How did the company's revenue and profitability change in fiscal 1998?

Net revenues increased to $1,470.9 million from $1,180.4 million in fiscal 1997. Income from operations rose to $199.8 million from $157.4 million, and net income rose to $147.6 million from $117.3 million. Net income includes a $27.4 million non-recurring deferred tax benefit tied to the Reorganization, and the pro forma net income was $120.1 million.

What was the effect of the initial public offering on the company's balance sheet?

The company sold 11,170,000 Class A shares at $26.00 per share on June 17, 1997, generating net proceeds of $268.8 million. Those proceeds repaid $163.5 million under the New Credit Facility, paid $43.0 million of Dividend and Reorganization Notes, repaid $24.3 million of subordinated notes and interest, and left $38.0 million for general corporate purposes. Total debt was $337 thousand at March 28, 1998, compared with $140.9 million a year earlier.

Does the company pay dividends, and is it repurchasing shares?

The company does not intend to pay cash dividends on its Common Stock in the foreseeable future and plans to retain earnings to finance growth. Dividends were declared only to Class B and Class C holders in connection with the June 9, 1997 Reorganization. In March 1998 the board authorized repurchases of up to $100.0 million of Class A Common Stock over two years beginning April 1, 1998, subject to market conditions.

What are the main risks and legal matters disclosed?

Three customers, Dillard, Federated and May, accounted for 53.0% of trade accounts receivable at March 28, 1998. Three licensing partners accounted for about 35.0% of licensing revenue, and products are manufactured by independent contractors, largely in the Far East. A purported national class action filed in the Delaware Supreme Court in July 1997 alleges that outlet store advertising practices violated consumer protection statutes; the company intends to defend it vigorously. Management does not expect pending matters to have a material adverse effect.

How much did the company invest in its retail expansion and what are its plans?

Capital expenditures were $63.1 million in fiscal 1998, mainly for the shop-within-shops program and retail expansion. The company plans to invest approximately $120.0 million, net of landlord incentives, in retail stores, including flagship stores, over the next fiscal year. It plans to add approximately 230 shop-within-shops in fiscal 1999 and 10 to 20 new outlet stores over the next three years.

RL 10-K FY1998 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed June 26, 1998. Cited figures are marked; the original filing is the authoritative source.

Polo Ralph Lauren Corporation's annual report on Form 10-K for the fiscal year ended March 28, 1998 shows net revenues of $1.47 billion^a, up from $1.18 billion in fiscal 1997 (pro forma basis for fiscal 1997 was $1.27 billion).

Net sales were $1.30 billion^b, with wholesale net sales of $733.1 million and retail sales of $570.8 million. Licensing revenue rose to $167.1 million from $137.1 million. Income from operations was $199.8 million and net income was $147.6 million, though net income includes a $27.4 million non-recurring deferred tax benefit recorded on the Reorganization.

Gross profit as a percentage of net revenues improved to 48.6% from 45.8% in fiscal 1997 (pro forma), while SG&A expenses rose to 35.0% of net revenues from 33.8%. The company completed its initial public offering on June 17, 1997, selling 11,170,000 Class A shares at $26.00^c per share, with net proceeds of $268.8 million used largely to repay debt. Total debt was reduced to $337 thousand at March 28, 1998, from $140.9 million a year earlier, and the company had no direct borrowings under its $225.0 million revolving credit facility.

Stockholders' equity increased to $584.3 million^d from $260.7 million. Cash provided by operating activities declined to $96.2 million from $203.6 million, mainly due to higher inventory levels. The board authorized a repurchase of up to $100.0 million of Class A common stock over two years beginning April 1, 1998, and the company does not intend to pay cash dividends on its common stock.

The filing also discloses a purported national class action lawsuit filed in the Delaware Supreme Court in July 1997 concerning advertising and marketing practices at outlet stores, which management intends to vigorously defend. Management believes the resolution of pending matters will not have a material adverse effect on financial condition or results of operations. Principal risks noted include dependence on licensing partners, concentration of receivables among a few department store customers, and reliance on foreign manufacturers.

02—Key points

Key Highlights

Net revenues rose to $1,470.9 million in fiscal 1998 from $1,180.4 million in fiscal 1997, with retail sales up to $570.8 million from $380.0 million on a historical basis.
Licensing revenue increased to $167.1 million from $137.1 million, driven by the Lauren women's line launch and growth in Chaps and Home Collection.
Gross profit margin improved to 48.6% of net revenues from 45.8% in fiscal 1997 (pro forma), reflecting better wholesale fulfillment and a planned reduction in off-price sales.
Net income was $147.6 million, including a $27.4 million non-recurring deferred tax benefit recorded at the June 9, 1997 Reorganization; pro forma net income was $120.1 million.
The June 1997 IPO raised net proceeds of $268.8 million, which were used to repay $163.5 million of credit facility borrowings and other debt, leaving total debt at $337 thousand.
Stockholders' equity increased to $584.3 million from $260.7 million, and the board authorized up to $100.0 million in share repurchases over two years beginning April 1, 1998.
Operating cash flow fell to $96.2 million from $203.6 million, primarily due to inventory build-up, and capital expenditures rose to $63.1 million from $35.3 million.

03—Questions

Frequently Asked Questions

How did the company's revenue and profitability change in fiscal 1998?
Net revenues increased to $1,470.9 million from $1,180.4 million in fiscal 1997. Income from operations rose to $199.8 million from $157.4 million, and net income rose to $147.6 million from $117.3 million. Net income includes a $27.4 million non-recurring deferred tax benefit tied to the Reorganization, and the pro forma net income was $120.1 million.
What was the effect of the initial public offering on the company's balance sheet?
The company sold 11,170,000 Class A shares at $26.00 per share on June 17, 1997, generating net proceeds of $268.8 million. Those proceeds repaid $163.5 million under the New Credit Facility, paid $43.0 million of Dividend and Reorganization Notes, repaid $24.3 million of subordinated notes and interest, and left $38.0 million for general corporate purposes. Total debt was $337 thousand at March 28, 1998, compared with $140.9 million a year earlier.
Does the company pay dividends, and is it repurchasing shares?
The company does not intend to pay cash dividends on its Common Stock in the foreseeable future and plans to retain earnings to finance growth. Dividends were declared only to Class B and Class C holders in connection with the June 9, 1997 Reorganization. In March 1998 the board authorized repurchases of up to $100.0 million of Class A Common Stock over two years beginning April 1, 1998, subject to market conditions.
What are the main risks and legal matters disclosed?
Three customers, Dillard, Federated and May, accounted for 53.0% of trade accounts receivable at March 28, 1998. Three licensing partners accounted for about 35.0% of licensing revenue, and products are manufactured by independent contractors, largely in the Far East. A purported national class action filed in the Delaware Supreme Court in July 1997 alleges that outlet store advertising practices violated consumer protection statutes; the company intends to defend it vigorously. Management does not expect pending matters to have a material adverse effect.
How much did the company invest in its retail expansion and what are its plans?
Capital expenditures were $63.1 million in fiscal 1998, mainly for the shop-within-shops program and retail expansion. The company plans to invest approximately $120.0 million, net of landlord incentives, in retail stores, including flagship stores, over the next fiscal year. It plans to add approximately 230 shop-within-shops in fiscal 1999 and 10 to 20 new outlet stores over the next three years.

04—Continue

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