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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13057
POLO RALPH LAUREN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-2622036
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
650 MADISON AVENUE, NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-318-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrants were
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
At November 9, 2000, 30,736,230 shares of the registrant's Class A Common Stock,
$.01 par value, were outstanding, 43,280,021 shares of the registrant's Class B
Common Stock, $.01 par value, were outstanding and 22,720,979 shares of the
registrant's Class C Common Stock, $.01 par value were outstanding.
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<PAGE>
POLO RALPH LAUREN CORPORATION
INDEX TO FORM 10-Q
PART 1. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2000
(Unaudited) and April 1, 2000 ................................. 3
Consolidated Statements of Operations for the three
and six months ended September 30, 2000 and
October 2, 1999 (Unaudited) ................................... 4
Consolidated Statements of Cash Flows for the six months ended
September 30, 2000 and October 2, 1999 (Unaudited) .............. 5-6
Notes to Consolidated Financial Statements ...................... 7-14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ..................................... 15-21
Item 3. Quantitative and Qualitative Disclosures about Market Risk ...... 21
PART II. OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Security-Holders ............ 22
Item 6. Exhibits and Reports on Form 8-K ................................ 23
<PAGE>
POLO RALPH LAUREN CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 1,
2000 2000
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 79,433 $ 164,571
Marketable securities 66,248 -
Accounts receivable, net of allowances of $17,751 and $16,631 respectively 226,237 204,447
Inventories 433,610 390,953
Deferred tax assets 39,414 40,378
Prepaid expenses and other 60,951 52,542
---------- -----------
TOTAL CURRENT ASSETS 905,893 852,891
Property and equipment, net 306,124 372,977
Deferred tax assets 44,812 11,068
Goodwill, net 262,002 277,822
Other assets, net 80,314 105,804
---------- ----------
$1,599,145 $1,620,562
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes and acceptances payable - banks $ 126,247 $ 86,131
Accounts payable 158,566 151,281
Accrued expenses and other 164,463 168,816
---------- ----------
TOTAL CURRENT LIABILITIES 449,276 406,228
Long-term debt 322,743 342,707
Other noncurrent liabilities 100,254 99,190
Stockholders' equity
Common Stock
Class A, par value $.01 per share; 500,000,000 shares
authorized; 34,499,952 and 34,381,653 shares issued, respectively 345 344
Class B, par value $.01 per share; 100,000,000 shares
authorized; 43,280,021 shares issued and outstanding 433 433
Class C, par value $.01 per share; 70,000,000 shares
authorized; 22,720,979 shares issued and outstanding 227 227
Additional paid-in-capital 452,029 450,030
Retained earnings 331,947 370,785
Treasury Stock, Class A, at cost (3,592,806 and 2,952,677 shares) (67,825) (57,346)
Accumulated other comprehensive income 13,129 9,655
Unearned compensation (3,413) (1,691)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 726,872 772,437
---------- ----------
$1,599,145 $1,620,562
========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
POLO RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ------------------------------
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 516,810 $ 470,509 $ 950,537 $ 854,981
Licensing revenue 67,857 71,328 120,293 119,204
Other income 1,550 2,048 2,684 4,121
------------- ------------- ------------- ------------
Net revenues 586,217 543,885 1,073,514 978,306
Cost of goods sold 336,084 274,470 570,834 491,916
------------- ------------- ------------- ------------
Gross profit 250,133 269,415 502,680 486,390
------------- ------------- ------------- ------------
Selling, general and administrative expenses 218,617 172,311 425,017 339,410
Restructuring charges 128,571 - 128,571 -
------------- ------------- ------------- ------------
Total expenses 347,188 172,311 553,588 339,410
------------- ------------- ------------- ------------
(Loss) income from operations (97,055) 97,104 (50,908) 146,980
Interest expense 6,783 3,687 13,288 6,175
------------- ------------- ------------- ------------
(Loss) income before income taxes and cumulative effect
of change in accounting principle (103,838) 93,417 (64,196) 140,805
(Benefit from) provision for income taxes (41,017) 38,068 (25,358) 57,379
------------- ------------- ------------- ------------
(Loss) income before cumulative effect of change
in accounting principle (62,821) 55,349 (38,838) 83,426
Cumulative effect of change in accounting
principle, net of taxes - - - 3,967
------------- ------------- ------------- ------------
Net (loss) income ($62,821) $55,349 ($38,838) $79,459
============= ============= ============= ============
(Loss) income per share before cumulative effect of change in
accounting principle - Basic and Diluted ($0.65) $0.56 ($0.40) $0.84
Cumulative effect of change in accounting
principle, net of taxes, per share - Basic and Diluted $0.00 $0.00 - 0.04
------------- ------------- ------------
Net (loss) income per share - Basic and Diluted ($0.65) $0.56 ($0.40) $0.80
============= ============= ============
Weighted average common shares outstanding - Basic 96,713,414 99,117,576 96,902,715 99,328,755
============= ============= ============
Weighted average common shares outstanding - Diluted 97,256,321 99,250,565 97,273,904 99,510,226
============= ============= ============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
POLO RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income ($38,838) $79,459
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 41,145 32,288
Benefit from deferred income taxes (33,001) -
Cumulative effect of change in accounting principle - 3,967
Provision for restructuring charges 98,836 -
Provision for losses on accounts receivable 912 1,410
Other (1,076) 256
Changes in assets and liabilities, net of acquisition
Accounts receivable (24,302) (54,879)
Inventories (45,857) (20,721)
Prepaid expenses and other (10,689) 11,560
Other assets, net 8,947 (3,325)
Accounts payable 9,298 5,234
Income taxes payable and accrued expenses and other 18,889 (12,832)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,264 42,417
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net (46,324) (58,682)
Investments in marketable securities (66,248) -
Acquisition, net of cash acquired (20,929) (50,824)
Proceeds from release of restricted cash held for Club Monaco acquisition - 44,217
Cash surrender value - officers' life insurance, net (2,296) (2,893)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (135,797) (68,182)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchases of common stock (10,479) (14,065)
Proceeds from short-term borrowings, net 42,094 39,300
Repayments of long-term debt - (37,358)
Proceeds from long-term debt - 35,783
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 31,615 23,660
---------- ----------
Effect of exchange rate changes on cash (5,220) -
---------- ----------
Net decrease in cash and cash equivalents (85,138) (2,105)
Cash and cash equivalents at beginning of period 164,571 44,458
---------- ----------
Cash and cash equivalents at end of period $79,433 $42,353
========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
POLO RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
---- ----
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $4,034 $6,651
======== ========
Cash paid for income taxes $17,946 $51,978
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value of assets acquired, excluding cash $110,617
Less:
Cash paid 51,481
--------
Liabilities assumed $ 59,136
========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
POLO RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR SEPTEMBER 30, 2000
AND OCTOBER 2, 1999 IS UNAUDITED)
(In Thousands, except where otherwise indicated)
1 BASIS OF PRESENTATION
(a) UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and in a manner consistent with that used in
the preparation of the April 1, 2000 audited consolidated financial
statements of the Company. In the opinion of management, the accompanying
consolidated financial statements reflect all adjustments necessary for a
fair presentation of the financial position and results of operations and
cash flows for the periods presented.
Operating results for the three and six months ended September 30, 2000
and October 2, 1999 are not necessarily indicative of the results that may
be expected for a full year. In addition, the unaudited interim
consolidated financial statements do not include all information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles. These
consolidated financial statements should be read in conjunction with the
Company's fiscal 2000 audited consolidated financial statements.
(b) ACQUISITION
On January 6, 2000, the Company completed the acquisition of stock and
certain assets of Poloco S.A.S. and certain of its affiliates ("Poloco"),
which hold licenses to sell men's and boys' Polo apparel, men's and women's
Polo Jeans apparel, and certain Polo accessories in Europe. In addition to
acquiring Poloco's wholesale business, the Company acquired one flagship
store in Paris and six outlet stores located in France, the United Kingdom
and Austria. The Company acquired Poloco for an aggregate cash
consideration of $209.7 million, plus the assumption of $10.0 million in
short-term debt. The Company used a portion of the net proceeds from the
Eurobond Offering (as defined) to finance this acquisition. During the
quarter ended July 1, 2000, the final 10% of the acquisition price for
Poloco in the amount of $20.9 million was distributed in accordance with
the terms of the agreement. This acquisition has been accounted for as a
purchase. The June 30, 2000 consolidated balance sheet and January 6, 2000
combined balance sheet of Poloco have been included in the accompanying
September 30, 2000 and April 1, 2000 consolidated balance sheets,
respectively, and the Company has consolidated the results of operations of
Poloco for the three and six months ended June 30, 2000 in the September
30, 2000 results of operations. The purchase price has been preliminarily
allocated based upon fair values at the date of acquisition, pending final
determination of certain acquired balances. This preliminary allocation
resulted in an excess of purchase price over the estimated fair value of
net assets acquired of approximately $202.8 million, which has been
recorded as goodwill and is being amortized on a straight-line basis over
an estimated useful life of 40 years.
7
<PAGE>
The following table sets forth unaudited pro forma information for the
three and six months ended October 2, 1999 which present the effects on the
Company's historical results as if the acquisition of Poloco occurred at
the beginning of the period:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 2, OCTOBER 2,
1999 1999
<S> <C> <C>
Pro forma net revenues $ 562,354 $ 1,061,675
Pro forma net income 51,691 85,555
Pro forma net income per share- Basic and Diluted .52 .86
</TABLE>
The unaudited pro forma information above has been prepared for
comparative purposes only and includes certain adjustments to the Company's
historical statements of income, such as additional amortization as a
result of goodwill and increased interest expense on acquisition debt. The
results do not purport to be indicative of the results of operations that
would have resulted had the acquisition occurred at the beginning of the
period, or of future results of operations of the consolidated entities.
(c) MARKETABLE SECURITIES
Management determines the appropriate classification of its investments
in debt securities at the time of purchase and reevaluates such
determinations at each balance sheet date. Debt securities are classified
as held-to-maturity when the Company has the positive intent and ability to
hold the securities to maturity. Held-to-maturity securities are stated at
amortized cost. Debt securities for which the Company does not have the
intent or ability to hold to maturity are classified as available-for-sale.
Securities available-for-sale are carried at fair value, with the
unrealized gains and losses, net of income taxes, reported as a separate
component of Stockholders' Equity. The Company has no investments that
qualify as trading.
The Company's investments in debt securities are diversified among
high-credit quality securities in accordance with the Company's investment
policy.
The following is a summary of the investments in debt securities
classified as current assets (in thousands):
SEPTEMBER 30,
2000
Corporate debt securities $ 33,176
Commercial paper 18,027
Money market funds 15,045
----------
$ 66,248
==========
The amortized cost of available-for-sale securities approximated their
fair value at September 30, 2000. Gross realized gains and losses on sales
of available-for-sale securities were not material in the three and six
months ended September 30, 2000.
8
<PAGE>
The contractual maturities of debt securities at September 30, 2000 are
as follows: $52.0 million due in one year or less; and $14.2 million due
between one and two years. Expected maturities may differ from contractual
maturities because the issuers of the securities may have the right to
prepay obligations without prepayment penalties.
2 COMPREHENSIVE INCOME
For the three and six months ended September 30, 2000, comprehensive
loss was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 2000
<S> <C> <C>
Net loss $ 62,821 $ 38,838
Other comprehensive income, net of taxes:
Foreign currency translation adjustments 8,881 3,474
--------- ---------
Comprehensive loss $ 53,940 $ 35,364
========= =========
</TABLE>
Income tax benefit related to foreign currency translation adjustments
was $5.8 million and $2.3 million in the three and six months ended
September 30, 2000, respectively.
For the three and six months ended October 2, 1999, comprehensive
income was equal to net income.
3 RECENTLY ISSUED PRONOUNCEMENTS
In June 2000, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 138, Accounting
for Certain Derivative Instruments and Hedging Activities, an amendment of
FASB Statement No. 133. This statement addresses a limited number of
implementation issues for entities applying SFAS No. 133. SFAS No. 133
establishes accounting and reporting standards for derivative instruments
and hedging activities. It requires the recognition of all derivatives as
either assets or liabilities in the statement of financial position and
measurement of those instruments at fair value. The accounting for changes
in the fair value of a derivative is dependent upon the intended use of the
derivative. SFAS No. 133 is effective for the Company's first quarter of
its fiscal year ending March 30, 2002, and retroactive application is not
permitted. The Company has not yet determined whether the application of
SFAS No. 133 will have a material impact on the Company's financial
position or results of operations.
9
<PAGE>
4 INVENTORIES
SEPTEMBER 30, APRIL 1,
2000 2000
Raw materials $ 7,277 $ 13,649
Work-in-process 7,581 6,337
Finished goods 418,752 370,967
----------- ---------
$ 433,610 $ 390,953
========== =========
5 RESTRUCTURING AND SPECIAL CHARGES
During the second quarter of fiscal 2001, the Company completed an
internal operational review and formalized its plans to enhance the growth
of its worldwide luxury retail business, to better manage inventory and to
increase its overall profitability (the "Operational Plan"). The major
initiatives of the Operational Plan include: refining the Company's retail
strategy; developing efficiencies in the Company's supply chain; and
consolidating corporate strategic business functions and internal
processes.
The Company will continue to refine its retail strategy by expanding
the presence of its full-line luxury stores, both in North America and
abroad, and by building a profitable portfolio of Club Monaco stores in key
urban locations that fully emphasize and capitalize on its fashion-forward
merchandising strategy. In connection with this initiative, the Company
will close all 12 Polo Jeans Co. full-price retail stores and 11
under-performing Club Monaco retail stores. Costs associated with this
aspect of the Operational Plan have been recorded in the restructuring
charges line in the accompanying consolidated statement of operations for
the three months ended September 30, 2000 and include lease and contract
terminations costs, store fixed asset write downs (primarily leasehold
improvements) and severance and termination benefits.
Additionally, as a result of changes in market conditions in certain
locations in which the Company operates full-price retail stores, the
Company performed an evaluation of the recoverability of the assets of
certain of these stores in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of. The Company concluded from the results of this evaluation that a
significant impairment of long-lived assets had occurred. Accordingly, a
write-down of these assets (primarily leasehold improvements) to their
estimated fair value was recorded in the second quarter of fiscal year 2001
and is reflected in the restructuring charges line of the accompanying
consolidated statement of operations.
10
<PAGE>
In connection with the implementation of the Operational Plan discussed
above, the Company recorded a pre-tax restructuring charge of $128.6
million in its second quarter of fiscal 2001. The major components of the
charge and the activity through September 30, 2000 were as follows:
<TABLE>
<CAPTION>
LEASE AND
SEVERANCE AND ASSET CONTRACT
TERMINATION WRITE TERMINATION OTHER
BENEFITS DOWNS COSTS COSTS TOTAL
<S> <C> <C> <C> <C> <C>
2001 provision $ 7,947 $ 98,835 $ 20,655 $ 1,134 $ 128,571
2001 activity (1,554) (98,835) (-) - (100,389)
-------- -------- -------- ------- ---------
Balance at September 30, 2000 $ 6,393 $ - $ 20,655 $ 1,134 $ 28,182
======== ======== ======== ======= =========
</TABLE>
The Company's operational review also targeted its supply chain
management as one of the most important areas for improvement. The
development of operating efficiencies in Polo's worldwide logistics and
supply chain management will better support the Company's growing and
increasingly global retail operations. In connection with initiating this
aspect of the Operational Plan, the Company recorded $37.9 million of
inventory write-downs in its second quarter of fiscal year 2001 associated
with the planned acceleration in the reduction of aged inventory. This
charge is reflected in cost of goods sold in the accompanying consolidated
statement of operations.
Total severance and termination benefits as a result of the Operational
Plan relate to approximately 550 employees, 65 of which have been
terminated as of September 30, 2000. Total cash outlays related to the
Operational Plan are expected to be approximately $29.7 million, $1.6
million of which has been paid to date. The Company expects to complete the
implementation of the Operational Plan by the end of its second quarter of
fiscal 2002.
During the fourth quarter of fiscal 1999, the Company formalized its
plans to streamline operations within its wholesale and retail operations
and reduce its overall cost structure (the "Restructuring Plan"). The major
initiatives of the Restructuring Plan included the following: an evaluation
of the Company's retail operations and site locations; the realignment and
operational integration of the Company's wholesale operating units; and,
the realignment and consolidation of corporate strategic business functions
and internal processes.
In connection with the implementation of the Restructuring Plan, the
Company recorded a pre-tax restructuring charge of $58.6 million in its
fourth quarter of fiscal 1999. The major components of the restructuring
charge and the activity through September 30, 2000 were as follows:
<TABLE>
<CAPTION>
LEASE AND
SEVERANCE AND CONTRACT
TERMINATION TERMINATION OTHER
BENEFITS COSTS COSTS TOTAL
<S> <C> <C> <C> <C>
Balance at April 1, 2000 $ 7,265 $ 4,878 $ 140 $ 12,283
2001 activity (1,606) (1,728) - (3,334)
------- -------- ------- -------
Balance at September 30, 2000 $ 5,659 $ 3,150 $ 140 $ 8,949
======== ======== ======= =======
</TABLE>
Total severance and termination benefits as a result of the
Restructuring Plan related to 280 employees, all of which have been
terminated. Total cash outlays related to the Restructuring Plan are
approximately $39.5 million, $30.6 million of which have been paid to date.
The Company completed the implementation of the Restructuring Plan in
fiscal 2000.
11
<PAGE>
6 BORROWINGS
The Company has two Credit Facilities (as defined) available for
borrowings and the issuance of letters of credit which contain restrictive
covenants requiring maintenance of net worth and leverage ratios and impose
limitations on indebtedness, loans, investments and incurrences of liens,
and restrictions on sales of assets and transactions with affiliates. On
October 18, 2000, the Company received consent from its lenders under the
Credit Facilities permitting the Company to incur the charges it recorded
in connection with the Operational Plan (see Note 5) up to specified
thresholds.
7 SEGMENT REPORTING
The Company has three reportable business segments: wholesale, retail
and licensing. The Company's reportable segments are individual business
units that offer different products and services. The segments are managed
separately because each segment requires different strategic initiatives,
promotional campaigns, marketing and advertising, based upon its individual
position in the market. Additionally, these segments reflect the reporting
basis used internally by senior management to evaluate performance and the
allocation of resources.
The Company's net revenues and income from operations for the three and
six months ended September 30, 2000 and October 2, 1999 by segment were as
follows:
THREE MONTHS ENDED
SEPTEMBER 30, OCTOBER 2,
2000 1999
NET REVENUES:
Wholesale $ 262,542 $ 248,643
Retail 255,818 223,914
Licensing 67,857 71,328
----------- ----------
$ 586,217 $ 543,885
=========== ==========
(LOSS) INCOME FROM OPERATIONS:
Wholesale $ 26,024 $ 25,658
Retail 16,625 21,647
Licensing 44,800 49,799
----------- ----------
87,449 97,104
Less: Unallocated
restructuring and
other non-recurring charges 184,504 -
----------- ----------
$ (97,055) $ 97,104
=========== ==========
12
<PAGE>
SIX MONTHS ENDED
SEPTEMBER 30, OCTOBER 2,
2000 1999
NET REVENUES:
Wholesale $ 488,696 $ 445,294
Retail 464,525 413,808
Licensing 120,293 119,204
----------- ----------
$ 1,073,514 $ 978,306
=========== ==========
(LOSS) INCOME FROM OPERATIONS:
Wholesale $ 47,288 $ 37,439
Retail 16,564 29,747
Licensing 69,744 73,098
----------- ----------
133,596 140,284
Less: Unallocated
restructuring and other
non-recurring charges 184,504 -
Add: Cumulative effect of
change in accounting
principle before taxes - 6,696
----------- ----------
$ (50,908) $ 146,980
=========== ==========
The Company's total assets by segment as of September 30, 2000 and
April 1, 2000 were as follows:
SEPTEMBER 30, APRIL 1,
2000 2000
SEGMENT ASSETS:
Wholesale $ 519,591 $ 524,223
Retail 543,732 596,989
Licensing 201,516 202,090
Corporate 334,306 297,260
----------- ----------
$ 1,599,145 $1,620,562
=========== ==========
13
<PAGE>
The Company's net revenues for the three and six months ended September
30, 2000 and October 2, 1999 and its long-lived assets as of September 30,
2000 and April 1, 2000 by geographic location were as follows:
THREE MONTHS ENDED
SEPTEMBER 30, OCTOBER 2,
2000 1999
NET REVENUES:
United States $ 522,847 $ 502,775
Foreign countries 63,370 41,110
----------- ----------
$ 586,217 $ 543,885
=========== ==========
SIX MONTHS ENDED
SEPTEMBER 30, OCTOBER 2,
2000 1999
NET REVENUES:
United States $ 917,680 $ 903,624
Foreign countries 155,834 74,682
----------- ----------
$ 1,073,514 $ 978,306
=========== ==========
SEPTEMBER 30, APRIL 1,
2000 2000
LONG-LIVED ASSETS:
United States $ 268,992 $ 306,439
Foreign countries 37,132 66,538
----------- ----------
$ 306,124 $ 372,977
=========== ==========
14
<PAGE>
POLO RALPH LAUREN CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO
WHICH ARE INCLUDED HEREIN. THE COMPANY UTILIZES A 52-53 WEEK FISCAL YEAR ENDING
ON THE SATURDAY NEAREST MARCH 31. FISCAL YEARS 2001 AND 2000 END ON MARCH 31,
2001 AND APRIL 1, 2000, RESPECTIVELY. DUE TO THE COLLABORATIVE AND ONGOING
NATURE OF THE COMPANY'S RELATIONSHIPS WITH ITS LICENSEES, SUCH LICENSEES ARE
REFERRED TO HEREIN AS "LICENSING PARTNERS" AND THE RELATIONSHIPS BETWEEN THE
COMPANY AND SUCH LICENSEES ARE REFERRED TO HEREIN AS "LICENSING ALLIANCES."
NOTWITHSTANDING THESE REFERENCES, HOWEVER, THE LEGAL RELATIONSHIP BETWEEN THE
COMPANY AND ITS LICENSEES IS ONE OF LICENSOR AND LICENSEE, AND NOT ONE OF
PARTNERSHIP.
CERTAIN STATEMENTS IN THIS FORM 10-Q AND IN FUTURE FILINGS BY THE
COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION, IN THE COMPANY'S PRESS
RELEASES AND IN ORAL STATEMENTS MADE BY OR WITH THE APPROVAL OF AUTHORIZED
PERSONNEL CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON CURRENT EXPECTATIONS AND ARE INDICATED BY WORDS OR
PHRASES SUCH AS "ANTICIPATE," "ESTIMATE," "EXPECT," "PROJECT," " WE BELIEVE,"
"IS OR REMAINS OPTIMISTIC," "CURRENTLY ENVISIONS" AND SIMILAR WORDS OR PHRASES
AND INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY
CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE,
AMONG OTHERS, THE FOLLOWING: RISKS ASSOCIATED WITH CHANGES IN THE COMPETITIVE
MARKETPLACE, INCLUDING THE INTRODUCTION OF NEW PRODUCTS OR PRICING CHANGES BY
THE COMPANY'S COMPETITORS; CHANGES IN GLOBAL ECONOMIC CONDITIONS; RISKS
ASSOCIATED WITH THE COMPANY'S DEPENDENCE ON SALES TO A LIMITED NUMBER OF LARGE
DEPARTMENT STORE CUSTOMERS, INCLUDING RISKS RELATED TO EXTENDING CREDIT TO
CUSTOMERS; RISKS ASSOCIATED WITH THE COMPANY'S DEPENDENCE ON ITS LICENSING
PARTNERS FOR A SUBSTANTIAL PORTION OF ITS NET INCOME AND RISKS ASSOCIATED WITH A
LACK OF OPERATIONAL AND FINANCIAL CONTROL OVER LICENSED BUSINESSES; RISKS
ASSOCIATED WITH THE IMPLEMENTATION OF THE COMPANY'S OPERATIONAL PLAN; RISKS
ASSOCIATED WITH CONSOLIDATIONS, RESTRUCTURINGS AND OTHER OWNERSHIP CHANGES IN
THE RETAIL INDUSTRY; RISKS ASSOCIATED WITH COMPETITION IN THE SEGMENTS OF THE
FASHION AND CONSUMER PRODUCT INDUSTRIES IN WHICH THE COMPANY OPERATES, INCLUDING
THE COMPANY'S ABILITY TO SHAPE, STIMULATE AND RESPOND TO CHANGING CONSUMER
TASTES AND DEMANDS BY PRODUCING ATTRACTIVE PRODUCTS, BRANDS AND MARKETING, AND
ITS ABILITY TO REMAIN COMPETITIVE IN THE AREAS OF QUALITY AND PRICE; RISKS
ASSOCIATED WITH UNCERTAINTY RELATING TO THE COMPANY'S ABILITY TO IMPLEMENT ITS
GROWTH STRATEGIES; RISKS ASSOCIATED WITH THE COMPANY'S ENTRY INTO NEW MARKETS
EITHER THROUGH INTERNAL DEVELOPMENT ACTIVITIES OR THROUGH ACQUISITIONS; RISKS
ASSOCIATED WITH THE POSSIBLE ADVERSE IMPACT OF THE COMPANY'S UNAFFILIATED
MANUFACTURERS' INABILITY TO MANUFACTURE IN A TIMELY MANNER, TO MEET QUALITY
STANDARDS OR TO USE ACCEPTABLE LABOR PRACTICES; RISKS ASSOCIATED WITH CHANGES IN
SOCIAL, POLITICAL, ECONOMIC AND OTHER CONDITIONS AFFECTING FOREIGN OPERATIONS
AND SOURCING AND THE POSSIBLE ADVERSE IMPACT OF CHANGES IN IMPORT RESTRICTIONS;
RISKS RELATED TO THE COMPANY'S ABILITY TO ESTABLISH AND PROTECT ITS TRADEMARKS
AND OTHER PROPRIETARY RIGHTS; RISKS RELATED TO FLUCTUATIONS IN FOREIGN CURRENCY
AFFECTING THE COMPANY'S FOREIGN SUBSIDIARIES' AND FOREIGN LICENSEES' RESULTS OF
OPERATIONS AND THE RELATIVE PRICES AT WHICH THE COMPANY AND FOREIGN COMPETITORS
SELL THEIR PRODUCTS IN THE SAME MARKET AND THE COMPANY'S OPERATING AND
MANUFACTURING COSTS OUTSIDE OF THE UNITED STATES; AND, RISKS ASSOCIATED
15
<PAGE>
WITH THE COMPANY'S CONTROL BY LAUREN FAMILY MEMBERS AND THE ANTI-TAKEOVER EFFECT
OF MULTIPLE CLASSES OF STOCK. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
OVERVIEW
The Company began operations in 1968 as a designer and marketer of
premium quality men's clothing and sportswear. Since inception, the Company,
through internal operations and in conjunction with its licensing partners, has
grown through increased sales of existing product lines, the introduction of new
brands and products, expansion into international markets, development of its
retail operations and, more recently, through the strategic acquisition of new
businesses. The Company's net revenues are generated from its three integrated
operations: wholesale, retail and licensing alliances.
RESULTS OF OPERATIONS
The following discussion provides information and analysis of the
Company's results of operations for the three and six months ended September 30,
2000 compared to October 2, 1999. The table below sets forth the percentage
relationship to net revenues of certain items in the Company's statements of
income for the three and six months ended September 30, 2000 and October 2,
1999:
<TABLE>
<CAPTION>
SEPT. 30, 2000 OCT. 2, 1999
THREE SIX THREE SIX
MONTHS MONTHS MONTHS MONTHS
<S> <C> <C> <C> <C>
Net sales 88.2% 88.5% 86.5% 87.4%
Licensing revenue 11.6 11.2 13.1 12.2
Other income 0.2 0.3 0.4 0.4
----- ----- ----- -----
Net revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----
Gross profit 42.7 46.8 49.5 49.7
Selling, general and administrative expenses 37.3 39.6 31.7 34.7
Restructuring charges 21.9 12.0 - -
----- ----- ----- -----
(Loss) income from operations (16.5) (4.8) 17.8 15.0
Interest expense 1.2 1.2 0.7 0.6
----- ----- ----- -----
(Loss) income before income taxes and
change in accounting principle (17.7)% (6.0)% 17.1% 14.4%
==== === ==== ====
</TABLE>
16
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED OCTOBER 2,
1999
NET SALES. Net sales increased 9.8% to $516.8 million in the three
months ended September 30, 2000 from $470.5 million in the three months ended
October 2, 1999. Wholesale net sales increased 5.8% to $261.0 million in the
three months ended September 30, 2000 from $246.6 million in the corresponding
period of fiscal 2000. Wholesale growth primarily reflects the benefit of three
months of operations for Poloco's wholesale division acquired on January 6,
2000. Retail sales increased by 14.2% to $255.8 million in the three months
ended September 30, 2000 from $223.9 million in the corresponding period in
fiscal 2000. This increase is primarily attributable to a $42.0 million benefit
from the following: (a) new store openings in fiscal 2001 (nine stores, net of
closures); (b) new stores opened in the second half of fiscal 2000; and (c) the
inclusion of the results of one flagship and six outlet stores purchased in
connection with the acquisition of Poloco. Although the Company's stores remain
highly productive, comparable store sales, which represent net sales of stores
open in both reporting periods for the full portion of such periods, decreased
by 5.0%. The decline was due to a promotionally driven outlet environment and
lower sales in Club Monaco's Canadian stores. At September 30, 2000, the Company
operated 47 Polo stores, 125 outlet stores and 70 Club Monaco stores.
LICENSING REVENUE. Licensing revenue decreased 4.9% to $67.9 million in
the three months ended September 30, 2000 from $71.3 million in the
corresponding period of fiscal 2000. This decrease was primarily attributable to
the timing of shipments by licensees and lower international revenue mainly in
the Pacific Rim.
GROSS PROFIT. Gross profit as a percentage of net revenues decreased to
42.7% in the three months ended September 30, 2000 from 49.5% in the
corresponding period of fiscal 2000. This decrease was mainly attributable to
$37.9 million of inventory write-downs recorded in the second quarter of fiscal
2001 in connection with the implementation of the Company's Operational Plan and
its decision to accelerate the disposition of aged inventory.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative ("SG&A") expenses as a percentage of net revenues increased to
37.3% in the three months ended September 30, 2000 from 31.7% in the
corresponding period of fiscal 2000. This increase in SG&A expenses as a
percentage of net revenues was primarily due to a charge of $18.1 million
recorded in the second quarter of fiscal 2001 relating to non-recurring charges
associated with targeted opportunities for improvement and other
employee-related costs. SG&A expenses also increased as a percentage of net
revenues due to start-up costs associated with the expansion of the Company's
retail operations and the acquisition of Poloco.
INTEREST EXPENSE. Interest expense increased to $6.8 million in the
three months ended September 30, 2000 from $3.7 million in the comparable period
in fiscal 2000. This increase was due to a higher level of borrowings during the
current quarter attributable to the additional financing used for the
acquisition of Poloco.
INCOME TAXES. The effective tax rate decreased to 39.5% in the three
months ended September 30, 2000 from 40.8% in the corresponding period in fiscal
2000. This decline is primarily a result of the benefit of tax strategies
implemented by the Company. The three months ended September 30, 2000 include a
tax benefit of $72.9 million resulting from charges recorded in connection with
the Operational Plan.
17
<PAGE>
SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO SIX MONTHS ENDED OCTOBER 2, 1999
NET SALES. Net sales increased 11.2% to $950.5 million in the six
months ended September 30, 2000 from $855.0 million in the six months ended
October 2, 1999. Wholesale net sales increased 10.2% to $486.0 million in the
six months ended September 30, 2000 from $441.2 million in the corresponding
period of fiscal 2000. Wholesale growth primarily reflects the benefit of six
months of operations for Poloco's wholesale division acquired on January 6,
2000. This increase was offset by the negative impact caused by a change in the
timing of holiday shipments to retailers in the six months ended September 30,
2000 compared to the prior period last year. Retail sales increased by 12.3% to
$464.5 million in the six months ended September 30, 2000 from $413.8 million in
the corresponding period in fiscal 2000. This increase is primarily attributable
to a $70.1 million benefit from the following: (a) new store openings in the six
months ended September 30, 2000 (nine stores, net of closures); (b) a full six
months of revenues from new stores opened in fiscal 2000; and (c) the inclusion
of the results of one flagship and six outlet stores purchased in connection
with the acquisition of Poloco. Although the Company's stores remain highly
productive, comparable store sales, which represent net sales of stores open in
both reporting periods for the full portion of such periods, decreased by 5.3%.
The decline was due to a promotionally driven outlet environment and lower sales
in Club Monaco's Canadian stores.
LICENSING REVENUE. Licensing revenue increased 0.9% to $120.3 million
in the six months ended September 30, 2000 from $119.2 million in the
corresponding period of fiscal 2000. This increase is primarily attributable to
increases in sales of existing licensed products.
GROSS PROFIT. Gross profit as a percentage of net revenues decreased to
46.8% in the six months ended September 30, 2000 from 49.7% in the corresponding
period of fiscal 2000. This decrease was mainly attributable to $37.9 million of
inventory write-downs recorded in the second quarter of fiscal 2001 in
connection with the implementation of the Company's Operational Plan and its
decision to accelerate the disposition of aged inventory.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses as a
percentage of net revenues increased to 39.6% in the six months ended September
30, 2000 from 34.7% in the corresponding period of fiscal 2000. This increase in
SG&A expenses as a percentage of net revenues was primarily due to a charge of
$18.1 million recorded in the second quarter of fiscal 2001 relating to
non-recurring charges associated with targeted opportunities for improvement and
other employee-related costs. Additionally, SG&A expenses as a percentage of net
revenues increased due to an increase in depreciation and amortization expense
and start-up costs associated with the expansion of the Company's retail
operations and the acquisition of Poloco.
INTEREST EXPENSE. Interest expense increased to $13.3 million in the
six months ended September 30, 2000 from $6.2 million in the comparable period
in fiscal 2000. This increase was due to a higher level of borrowings during the
current period attributable to the additional financing used for the acquisition
of Poloco.
INCOME TAXES. The effective tax rate decreased to 39.5% in the six
months ended September 30, 2000 from 40.8% in the corresponding period in fiscal
2000. This decline is primarily a result of the benefit of tax strategies
implemented by the Company. The six months ended September 30, 2000 include a
tax benefit of $72.9 million resulting from charges recorded in connection with
the Operational Plan.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements primarily derive from working capital
needs, construction and renovation of shop-within-shops, retail expansion and
other corporate activities. The Company's main sources of liquidity are cash
flows from operations, credit facilities and other borrowings.
Net cash provided by operating activities decreased to $24.3 million in
the six months ended September 30, 2000 from $42.4 million in the comparable
period in fiscal 2000. Net cash provided by operating activities was negatively
impacted by charges recorded in the second quarter of fiscal 2001 in connection
with the implementation of the Operational Plan. Net cash used in investing
activities increased to $135.8 million in the six months ended September 30,
2000 from $68.2 million in the comparable period in fiscal 2000. This increase
principally reflects investments in marketable securities of $66.2 million and
the use of $20.9 million to complete the acquisition of Poloco. Net cash
provided by financing activities increased to $31.6 million in the six months
ended September 30, 2000 from $23.7 million in the comparable period in fiscal
2000. This increase is primarily due to proceeds received from short-term
borrowings under the Credit Facilities (as defined below) for operational needs.
On June 9, 1997, the Company entered into a credit facility with a
syndicate of banks which provides for a $225.0 million revolving line of credit
available for the issuance of letters of credit, acceptances and direct
borrowings and matures on December 31, 2002 (the "Credit Facility"). Borrowings
under the Credit Facility bear interest, at the Company's option, at a Base Rate
equal to the higher of: (i) the Federal Funds Rate, as published by the Federal
Reserve Bank of New York, plus 1/2 of one percent; and (ii) the prime commercial
lending rate of The Chase Manhattan Bank in effect from time to time, or at the
Eurodollar Rate plus an interest margin.
On March 30, 1999, in connection with the Company's acquisition of Club
Monaco, the Company entered into a $100.0 million senior credit facility (the
"1999 Credit Facility") with a syndicate of banks consisting of a $20.0 million
revolving line of credit and an $80.0 million term loan (the "Term Loan"). The
revolving line of credit is available for working capital needs and general
corporate purposes and matures on June 30, 2003. The Term Loan was used to
finance the acquisition of all of the outstanding common stock of Club Monaco
and to repay indebtedness of Club Monaco. The Term Loan is also repayable on
June 30, 2003. Borrowings under the 1999 Credit Facility bear interest, at the
Company's option, at a Base Rate equal to the higher of: (i) the Federal Funds
Rate, as published by the Federal Reserve Bank of New York, plus 1/2 of one
percent; and (ii) the prime commercial lending rate of The Chase Manhattan Bank
in effect from time to time, or at the Eurodollar Rate plus an interest margin.
On April 12, 1999, the Company entered into interest rate swap agreements with
an aggregate notional amount of $100.0 million to convert the variable interest
rate on the 1999 Credit Facility to a fixed rate of 5.5%.
The Credit Facility and 1999 Credit Facility (collectively, the "Credit
Facilities") contain customary representations, warranties, covenants and events
of default, including covenants regarding maintenance of net worth and leverage
ratios, limitations on indebtedness, loans, investments and incurrences of
liens, and restrictions on sales of assets and transactions with affiliates.
Additionally, the Credit Facilities provide that an event of default will occur
if Mr. Lauren and related entities fail to maintain a specified minimum
percentage of the voting power of the Company's common stock.
19
<PAGE>
On November 22, 1999, the Company issued euro 275.0 million of 6.125
percent Notes (the "Eurobonds") due November 2006 (the "Eurobond Offering"). The
Eurobonds are listed on the London Stock Exchange. The net proceeds from the
Eurobond Offering were $281.5 million based on the foreign exchange rate on the
issuance date. Interest on the Eurobonds is payable annually. A portion of the
net proceeds from the issuance was used to pay down existing debt under the
Company's Credit Facilities and to acquire Poloco.
As of September 30, 2000, the Company had $126.2 million outstanding in
direct borrowings, $80.0 million outstanding under the Term Loan and $242.7
million outstanding in Eurobonds based on the quarter end exchange rate. The
Company was also contingently liable under the Credit Facilities for $58.3
million in outstanding letters of credit related to commitments for the purchase
of inventory and in connection with its leases. The weighted average interest
rate on borrowings at September 30, 2000, was 6.2%.
During the second quarter of fiscal 2001, the Company completed an
internal operational review and formalized its plans to enhance the growth of
its international luxury retail business, to better manage inventory and to
increase its overall profitability. The major initiatives of the Operational
Plan include: refining the Company's retail strategy; developing efficiencies in
the Company's supply chain; and consolidating corporate strategic business
functions and internal processes. Total cash outlays related to the Operational
Plan are expected to be approximately $29.7 million, $1.6 million of which has
been paid to date. On October 18, 2000, the Company received consent from its
lenders under the Credit Facilities permitting the Company to incur the charges
it recorded in connection with the Operational Plan (see Note 5) up to specified
thresholds.
Capital expenditures were $46.3 million and $58.7 million in the six
months ended September 30, 2000 and October 3, 1999, respectively. Capital
expenditures primarily reflect costs associated with the following: (i) the
Company's expansion of its distribution facilities; (ii) the shop-within-shops
development program which includes new shops, renovations and expansions; (iii)
the expansion of the Company's retail operations; and (iv) additional purchases
of information systems. The Company plans to invest approximately $125.0
million, net of landlord incentives, over the current fiscal year primarily for
its retail concepts, outlet and Club Monaco stores, its European expansion, the
shop-within-shops development program, its information systems and other capital
projects.
In March 1998, the Board of Directors authorized the repurchase,
subject to market conditions, of up to $100.0 million of the Company's Class A
Common Stock. Share repurchases under this plan were made in the open market
over a two-year period that commenced April 1, 1998. On March 2, 2000, the Board
of Directors authorized a two-year extension of the stock repurchase program.
Shares acquired under the repurchase program will be used for stock option
programs and for other corporate purposes. As of September 30, 2000, the Company
had repurchased 3,592,806 shares of its Class A Common Stock at an aggregate
cost of $67.8 million.
Management believes that cash from ongoing operations and funds
available under the Credit Facilities and from the Eurobond Offering will be
sufficient to satisfy the Company's current level of operations, the Operational
Plan, the Restructuring Plan, capital requirements, the stock repurchase program
and other corporate activities for the next 12 months. Additionally, the Company
does not currently intend to pay dividends on its Common Stock during the next
12 months.
20
<PAGE>
SEASONALITY OF BUSINESS
The Company's business is affected by seasonal trends, with higher
levels of wholesale sales in its second and fourth quarters and higher retail
sales in its second and third quarters. These trends result primarily from the
timing of seasonal wholesale shipments to retail customers and key vacation
travel and holiday shopping periods in the retail segment. As a result of the
growth in the Company's retail operations and licensing revenue and the
acquisition of Poloco, historical quarterly operating trends and working capital
requirements may not accurately reflect future performances. In addition,
fluctuations in sales and operating income in any fiscal quarter may be affected
by the timing of seasonal wholesale shipments and other events affecting retail.
NEW ACCOUNTING STANDARDS
In June 2000, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 138, Accounting for
Certain Derivative Instruments and Hedging Activities, an amendment of FASB
Statement No. 133. This Statement addresses a limited number of implementation
issues for entities applying SFAS No. 133. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments and hedging activities. It
requires the recognition of all derivatives as either assets or liabilities in
the statement of financial position and measurement of those instruments at fair
value. The accounting for changes in the fair value of a derivative is dependent
upon the intended use of the derivative. SFAS No. 133 is effective for the
Company's first quarter of its fiscal year ending March 30, 2002, and
retroactive application is not permitted. The Company has not yet determined
whether the application of SFAS No. 133 will have a material impact on its
financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The market risk inherent in the Company's financial instruments
represents the potential loss in fair value, earnings or cash flows arising from
adverse changes in interest rates or foreign currency exchange rates. The
Company manages these exposures through operating and financing activities and,
when appropriate, through the use of derivative financial instruments. The
policy of the Company allows for the use of derivative financial instruments for
identifiable market risk exposures, including interest rate and foreign currency
fluctuations. The Company does not enter into derivative financial contracts for
trading or other speculative purposes. Since April 1, 2000, there have been no
significant changes in the Company's interest rate and foreign currency
exposures, changes in the types of derivative instruments used to hedge those
exposures, or significant changes in underlying market conditions.
21
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
(a) The Annual Meeting of Stockholders of the Company was held on August
17, 2000.
(b) The following directors were elected at the Annual Meeting of
Stockholders to serve until the 2001 Annual Meeting and until their
respective successors are duly elected and qualified:
CLASS A DIRECTOR:
-----------------
Allen Questrom
CLASS B DIRECTORS:
-----------------
Ralph Lauren
F. Lance Isham
Roger N. Farah
Frank A. Bennack, Jr.
Joel L. Fleishman
Terry S. Semel
CLASS C DIRECTOR:
-----------------
Richard A. Friedman
(c)(i) Each person elected as a director received the number of votes (shares
of Class B Common Stock are entitled to ten votes per share) indicated
beside his name:
NUMBER OF NUMBER OF
VOTES FOR VOTES WITHHELD
--------- --------------
CLASS A DIRECTOR:
-----------------
Allen Questrom 26,863,659 285,089
CLASS B DIRECTORS:
-----------------
Ralph Lauren 432,800,210 -0-
F. Lance Isham 432,800,210 -0-
Roger N. Farah 432,800,210 -0-
Frank A. Bennack, Jr. 432,800,210 -0-
Joel L. Fleishman 432,800,210 -0-
Terry S. Semel 432,800,210 -0-
CLASS C DIRECTOR:
-----------------
Richard A. Friedman 22,720,979 -0-
(ii) 482,607,343 votes were cast for and 41,332 votes were cast against
the ratification of the selection of Deloitte & Touche LLP as the independent
auditors of the Company for the year ending March 31, 2001. Abstentions totaled
21,262; there were no broker nonvotes.
22
<PAGE>
(iii) 468,487,157 votes were cast for and 6,401,064 votes were cast
against the approval of the terms of the Amendment to the 1997 Polo Ralph Lauren
Corporation Long-Term Stock Incentive Plan. Abstentions totaled 2,587,145; there
were no broker nonvotes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits--
27.1 Financial Data Schedule
(b) Reports on Form 8-K--
The Company filed no reports on Form 8-K in the quarter ended
September 30, 2000.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
POLO RALPH LAUREN CORPORATION
Date: November 14, 2000 By: /s/ Nancy A. Platoni Poli
----------------------------------
Nancy A. Platoni Poli
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
24
