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Kate Spade & Company Reports Fourth Quarter And Full Year 2016 Results And Is Reviewing Strategic Alternatives

Donnerstag, 16.02.2017 14:05 von

PR Newswire

NEW YORK, Feb. 16, 2017 /PRNewswire/ -- Kate Spade & Company (NYSE: KATE) today announced results for the fourth quarter and full year ended December 31, 2016.

Craig A. Leavitt, Chief Executive Officer of Kate Spade & Company, said: "Our solid fourth quarter and fiscal year performance demonstrate the strength of our differentiated business model, as we continued to gain market share and deliver strong growth despite a challenging retail environment. In 2016, we further strengthened our handbag portfolio, introduced new categories to our casual ready-to-wear classifications, and thoughtfully expanded our global store base, opening 52 net new owned and partner-operated stores. At the same time, we remain committed to maximizing value and are exploring strategic alternatives that are in the best interests of our Company and shareholders."

George Carrara, President and Chief Operating Officer of Kate Spade & Company, added: "We are pleased to report top-line growth of 14% for the full-year. In 2016, we delivered Adjusted EBITDA margin expansion of 220 basis points compared to the prior year, reflecting our ongoing focus on expense management, as well as the benefit of lower annual incentive compensation year-over-year. We generated robust cash flow and ended the year in a strong financial position, and with nearly $500 million in cash."

For the full year 2016 on a GAAP basis, the Company recorded income from continuing operations of $152 million, or $1.17 per diluted share, compared to income from continuing operations for the full year 2015 of $22 million, or $0.17 per diluted share. Diluted earnings per share from continuing operations for the full year 2016 were $0.70, using a normalized tax rate, compared to Adjusted diluted earnings per share of $0.48 for the full year 2015. Net sales for the full year 2016 were $1.381 billion, an increase of $139 million, or 11.2%, compared to the full year 2015. Net sales for the full year 2016 increased $166 million, or 13.7%, excluding sales for wind-down operations for the full year 2015. Adjusted EBITDA was $261 million for the full year 2016, compared to Adjusted EBITDA, excluding wind-down operations of $203 million for the full year 2015.   

REVIEW OF STRATEGIC ALTERNATIVES

Kate Spade & Company's Board of Directors, together with management and in consultation with Perella Weinberg Partners as its financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison as its legal counsel, is conducting a process to explore and evaluate strategic alternatives to further enhance shareholder value. The Board plans to proceed in a timely manner, but has not set a definitive timetable for completion of this process. There can be no assurance that this review process will result in a transaction or other strategic alternative of any kind. The Company does not intend to disclose developments or provide updates on the progress or status of this process or discuss with investors the Company's results of operations until it deems further disclosure is appropriate or required. Additionally, no forward-looking guidance will be provided at this time.

FOURTH QUARTER RESULTS

Overall Results

Net sales for the fourth quarter of 2016 were $471 million, an increase of $42 million, or 9.8% compared to the fourth quarter of 2015. Net sales for the fourth quarter of 2016 increased $43 million, or 10.1%, excluding sales for wind-down operations for the fourth quarter of 2015. Fourth quarter 2016 direct-to-consumer comparable sales growth was 9.3%, or (1.5)% excluding eCommerce. Comparable sales per square foot for kate spade new york stores were $1,557 for the latest twelve months, compared to $1,615 for the twelve month period ended October 1, 2016, partially impacted by foreign exchange rates.

Gross profit as a percentage of net sales was 59.2% for the fourth quarter of 2016, compared to 60.2% for the fourth quarter of 2015. Gross profit for the fourth quarter of 2015 was 60.3%, excluding the results of wind-down operations.

Selling, general & administrative expenses were $184 million in the fourth quarter of both 2016 and 2015, or 39.1% and 43.0% of net sales, respectively. Excluding the results of wind-down operations and expenses associated with streamlining activities, selling, general & administrative expenses in the fourth quarter of 2015 were $182 million, or 42.4% of net sales.

Income from continuing operations was $87 million, or $0.67 per diluted share in the fourth quarter of 2016, compared to $62 million, or $0.48 per diluted share, in the fourth quarter of 2015. Diluted earnings per share from continuing operations in the fourth quarter of 2016 using a normalized tax rate were $0.41, compared to adjusted diluted earnings per share of $0.32 in the fourth quarter of 2015.

Segment Highlights

  • Kate Spade North America net sales for the fourth quarter of 2016 were $407 million, an increase of $35 million, or 9.5% compared to the fourth quarter of 2015. Kate Spade North America Segment Adjusted EBITDA was $107 million (26.4% of net sales) for the fourth quarter of 2016 compared to $91 million (24.5% of net sales) for the fourth quarter of 2015.
  • Kate Spade International net sales for the fourth quarter of 2016 were $59 million, an increase of $6 million, or 12.4% compared to the fourth quarter of 2015. Net sales for the fourth quarter of 2016 increased $8 million, or 15.2%, excluding sales for wind-down operations for the fourth quarter of 2015. Kate Spade International Segment Adjusted EBITDA was $10 million (17.1% of net sales) for the fourth quarter of 2016 and $4 million (8.6% of net sales) in 2015. Segment Adjusted EBITDA Excluding Wind-Down Operations was $5 million (9.1% of adjusted net sales) for the fourth quarter of 2015.
  • Adelington Design Group net sales for the fourth quarter of 2016 were $6 million, an increase of 2.3% compared to the fourth quarter of 2015. Adelington Design Group Segment Adjusted EBITDA was $1 million (14.4% of net sales) for the fourth quarter of 2016, compared to $2 million (32.3% of net sales) for the fourth quarter of 2015. Segment Adjusted EBITDA Excluding Wind-Down Operations was $1 million (26.6% of net sales) for the fourth quarter of 2015.

Store Count Information


Q3 2016

Q4 2016
Net Store Openings

Q4 2016

North America Owned Stores




   Specialty

108

-

108

   Outlet

67

1

68

Total North America Owned Stores

175

1

176

Average Square Feet (in '000s)

403


409





International Owned Stores




   Specialty

25

-

25

   Outlet

14

-

14

   Concessions

54

-

54

Total International Owned Stores

93

-

93

Average Square Feet (in '000s)

87


87





Total Owned Store Count

268

1

269

Average Owned Square Feet (in '000s)

490


496





Partner Operated Stores

92

13

105

Greater China Joint Venture Stores

42

3

45

Total Partnered Store Count

134

16

150





Total Store Count

402

17

419





Total Licensee Operated Partnered Stores

29

-

29





Total Store Footprint

431

17

448

 

CONFERENCE CALL INFORMATION

The Company will host a pre-recorded conference call at 8:30 a.m. Eastern time today to discuss its financial results for the fourth quarter and fiscal year 2016. The conference call will be limited to prepared remarks from Craig Leavitt, Chief Executive Officer, and George Carrara, President and Chief Operating Officer, and will not include a Q&A session. 

The dial-in number is 1-888-694-4676 with pass code 70910517. 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 will be available in the Company's Form 10-K for the full year 2016 to be filed with the Securities and Exchange Commission.

PRESENTATION OF GAAP FINANCIAL INFORMATION

As the audit of the Company's 2016 financial statements is not complete, the results presented in this press release are estimated and preliminary, and, therefore, may change. No party has reviewed or audited the preliminary results presented in this release.

PRESENTATION OF NON-GAAP FINANCIAL INFORMATION AND KEY OPERATING METRICS

The income from continuing operations for 2016 and 2015 is presented on a GAAP basis and also adjusted by multiplying pretax income 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 from continuing operations and Adjusted EBITDA for the fourth quarter and twelve 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 INCOME

(All amounts in thousands, except per common share data)

(Preliminary and Unaudited)

















Three Months Ended





Three Months Ended






December 31, 2016


% of


January 2, 2016


% of



(13 Weeks)


Sales


(13 Weeks)


Sales














Net Sales


$

470,837


100.0

%


$

428,958


100.0

%

   Cost of goods sold



192,032


40.8

%



170,870


39.8

%

Gross Profit



278,805


59.2

%



258,088


60.2

%

   Selling, general & administrative expenses



184,062


39.1

%



184,427


43.0

%

Operating Income



94,743


20.1

%



73,661


17.2

%

   Other expense, net



(2,195)


(0.5)

%



(6,359)


(1.5)

%

   Interest expense, net



(4,861)


(1.0)

%



(5,170)


(1.2)

%

Income Before Provision for Income Taxes



87,687


18.6

%



62,132


14.5

%

   Provision for income taxes



1,107


0.2

%



624


0.1

%

Income from Continuing Operations



86,580


18.4

%



61,508


14.3

%

   Discontinued operations, net of income taxes



(1,033)






(44)




Net Income


$

85,547





$

61,464

















Earnings per Share:













Basic













   Income from Continuing Operations


$

0.68





$

0.48




   Net Income


$

0.67





$

0.48

















Diluted













   Income from Continuing Operations


$

0.67





$

0.48




   Net Income


$

0.66





$

0.48

















Weighted Average Shares, Basic



128,139






127,703




Weighted Average Shares, Diluted



129,425






128,267




 

 

 

KATE SPADE & COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(All amounts in thousands, except per common share data)

(Preliminary and Unaudited)





























Twelve Months Ended





Twelve Months Ended






December 31, 2016


% of


January 2, 2016


% of



(52 Weeks)


Sales


(52 Weeks)


Sales














Net Sales


$

1,381,478


100.0

%


$

1,242,720


100.0

%

   Cost of goods sold



554,558


40.1

%



488,613


39.3

%

Gross Profit



826,920


59.9

%



754,107


60.7

%

   Selling, general & administrative expenses



643,307


46.6

%



687,709


55.3

%

Operating Income



183,613


13.3

%



66,398


5.3

%

   Other expense, net



(8,270)


(0.6)

%



(11,137)


(0.9)

%

   Loss on settlement of note receivable







(9,873)


(0.8)

%

   Interest expense, net



(19,714)


(1.4)

%



(19,152)


(1.5)

%

Income Before Provision for Income Taxes



155,629


11.3

%



26,236


2.1

%

   Provision for income taxes



4,071


0.3

%



4,528


0.4

%

Income from Continuing Operations



151,558


11.0

%



21,708


1.7

%

   Discontinued operations, net of income taxes



2,024






(4,621)




Net Income


$

153,582





$

17,087

















Earnings per Share:













Basic













   Income from Continuing Operations


$

1.18





$

0.17




   Net Income


$

1.20





$

0.13

















Diluted













   Income from Continuing Operations


$

1.17





$

0.17




   Net Income


$

1.19





$

0.13

















Weighted Average Shares, Basic



128,043






127,634




Weighted Average Shares, Diluted



129,164






128,222




 

 

 

KATE SPADE & COMPANY

CONSOLIDATED BALANCE SHEETS

(All amounts in thousands)

(Preliminary and Unaudited)











December 31, 2016


January 2, 2016


Assets








   Current Assets:








      Cash and cash equivalents


$

478,536


$

297,851


      Accounts receivable - trade, net



77,487



96,850


      Inventories, net



167,461



191,879


      Other current assets



34,024



34,245


      Total current assets



757,508



620,825










   Property and Equipment, Net



167,192



173,963


   Goodwill



50,045



48,730


   Intangibles, Net



86,703



86,288


   Other Assets



48,871



45,791


Total Assets


$

1,110,319


$

975,597










Liabilities and Stockholders' Equity








   Current Liabilities:








      Short-term borrowings


$

3,664


$

3,625


      Other current liabilities



220,785



262,662


      Total current liabilities



224,449



266,287










   Long-Term Debt



389,742



393,168


   Other Non-Current Liabilities



66,197



70,921


   Stockholders' Equity



429,931



245,221


Total Liabilities and Stockholders' Equity


$

1,110,319


$

975,597


 

 

 

KATE SPADE & COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands)

(Preliminary and Unaudited)











Twelve Months Ended




December 31, 2016


January 2, 2016




(52 Weeks)


(52 Weeks)


Cash Flows from Operating Activities:








   Net income


$

153,582


$

17,087


   Adjustments to arrive at income from continuing operations



(2,024)



4,621


   Income from continuing operations



151,558



21,708










   Adjustments to reconcile income from continuing operations to net cash provided by
     operating activities:








      Depreciation and amortization



49,336



49,937


      Loss on asset disposals and impairments, including streamlining initiatives, net



9,204



13,600


      Deferred income taxes



(1,110)



474


      Share-based compensation



27,139



25,577


      Loss on settlement of note receivable





9,873


      Foreign currency transaction losses, net



2,908



4,845


      Equity losses of equity investees



6,450



6,694


      Other, net



(58)



(281)


   Changes in assets and liabilities:








      Decrease (increase) in accounts receivable - trade, net



19,809



(7,540)


      Decrease (increase) in inventories, net



24,878



(42,540)


      (Increase) decrease in other current and non-current assets



(3,076)



5,597


      (Decrease) increase in accounts payable



(18,106)



23,911


      (Decrease) increase in accrued expenses and other non-current liabilities



(23,687)



7,773


      Increase in income taxes payable



2,085



912


      Net cash used in operating activities of discontinued operations



(2,444)



(14,964)


         Net cash provided by operating activities



244,886



105,576










Cash Flows from Investing Activities:








   Proceeds from sales of property and equipment





816


   Purchases of property and equipment



(46,260)



(55,084)


   Proceeds from sales of joint venture interests, net



(2,350)



17,621


   Investments in and advances to equity investees



(6,500)



(5,000)


   Payment for joint venture interest





(10,000)


   Payments for in-store merchandise shops



(2,889)



(5,123)


   Net proceeds from settlement of note receivable





75,128


   Purchase of trademarks



(1,200)




   Other, net



(45)



276


   Net cash provided by investing activities of discontinued operations





634


         Net cash (used in) provided by investing activities



(59,244)



19,268










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



(4,000)



(3,000)


   Principal payments under capital lease obligations



(513)



(459)


   Proceeds from exercise of stock options



2,631



2,464


   Payment of deferred financing fees



(1,275)



(1,473)


         Net cash used in financing activities



(3,157)



(8,468)










Effect of Exchange Rate Changes on Cash and Cash Equivalents



(1,800)



(2,569)










Net Change in Cash and Cash Equivalents



180,685



113,807


Cash and Cash Equivalents at Beginning of Year



297,851



184,044


Cash and Cash Equivalents at End of Year


$

478,536


$

297,851


 

 



KATE SPADE & COMPANY



RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION



(All amounts in thousands, except per common share data)



(Preliminary and Unaudited)












Three Months Ended






December 31, 2016






(13 Weeks)











Total Net Sales


$

470,837




      KATE SPADE North America



406,584




      KATE SPADE International



58,576




      Adelington Design Group



5,677











Gross Profit



278,805











SG&A



184,062











Operating Income


$

94,743











      Other expense, net



(2,195)




      Interest expense, net



(4,861)




      Provision for income taxes



1,107




Income from Continuing Operations


$

86,580











      Discontinued operations, net of income taxes



(1,033)











Net Income


$

85,547











      Basic Earnings per Common Share from Continuing Operations


$

0.68




      Diluted Earnings per Common Share from Continuing Operations


$

0.67











Reconciliation of Adjusted Income from Continuing Operations:






Net Income, per above


$

85,547

Less: discontinued operations, net of income taxes



1,033

Adjustment to provision for income taxes



(34,024)

Adjusted Income from Continuing Operations (a)


$

52,556





      Adjusted Basic Earnings per Common Share from Continuing Operations


$

0.41

      Adjusted Diluted Earnings per Common Share from Continuing Operations (b)


$

0.41













Reconciliation of Adjusted EBITDA:






Net Income, per above


$

85,547


      Adjustments:





      Depreciation and amortization, asset impairments and losses on asset disposals, net (c)



19,099


      Share-based compensation



4,911


      Foreign currency adjustments, net



1,859


      Interest expense, net



4,861


      Provision for income taxes



(1,107)


      Discontinued operations, net of income taxes



1,033


Adjusted EBITDA


$

118,417







Adjusted EBITDA





Reportable Segments Adjusted EBITDA (d):





      KATE SPADE North America


$

107,447


      KATE SPADE International (e)



10,012


      Adelington Design Group



818


Other (f)



140


Adjusted EBITDA


$

118,417







Adjusted EBITDA Margin





KATE SPADE North America



26.4

%

KATE SPADE International (e)



17.1

%

Adelington Design Group



14.4

%

Kate Spade & Company



25.2

%

_________________________


(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 December 31, 2016 are based on 129,425 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 $476.

(f)  

Amount is Other expense, net as shown above, net of foreign currency transaction adjustment of $1,859 and equity in the losses of equity method investees of $476.

 

 


 


KATE SPADE & COMPANY



RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION



(All amounts in thousands, except per common share data)



(Unaudited)




































Adjusted Results









Streamlining





Results of Wind-Down


(Excluding Wind-






Reported (a)


Initiatives (b)


Adjusted Results


Operations (c)


Down Operations) (d)




Three Months Ended January 2, 2016 (13 Weeks)



















   Total Net Sales


$

428,958





$

428,958


$

(1,153)


$

427,805




      KATE SPADE North America



371,314






371,314



89



371,403




      KATE SPADE International



52,095






52,095



(1,242)



50,853




      Adelington Design Group



5,549






5,549





5,549























Gross Profit



258,088






258,088



(262)



257,826























SG&A



184,427


$

(2,573)



181,854



(259)



181,595























Operating Income


$

73,661


$

2,573


$

76,234


$

(3)


$

76,231























      Other expense, net



(6,359)



5,304



(1,055)






(1,055)




      Interest expense, net



(5,170)






(5,170)






(5,170)




      Provision for income taxes (e)



624



27,809



28,433



(1)



28,432




Income from Continuing Operations


$

61,508


$

(19,932)


$

41,576


$

(2)


$

41,574























      Discontinued operations, net of income taxes



(44)



































Net Income


$

61,464



































      Basic Earnings per Common Share from Continuing Operations


$

0.48





$

0.33





$

0.33




      Diluted Earnings per Common Share from Continuing Operations (f)


$

0.48





$

0.32





$

0.32























Reconciliation of Adjusted EBITDA:


















Net Income, per above


$

61,464














      Adjustments:

















      Other expense, net



6,359














      Interest expense, net



5,170














      Provision for income taxes



(624)














      Discontinued operations, net of income taxes



44














Operating Income


$

73,661


$

2,573


$

76,234


$

(3)


$

76,231


      Depreciation and amortization, asset impairments and losses on asset disposals, 
        net (g)









16,219






16,219


      Share-based compensation, net









6,137






6,137


      Other expense, net (h)









(1,155)






(1,155)


Adjusted EBITDA








$

97,435


$

(3)


$

97,432



















Adjusted EBITDA

















Reportable Segments Adjusted EBITDA (i):

















      KATE SPADE North America








$

91,027


$

143


$

91,170


      KATE SPADE International (j)









4,482



171



4,653


      Adelington Design Group









1,795



(317)



1,478


Other (k)









131






131


Adjusted EBITDA








$

97,435


$

(3)


$

97,432



















Adjusted EBITDA Margin

















KATE SPADE North America









24.5

%





24.5

%

KATE SPADE International (j)









8.6

%





9.1

%

Adelington Design Group









32.3

%





26.6

%

Kate Spade & Company









22.7

%





22.8

%

_________________________


(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 $2,370; and (ii) store
closure, other brand-exiting and acquisition related costs of $203.

(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 $0.4 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 January 2, 2016 are based on 128,267 shares outstanding.

(g)

Excludes amortization included in Interest expense, net.

(h)

Amount is reported Other expense, net as shown above, net of foreign currency transaction adjustment of $3,908 and restructuring charges of $1,296 included in
equity in the losses of equity method investees.

(i)

Segment Adjusted EBITDA excludes: (i) depreciation and amortization; (ii) charges due to streamlining initiatives, brand-exiting activities and acquisition
related costs; and (iii) losses on asset disposals and impairments. The costs of all corporate departments that serve the respective segment are fully allocated, 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.

(j)

Amounts include equity in the adjusted losses of equity method investees of $1,286.

(k)

Amount is reported Other expense, net as shown above, net of foreign currency transaction adjustment of $3,908 and equity in the losses of equity method investees
of $2,582.

 

 



KATE SPADE & COMPANY



RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION



(All amounts in thousands, except per common share data)



(Preliminary and Unaudited)












Twelve Months Ended






December 31, 2016






(52 Weeks)











Total Net Sales


$

1,381,478




      KATE SPADE North America



1,156,373




      KATE SPADE International



201,834




      Adelington Design Group



23,271











Gross Profit



826,920











SG&A



643,307











Operating Income


$

183,613











      Other expense, net



(8,270)




      Interest expense, net



(19,714)




      Provision for income taxes



4,071




Income from Continuing Operations


$

151,558











      Discontinued operations, net of income taxes



2,024











Net Income


$

153,582











      Basic Earnings per Common Share from Continuing Operations


$

1.18




      Diluted Earnings per Common Share from Continuing Operations


$

1.17











Reconciliation of Adjusted Income from Continuing Operations:






Net Income, per above


$

153,582


Less: discontinued operations, net of income taxes



(2,024)


Adjustment to provision for income taxes



(60,931)


Adjusted Income from Continuing Operations (a)


$

90,627







      Adjusted Basic Earnings per Common Share from Continuing Operations


$

0.71


      Adjusted Diluted Earnings per Common Share from Continuing Operations (b)


$

0.70















Reconciliation of Adjusted EBITDA:






Net Income, per above


$

153,582


      Adjustments:





      Depreciation and amortization, asset impairments and losses on asset disposals, net (c)



54,986


      Share-based compensation



27,139


      Foreign currency adjustments, net



3,680


      Interest expense, net



19,714


      Provision for income taxes



(4,071)


      Discontinued operations, net of income taxes



(2,024)


Adjusted EBITDA


$

261,148







Adjusted EBITDA





Reportable Segments Adjusted EBITDA (d):





      KATE SPADE North America


$

226,385


      KATE SPADE International (e)



27,889


      Adelington Design Group



5,014


Other (f)



1,860


Adjusted EBITDA


$

261,148







Adjusted EBITDA Margin





KATE SPADE North America



19.6

%

KATE SPADE International (e)



13.8

%

Adelington Design Group



21.5

%

Kate Spade & Company



18.9

%

_________________________






(a) 

Adjusted amount represents pretax income multiplied by a normalized tax rate of 40.0%, plus $0.2 million for interest and penalties on uncertain tax positions. The normalized tax rate was derived by reference to statutory tax rates in the regions in which the Company operates, without giving effect to the Company's valuation allowance or potential use of its net operating loss carryforwards.

(b)

Adjusted diluted earnings per share for the twelve months ended December 31, 2016 are based on 129,164 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 $6,450.

(f)

Amount is Other expense, net as shown above, net of foreign currency transaction adjustment of $3,680 and equity in the losses of equity method investees of $6,450.

 

 




KATE SPADE & COMPANY



RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION



(All amounts in thousands, except per common share data)



(Unaudited)


























Streamlining








Adjusted Results









Initiatives and JV





Results of Wind-Down


(Excluding Wind-






Reported (a)


Termination Fee (b)


Adjusted Results


Operations (c)


Down Operations) (d)




Twelve Months Ended January 2, 2016 (52 Weeks)



















   Total Net Sales


$

1,242,720





$

1,242,720


$

(27,309)


$

1,215,411




      KATE SPADE North America



1,031,123






1,031,123



(12,891)



1,018,232




      KATE SPADE International



188,151






188,151



(12,701)



175,450




      Adelington Design Group



23,446






23,446



(1,717)



21,729























   Gross Profit



754,107






754,107



(11,389)



742,718























   SG&A



687,709


$

(61,317)



626,392



(15,066)



611,326























   Operating Income


$

66,398


$

61,317


$

127,715


$

3,677


$

131,392























      Other expense, net



(11,137)



5,830



(5,307)






(5,307)




      Loss on settlement of note receivable



(9,873)



9,873











      Interest expense, net



(19,152)






(19,152)






(19,152)




      Provision for income taxes (e)



4,528



37,412



41,940



1,471



43,411




   Income from Continuing Operations


$

21,708


$

39,608


$

61,316


$

2,206


$

63,522























      Discontinued operations, net of income taxes



(4,621)



































   Net Income


$

17,087



































      Basic Earnings per Common Share from Continuing Operations


$

0.17





$

0.48





$

0.50




      Diluted Earnings per Common Share from Continuing Operations (f)


$

0.17





$

0.48





$

0.50























   Reconciliation of Adjusted EBITDA:


















   Net Income, per above


$

17,087














      Adjustments:

















      Other expense, net



11,137














      Loss on settlement of note receivable



9,873














      Interest expense, net



19,152














      Provision for income taxes



(4,528)














      Discontinued operations, net of income taxes



4,621














   Operating Income


$

66,398


$

61,317


$

127,715


$

3,677


$

131,392


      Depreciation and amortization, asset impairments and losses on asset 
        disposals, net (g)









51,699



(550)



51,149


      Share-based compensation, net (h)









25,271






25,271


      Other expense, net (i)









(4,910)






(4,910)


   Adjusted EBITDA








$

199,775


$

3,127


$

202,902



















   Adjusted EBITDA

















   Reportable Segments Adjusted EBITDA (j):

















      KATE SPADE North America








$

177,593


$

3,074


$

180,667


      KATE SPADE International (k)









17,697



646



18,343


      Adelington Design Group









4,523



(593)



3,930


   Other (l)









(38)






(38)


   Adjusted EBITDA








$

199,775


$

3,127


$

202,902



















   Adjusted EBITDA Margin

















   KATE SPADE North America









17.2

%





17.7

%

   KATE SPADE International (k)









9.4

%





10.5

%

   Adelington Design Group









19.3

%





18.1

%

   Kate Spade & Company









16.1

%





16.7

%

     _________________________


(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 $35,395; (ii) store closure, other brand-exiting and acquisition related credits of $(78); 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 $0.6 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 twelve months ended January 2, 2016 are based on 128,222 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 $4,405 and restructuring charges of $1,822 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 twelve months ended January 2, 2016 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 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 $4,872.


(l)

Amount is reported Other expense, net as shown above, net of foreign currency transaction adjustment of $4,405 and equity in the losses of equity method investees of $6,694.

 

 


KATE SPADE & COMPANY

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION

(Dollars in thousands)

(Preliminary and Unaudited)


The following table provides reconciliations of Net Sales as reported to Net Sales excluding wind-down operations(a) in 2015.





























Three Months Ended









December 31, 2016


January 2, 2016


Variance




(13 Weeks)


(13 Weeks)


$


%


Total Company













Net Sales as reported


$

470,837


$

428,958


$

41,879


9.8

%

Less: Net sales for wind-down operations (a)





(1,153)







Adjusted Net Sales


$

470,837


$

427,805


$

43,032


10.1

%














KATE SPADE North America













Net Sales as reported


$

406,584


$

371,314


$

35,270


9.5

%

Less: Net sales for wind-down operations (a)





89







Adjusted Net Sales


$

406,584


$

371,403


$

35,181


9.5

%














KATE SPADE International













Net Sales as reported


$

58,576


$

52,095


$

6,481


12.4

%

Less: Net sales for wind-down operations (a)





(1,242)







Adjusted Net Sales


$

58,576


$

50,853


$

7,723


15.2

%














Adelington Design Group













Net Sales as reported


$

5,677


$

5,549


$

128


2.3

%

Less: Net sales for wind-down operations (a)











Adjusted Net Sales


$

5,677


$

5,549


$

128


2.3

%

_________________________

(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)

(Preliminary and Unaudited)


The following table provides reconciliations of Net Sales as reported to Net Sales excluding wind-down operations(a) in 2015.





























Twelve Months Ended









December 31, 2016


January 2, 2016


Variance




(52 Weeks)


(52 Weeks)


$


%


Total Company













Net Sales as reported


$

1,381,478


$

1,242,720


$

138,758


11.2

%

Less: Net sales for wind-down operations (a)





(27,309)







Adjusted Net Sales


$

1,381,478


$

1,215,411


$

166,067


13.7

%














KATE SPADE North America













Net Sales as reported


$

1,156,373


$

1,031,123


$

125,250


12.1

%

Less: Net sales for wind-down operations (a)





(12,891)







Adjusted Net Sales


$

1,156,373


$

1,018,232


$

138,141


13.6

%














KATE SPADE International













Net Sales as reported (b)


$

201,834


$

188,151


$

13,683


7.3

%

Less: Net sales for wind-down operations (a)





(12,701)







Adjusted Net Sales (b)


$

201,834


$

175,450


$

26,384


15.0

%














Adelington Design Group













Net Sales as reported


$

23,271


$

23,446


$

(175)


(0.7)

%

Less: Net sales for wind-down operations (a)





(1,717)







Adjusted Net Sales


$

23,271


$

21,729


$

1,542


7.1

%

_________________________








(a)

Represents net sales for KATE SPADE SATURDAY, JACK SPADE brick and mortar, Kate Spade Brazil and Adelington Design
Group exiting brands (Trifari, Trina Turk and Kensie).

(b)

Includes $6.4 million of net sales for the twelve months ended January 2, 2016 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-fourth-quarter-and-full-year-2016-results-and-is-reviewing-strategic-alternatives-300408584.html

SOURCE Kate Spade & Company