|
|
||||
|
|
$ |
382,977 |
|
$ |
110,899 |
|
$ |
2,354 |
|
$ |
496,230 |
International |
|
|
46,268 |
|
|
64,400 |
|
|
— |
|
|
110,668 |
Total |
|
$ |
429,245 |
|
$ |
175,299 |
|
$ |
2,354 |
|
$ |
606,898 |
|
|
Three Months Ended |
||||||||||
|
|
Revenues - As Reported |
||||||||||
(In thousands) |
|
Wrangler |
|
Lee |
|
Other |
|
Total |
||||
Channel revenues |
|
|
|
|
|
|
|
|
||||
|
|
$ |
355,207 |
|
$ |
98,218 |
|
$ |
2,366 |
|
$ |
455,791 |
Non- |
|
|
38,104 |
|
|
51,232 |
|
|
— |
|
|
89,336 |
Direct-to-Consumer |
|
|
32,174 |
|
|
38,558 |
|
|
150 |
|
|
70,882 |
Total |
|
$ |
425,485 |
|
$ |
188,008 |
|
$ |
2,516 |
|
$ |
616,009 |
|
|
|
|
|
|
|
|
|
||||
Geographic revenues |
|
|
|
|
|
|
|
|
||||
|
|
$ |
382,111 |
|
$ |
114,248 |
|
$ |
2,516 |
|
$ |
498,875 |
International |
|
|
43,374 |
|
|
73,760 |
|
|
— |
|
|
117,134 |
Total |
|
$ |
425,485 |
|
$ |
188,008 |
|
$ |
2,516 |
|
$ |
616,009 |
|
||||||||||
Supplemental Financial Information |
||||||||||
Summary of Select Revenue Information |
||||||||||
(Unaudited) |
||||||||||
|
|
|||||||||
|
|
Three Months Ended June |
|
|
|
|
||||
|
|
2024 |
|
2023 |
|
2024 to 2023 |
||||
(Dollars in thousands) |
|
As Reported under GAAP |
|
% Change
|
|
% Change
|
||||
Wrangler |
|
$ |
382,977 |
|
$ |
382,111 |
|
—% |
|
—% |
Lee |
|
|
110,899 |
|
|
114,248 |
|
(3)% |
|
(3)% |
Other |
|
|
2,354 |
|
|
2,516 |
|
(6)% |
|
(6)% |
Total |
|
$ |
496,230 |
|
$ |
498,875 |
|
(1)% |
|
(1)% |
|
|
|
|
|
|
|
|
|
||
|
|
$ |
46,268 |
|
$ |
43,374 |
|
7% |
|
7% |
|
|
|
64,400 |
|
|
73,760 |
|
(13)% |
|
(11)% |
|
|
$ |
110,668 |
|
$ |
117,134 |
|
(6)% |
|
(5)% |
|
|
|
|
|
|
|
|
|
||
Global Wrangler |
|
$ |
429,245 |
|
$ |
425,485 |
|
1% |
|
1% |
Global Lee |
|
|
175,299 |
|
|
188,008 |
|
(7)% |
|
(6)% |
Global Other |
|
|
2,354 |
|
|
2,516 |
|
(6)% |
|
(6)% |
Total revenues |
|
$ |
606,898 |
|
$ |
616,009 |
|
(1)% |
|
(1)% |
Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on a constant currency basis, which is a non-GAAP financial measure. See “Business Segment Information – Constant Currency Basis (Non-GAAP)" for additional information on constant currency financial calculations.
|
||||||||||||
Supplemental Financial Information |
||||||||||||
Adjusted Return on |
||||||||||||
(Unaudited) |
||||||||||||
(Dollars in thousands) |
|
Trailing Twelve Months Ended June |
|
|
||||||||
Numerator |
|
2024 |
|
2023 |
|
|
||||||
Net Income |
|
$ |
239,578 |
|
|
$ |
205,380 |
|
|
|
||
Plus: Income taxes |
|
|
37,315 |
|
|
|
69,392 |
|
|
|
||
Plus: Interest income (expense), net |
|
|
32,424 |
|
|
|
36,901 |
|
|
|
||
EBIT |
|
$ |
309,317 |
|
|
$ |
311,673 |
|
|
|
||
Plus: Restructuring and transformation costs (a) |
|
|
18,392 |
|
|
|
21,419 |
|
|
|
||
Plus: Operating lease interest (b) |
|
|
1,205 |
|
|
|
990 |
|
|
|
||
Adjusted EBIT |
|
$ |
328,914 |
|
|
$ |
334,082 |
|
|
|
||
Adjusted effective income tax rate (c) |
|
|
14 |
% |
|
|
25 |
% |
|
|
||
Adjusted net operating profit after taxes |
|
$ |
282,212 |
|
|
$ |
251,338 |
|
|
|
||
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Denominator |
|
|
|
|
|
|
||||||
Equity |
|
$ |
367,151 |
|
|
$ |
323,251 |
|
|
$ |
179,189 |
|
Plus: Current portion of long-term debt and other borrowings |
|
|
— |
|
|
|
15,062 |
|
|
|
9,848 |
|
Plus: Noncurrent portion of long-term debt |
|
|
749,654 |
|
|
|
773,270 |
|
|
|
786,968 |
|
Plus: Operating lease liabilities (d) |
|
|
58,625 |
|
|
|
63,943 |
|
|
|
45,386 |
|
Less: Cash and cash equivalents |
|
|
(224,296 |
) |
|
|
(82,418 |
) |
|
|
(145,296 |
) |
Invested capital |
|
$ |
951,134 |
|
|
$ |
1,093,108 |
|
|
$ |
876,095 |
|
Average invested capital (e) |
|
$ |
1,022,121 |
|
|
$ |
984,602 |
|
|
|
||
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Net income to average debt and equity (f) |
|
|
21.5 |
% |
|
|
19.7 |
% |
|
|
||
Adjusted return on invested capital |
|
|
27.6 |
% |
|
|
25.5 |
% |
|
|
Non-GAAP Financial Information: Adjusted return on invested capital ("ROIC") is a non-GAAP measure. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. ROIC may be different from similarly titled measures used by other companies. Amounts herein may not recalculate due to the use of unrounded numbers.
(a) See Note 2 of “Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures" at the end of this document. |
(b) Operating lease interest is based upon the discount rate for each lease and recorded as a component of rent expense within "Selling, general and administrative expenses" in the Company's statements of operations. The adjustment for operating lease interest represents the add-back to earnings before interest and taxes ("EBIT") based upon the assumption that properties under our operating leases were owned or accounted for as finance leases. Operating lease interest is added back to EBIT in the adjusted ROIC calculation to account for differences in capital structure between us and other companies. |
(c) Effective income tax rate adjusted for restructuring and transformation costs and the corresponding tax impact. See Note 2 of “Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures" at the end of this document. |
(d) Total of "Operating lease liabilities, current" and "Operating lease liabilities, noncurrent" in the Company's balance sheets. |
(e) The average is based on the "Invested capital" at the end of the current period and at the end of the comparable prior period. |
(f) Calculated as "Net income" divided by average "Debt" and "Equity." "Debt" includes the current and noncurrent portion of long-term debt as well as other short-term borrowings. The average is based on the subtotal of "Debt" and "Equity" at the end of the current period and at the end of the comparable prior period. |
Supplemental Financial Information
Reconciliation of Adjusted Financial Measures - Notes (Non-GAAP)
(Unaudited)
Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures
Management uses non-GAAP 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 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.
(1) During the three months ended
(2) During the trailing twelve months ended
During the trailing twelve months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240801389189/en/
Investors:
Vice President, Corporate Development, Strategy, and Investor Relations
Michael.Karapetian@kontoorbrands.com
or
Media:
Director,
Julia.Burge@kontoorbrands.com
Source: