Kontoor Brands, Inc. Announces Filing of Quarterly Report on Form 10-Q

Jun 20, 2019 Press Release Tags:
  • Reaffirms full year 2019 outlook and three-year financial roadmap;
  • Reaffirms annual dividend plan of $2.24 per share;
  • Outlines near-term progress of restructuring and cost savings actions; and,
  • Provides select supplemental financial information for first quarter 2019 and full year ended December 2018, by quarter.

GREENSBORO, N.C.--(BUSINESS WIRE)-- Kontoor Brands, Inc. (NYSE: KTB), a global lifestyle apparel company, with a portfolio led by two of the world’s most iconic consumer brands, Wrangler® and Lee®, today announced that it has filed its Form 10-Q with the Securities and Exchange Commission (SEC), reporting results for its first quarter ended March 30, 2019.

Kontoor Brands became a publicly traded, independent company on May 23, 2019, following its planned separation from VF Corporation. The Form 10-Q reflects carve-out accounting under U.S. generally accepted accounting principles (“GAAP”) for the newly created company. The 10-Q can also be found on the Kontoor Brands website at: https://www.kontoorbrands.com/investors/sec-filings.

Additionally, Kontoor Brands today reaffirmed its full year 2019 outlook and three-year financial roadmap and provided an update regarding the company’s actions associated with its restructuring and cost savings program, both of which were announced via a VF Corporation news release on April 26, 2019. The company also provided select supplemental financial information for first quarter 2019 and full year ended December 2018, on a quarterly basis.

Restructuring and Cost Savings Programs

Kontoor Brands’ previously announced restructuring and cost savings program is on track, targeting more than $50 million in total savings. We believe Phase 1 actions will reduce costs by $20 million to $25 million on an annualized basis, which we expect will accelerate in the second half of 2019 and be complete by the end of 2020. Phase 2, beginning in 2021, is expected to further leverage improved global processes and systems generating additional savings.

Actions already completed include: Exited unprofitable markets in select European and South American countries; streamlined and rightsized supply chain operations, including closing three owned manufacturing facilities in Mexico; consolidated and relocated select facilities and operations; and redesigned commercial organizations in the U.S. and Asia.

“Consistent with our previously announced plans, we’ve taken significant actions in all regions of the world to simplify, stabilize and strengthen the company’s global results and deliver improved profitability,” said Scott Baxter, President and Chief Executive Officer, Kontoor Brands.

Full Year 2019 Outlook

Kontoor Brands’ outlook for fiscal year ended December 28, 2019, remains unchanged:

  • Revenue is expected to exceed $2.5 billion, reflecting a mid-single digit decline compared with full year 2018 adjusted revenue. The company’s 2019 revenue outlook includes an approximate 1 to 2 percentage point negative impact from foreign currency exchange rates. Excluding the negative impact of foreign currency exchange rates, impacts of prior year customer bankruptcies, and strategic business exits, full year 2019 revenue is expected to be relatively consistent with full year 2018 adjusted revenue. The negative impacts of foreign currency, proactive strategic actions and prior year customer bankruptcies should be more pronounced in the first half of 2019, particularly in the second quarter. The benefits of strategic initiatives begin to improve revenues in the second half of the year and beyond.

  • Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is expected to range between $340 million and $360 million, reflecting a mid-single digit to low double-digit decline compared with full year 2018 adjusted EBITDA. We anticipate the impacts of strategic actions and prior year customer bankruptcies will weigh on our second quarter performance. However, we do expect to see improved second-half performance based on early benefits from restructuring and cost savings initiatives. As planned, inventory levels are expected to remain elevated during the second and third quarters of the year, until the full benefits of capacity adjustments associated with the closure of the manufacturing facilities in Mexico are achieved.

  • Capital Expenditures are expected to range between $55 million and $65 million, including approximately $30 million to $40 million to support the design and implementation of a global enterprise resource planning (ERP) system. As previously announced, the global ERP system implementation is expected to require approximately $80 million to $90 million of capital investment during a two-to-three year period and is expected to result in significant efficiencies and cost savings, once fully implemented.

  • Other full year assumptions include an effective tax rate of approximately 24 percent, and approximately $60 million of interest expense.

  • As previously communicated in our Registration Statement on Form 10, Kontoor intends to pay a quarterly dividend, in cash, at an annual rate initially equal to $2.24 per share of our common stock (representing a quarterly rate initially equal to $0.56 per share). The dividend declaration will be at the discretion of Kontoor Brands’ Board of Directors and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors the Board of Directors deems relevant.

2020 to 2021 Financial Roadmap Reaffirmed

  • Revenue is expected to increase at a low-single digit compound annual growth rate (CAGR) over the time period.

  • Adjusted EBITDA is expected to increase at a mid-single digit CAGR over the period.

  • Capital Expenditures are expected to range between $105 million and $110 million in aggregate over the period.

“Our financial model is based on durable and consistent free cash flow and a commitment to improved operational performance,” Baxter said. “An essential element of that model is a compelling dividend yield, supported by a 60 percent target-payout ratio. Our approach to business success is and will remain fully aligned with our sharp focus on Total Shareholder Return.”

Non-GAAP Financial Measures

Constant Currency - This release refers to “reported” amounts in accordance with U.S. 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.

Adjusted Amounts - This release refers to adjusted amounts that exclude the impact of restructuring and separations costs, changes in our business model and other adjustments.

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 information is useful to investors. Such non-GAAP measures should be viewed in addition to, and not as an alternative for, reported results under GAAP. The non-GAAP measures used by Kontoor Brands in this press release may be different from the measures used by other companies.

About Kontoor Brands

Kontoor Brands, Inc. (NYSE: KTB) is a global lifestyle apparel company, with a portfolio led by some of the world’s most iconic denim brands: Wrangler®, Lee® and Rock & Republic®. Kontoor designs, manufactures and distributes superior high-quality products that look good and fit right, giving people around the world the freedom and confidence to express themselves. Kontoor Brands is focused on leveraging its global platform, strategic sourcing model and best-in-class supply chain to drive brand growth and deliver long-term value for its stakeholders.

For more information about Kontoor Brands, please visit www.KontoorBrands.com.

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 Kontoor Brands 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,” and “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. Potential risks and uncertainties that could cause the actual results of operations or financial condition of Kontoor to differ materially from those expressed or implied by forward-looking statements in this release include, but are not limited to: risks associated with Kontoor Brands’ spin-off from VF Corporation, including the risk of disruption to Kontoor’s business in connection with the spin-off and that Kontoor could lose revenue as a result of such disruption; the risk that Kontoor does not realize all of the expected benefits of the spin-off; the risk that the spin-off will not be tax-free for U.S. federal income tax purposes; and the risk that there will be a loss of synergies from separating the businesses that could negatively impact the balance sheet, profit margins or earnings of Kontoor. Other risks for Kontoor includes foreign currency fluctuations; the level of consumer demand for apparel; disruption to distribution systems; reliance on a small number of large customers; the financial strength of customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior, intense competition from online retailers, manufacturing and product innovation; increasing pressure on margins; ability to implement their business strategy; ability to grow their international and direct-to-consumer businesses; each company and its vendors’ ability to maintain the strength and security of information technology systems; the risk that facilities and systems and those of third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; ability to properly collect, use, manage and secure consumer and employee data; stability of manufacturing facilities and foreign suppliers; continued use by suppliers of ethical business practices; ability to accurately forecast demand for products; continuity of members of management; ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; maintenance by licensees and distributors of the value of Kontoor’s brands; ability to execute and integrate acquisitions; changes in tax laws and liabilities; legal, regulatory, political and economic risks; the risk of economic uncertainty associated with the pending exit of the United Kingdom from the European Union ("Brexit") or any other similar referendums that may be held; and adverse or unexpected weather conditions. More information on potential factors that could affect Kontoor’s financial results is included from time to time in Kontoor’s public reports filed with the SEC and Kontoor Brands’ Registration Statement on Form 10 also filed with the SEC.

KONTOOR BRANDS, INC.

Condensed Combined Statements of Income

(Unaudited)

(In thousands)

 

 

Three Months Ended March

 

%

 

 

 

2019

 

2018

 

Change

 

Net revenues

 

$

648,344

 

 

$

669,663

 

 

(3)%

 

Costs and operating expenses

 

 

 

 

 

 

 

Cost of goods sold

 

 

401,025

 

 

 

382,421

 

 

5%

 

Selling, general and administrative expenses

 

 

222,124

 

 

 

194,834

 

 

14%

 

Total costs and operating expenses

 

 

623,149

 

 

 

577,255

 

 

8%

 

Operating income

 

 

25,195

 

 

 

92,408

 

 

(73)%

 

Related party interest income, net

 

 

2,339

 

 

 

1,651

 

 

42%

 

Other interest income, net

 

 

1,325

 

 

 

917

 

 

44%

 

Other expense, net

 

 

(971

)

 

 

(1,197

)

 

(19)%

 

Income before income taxes

 

 

27,888

 

 

 

93,779

 

 

(70)%

 

Income taxes

 

 

12,475

 

 

 

14,083

 

 

(11)%

 

Net income

 

$

15,413

 

 

$

79,696

 

 

(81)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basis of presentation: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 each year. For presentation purposes herein, all references to periods ended March 2019 and March 2018 relate to the 13-week fiscal periods ended March 30, 2019 and March 31, 2018, respectively. References to December 2018 relate to the balance sheet as of December 29, 2018. Amounts herein may not recalculate due to the use of unrounded numbers.

 

KONTOOR BRANDS, INC.

Condensed Combined Balance Sheets

(Unaudited)

(In thousands)

 

 

 

March 2019

 

December 2018

 

March 2018

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and equivalents

 

$

102,945

 

 

$

96,776

 

 

$

88,234

 

Accounts receivable

 

299,328

 

 

252,966

 

 

318,480

 

Due from related parties, current

 

291,127

 

 

547,690

 

 

274,368

 

Related party notes receivable

 

517,940

 

 

517,940

 

 

546,740

 

Inventories

 

519,006

 

 

473,812

 

 

499,849

 

Other current assets

 

50,671

 

 

52,014

 

 

51,783

 

Total current assets

 

1,781,017

 

 

1,941,198

 

 

1,779,454

 

Due from related parties, noncurrent

 

370

 

 

611

 

 

1,576

 

Property, plant and equipment, net

 

138,972

 

 

138,449

 

 

142,958

 

Operating lease assets

 

77,305

 

 

 

 

 

Intangible assets, net

 

51,913

 

 

53,059

 

 

56,638

 

Goodwill

 

213,623

 

 

214,516

 

 

220,233

 

Other assets

 

122,210

 

 

110,632

 

 

125,106

 

TOTAL ASSETS

 

$

2,385,410

 

 

$

2,458,465

 

 

$

2,325,965

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Short-term borrowings

 

$

8,368

 

 

$

3,215

 

 

$

12,103

 

Accounts payable

 

147,403

 

 

134,129

 

 

131,667

 

Due to related parties, current

 

3,865

 

 

16,140

 

 

60,424

 

Related party notes payable

 

241,867

 

 

269,112

 

 

269,112

 

Accrued liabilities

 

206,517

 

 

194,228

 

 

171,501

 

Operating lease liabilities, current

 

29,156

 

 

 

 

 

Total current liabilities

 

637,176

 

 

616,824

 

 

644,807

 

Operating lease liabilities, noncurrent

 

51,533

 

 

 

 

 

Other liabilities

 

117,719

 

 

118,189

 

 

117,376

 

Commitments and contingencies

 

 

 

 

 

 

Total liabilities

 

806,428

 

 

735,013

 

 

762,183

 

Equity

 

 

 

 

 

 

Parent company investment

 

1,723,406

 

 

1,868,634

 

 

1,676,563

 

Accumulated other comprehensive income (loss)

 

(144,424

)

 

(145,182

)

 

(112,781

)

Total equity

 

1,578,982

 

 

1,723,452

 

 

1,563,782

 

TOTAL LIABILITIES AND EQUITY

 

$

2,385,410

 

 

$

2,458,465

 

 

$

2,325,965

 

 

KONTOOR BRANDS, INC.

Condensed Combined Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Three Months Ended March

 

 

2019

 

2018

OPERATING ACTIVITIES

 

 

 

 

Net income

 

$

15,413

 

 

$

79,696

 

Depreciation and amortization

 

7,703

 

 

8,310

 

Stock-based compensation

 

7,685

 

 

3,740

 

Provision for doubtful accounts

 

2,730

 

 

(10

)

Other adjustments

 

172,956

 

 

(206,101

)

Cash provided (used) by operating activities

 

206,487

 

 

(114,365

)

INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

(5,300

)

 

(6,528

)

Repayments received from related party notes receivable

 

 

 

1,000

 

Other, net

 

(20

)

 

6,428

 

Cash (used) provided by investing activities

 

(5,320

)

 

900

 

FINANCING ACTIVITIES

 

 

 

 

Net increase in short-term borrowings

 

5,081

 

 

7,565

 

Repayments of related party notes payable

 

(27,245

)

 

 

Net transfers (to) from Parent

 

(173,485

)

 

109,705

 

Cash (used) provided by financing activities

 

(195,649

)

 

117,270

 

Effect of foreign currency rate changes on cash and cash equivalents

 

651

 

 

3,618

 

Net change in cash and cash equivalents

 

6,169

 

 

7,423

 

Cash and cash equivalents – beginning of year

 

96,776

 

 

80,811

 

Cash and cash equivalents – end of period

 

$

102,945

 

 

$

88,234

 

KONTOOR BRANDS, INC.

Supplemental Financial Information

Reportable Segment Information

(Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

% Change

Constant

Currency (a)

 

 

Three Months Ended March

 

% Change

 

 

 

2019

 

2018

 

 

 

 

Segment revenues:

 

 

 

 

 

 

 

 

Wrangler

 

$

369,935

 

 

$

364,983

 

 

1%

 

4%

Lee

 

241,531

 

 

261,961

 

 

(8)%

 

(4)%

Other (b)

 

36,878

 

 

42,719

 

 

(14)%

 

(14)%

Total segment revenues

 

$

648,344

 

 

$

669,663

 

 

(3)%

 

*

Segment profit:

 

 

 

 

 

 

 

 

Wrangler

 

$

23,665

 

 

$

62,946

 

 

(62)%

 

(81)%

Lee

 

17,633

 

 

35,989

 

 

(51)%

 

(52)%

Other (b)

 

(3,085

)

 

(1,749

)

 

(76)%

 

(76)%

Total segment profit

 

38,213

 

 

97,186

 

 

(61)%

 

(73)%

Corporate and other expenses

 

(13,989

)

 

(5,975

)

 

134%

 

134%

Related party interest income, net

 

2,339

 

 

1,651

 

 

42%

 

42%

Other interest income, net

 

1,325

 

 

917

 

 

44%

 

51%

Income before income taxes

 

$

27,888

 

 

$

93,779

 

 

(70)%

 

(83)%

 

 

 

 

 

 

 

 

 

 

(a) Refer to constant currency definition on the following pages.

(b) Other is included for purposes of reconciliation of revenues and profit, but it is not considered a reportable segment. Other includes sales (i) of VF-branded products (other than Wrangler® and Lee® branded products which are reported in the respective segments above) and third-party branded merchandise at VF Outlet™ stores, (ii) of Rock and Republic® branded apparel, (iii) to VF for products manufactured in our plants and use of our transportation fleet and, (iv) from fulfilling a transition services agreement related to VF's sale of its Nautica® brand business in mid-2018.

* Calculation not meaningful

 

KONTOOR BRANDS, INC.

Supplemental Financial Information

Reportable Segment Information – Constant Currency Basis (Non-GAAP)

(Unaudited)

(Dollars in thousands)

 

 

Three Months Ended March 2019

 

 

As Reported

 

Adjust for Foreign

 

 

 

 

under GAAP

 

Currency Exchange

 

Constant Currency

Segment revenues:

 

 

 

 

 

 

Wrangler

 

$

369,935

 

 

$

8,972

 

 

$

378,907

 

Lee

 

241,531

 

 

9,511

 

 

251,042

 

Other

 

36,878

 

 

1

 

 

36,879

 

Total segment revenues

 

$

648,344

 

 

$

18,484

 

 

$

666,828

 

Segment profit:

 

 

 

 

 

 

Wrangler

 

$

23,665

 

 

$

(11,391

)

 

$

12,274

 

Lee

 

17,633

 

 

(304

)

 

17,329

 

Other

 

(3,085

)

 

(1

)

 

(3,086

)

Total segment profit

 

38,213

 

 

(11,696

)

 

26,517

 

Corporate and other expenses

 

(13,989

)

 

 

 

(13,989

)

Related party interest income, net

 

2,339

 

 

 

 

2,339

 

Other interest income, net

 

1,325

 

 

59

 

 

1,384

 

Income before income taxes

 

$

27,888

 

 

$

(11,637

)

 

$

16,251

 

 

 

 

 

 

 

 

Constant Currency Financial Information

The Company 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 the Company 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 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.

KONTOOR BRANDS, INC.

Condensed Combined Statements of Income by Quarter

(Unaudited)

(In thousands)

 

 

 

2018

 

 

March

 

June

 

September

 

December

 

Full Year

Net revenues

 

$

669,663

 

 

$

663,856

 

 

$

704,246

 

 

$

726,233

 

 

$

2,763,998

 

Costs and operating expenses

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

382,421

 

 

396,785

 

 

424,053

 

 

446,176

 

 

1,649,435

 

Selling, general and administrative expenses

 

194,834

 

 

187,835

 

 

188,411

 

 

210,441

 

 

781,521

 

Total costs and operating expenses

 

577,255

 

 

584,620

 

 

612,464

 

 

656,617

 

 

2,430,956

 

Operating income

 

92,408

 

 

79,236

 

 

91,782

 

 

69,616

 

 

333,042

 

Related party interest income, net

 

1,651

 

 

1,660

 

 

2,104

 

 

2,323

 

 

7,738

 

Other interest income, net

 

917

 

 

970

 

 

1,308

 

 

1,372

 

 

4,567

 

Other expense, net

 

(1,197

)

 

(1,241

)

 

(2,084

)

 

(746

)

 

(5,269

)

Income before income taxes

 

93,779

 

 

80,625

 

 

93,110

 

 

72,565

 

 

340,078

 

Income taxes

 

14,083

 

 

17,392

 

 

24,867

 

 

20,663

 

 

77,005

 

Net income

 

$

79,696

 

 

$

63,233

 

 

$

68,243

 

 

$

51,902

 

 

$

263,073

 

 

 

 

 

 

 

 

 

 

 

 

Basis of presentation: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to the March, June, September and December quarters of 2018 relate to the 13-week fiscal periods ended March 31, 2018, June 30, 2018, September 29, 2018, and December 29, 2018, respectively. The Company has presented its 2018 unaudited condensed combined statements of income by quarter in order to provide investors with comparable financial information. Amounts herein may not recalculate due to the use of unrounded numbers.

 

 

KONTOOR BRANDS, INC.

Supplemental Financial Information

Reconciliation of Adjusted Net Revenues, EBIT, EBITDA and Adjusted EBITDA by Quarter (Non-GAAP)

(Unaudited)

(In thousands)

 

 

2019

 

2018

 

 

 

March

 

March

 

June

 

September

 

December

 

Full Year

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues as reported under GAAP

$

648,344

 

 

$

669,663

 

 

$

663,856

 

 

$

704,246

 

 

$

726,233

 

 

$

2,763,998

 

 

 

 

 

 

 

 

 

 

 

 

 

Business model changes(a)

(18,416

)

 

(21,694

)

 

(21,027

)

 

(22,248

)

 

(16,363

)

 

(81,332

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net revenues

$

629,928

 

 

$

647,969

 

 

$

642,829

 

 

$

681,998

 

 

$

709,870

 

 

$

2,682,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income as reported under GAAP

$

15,413

 

 

$

79,696

 

 

$

63,233

 

 

$

68,243

 

 

$

51,902

 

 

$

263,073

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

12,475

 

 

14,083

 

 

17,392

 

 

24,867

 

 

20,663

 

 

77,005

 

Related party interest income, net

(2,339

)

 

(1,651

)

 

(1,660

)

 

(2,104

)

 

(2,323

)

 

(7,738

)

Other interest income, net

(1,325

)

 

(917

)

 

(970

)

 

(1,308

)

 

(1,372

)

 

(4,567

)

 

 

 

 

 

 

 

 

 

 

 

 

EBIT

24,224

 

 

91,211

 

 

77,994

 

 

89,698

 

 

68,870

 

 

327,773

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

7,703

 

 

8,310

 

 

7,780

 

 

7,581

 

 

7,361

 

 

31,032

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

31,927

 

 

99,521

 

 

85,774

 

 

97,279

 

 

76,231

 

 

358,805

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and separation costs(b)

36,580

 

 

1,936

 

 

2,017

 

 

1,216

 

 

23,446

 

 

28,615

 

Business model changes(a)

3,201

 

 

(57

)

 

1,449

 

 

2,472

 

 

2,348

 

 

6,212

 

Other adjustments(c)

4,192

 

 

1,793

 

 

1,774

 

 

(1,402

)

 

(10,188

)

 

(8,023

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

75,900

 

 

$

103,193

 

 

$

91,014

 

 

$

99,565

 

 

$

91,837

 

 

$

385,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basis of presentation: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to the March, June, September and December quarters of 2018 relate to the 13-week fiscal periods ended March 31, 2018, June 30, 2018, September 29, 2018, and December 29, 2018, respectively. The Company has presented its 2018 financial information by quarter in order to provide investors with comparable financial information. Amounts herein may not recalculate due to the use of unrounded numbers.

 

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.

 

Management uses the above 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 lenders. 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 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.

 

(a) Business model changes relate to the exit of unprofitable markets in select European and South American countries, and the discontinuation of manufacturing for VF Corporation.

(b) Restructuring costs relate to strategic actions taken to achieve cost savings, and separation costs relate to the spin-off from VF Corporation and establishment of Kontoor as a separate public company.

(c) Other adjustments have been made to revise historical corporate allocations, primarily attributable to the carve-out basis of accounting, so that Adjusted EBITDA reflects the anticipated cost structure of a separate public company. Additionally, adjustments have been made to remove the funding fees related to the accounts receivable sale arrangement, as they are treated as interest expense for calculation of Adjusted EBITDA for debt compliance purposes.

 

 

Investors:
Eric Tracy, (336) 332-5205
Senior Director, Investor Relations
Eric.Tracy@kontoorbrands.com

or

Media:
Vanessa McCutchen, (336) 332-5612
Senior Director, Corporate Communications
Vanessa.McCutchen@kontoorbrands.com

Source: Kontoor Brands, Inc.