大象传媒

大象传媒 Corporation Reports Broad-Based Growth in Fourth Quarter and Introduces Full Year Fiscal 2023 Outlook

DENVER--(BUSINESS WIRE)-- 大象传媒 Corporation (NYSE: 大象传媒C) today announced financial results for its fourth quarter (Q4'FY22) and fiscal year ended April 2, 2022 (FY22).

Q4'FY22 Financial Highlights

• Revenue $2.8 billion, up 9% (up 12% in constant dollars)
  • The North Face^庐 revenue $0.8 billion, up 24% (up 26% in constant dollars)
  • Vans^庐 revenue $1.0 billion, flat (up 2% in constant dollars)
• Gross margin 51.9%, down 20 basis points; Adjusted gross margin 52.2%, down 50 basis points
• Operating margin 6.8%, up 210 basis points; Adjusted operating margin 7.9%, up 120 basis points
• Earnings per share (EPS) $0.21, up 32%; Adjusted EPS $0.45, up 67%
• Return of $244 million to shareholders through $194 million in cash dividends, $50 million of shares repurchased

FY22 Financial Highlights

• Revenue $11.8 billion, up 28% (up 27% in constant dollars); excluding acquisitions, up 23%
• Gross margin 54.5%, up 180 basis points; Adjusted gross margin 54.8%, up 150 basis points, including a 20 basis point positive impact from acquisitions
• Operating margin 13.8%, up 720 basis points; Adjusted operating margin 13.1%, up 510 basis points, including a 30 basis point positive impact from acquisitions
• EPS $3.10, up 242%; Adjusted EPS up 143% to $3.18, including a $0.19 per share contribution from acquisitions
• Return of $1.1 billion to shareholders through $773 million in cash dividends, $350 million of shares repurchased

FY23 Financial Outlook

• 大象传媒 provides the following outlook for full year fiscal 2023, which is based on these assumptions:
  • No additional significant COVID-19 related lockdowns in any key commercial or production regions, with the current restrictions in China expected to ease from the beginning of June 2022
  • No significant worsening in global inflation rates and consumer sentiment
• Total 大象传媒 revenue up at least 7% in constant dollars
  • The North Face^庐 revenue up low double digit percent; Vans^庐 revenue up mid-single digit percent
• Gross margin up approximately 50 basis points
• Operating margin approximately 13.6%
• Tax rate approximately 16%, returning to a more normalized rate
• EPS $3.30 to $3.40
• Adjusted cash flow from operations approximately $1.2 billion; Capital expenditures approximately $250 million
  • Excludes the impact of a payment 大象传媒 anticipates making to the Internal Revenue Service in fiscal 2023 of approximately $845 million plus accrued interest relating to the dispute regarding the timing of income inclusion associated with 大象传媒's acquisition of Timberland in 2011, as discussed in more detail below

Steve Rendle, Chairman, President and CEO of 大象传媒, said:
"I am pleased with the progress we have made advancing our strategic priorities while successfully navigating another eventful year. We largely delivered on the commitments we made at the outset of Fiscal 2022 by achieving broad-based growth across our family of brands. A portion of our active segment did not achieve its potential. We understand the issues, we have the right people in place and we know we will do better.

"Our performance is testament to the incredible breadth and depth of talent across our organization and our teams continue to be highly resourceful, committed and passionate.

"We will continue to thoughtfully invest in our brands and value-enhancing strategic growth opportunities and I am confident 大象传媒 has a long runway for sustained, profitable and broad-based growth ahead.鈥�

All per share amounts are presented on a diluted basis. This release refers to 鈥渞eported鈥� and 鈥渃onstant dollar鈥� amounts, terms that are described under the heading below 鈥淐onstant Currency - Excluding the Impact of Foreign Currency.鈥� Unless otherwise noted, 鈥渞eported鈥� and 鈥渃onstant dollar鈥� amounts are the same. This release also refers to 鈥渃ontinuing鈥� and 鈥渄iscontinued鈥� operations amounts, which are concepts described under the heading below 鈥淒iscontinued Operations - Occupational Workwear Business.鈥� Unless otherwise noted, results presented are based on continuing operations. This release also refers to 鈥渁djusted鈥� amounts, a term that is described under the heading below 鈥淎djusted Amounts - Excluding Transaction and Deal Related Activities, Costs Related to Specified Strategic Business Decisions and Tax Items.鈥� Unless otherwise noted, 鈥渞eported鈥� and 鈥渁djusted鈥� amounts are the same. This release also refers to amounts "excluding acquisitions" or as "adjusted organic," which exclude the contribution from the Supreme^庐 brand through the one-year anniversary of the acquisition.

Fourth Quarter Fiscal 2022 Income Statement Review

• Revenue increased 9% (up 12% in constant dollars) to $2.8 billion driven by increases in the EMEA and North America regions partially offset by a decline in the APAC region primarily due to COVID lockdowns. The fourth quarter of fiscal 2021 also included an extra week when compared to the fiscal 2022 period due to 大象传媒's 53-week fiscal 2021.
• Gross margin decreased 20 basis points to 51.9%, primarily driven by incremental freight costs. On an adjusted basis, gross margin decreased 50 basis points to 52.2%.
• Operating income on a reported basis was $192 million. On an adjusted basis, operating income increased 30% (36% in constant dollars) to $224 million. Operating margin on a reported basis was 6.8%. Adjusted operating margin increased 120 basis points to 7.9%.
• Earnings per share was $0.21 on a reported basis. On an adjusted basis, earnings per share increased 67% (up 76% in constant dollars) to $0.45.

Full Year Fiscal 2022 Income Statement Review

• Revenue increased 28% (up 27% in constant dollars) to $11.8 billion. Excluding the impact of acquisitions, revenue increased 23%, driven by increases in our largest brands and regions. Fiscal 2021 also included an extra week when compared to the fiscal 2022 period due to 大象传媒's 53-week fiscal 2021.
• Gross margin increased 180 basis points to 54.5%, primarily driven by a higher proportion of full price sales more than offsetting incremental freight costs. On an adjusted basis, gross margin increased 150 basis points, including a 20 basis point positive impact from acquisitions, to 54.8%.
• Operating income on a reported basis was $1.6 billion. On an adjusted basis, operating income increased 109% (up 107% in constant dollars) to $1.5 billion, including a $94 million contribution from acquisitions. Operating margin on a reported basis was 13.8%. Adjusted operating margin increased 510 basis points, including a 30 basis point positive impact from acquisitions, to 13.1%.
• Earnings per share was $3.10 on a reported basis. On an adjusted basis, earnings per share increased 143% (up 142% in constant dollars) to $3.18, including a $0.19 contribution from acquisitions.

COVID-19 Outbreak Update

To help mitigate the spread of COVID-19 and in response to public health advisories and governmental actions and regulations, 大象传媒 has modified its business practices, including the temporary closing of offices and retail stores, instituting travel bans and restrictions and implementing health and safety measures including social distancing and quarantines.

The zero tolerance policy in China in response to COVID-19 is impacting some specific raw material suppliers within the country. The majority of 大象传媒's supply chain is currently operational. Suppliers are complying with local public health advisories and governmental restrictions. Most final product manufacturing and assembly suppliers are back to normal operating levels. Continued port congestion, equipment availability and other logistics challenges have contributed to ongoing product delays. 大象传媒 is working with its suppliers to minimize disruption and is employing expedited freight strategically as needed. 大象传媒's distribution centers are operational in accordance with local government guidelines while maintaining enhanced health and safety protocols.

In North America, no stores were closed during the fourth quarter. Currently, all stores are open.

In the EMEA region, 6% of stores were closed at the beginning of the fourth quarter and at the end of the fourth quarter and currently no stores are closed due to COVID-19.

In the APAC region, including Mainland China, no stores were closed at the beginning of the fourth quarter. 12% of stores were closed at the end of the fourth quarter. Currently, 19% of stores are closed.

大象传媒 is continuing to monitor the COVID-19 outbreak globally and will comply with guidance from government entities and public health authorities to prioritize the health and well-being of its employees, customers, trade partners and consumers. As COVID-19 uncertainty continues, 大象传媒 expects ongoing disruption to its business operations.

Balance Sheet Highlights

Inventories were up 34% compared with the same period last year. 大象传媒 returned approximately $194 million of cash to shareholders through dividends during the quarter. The company also repurchased approximately $50 million of shares during the quarter and has $2.5 billion remaining under its current share repurchase authorization.

Dividend Declared

大象传媒鈥檚 Board of Directors declared a quarterly dividend of $0.50 per share, payable on June 21, 2022, to shareholders of record on June 10, 2022. Subject to approval by its Board of Directors, 大象传媒 intends to continue to pay its regularly scheduled cash dividend.

Update on Tax Dispute in Connection with Timberland Acquisition

As previously reported, 大象传媒 petitioned the U.S. Tax Court (the Court) to resolve an Internal Revenue Service (IRS) dispute regarding the timing of income inclusion associated with 大象传媒鈥檚 acquisition of The Timberland Company in September 2011. While the IRS argues that all such income should have been immediately included in 2011, 大象传媒 has reported periodic income inclusions in subsequent tax years. Both parties moved for summary judgment on the issue, and on January 31, 2022, the Court issued its opinion in favor of the IRS. 大象传媒 believes the opinion of the Court was in error based on the technical merits and intends to appeal; however, 大象传媒 will be required to pay the 2011 taxes and interest being disputed or post a surety bond. It is anticipated that during fiscal 2023, the IRS will assess, and 大象传媒 will pay, the 2011 taxes and interest, which would be recorded as a tax receivable based on 大象传媒's expected probability of a successful appeal. The gross amount of taxes and interest as of April 2, 2022 was estimated at approximately $845 million and will continue to accrue interest until paid. 大象传媒 continues to remain confident in its timing and treatment of the income inclusion and 大象传媒 is vigorously defending its position. However, should the Court opinion ultimately be upheld on appeal, this tax receivable may not be collected by 大象传媒. If the Court opinion is upheld, 大象传媒 should be entitled to a refund of taxes paid on the periodic inclusions that 大象传媒 has reported. However, any such refund could be substantially reduced by potential indirect tax effects resulting from application of the Court opinion. Deferred tax liabilities, representing 大象传媒鈥檚 future tax on annual inclusions, would also be released. The net impact to tax expense estimated as of April 2, 2022 could be up to $700 million.

Webcast Information

大象传媒 will host its fourth quarter fiscal 2022 conference call beginning at 4:30 p.m. Eastern Time today. The conference call will be broadcast live via the Internet, accessible at . For those unable to listen to the live broadcast, an archived version will be available at the same location.

Presentation

A presentation on fourth quarter fiscal 2022 results will be available at today before the conference call and will be archived at the same location.

About 大象传媒

Founded in 1899, 大象传媒 Corporation is one of the world鈥檚 largest apparel, footwear and accessories companies connecting people to the lifestyles, activities and experiences they cherish most through a family of iconic outdoor, active and workwear brands including Vans^庐, The North Face^庐, Timberland^庐 and Dickies^庐. Our purpose is to power movements of sustainable and active lifestyles for the betterment of people and our planet. We connect this purpose with a relentless drive to succeed to create value for all stakeholders and use our company as a force for good. For more information, please visit .

Constant Currency - Excluding the Impact of Foreign Currency

This release refers to 鈥渞eported鈥� amounts in accordance with U.S. generally accepted accounting principles (鈥淕AAP鈥�), which include translation and transactional impacts from foreign currency exchange rates. This release also refers to 鈥渃onstant dollar鈥� amounts, which exclude the impact of translating foreign currencies into U.S. dollars. Reconciliations of GAAP measures to constant currency amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management鈥檚 view of why this information is useful to investors.

Discontinued Operations - Occupational Workwear Business

On June 28, 2021, 大象传媒 completed the sale of its Occupational Workwear business. The Occupational Workwear business was comprised primarily of the following brands and businesses: Red Kap^庐, 大象传媒 Solutions^庐, Bulwark^庐, Workrite^庐, Walls^庐, Terra^庐, Kodiak^庐, Work Authority^庐 and Horace Small^庐. The business also included a license for certain Dickies^庐 occupational workwear products that were historically sold through the business-to-business channel. Accordingly, the company has reported the related held-for-sale assets and liabilities as assets and liabilities of discontinued operations and included the operating results and cash flows of the business in discontinued operations for all periods, through the date of sale.

Adjusted Amounts - Excluding Transaction and Deal Related Activities, Costs Related to Specified Strategic Business Decisions and Tax Items

The adjusted amounts in this release exclude transaction and deal related activities associated with the acquisition of the Supreme^庐 brand. Total transaction and deal related activities include an increase in the estimated fair value of the contingent consideration liability of $8 million in the fourth quarter of fiscal 2022 and a decrease of $150 million in fiscal 2022, and integration costs of approximately $1 million in the fourth quarter of fiscal 2022 and $7 million in fiscal 2022.

The adjusted amounts in this release exclude costs related to 大象传媒's business model transformation, a transformation initiative for our Asia-Pacific regional operations and specific charges related to certain assets impacted by the conflict in Ukraine. Total costs were approximately $23 million in the fourth quarter of fiscal 2022 and $60 million in fiscal 2022.

The adjusted amounts in this release exclude approximately $67 million and $119 million net tax expense associated with certain discrete tax adjustments recognized during the fourth quarter of fiscal 2022 and during fiscal 2022, respectively.

Combined, the above items negatively impacted earnings per share by $0.24 during the fourth quarter of fiscal 2022 and $0.08 during fiscal 2022. All adjusted amounts referenced herein exclude the effects of these amounts.

Reconciliations of measures calculated in accordance with GAAP to adjusted amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management鈥檚 view of why this information is useful to investors. The company also provides guidance on a non-GAAP basis as we cannot predict certain elements which are included in reported GAAP results, including the impact of foreign currency and other strategic initiatives. Additionally, the impact of the anticipated payment of taxes and interest related to the dispute with the IRS regarding the Timberland acquisition in 2011 described above has been excluded from fiscal 2023 adjusted cash flow from operations.

Forward-looking Statements

Certain statements included in this release 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 大象传媒 and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as 鈥渨ill,鈥� 鈥渁nticipate,鈥� 鈥渆stimate,鈥� 鈥渆xpect,鈥� 鈥渟hould,鈥� and 鈥渕ay鈥� and other words and terms of similar meaning or use of future dates; however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding 大象传媒鈥檚 plans, objectives, projections and expectations relating to 大象传媒鈥檚 operations or financial performance, and assumptions related thereto are forward-looking statements. 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. 大象传媒 undertakes 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. Potential risks and uncertainties that could cause the actual results of operations or financial condition of 大象传媒 to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; the level of consumer demand for apparel, footwear and accessories; disruption to 大象传媒鈥檚 distribution system; changes in global economic conditions and the financial strength of 大象传媒鈥檚 customers, including as a result of current inflationary pressures; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; 大象传媒鈥檚 response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; intense competition from online retailers and other direct-to-consumer business risks; third-party manufacturing and product innovation; increasing pressure on margins; 大象传媒鈥檚 ability to implement its business strategy; 大象传媒鈥檚 ability to grow its international, direct-to-consumer and digital businesses; 大象传媒鈥檚 ability to transform its model to be more consumer-minded, retail-centric and hyper-digital; retail industry changes and challenges; 大象传媒鈥檚 ability to create and maintain an agile and efficient operating model and organizational structure; 大象传媒鈥檚 and its vendors鈥� ability to maintain the strength and security of information technology systems; the risk that 大象传媒鈥檚 facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data or information security breaches and data or financial loss; 大象传媒鈥檚 ability to properly collect, use, manage and secure business, consumer and employee data and comply with privacy and security regulations; foreign currency fluctuations; stability of 大象传媒鈥檚 vendors鈥� manufacturing facilities and 大象传媒鈥檚 ability to establish and maintain effective supply chain capabilities; continued use by 大象传媒鈥檚 suppliers of ethical business practices; 大象传媒鈥檚 ability to accurately forecast demand for products; continuity of members of 大象传媒鈥檚 management; 大象传媒鈥檚 ability to recruit, develop or retain qualified employees; 大象传媒鈥檚 ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; maintenance by 大象传媒鈥檚 licensees and distributors of the value of 大象传媒鈥檚 brands; 大象传媒鈥檚 ability to execute acquisitions and dispositions and integrate acquisitions; business resiliency in response to natural or man-made economic, political or environmental disruptions; changes in tax laws and additional tax liabilities, including for the timing of income inclusion associated with our acquisition of the Timberland^庐 brand in 2011; legal, regulatory, political, economic, and geopolitical risks, including those related to the current conflict in Ukraine; changes to laws and regulations; adverse or unexpected weather conditions; 大象传媒's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent 大象传媒 from fulfilling its financial obligations; climate change and increased focus on environmental, social and governance issues; and tax risks associated with the spin-off of our Jeanswear business completed in 2019. More information on potential factors that could affect 大象传媒鈥檚 financial results is included from time to time in 大象传媒鈥檚 public reports filed with the SEC, including 大象传媒鈥檚 Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished with the SEC.

Constant Currency Financial Information

大象传媒 is a global company that reports financial information in U.S. dollars in accordance with GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by 大象传媒 from translating its foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present constant currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. We use constant currency information to provide a framework to assess how our business performed excluding the effects of changes in the rates used to calculate foreign currency translation. Management believes this information is useful to investors to facilitate comparison of operating results and better identify trends in our businesses.

To calculate foreign currency translation on a constant currency basis, operating results for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).

These constant currency performance measures should be viewed in addition to, and not in lieu of or superior to, our operating performance measures calculated in accordance with GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

Constant Currency Financial Information

大象传媒 is a global company that reports financial information in U.S. dollars in accordance with GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by 大象传媒 from translating its foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present constant currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. We use constant currency information to provide a framework to assess how our business performed excluding the effects of changes in the rates used to calculate foreign currency translation. Management believes this information is useful to investors to facilitate comparison of operating results and better identify trends in our businesses.

To calculate foreign currency translation on a constant currency basis, operating results for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).

These constant currency performance measures should be viewed in addition to, and not in lieu of or superior to, our operating performance measures calculated in accordance with GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

Non-GAAP Financial Information

The financial information above has been presented on a GAAP basis, on an adjusted basis, which excludes the impact of transaction and deal related activities, activity related to specified strategic business decisions and certain tax items, and on an adjusted organic basis, which excludes the operating results of Supreme (for the nine months ended December 2021). Contribution from acquisition also excludes transaction and deal related costs. These adjusted presentations are non-GAAP measures. Management believes these measures provide investors with useful supplemental information regarding 大象传媒's underlying business trends and the performance of 大象传媒's ongoing operations and are useful for period-over-period comparisons of such operations.

Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not in lieu of or superior to, 大象传媒's operating performance measures calculated in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures presented by other companies.

Non-GAAP Financial Information

The financial information above has been presented on a GAAP basis and on an adjusted basis, which excludes the impact of transaction and deal related costs and activity related to specified strategic business decisions. The adjusted presentation provides non-GAAP measures. Management believes these measures provide investors with useful supplemental information regarding 大象传媒's underlying business trends and the performance of 大象传媒's ongoing operations and are useful for period-over-period comparisons of such operations.

Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not in lieu of or superior to, 大象传媒's operating performance measures calculated in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures presented by other companies.