Warnaco Q1 profit declines on restructuring expenses
May 13, 2008 - United States Of America
The Warnaco Group Inc reported results for the first quarter ended April 5, 2008. The Company notes that the quarter ended April 5, 2008 comprised 14 weeks compared to 13 weeks in the prior year period. Revenues related to the extra week were approximately $23 million. The accompanying tables provide a reconciliation of actual results to the as adjusted results.
The Company believes it is valuable for users of the Company's financial statements to be made aware of the as adjusted financial information, as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis.
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Sportswear - Revenues for the Sportswear Group increased 28% to $300.1 million, driven by continued momentum in Calvin Klein Jeans, with notable strength in Europe and Asia. Operating income, however, decreased to $22.1 million, or 7% of Sportswear Group net revenues. Strong results in Calvin Klein Jeans were more than offset by $18.7 million of restructuring expense primarily related to the Company's previously announced transfer of the Calvin Klein Collection business.
Intimate Apparel - Intimate Apparel Group revenues rose 22% to $167.6 million and operating income increased to $32.4 million, or 19% of Intimate Apparel Group net revenues. Momentum at both retail and wholesale, in Calvin Klein Underwear, driven by ongoing strength in Calvin Klein Steel contributed tothe strong results. Additionally, the Company's Core brands reported both top and bottom line growth. Expanded distribution and strong product offerings led to market share gains for both Warner's(R) and Olga(R).
Swimwear - Swimwear Group revenues were $107.2 million, a 5% decline compared to the prior year period, and operating income decreased to $14.8 million, or 14% of Swimwear Group net revenues. Calvin Klein swim revenues were sharply higher, driven by strong European demand. Speedo(R) revenues were flat while Speedo operating income was down. Speedo operating income was adversely affected by restructuring expense and the timing of certain manufacturing variances which favorably affected the prior year period.
Balance Sheet - Cash and cash equivalents at April 5, 2008 rose to $138.0 million from $105.2 million at March 31, 2007. During the quarter, the Company used approximately $44 million in proceeds from the previously announced sale of Lejaby to reduce the principal amount of the Company's outstanding 8 7/8% Senior Notes due 2013. Net inventories were $321.0 million at April 5, 2008, down from $380.9 million at March 31, 2007, primarily as a result of discontinued operations, and appropriate for the Company's needs to service its ongoing business.
"While our reported results include restructuring expenses (primarily related to our previously announced transfer of the Calvin Klein Collection business) as well as a substantially non-cash tax charge of $19.5 million associated with the repatriation of the proceeds from the sale of Lejaby, our as adjusted results exceeded our expectations and are reflected in our updated adjusted guidance," commented Larry Rutkowski, Warnaco's Executive Vice President and Chief Financial Officer.