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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 January 1, 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 of (I.R.S. Employer
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 February 10, 2000, 32,670,476 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 January 1, 2000 (Unaudited)
and April 3, 1999.............................................. 3
Consolidated Statements of Income for the three and nine months
ended January 1, 2000 and September 26, 1998 (Unaudited)....... 4
Consolidated Statements of Cash Flows for the nine months ended
January 1, 2000 and December 26, 1998 (Unaudited)............. 5-6
Notes to Consolidated Financial Statements....................... 7-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................... 14-22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 23
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 23
Item 5. Other Information................................................. 23
Item 6. Exhibits and Reports on Form 8-K.................................. 24
2
<PAGE>
POLO RALPH LAUREN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
January 1, April 3,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 345,330 $ 44,458
Accounts receivable, net of allowances of $14,341 and $13,495 respectively 128,908 157,203
Inventories 343,210 376,860
Deferred tax assets 51,939 51,939
Prepaid expenses and other 29,411 48,994
----------- -----------
Total current assets 898,798 679,454
Property and equipment, net 334,901 261,799
Deferred tax assets 12,737 12,493
Restricted cash -- 44,217
Goodwill, net 76,937 27,464
Other assets, net 96,278 79,157
----------- -----------
$ 1,419,651 $ 1,104,584
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes and acceptances payable - banks $ 25,000 $ 115,500
Accounts payable 82,741 88,898
Income taxes payable 16,639 17,432
Accrued expenses and other 111,555 126,142
----------- -----------
Total current liabilities 235,935 347,972
Long-term debt 356,705 44,217
Other noncurrent liabilities 73,198 53,490
Stockholders' equity
Common Stock
Class A, par value $.01 per share; 500,000,000 shares
authorized; 34,381,653 shares issued 344 344
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 450,030 450,030
Retained earnings 339,015 227,288
Treasury Stock, Class A, at cost (1,711,177 and 603,864 shares) (36,829) (16,084)
Accumulated other comprehensive income 2,425 --
Unearned compensation (1,832) (3,333)
----------- -----------
Total stockholders' equity 753,813 658,905
----------- -----------
$ 1,419,651 $ 1,104,584
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
POLO RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
January 1, December 26, January 1, December 26,
2000 1998 2000 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 453,015 $ 395,436 $ 1,307,996 $ 1,116,047
Licensing revenue 55,741 49,164 174,945 153,951
Other income 1,543 2,930 5,664 11,115
----------- ----------- ----------- -----------
Net revenues 510,299 447,530 1,488,605 1,281,113
Cost of goods sold 270,719 240,661 762,635 657,917
----------- ----------- ----------- -----------
Gross profit 239,580 206,869 725,970 623,196
Selling, general and administrative expenses 181,696 163,009 521,105 456,756
----------- ----------- ----------- -----------
Income from operations 57,884 43,860 204,865 166,440
Interest expense 3,422 1,074 9,597 1,070
----------- ----------- ----------- -----------
Income before income taxes and cumulative effect
of change in accounting principle 54,462 42,786 195,268 165,370
Provision for income taxes 22,194 17,435 79,574 67,389
----------- ----------- ----------- -----------
Income before cumulative effect of change
in accounting principle 32,268 25,351 115,694 97,981
Cumulative effect of change in accounting
principle, net of taxes -- -- 3,967 --
----------- ----------- ----------- -----------
Net income $ 32,268 $ 25,351 $ 111,727 $ 97,981
=========== =========== =========== ===========
Income per share before cumulative effect of change in
accounting principle - Basic and Diluted $ 0.33 $ 0.25 $ 1.17 $ 0.98
Cumulative effect of change in accounting
principle, net of taxes, per share - Basic and Diluted $ -- $ -- 0.04 $ --
----------- ----------- ----------- -----------
Net income per share - Basic and Diluted $ 0.33 $ 0.25 $ 1.13 $ 0.98
=========== =========== =========== ===========
Weighted average common shares outstanding - Basic 98,807,754 99,622,932 99,155,088 99,881,675
=========== =========== =========== ===========
Weighted average common shares outstanding - Diluted 98,938,341 99,674,214 99,299,695 99,932,957
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
POLO RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
January 1, December 26,
2000 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $ 111,727 $ 97,981
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 53,074 33,288
Cumulative effect of change in accounting principle 3,967 --
Provision for losses on accounts receivable 2,268 653
Other 1,579 (1,199)
Changes in assets and liabilities, net of acquisition
Accounts receivable 26,420 15,515
Inventories 57,713 (79,415)
Prepaid expenses and other 15,943 (13,438)
Other assets, net (8,672) (9,879)
Accounts payable (19,221) (17,768)
Income taxes payable and accrued expenses and other (11,039) 16,601
--------- ---------
Net cash provided by operating activities 233,759 42,339
--------- ---------
Cash flows from investing activities
Purchases of property and equipment, net (88,627) (94,991)
Acquisition, net of cash acquired (52,391) (6,981)
Proceeds from release of restricted cash held for Club Monaco acquisition 44,217 --
Cash surrender value - officers' life insurance, net (4,065) (1,737)
--------- ---------
Net cash used in investing activities (100,866) (103,709)
--------- ---------
Cash flows from financing activities
Proceeds from issuance of common stock, net -- 113
Repurchases of common stock (20,745) (16,084)
(Repayments of) proceeds from short-term borrowings, net (90,500) 40,000
Repayments of long-term debt (37,358) (337)
Proceeds from long-term debt 319,611 --
--------- ---------
Net cash provided by financing activities 171,008 23,692
--------- ---------
Net increase (decrease) in cash and cash equivalents 303,901 (37,678)
Effect of exchange rate changes on cash and cash equivalents (3,029) --
Cash and cash equivalents at beginning of period 44,458 58,755
--------- ---------
Cash and cash equivalents at end of period $ 345,330 $ 21,077
========= =========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
POLO RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
January 1, December 26,
2000 1998
-------- --------
<S> <C> <C>
Supplemental cash flow information
Cash paid for interest $ 10,085 $ 127
======== ========
Cash paid for income taxes $ 79,648 $ 55,464
======== ========
Supplemental schedule of non-cash investing and financing activities
Fair value of assets acquired, excluding cash $113,492 $ 14,868
Less:
Cash paid 54,314 6,981
Promissory notes issued -- 5,000
-------- --------
Liabilities assumed $ 59,178 $ 2,887
======== ========
Fair market value of restricted stock grants $ 1,501
========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
POLO RALPH LAUREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for January 1, 2000 and December 26, 1998 is unaudited)
1 Basis of Presentation
(a) Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements include
the results of operations of Polo Ralph Lauren Corporation and its
subsidiaries (collectively, the "Company"). All significant intercompany
balances and transactions have been eliminated.
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 3, 1999 audited consolidated
financial statements of the Company. In the opinion of management, the
accompanying consolidated financial statements reflect all adjustments,
consisting only of normal and recurring 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 months and nine months ended January
1, 2000 and December 26, 1998 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 unaudited consolidated financial statements should be read in
conjunction with the Company's fiscal 1999 audited consolidated financial
statements.
(b) Acquisition
On April 6, 1999, PRL Acquisition Corp., a Nova Scotia unlimited
liability corporation and a wholly owned subsidiary of the Company,
acquired, through a tender offer, 98.83% of the outstanding shares of Club
Monaco Inc. ("Club Monaco"), a corporation organized under the laws of the
Province of Ontario, Canada. On May 3, 1999, PRL Acquisition Corp.
acquired the remaining outstanding 1.17% shares pursuant to a statutory
compulsory acquisition. The total purchase price was approximately $51.0
million in cash based on the then current foreign exchange rates. The
Company used funds from its credit facility to finance this acquisition
and to repay in full assumed debt of Club Monaco of approximately $35.0
million. This acquisition has been accounted for as a purchase and the
Company has consolidated the operations of Club Monaco in the accompanying
financial statements from the effective date of the transaction. 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 $51.0 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>
2 Significant Accounting Policies
(a) Net income per share
Basic net income per share was calculated by dividing net income by
the weighted average number of shares outstanding during the period and
excluded any potential dilution. Diluted net income per share was
calculated similarly but included potential dilution from the exercise of
stock options and awards.
(b) Comprehensive Income
For the three and nine months ended January 1, 2000, comprehensive
income was as follows:
Three Months Nine Months
January 1, January 1,
2000 2000
Net income $ 32,268 $111,727
Other comprehensive income, net of taxes:
Foreign currency translation adjustments 2,425 2,425
-------- --------
Comprehensive income $ 34,693 $114,152
======== ========
Income tax expense related to foreign currency translation
adjustments was $1.7 million in the three and nine months ended January 1,
2000, respectively.
For the three and nine months ended December 26, 1998, comprehensive
income was equal to net income.
(c) Accounting Changes
Effective April 4, 1999, the Company adopted the provisions of
Statement of Position No. 98-5 ("SOP 98-5"), Reporting on the Costs of
Start-up Activities. SOP 98-5 requires that costs of start-up activities,
including store pre-opening costs, be expensed as incurred. Prior to its
adoption of SOP 98-5, the Company's accounting policy was to capitalize
store pre-opening costs as prepaid expenses and amortize such costs over a
twelve-month period following store opening. As a result of adopting SOP
98-5, the Company recorded a charge of $4.0 million, after taxes, as the
cumulative effect of a change in accounting principle in the accompanying
financial statements.
Effective April 4, 1999, the Company changed its method of valuing
its retail inventories from the retail method to the lower of cost
(first-in, first-out) or market. The impact of this change was not
material and is included in selling, general and administrative expenses
in the accompanying financial statements.
8
<PAGE>
(d) Recently Issued Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement 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 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.
3 Inventories
January 1, April 3,
2000 1999
Raw materials $ 14,304 $ 17,675
Work-in-process 8,940 8,545
Finished goods 319,966 350,640
-------- --------
$343,210 $376,860
======== ========
Merchandise inventories of $196.1 million at April 3, 1999 were
valued utilizing the retail method and are included in finished goods.
9
<PAGE>
4 Restructuring Charge
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 ("Restructuring Plan"). The major
initiatives of the Restructuring Plan included the following: (1) an
evaluation of the Company's retail operations and site locations; (2) the
realignment and operational integration of the Company's wholesale
operating units; and (3) 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 January 1, 2000 were as follows:
<TABLE>
<CAPTION>
Lease and
Severance and Asset Contract
Termination Write Termination Other Total
Benefits Downs Costs Costs
<S> <C> <C> <C> <C> <C>
1999 provision ............. $ 15,277 $ 17,788 $ 24,665 $ 830 $ 58,560
1999 activity .............. (3,318) (17,788) (1,112) (105) (22,323)
-------- -------- -------- -------- --------
Balance at April 3, 1999 ... 11,959 -- 23,553 725 36,237
2000 activity .............. (3,557) -- (16,344) (250) (20,151)
-------- -------- -------- -------- --------
Balance at January 1, 2000 . $ 8,402 $ -- $ 7,209 $ 475 $ 16,086
======== ======== ======== ======== ========
</TABLE>
Total severance and termination benefits as a result of the
Restructuring Plan relate to approximately 280 employees, 223 of which
have been terminated through January 2000. Total cash outlays related to
the Restructuring Plan are expected to be approximately $39.5 million,
$19.7 million of which was paid in the nine months ended January 1, 2000.
The Company expects to substantially complete the implementation of the
Restructuring Plan in fiscal 2000.
10
<PAGE>
5 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. They are
managed separately because each segment requires different strategic
initiatives, promotional campaigns, marketing and advertising, based upon
its own individual positioning 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 nine months ended January 1, 2000 and December 26, 1998 and total
assets as of January 1, 2000 and April 3, 1999 by segment were as follows:
Three Months Ended
January 1, December 26,
2000 1998
Net revenues:
Wholesale $ 197,831 $ 193,233
Retail 256,727 205,133
Licensing 55,741 49,164
---------- ----------
$ 510,299 $ 447,530
========== ==========
Income from operations:
Wholesale $ 12,100 $ 2,207
Retail 12,684 16,440
Licensing 33,100 25,213
---------- ----------
$ 57,884 $ 43,860
========== ==========
Nine Months Ended
January 1, December 26,
2000 1998
Net revenues:
Wholesale $ 643,125 $ 605,231
Retail 670,535 521,931
Licensing 174,945 153,951
---------- ----------
$1,488,605 $1,281,113
========== ==========
11
<PAGE>
Nine Months Ended
January 1, December 26,
2000 1998
Income from operations:
Wholesale $ 49,539 $ 31,500
Retail 42,431 48,040
Licensing 106,199 86,900
---------- ----------
198,169 166,440
Add: Cumulative effect of change
in accounting principle before taxes 6,696 --
---------- ----------
$ 204,865 $ 166,440
========== ==========
January 1, April 3,
2000 1999
Segment assets:
Wholesale $ 296,902 $ 376,154
Retail 532,321 424,203
Licensing 82,663 73,389
Corporate 507,765 230,838
---------- ----------
$1,419,651 $1,104,584
========== ==========
A substantial portion of the Company's net revenues and income from
operations are derived from, and identifiable assets are located in, the
United States.
6 Borrowings
On November 22, 1999, the Company issued euro 275.0 million of 6.125
per cent 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 $274.4 million based on current
exchange rates. A portion of the net proceeds from the issuance was used
to pay down existing debt under the Company's credit facilities while the
remaining proceeds were used to complete the acquisition discussed in Note
7 below. Interest on the Eurobonds is payable annually.
12
<PAGE>
7 Subsequent Events
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 in Europe men's and boys' Polo
apparel, the men's and women's Polo Jeans business, and certain Polo
accessories. In addition to the wholesale business, included in the
acquisition is a Polo store in Paris and six outlet stores located in
France, the United Kingdom and Austria. Poloco had revenues of
approximately $180.0 million for calendar year 1998. The Company acquired
Poloco for an aggregate cash consideration of approximately $210.0
million, plus the assumption of approximately $30 million in short-term
debt. The Company used a portion of the net proceeds from the Eurobond
Offering to finance this acquisition. The acquisition will be accounted
for as a purchase from the effective date of the transaction.
On February 7, 2000, the Company announced the formation of Ralph
Lauren Media, LLC ("RL Media"), a joint venture between the Company and
NBC and certain affiliated companies. RL Media was created to bring the
Company's American lifestyle experience to consumers via multiple media
platforms, including the Internet, broadcast, cable and print. Under the
30-year joint venture agreement, RL Media will be owned 50% by the
Company, 25% by NBC, 12.5% by ValueVision International, Inc.
("ValueVision"), 10% by NBC Internet, Inc. ("NBCi") and 2.5% by CNBC.com.
In exchange for its 50% interest, the Company will provide marketing
through its annual print advertising campaign, make its merchandise
available at initial cost of inventory, provide customer service via its
full-price retail stores and handle excess inventory through its outlet
stores. NBC will contribute $110.0 million of television and online
advertising on NBC and CNBC.com properties. NBCi will contribute $40.0
million in online distribution and promotion and ValueVision will
contribute a cash funding commitment up to $50.0 million. Under the
arrangement, the Company will not absorb any losses from the joint venture
up to the first $50.0 million incurred and will share proportionately in
the net income or losses thereafter. Additionally, the Company will
receive a royalty on the sale of its products by RL Media based on
specified percentages of net sales over a predetermined threshold, subject
to certain limitations. RL Media's managing board will have equal
representation from the Company and NBC, including its affiliated
companies.
13
<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 2000 and 1999 end on April 1, 2000 and
April 3, 1999, 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," "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 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
ability of the Company or the Company's third party customers and suppliers and
government agencies to timely and adequately remedy any Year 2000 issues; risks
associated with the possible adverse impact of the Company's unaffiliated
manufacturers' inability to manufacture
14
<PAGE>
POLO RALPH LAUREN CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 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 and development of its
retail operations. The Company's net revenues are generated from its three
integrated operations: wholesale, retail and licensing alliances. Licensing
revenue includes royalties received from home collection licensing partners.
15
<PAGE>
Results of Operations
The following discussion provides information and analysis of the
Company's results of operations for the three and nine months ended January 1,
2000 compared to December 26, 1998. 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 nine months ended January 1, 2000 and December 26,
1998:
<TABLE>
<CAPTION>
Jan. 1, 2000 Dec. 26, 1998
Three Nine Three Nine
Months Months Months Months
<S> <C> <C> <C> <C>
Net sales .................................. 88.8% 87.9% 88.4% 87.1%
Licensing revenue .......................... 10.9 11.8 11.0 12.0
Other income ............................... 0.3 0.3 0.6 0.9
----- ----- ----- -----
Net revenues ............................... 100.0 100.0 100.0 100.0
----- ----- ----- -----
Gross profit ............................... 46.9 48.8 46.2 48.7
Selling, general and administrative expenses 35.6 35.0 36.4 35.7
----- ----- ----- -----
Income from operations ..................... 11.3 13.8 9.8 13.0
Interest expense ........................... 0.7 0.6 0.2 0.1
----- ----- ----- -----
Income before income taxes and
change in accounting ..................... 10.6% 13.2% 9.6% 12.9%
===== ===== ===== =====
</TABLE>
Three Months Ended January 1, 2000 Compared to Three Months Ended December 26,
1998
Net Sales. Net sales increased 14.6% to $453.0 million in the three months
ended January 1, 2000 from $395.4 million in the three months ended December 26,
1998. Wholesale net sales increased 3.1% to $196.3 million in the three months
ended January 1, 2000 from $190.3 million in the corresponding period of fiscal
1999. Wholesale growth primarily reflects increased unit sales of existing Polo
and Collection brand products offset by a decline in average selling prices
resulting from changes in product mix and increased promotions. Retail sales
increased by 25.2% to $256.7 million in the three months ended January 1, 2000
from $205.1 million in the corresponding period in fiscal 1999. This increase is
primarily attributable to the $65.0 million benefit from the following: (a) new
store openings in fiscal 2000 (11 Polo full-price and 13 outlet stores, net of
store closures); (b) new store openings in the second half of fiscal 1999; and
(c) 70 Club Monaco stores acquired in the quarter ended July 3, 1999. Although
the Company's stores remain highly productive, comparable store sales decreased
by 8.1%. Comparable store sales, which represent net sales of stores open in
both reporting periods for the full portion of such periods, declined due to a
promotionally driven retail environment, an inadequate
16
<PAGE>
supply of leading product categories and the effects of a mature and challenging
outlet store environment. The Company anticipates that some of these factors
affecting its retail operations will continue for the foreseeable future. At
January 1, 2000, the Company operated 44 Polo full-price stores, 112 outlet
stores and 72 Club Monaco stores.
Licensing Revenue. Licensing revenue increased 13.4% to $55.7 million in
the three months ended January 1, 2000 from $49.2 million in the corresponding
period of fiscal 1999. This increase is primarily attributable to overall
increases in sales of existing licensed products, particularly Lauren, Polo
Jeans and Chaps.
Gross Profit. Gross profit as a percentage of net revenues increased to
46.9% in the three months ended January 1, 2000 from 46.2% in the corresponding
period of fiscal 1999. This increase was mainly attributable to a higher
concentration of retail sales to net revenues in the current period as a result
of the acquisition of Club Monaco in fiscal 2000.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses as a percentage of net revenues decreased to
35.6% in the three months ended January 1, 2000 from 36.4% of net revenues in
the corresponding period of fiscal 1999. This decrease in SG&A expenses as a
percentage of net revenues was primarily due to expense leveraging achieved with
the Company's revenue growth.
Interest Expense. Interest expense increased to $3.4 million in the
quarter ended January 1, 2000 from $1.1 million in the comparable period in
fiscal 1999. This increase was primarily due to a higher level of borrowings
incurred to fund the acquisitions of Club Monaco and Poloco.
Nine Months Ended January 1, 2000 Compared to Nine Months Ended December 26,
1998
Net Sales. Net sales increased 17.2% to $1.3 billion in the nine months
ended January 1, 2000 from $1.1 billion in the nine months ended December 26,
1998. Wholesale net sales increased 7.3% to $637.5 million in the nine months
ended January 1, 2000 from $594.1 million in the corresponding period of fiscal
1999. Wholesale growth primarily reflects increased unit sales of existing Polo
and Collection brand products and the timing of shipments to retailers. These
unit increases were partially offset by a decline in average selling prices
resulting from changes in product mix. Retail sales increased by 28.5% to $670.5
million in the nine months ended January 1, 2000 from $521.9 million in the
corresponding period in fiscal 1999. This increase is primarily attributable to
the $172.9 million benefit from the following: (a) new store openings in fiscal
2000 (11 Polo full-price and 13 outlet stores, net of store closures); (b) new
store openings in the second half of fiscal 1999; and (c) 70 Club Monaco stores
acquired in the quarter ended July 3, 1999. Although the Company's stores remain
highly productive, comparable store sales decreased by 5.4%. The decline was due
to a promotionally driven retail environment, an inadequate supply of leading
product categories and the effects of a mature and challenging outlet store
environment.
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Licensing Revenue. Licensing revenue increased 13.6% to $174.9 million in
the nine months ended January 1, 2000 from $154.0 million in the corresponding
period of fiscal 1999. This increase is primarily attributable to overall
general increases in sales of existing licensed products, particularly Lauren,
Polo Jeans and Home Collection.
Gross Profit. Gross profit as a percentage of net revenues increased
slightly to 48.8% in the nine months ended January 1, 2000 from 48.7% in the
corresponding period of fiscal 1999. This increase was mainly attributable to a
higher concentration of retail sales to net revenues in the current period as a
result of the acquisition of Club Monaco in fiscal 2000.
Selling, General and Administrative Expenses. SG&A expenses as a
percentage of net revenues decreased to 35.0% in the nine months ended January
1, 2000 from 35.7% of net revenues in the corresponding period of fiscal 1999.
This improvement in SG&A expenses as a percentage of net revenues was primarily
due to expense leveraging achieved with the Company's revenue growth.
Interest Expense. Interest expense increased to $9.6 million in the nine
months ended January 1, 2000 from $1.1 million in the comparable period in
fiscal 1999. This increase was due to a higher level of borrowings incurred
during the current period to fund the acquisitions of Club Monaco and Poloco.
Liquidity and Capital Resources
The Company's capital 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 and credit facilities.
Net cash provided by operating activities increased to $233.8 million in
the nine months ended January 1, 2000 from $42.3 million in the comparable
period in fiscal 1999. This improvement was driven by favorable changes in
inventories as the Company implemented a strategic initiative in its fourth
fiscal quarter of 1999 to reduce inventory levels and move excess product. This
improvement was also impacted by favorable changes in accounts receivable and
general expenses due to timing (i.e., customer remittances and vendor payments).
Net cash used in investing activities decreased to $100.9 million in the nine
months ended January 1, 2000 from $103.7 million in the comparable period in
fiscal 1999. This decrease principally reflects a decline in capital
expenditures in the nine months ended January 1, 2000. Net cash provided by
financing activities increased to $171.0 million in the nine months ended
January 1, 2000 from $23.7 million in the comparable period in fiscal 1999. This
increase primarily reflects the proceeds received by the Company in connection
with the Eurobond Offering offset by the use of a portion of these proceeds to
repay outstanding indebtedness under the Credit Facilities.
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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.
In April 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.
On November 22, 1999, the Company issued euro 275.0 million of 6.125 per
cent 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 $274.4 million based on current exchange rates. A portion
of the net proceeds from the issuance was used to pay down existing debt under
the Company's Credit Facilities while the remaining proceeds were used to
complete the acquisition of Poloco, as discussed further below. Interest on the
Eurobonds is payable annually.
As of January 1, 2000, the Company had $25.0 million outstanding in direct
borrowings and $80.0 million outstanding under the Term Loan and was
contingently liable for $32.9 million in outstanding letters of credit under the
Credit Facilities. Additionally, the Company had $276.7 million outstanding in
Eurobonds. The weighted average interest rate on outstanding borrowings was 6.0%
at January 1, 2000.
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Capital expenditures were $88.6 million and $95.0 million in the nine
months ended January 1, 2000 and December 26, 1998, 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 concept and outlet stores; and (iv) the
Company's information systems. The Company plans to invest approximately $130.0
million, net of landlord incentives, over the current fiscal year for the
aforementioned projects 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 will be made from time to time in the
open market over a two-year period which commenced April 1, 1998. Shares
acquired under the repurchase program will be used for stock option programs and
for other corporate purposes. As of January 1, 2000, the Company had repurchased
1,711,177 shares of its Class A Common Stock at an aggregate cost of $36.8
million.
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 in Europe men's and boys' Polo apparel, the men's and
women's Polo Jeans business, and certain Polo accessories. In addition to the
wholesale business, included in the acquisition is a Polo store in Paris and six
outlet stores located in France, the United Kingdom and Austria. Poloco had
revenues of approximately $180.0 million for calendar year 1998. The acquisition
is expected to be accretive to earnings beginning in fiscal year 2001. The
Company acquired Poloco for an aggregate cash consideration of approximately
$210.0 million, plus the assumption of approximately $30.0 million in short-term
debt. The Company used a portion of the net proceeds from the Eurobond Offering
to finance this acquisition.
On February 7, 2000, the Company announced the formation of Ralph Lauren
Media, LLC ("RL Media"), a joint venture between the Company and NBC and certain
affiliated companies. RL Media was created to bring the Company's American
lifestyle experience to consumers via multiple media platforms, including the
Internet, broadcast, cable and print. Under the 30-year joint venture agreement,
RL Media will be owned 50% by the Company, 25% by NBC, 12.5% by ValueVision
International, Inc. ("ValueVision"), 10% by NBC Internet, Inc. ("NBCi") and 2.5%
by CNBC.com. In exchange for its 50% interest, the Company will provide
marketing through its annual print advertising campaign, make its merchandise
available at initial cost of inventory, provide customer service via its
full-price retail stores and handle excess inventory through its outlet stores.
NBC will contribute $110.0 million of television and online advertising on NBC
and CNBC.com properties. NBCi will contribute $40.0 million in online
distribution and promotion and ValueVision will contribute a cash funding
commitment up to $50.0 million. Under the arrangement, the Company will not
absorb any losses from the joint venture up to the first $50.0 million incurred
and will share proportionately in the net income or losses thereafter.
Additionally, the Company will receive a royalty on the sale of its products by
RL Media based on specified percentages of net sales over a predetermined
threshold, subject to certain limitations. RL Media's managing board will have
equal representation from the Company and NBC, including its affiliated
companies.
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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 Restructuring Plan,
capital requirements, stock repurchase program, the acquisition of Poloco and
other corporate activities for the next 12 months. Additionally, the Company
does not currently intend to pay dividends on its Common Stock in the next 12
months.
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 growth in the
Company's retail operations and licensing revenue, 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.
Exchange Rates
Inventory purchases from contract manufacturers in the Far East are
primarily denominated in U.S. dollars; however, purchase prices for the
Company's products may be affected by fluctuations in the exchange rate between
the U.S. dollar and the local currencies of the contract manufacturers, which
may have the effect of increasing the Company's cost of goods sold in the
future. During the last two years, exchange rate fluctuations have not had a
material impact on the Company's inventory cost. Additionally, certain
international licensing revenue and the results of operations of foreign
subsidiaries could be materially affected by currency fluctuations. From time to
time, the Company hedges certain exposures to foreign currency exchange rate
changes arising in the ordinary course of business.
New Accounting Standards
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement 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 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.
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Year 2000 Compliance Update
The Company has reviewed its operations relating to Year 2000 issues.
Remediation and testing are complete for both information technology ("IT") and
non-IT systems that required attention and resources to be Year 2000 compliant.
Although the change in date has occurred, it is not possible to conclude that
all aspects of the Year 2000 issue that may affect the Company, including those
relating to third parties with whom the Company has material business
relationships (such as customers, licensees, transportation carriers, utility
and other general service providers), have been resolved. To date, the Company
has not experienced any significant disruptions in its operations relating to
Year 2000 issues. The Company has a contingency plan in place to mitigate the
potential effects, if any, that may arise.
The costs to address the Company's Year 2000 issues were approximately
$5.3 million. Substantially all of these costs had been incurred as of January
1, 2000.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is a defendant in a purported national class action lawsuit
filed in the Delaware Supreme Court in July 1997. The plaintiff has brought the
action allegedly on behalf of a class of persons who purchased products at the
Company's outlet stores throughout the United States at any time since July 15,
1991. The complaint alleges that advertising and marketing practices used by the
Company in connection with the sales of its products at its outlet stores
violate guidelines established by the Federal Trade Commission and the consumer
protection statutes of Delaware and other states with statutes similar to
Delaware's Consumer Fraud Act and Delaware's Consumer Contracts Act. The lawsuit
seeks, on behalf of the class, compensatory and punitive damages as well as
attorneys' fees. The Company answered the complaint and filed a motion for
judgment on the pleadings. At a hearing on that motion on March 5, 1999, the
Court ruled that the plaintiff must file an amended complaint within 30 days in
order to avoid dismissal. The plaintiff filed an amended complaint, essentially
containing the same allegations as the initial complaint, which the Company
answered on April 26, 1999. On August 5, 1999, the Company again filed a motion
for judgment on the pleadings and, on September 3, 1999, the plaintiff filed a
brief in opposition to such motion for judgment. On November 19, 1999, the
Company and the plaintiff entered into a Stipulation and Agreement of
Compromise, Settlement and Agreement, none of the provisions of which are
expected to have a material adverse impact on the business and financial
condition of the Company. By February 1, 2000, notice of the settlement was
published in a publication of national circulation and mailed to persons listed
on the Company's outlet customer list. A hearing will be held on April 18, 2000
to determine the fairness of the settlement to class members and to approve the
settlement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the sections entitled "Liquidity and Capital Resources" and "Exchange
Rates" in Item 2 above, which sections are incorporated herein by reference.
ITEM 5. OTHER INFORMATION.
On November 22, 1999, the Company issued euro 275 million of 6.125 per
cent Notes due November 2006. The Eurobonds were offered outside the United
States in reliance on Regulation S under the Securities Act of 1933, as amended,
through a group of managers led by Goldman Sachs International. The Eurobonds
are listed on the London Stock Exchange.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits--
10.1 Fiscal and Paying Agency Agreement dated November 22, 1999 among
Polo Ralph Lauren Corporation, its subsidiary guarantors and The
Bank of New York, as fiscal and principal paying agent.
27.1 Financial Data Schedule
(b) Reports on Form 8-K--
The Company filed one current report on Form 8-K on January 10, 2000
with respect to Item 2 - Acquisition or Disposition of Assets in
connection with the stock and asset purchase by the Company of Poloco,
S.A.S. and certain of its affiliates from S.A Louis Dreyfus et Cie, a
company organized under the laws of France, on January 6, 2000.
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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: February 15, 2000 By: /s/ Nancy A. Platoni Poli
Nancy A. Platoni Poli
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
25
FISCAL AND PAYING AGENCY AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of November 22, 1999, among
Polo Ralph Lauren Corporation, a corporation incorporated under the laws of the
State of Delaware (the "Issuer"), each of the subsidiaries of the Issuer
identified on Schedule I hereto and each additional subsidiary that is required
from time to time to become a party hereto pursuant to Section 16 hereof (each a
"Guarantor" and collectively, the "Guarantors"), The Bank of New York, acting
through its office at One Canada Square, London E14 5AL, as fiscal and principal
paying agent ("BONY" or any successor or additional fiscal and principal paying
agent appointed hereunder being called the "Agent"). BONY, and/or any successor
or additional paying agent appointed hereunder, is sometimes referred to herein
individually as a "Paying Agent" and collectively as the "Paying Agents").
W I T N E S S E T H:
Section 1. Notes; Guarantees; Appointment of Agent. (a) The Issuer
has authorized the creation and issue of euro 275,000,000 6.125 per cent
unsecured, unsubordinated notes (the "Notes") due 2006.
(b) The Guarantors hereby agree, jointly and severally, to guarantee
fully the Issuer's obligations under the Notes on an equal and ratable basis
(collectively, the "Guarantees"), on the terms and subject to the conditions
described herein, in the Guarantees and in the Notes.
(c) The Issuer and the Guarantors hereby (i) appoint the Agent to
act, on the terms and conditions specified herein and in the Notes, as fiscal
and principal paying agent for the Notes and any other Paying Agent to act on
the terms and conditions specified herein and in the Notes, as paying agent for
the Notes, and (ii) agree to all of the terms and conditions of the Notes (the
"Terms and Conditions"), to which the rights of the Noteholders (as defined in
Section 4(b) below) hereunder shall be subject.
Section 2. Amount; Execution. (a) The authorized aggregate principal
amount of Notes which may be issued hereunder is euro 275,000,000.
(b) Each of the Temporary Global Note, the Permanent Global Note and
the Definitive Notes, if any (each as defined in Section 4 below), shall be
executed by or on behalf
<PAGE>
of the Issuer by the manual or facsimile signature of an Authorized
Representative (as defined in Section 3 hereof) of the Issuer and authenticated
manually by or on behalf of the Agent.
(c) To evidence its guarantee of the payment of principal and
interest and any Additional Amounts in respect of the Notes, each Guarantor
shall execute a Guarantee, which shall be in substantially the form of Exhibit D
hereto and shall be endorsed on each Note. Each Guarantor's execution of the
Guarantee may be evidenced by a manual or facsimile signature of a duly
authorized officer and may be imprinted or otherwise reproduced on the
Guarantee, and for that purpose the Guarantor may adopt and use the facsimile
signature of any such officer. Each Guarantee (including the payment of
principal of, premium, if any, and interest and any Additional Amounts on the
Notes) shall rank pari passu in right of payment with all other present and
future unsecured and unsubordinated indebtedness of such Guarantor and shall
rank senior in right of payment to all subordinated indebtedness of such
Guarantor. In the event that any Guarantor is required, by the terms of its
Guarantee, to make or cause to be made any payment in respect of the Notes,
references to the Issuer in this Agreement (other than in Section 1(a)) shall be
deemed to mean and include the Guarantor except where the context otherwise
requires.
Section 3. Authorized Representatives. From time to time the Issuer
and each Guarantor will furnish the Agent with a certificate of the Issuer or
such Guarantor, as the case may be, certifying the incumbency and specimen
signatures of officers authorized to execute Notes or Guarantees on behalf of
the Issuer or such Guarantor, as the case may be (each an "Authorized
Representative"). Until the Agent receives a subsequent incumbency certificate
of the Issuer or such Guarantor, the Agent shall be entitled to rely on the last
such certificate delivered to it for purposes of determining the Authorized
Representatives. The Agent shall have no responsibility to the Issuer or the
Guarantors to determine by whom or by what means a facsimile signature may have
been affixed on the Notes, the interest coupons appertaining thereto (the
"Coupons"), if any, or the Guarantees endorsed on such Notes or to determine
whether any facsimile or manual signature is genuine, or if such facsimile or
manual signature resembles the specimen signatures filed with the Agent by a
duly authorized officer of the Issuer or such Guarantor. Any Note or Coupon or
the Guarantee endorsed on such Note bearing the manual or facsimile signature of
a person who is an Authorized Representative on the date such signature is
affixed shall bind the Issuer or such Guarantor, as the case may be, after the
authentication and delivery thereof by the Agent, notwithstanding that such
person
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shall have ceased to hold office on the date such Note, with attached Coupons,
if applicable, is authenticated and delivered by the Agent.
Section 4. Form of the Notes and Exchange of Notes. With regard to
the issuance of Notes:
(a) The Temporary Global Note and Permanent Global Note: The Notes
will initially be represented by a temporary global note (the "Temporary Global
Note") substantially in the form of Exhibit A hereto. The Temporary Global Note
will be exchangeable for interests in a permanent global note (the "Permanent
Global Note") substantially in the form of Exhibit B hereto as set out in the
terms of the Temporary Global Note. Immediately before issue, the Issuer shall
deliver to the Agent, and the Agent (or its agent on its behalf) shall
authenticate, the duly executed Temporary Global Note. The Agent shall then
deliver the Temporary Global Note upon written instruction of the Issuer to a
common depositary for Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System ("Euroclear"), and Cedelbank.
(b) The Definitive Notes: At any time on or after the Exchange Date
(as defined in Section 4(c)), the Permanent Global Note will become exchangeable
in whole, but not in part (free of charge to the holder), for Notes in
definitive form (the "Definitive Notes") in the denominations of euro 1,000,
euro 10,000 and euro 100,000 (i) at any time upon request of any holder thereof
(a "Noteholder"), including any person who is from time to time shown in the
records of Euroclear or Cedelbank as the holder of a particular principal amount
of such Notes (an "Accountholder"), upon at least 60 days' prior written notice
to the Agent specifying a Definitive Exchange Date (as defined below) or (ii) if
the Issuer would suffer a material disadvantage as a result of a change in laws
or regulations (taxation or otherwise) or as a result of a change in the
practice of Euroclear and/or Cedelbank which would not be suffered were the
Notes in definitive form and a certificate to such effect signed by two duly
Authorized Representatives of the Issuer is given to the Agent. Thereupon (in
the case of (ii) above) the Issuer may give notice to the Agent and the
Noteholders of its intention to exchange the Permanent Global Note for
Definitive Notes on the Definitive Exchange Date.
On any Definitive Exchange Date, the Permanent Global Note shall be
surrendered to or to the order of the Agent. In exchange for the Permanent
Global Note, the Issuer will deliver, or procure the delivery of, an equal
aggregate principal amount of Definitive
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Notes (having attached to them all Coupons in respect of interest which has not
already been paid on the Permanent Global Note), security printed in accordance
with any applicable legal and stock exchange requirements and in or
substantially in the form set out in this Agreement. On exchange of the
Permanent Global Note, the Issuer will ensure that it is canceled. From and
after such time as Definitive Notes are issued in exchange for the Permanent
Global Note, any remaining interest in the Temporary Global Note will be
exchangeable only for Definitive Notes, but only upon presentation to the Agent
of a certificate or certificates in substantially the form set forth in Exhibit
E hereto of Euroclear or Cedelbank, with respect to the Temporary Global Note or
portions thereof being exchanged, to the effect that it has received in writing
or by tested telex a certification or certifications in substantially the form
set forth in Exhibit F hereto signed by the person appearing in its records as
the owner of the Temporary Global Note or portions thereof being exchanged. No
Definitive Notes delivered in exchange for the Permanent Global Note or
Temporary Global Note will be mailed or otherwise delivered to any location in
the United States or its possessions in connection with such exchange.
If Definitive Notes have not been delivered by 5:00 p.m. (London
time) on the Definitive Exchange Date, then at 5:00 p.m. (London time) on the
Definitive Exchange Date, the holder(s) of the Permanent Global Note will cease
to have any rights thereunder, and Accountholders will acquire directly against
the Issuer all those rights that they would have had if they had been the
holders of Definitive Notes in an aggregate principal amount equal to the amount
of Notes they were shown as holding on the records of Euroclear and/or
Cedelbank.
"Definitive Exchange Date" means a day specified in the notice
requiring exchange falling not less than 60 days after that date on which such
notice is given and on which date banks are open for business in London and in
the city in which the relevant clearing system is located.
Each Definitive Note will be in substantially the form set out in
Exhibit C-1 hereto, will have attached to it Coupons in substantially the form
set out in Exhibit C-2 hereto, and will be security printed in accordance with
applicable legal and stock exchange requirements. The Notes will be endorsed
with the Terms and Conditions.
(c) Exchange of Temporary Global Note for the Permanent Global Note:
At least 14 days before the Exchange Date (as defined below), the Issuer will
execute and deliver to the London office of the Agent the Permanent Global Note.
On and after the Exchange Date,
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<PAGE>
the Temporary Global Note may be surrendered to the Agent at such office to be
exchanged, as a whole or in part, for interests in the Permanent Global Note
without charge, and the Agent shall authenticate and deliver, in exchange for
such Temporary Global Note or the portions thereof to be exchanged, an equal
aggregate principal amount of the Permanent Global Note, but only upon
presentation to the Agent of a certificate or certificates in substantially the
form set forth in Exhibit E hereto of Euroclear and/or Cedelbank, with respect
to the Temporary Global Note or portions thereof being exchanged, to the effect
that it has received in writing or by tested telex a certification or
certifications in substantially the form set forth in Exhibit F hereto signed by
the person appearing in its records as the owner of the Temporary Global Note or
portions thereof being exchanged. "Exchange Date" means the date which is 40
days after the closing date for the sale of such Notes. On exchange in part of
the Temporary Global Note, the principal amount of the Temporary Global Note so
exchanged shall be endorsed by or on behalf of the Agent in accordance with the
terms of the Temporary Global Note. Until so exchanged in full the holders of
interests in the Temporary Global Note shall in all respects be entitled to the
same benefits under this Agreement as the holders of interests in the Permanent
Global Note and the holders of the Definitive Notes authenticated and delivered
hereunder, except that neither the holder nor the beneficial owners of the
Temporary Global Note shall be entitled to receive any payments of principal or
interest, including Additional Amounts (as defined in, and payable pursuant to,
Section 4 of the Terms and Conditions), if any, on the Temporary Global Note
except (i) as provided in Section 7(i), or (ii) if, upon due certification,
exchange of the Temporary Global Note is improperly refused or withheld.
Section 5. Reliance on Instructions. No Paying Agent shall incur any
liability to the Issuer in acting hereunder pursuant to instructions which such
Paying Agent believed in good faith to have been given by an Authorized
Representative.
Section 6. Issuer's and Guarantors' Representations and Warranties.
Each Paying Agent is entitled to assume that;
(i) the issuance and delivery of the Notes by the Issuer have been
duly and validly authorized by the Issuer;
(ii) the execution and delivery of the Guarantees by the respective
Guarantors have, in each case, been duly and validly authorized by
each Guarantor;
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(iii) the Notes, when completed, authenticated, issued and delivered
pursuant hereto, will constitute the legal, valid and binding
obligations of the Issuer; and
(iv) upon the due authorization, issuance and delivery of the Notes
and the due endorsement of the Guarantees thereon, the Guarantees
will constitute the legal valid and binding obligations of the
Guarantors.
Section 7. Payments; Interest Payment Dates; Record Dates.
(a) Payment to Agent: The Issuer will, on each date on which any
payment in respect of the Notes becomes due, transfer to the Agent by 10:00 a.m.
London time such amount as may be required for the purposes of such payment. The
Issuer will procure the delivery to the Agent by 10:00 a.m. (London time) on the
second business day in London before the due date for any such payment a copy of
irrevocable instructions issued by it for such payment to be made to the Agent.
In this Clause, the date on which a payment in respect of the Notes becomes due
means the first date on which the holder of a Note or Coupon could claim the
relevant payment but disregarding the necessity for it to be a business day in
any particular place of presentation.
(b) Notification of Non-payment: The Agent will forthwith notify by
telex or facsimile each other Paying Agent, if any, and the Issuer if it has not
by 10:00 a.m. London time on the due date for any payment due in respect of the
Notes received the full amount so payable on such date.
(c) Payment by Paying Agents: Each Paying Agent will, subject to the
Agent's receipt of monies therefor from the Issuer and subject to and in
accordance with the Terms and Conditions, pay or cause to be paid on behalf of
the Issuer on and after each due date therefor the amounts due in respect of the
Notes and Coupons and, in the case of each Paying Agent other than the Agent,
will be entitled to claim any amounts so paid from the Agent. If any payment
provided for in sub-Clause (a) is made late but otherwise in accordance with
this Agreement, the Paying Agents may nevertheless make payments in respect of
the Notes and Coupons. However, unless and until the full amount of any such
payment has been made to the Agent, the Paying Agents will not be bound to make
such payments.
(d) Reimbursement of Paying Agents: The Agent will, subject to
receipt of monies therefor from the Issuer, on demand promptly reimburse each
other Paying Agent, if
6
<PAGE>
any, for payments in respect of the Notes and Coupons properly made by it in
accordance with the Notes and this Agreement.
(e) Late Payment: If the Agent has not by the due date for any
payment in respect of the Notes received the full amount payable on such date
but receives it later, it will forthwith give notice to each other Paying Agent
and Noteholders that it has received such full amount.
(f) Method of Payment to Agent: Unless otherwise provided in the
Notes, all sums payable to the Agent hereunder will be paid in euro and in
immediately available funds to such account with such bank as the Agent may from
time to time notify to the Issuer.
(g) Moneys Held by Agent: The Agent may deal with moneys paid to it
under this Agreement in the same manner as other moneys paid to it as a banker
by its customers except that (1) it may not exercise any lien, right of set-off
or similar claim in respect of them and (2) it shall not be liable to anyone for
interest on any sums held by it under this Agreement. Any monies paid by the
Issuer to the Agent for payment of principal or interest which remain unclaimed
for two years after such monies have become due and payable will be repaid to
the Issuer upon its written request and the Noteholder may thereafter look only
to the Issuer for payment thereof.
(h) Partial Payments: If on presentation of a Note or Coupon only
part of the amount payable in respect of it is paid (except as a result of
deduction of tax as permitted by the Terms and Conditions) the Paying Agent to
whom the Note or Coupon is presented shall procure that such Note or Coupons
shall have attached to it a memorandum of the amount paid and the date of
payment.
(i) Payments on the Temporary Global Note: Prior to the Exchange
Date, payments in respect of the Notes shall be made only with respect to that
portion of the Temporary Global Note for which the Agent has received the
certificates referred to in Section 4(c). In the event that the due date for any
payment in respect of the Notes shall occur at a time when any portion of the
principal amount of the Temporary Global Note has not been exchanged for
interests in the Permanent Global Note, payments of principal of, and interest
(including Additional Amounts (if any)), on that portion of the principal amount
of the Temporary Global Note which has not been exchanged for interests in the
Permanent Global Note shall be transferred by the Issuer to the Agent in
accordance with Section 7(a) and shall be held by the
7
<PAGE>
Agent for payment in respect of the Notes upon such exchange or, prior to the
Exchange Date, upon presentation to the Agent of the certificates referred to in
Section 4(c).
(j) Amounts to be Deducted or Withheld: At least five business days
prior to the first payment date (and at least five business days prior to each
succeeding payment date if there has been any change with respect to the matters
set forth in any certificate required to be delivered hereunder) the Issuer will
furnish to the Agent and each Paying Agent a certificate of an Authorized
Representative of the Issuer specifying the amount required to be deducted or
withheld in the United States on the payments of principal and interest due on
such payment date for or on account of any taxes, assessments or other
governmental charges described in Section 4 of the Terms and Conditions and
certifying that such amount will be deducted or withheld and paid by the Issuer.
The Issuer will provide the Agent with such evidence as the Agent may require of
the Issuer's compliance with the foregoing requirement to pay. The Issuer will
indemnify each of the Agent and each Paying Agent for, and hold it harmless
against, any loss, liability or expense incurred without negligence, bad faith
or willful misconduct on its part, arising out of or in connection with actions
taken or omitted by it in reliance on any certificate furnished pursuant to this
paragraph or the failure to furnish such a certificate. The obligations of the
Issuer under this paragraph will survive the payment of the Notes and the
resignation or removal of the Agent or any Paying Agent and the termination of
this Agreement.
Section 8. Duties of the Agent. In accordance with the Terms and
Conditions and this Agreement or if otherwise requested by the Issuer, the Agent
will:
(a) receive requests to effect exchanges of the Permanent Global
Note to Definitive Notes;
(b) maintain a record of the Temporary Global Note, the Permanent
Global Note and the certificate number or numbers of all Definitive Notes and
Coupons delivered hereunder;
(c) carry out such other acts as may be necessary to give effect to
the Terms and Conditions with respect to payment, transfer, cancellation and
replacement (if any Note or Coupon is mutilated or defaced or is apparently
destroyed, lost or stolen, it may be replaced at the specified office of any
Paying Agent subject to all applicable laws and stock exchange requirements upon
payment by the claimant of the expenses incurred in connection therewith
8
<PAGE>
and on such terms and with such indemnity as the Issuer and the Agent may
require; mutilated or defaced Notes or Coupons must be surrendered before
replacements will be issued); and
(d) upon and in accordance with the written instructions of the
Issuer received at least 15 days before the proposed publication date, arrange
for the publication of any notice delivered to the Agent by the Issuer which is
to be given to the Noteholders and supply a copy thereof to each other Paying
Agent, Euroclear, Cedelbank and, so long as the Notes are listed thereon, the
London Stock Exchange.
Section 9. Liability. None of the Agent, the other Paying Agents, if
any, or any of their respective officers or employees shall be liable for any
act or omission hereunder except in the case of its gross negligence or willful
misconduct. The duties and obligations of each of the Agent, the other Paying
Agents, if any, and each of their respective officers and employees shall be
determined by the express provisions of this Agreement and each shall not be
liable except for the performance of such duties and obligations as are
specifically set forth herein in respect of such person and no implied covenants
shall be read into this Agreement against any of them. Each of the Agent and the
Paying Agents may consult with counsel and shall be fully protected in any
action reasonably taken in good faith in accordance with the advice of counsel.
None of the Agent, the other Paying Agents, if any, nor any of their respective
officers or employees shall be required to ascertain whether any issuance or
sale of Notes (or any amendment or termination of this Agreement) have been duly
authorized or are in compliance with any other agreement to which the Issuer is
a party (whether or not the Paying Agents are also a party to such other
agreement).
Section 10. Protection of Agent.
(a) No provision of this Agreement shall require the Agent or any
Paying Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties, or in the exercise of its
rights and powers, hereunder.
(b) In acting hereunder and in connection with the Notes each of the
Agent and each Paying Agent shall act solely as an agent of the Issuer and will
not thereby assume any obligations towards, or relationship of agency or trust
for, any of the Noteholders.
(c) Each of the Agent and each Paying Agent may consult with legal
or other professional advisers satisfactory to it, and the opinion of such
advisers shall be full and
9
<PAGE>
complete protection in respect of any action taken, omitted or suffered
hereunder in good faith and in accordance with the opinion of such advisers.
(d) Each of the Agent and each Paying Agent shall be protected and
shall incur no liability for or in respect of any action taken, omitted or
suffered in reliance upon any instruction, request or order from the Issuer, or
any Note, form of transfer, resolution, direction, consent, certificate,
affidavit, statement, telex, facsimile transmission or other paper or document
believed by it in good faith to be genuine and to have been delivered, signed or
sent by the proper party or parties.
(e) Each of the Agent and each Paying Agent shall not be under any
obligation to take any action hereunder which it expects will result in any
expense or liability of the Agent or the Paying Agent, as the case may be, the
payment of which within a reasonable time is not, in its good faith opinion,
assured to it.
(f) Each of the Agent and each Paying Agent shall not be responsible
for any act done or omitted in connection herewith or therewith, except in the
case of its gross negligence or willful misconduct.
(g) Each of the Agent and each Paying Agent may perform the services
required to be rendered by it hereunder either directly or through
attorneys-in-fact or agents not regularly in its employ and the Agent and each
Paying Agent, as the case may be, shall not be responsible or liable for any
misconduct or negligence on the part of any such attorney or agent appointed by
it with due care hereunder.
(h) Each of the Agent and each Paying Agent shall not be liable for
any action taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred upon it by
this Agreement; and
(i) Each of the Agent and each Paying Agent shall not have any duty
or responsibility in the event of any default by the Issuer in the payment or
performance of any of the Issuer's obligations under this Agreement, the Notes
or any other agreement pertaining to any or all of the foregoing (including, but
not limited to, any duty or responsibility to accelerate all or any of the Notes
or to initiate or attempt to initiate any proceedings at law or otherwise or to
make any demand for the payment thereof upon the Issuer.
10
<PAGE>
Section 11. Indemnification by Issuer. The Issuer and the
Guarantors, jointly and severally, agree to indemnify and hold harmless, each of
the Agent, each Paying Agent and each of its respective directors, officers,
employees and agents from and against any and all liabilities (including
liability for penalties), losses, claims, damages, actions, suits, judgments,
demands, costs and expenses (including legal fees and expenses) relating to or
arising out of or in connection with its performance under this Agreement,
except to the extent caused by the gross negligence or willful misconduct of
such Agent or Paying Agent, as the case may be, or its directors, officers or
employees. The foregoing indemnity includes, but is not limited to, any action
taken or omitted in good faith within the scope of this Agreement upon
telephone, telecopier or other electronically transmitted instructions, if
authorized herein, received from or believed by the Agent or the Paying Agent,
as the case may be, in good faith to have been given by, an Authorized
Representative. This indemnity shall survive the resignation or removal of the
Agent or any Paying Agent and the satisfaction or termination of this Agreement
and the payment of the Notes and Coupons.
Section 12. Compensation of the Paying Agents. The Issuer and the
Guarantors, jointly and severally, agree to pay the compensation of the Agent
and each Paying Agent at such rates as shall be agreed upon in writing from time
to time between such Agent or Paying Agent, as the case may be, and the Issuer,
and to reimburse the Agent and each Paying Agent for its out-of-pocket expenses
(including costs of preparation of the Notes and legal fees and expenses),
disbursements and advances incurred or made in accordance with any provisions of
this Agreement. The obligations of the Issuer and the Guarantors to the Agent
and each Paying Agent pursuant to this Section shall survive the resignation or
removal of the Agent or any Paying Agent and the satisfaction or termination of
this Agreement and the payment of the Notes and Coupons.
Section 13. Meetings of the Noteholders. Attached hereto as Exhibit
G are the provisions for meetings of the Noteholders (each, a "Meeting"). A
Paying Agent shall, at the request of any Noteholder, issue Voting Certificates
and Block Voting Instructions in a form and manner which comply with the
provisions of Exhibit G (Provisions for Meetings of the Noteholders) (except
that it shall not be required to issue the same less than 48 hours before the
time fixed for any Meeting provided for therein). Such Paying Agent shall keep a
full record of Voting Certificates and Block Voting Instructions issued by it
and shall give to the Issuer, not
11
<PAGE>
less than 24 hours before the time appointed for any Meeting, full particulars
of all Voting Certificates and Block Voting Instructions issued by it in respect
of such Meeting.
Section 14. Notices. (a) All communications by or on behalf of the
Issuer or the Guarantors relating to the issuance, transfer, exchange or payment
of Notes or interest thereon shall be in writing and directed to the Agent at
its address set forth in subsection (b)(ii) hereof (or such other address as the
Agent shall specify in writing to the Issuer from time to time).
(b) Notices and other communications hereunder shall (except to the
extent otherwise expressly provided) be in writing and shall be addressed as
follows, or to such other addresses as the parties hereto shall specify from
time to time:
(i) if to the Issuer or the Guarantors:
c/o Polo Ralph Lauren Corporation
650 Madison Avenue
New York, NY 10022
Attention: General Counsel
Fax no.: (212) 318-7183
(ii) if to the Agent:
The Bank of New York
One Canada Square
London E14 5AL
Attention: Trevor Blewer
Telex no.: 011 44-171-883-265/6
Fax no.: 011 44-171-893-6399
Section 15. Resignation or Removal of Agent or a Paying Agent. The
Agent may at any time resign as such agent or a Paying Agent may at any time
resign as such paying agent by giving written notice to the Issuer of such
intention on its part, specifying the date on which its desired resignation
shall become effective; provided, however, that such date shall be not less than
30 days after the giving of such notice by the Agent or a Paying Agent, as the
case may be, to the Issuer. The Agent or a Paying Agent may be removed at any
time by the filing with it of an instrument in writing signed by a duly
Authorized Representative of the Issuer and specifying such removal and the date
upon which it is intended to become effective. Such registration or removal
shall take effect on the date of the appointment by the Issuer of a successor
agent or paying agent and the acceptance of such appointment by such successor
Agent or Paying Agent. In the event of resignation by the Agent or a Paying
Agent, if a
12
<PAGE>
successor agent or paying agent has not been appointed by the Issuer on or
before the effective date of such resignation, the Agent or such Paying Agent
may, at the expense of the Issuer, petition any court of competent jurisdiction
for appointment of a successor Agent or Paying Agent. The Issuer may appoint a
successor agent and additional or successor paying agents and shall forthwith
give notice of any such appointment to the Agent, if continuing, and each
continuing Paying Agent and the Noteholders, whereupon the Issuer, the
continuing Agent and each continuing Paying Agent and the additional or
successor agent or paying agent shall acquire and become subject to the same
rights and obligations between themselves as if they had entered into an
agreement in the form mutatis mutandis of this Agreement.
Section 16. Benefit of Agreement; Additional Guarantors. This
Agreement is solely for the benefit of the parties hereto, their successors,
assigns and any additional or successor Agent or Paying Agent appointed in
accordance with Section 15 above and the holders from time to time of the Notes
and no other person shall acquire or have any right under or by virtue hereof.
The Issuer will cause each of its subsidiaries that is required from time to
time following the date hereof to be a guarantor in respect of the Credit
Facilities (as defined below) to (i) execute and deliver an instrument in form
and substance satisfactory to the Agent agreeing to become a party to this
Agreement as an additional Guarantor, (ii) execute and deliver a Guarantee
pursuant to which such Guarantor will guarantee the Issuer's obligations under
the Notes on the terms and conditions set forth herein, in the Notes and in such
Guarantee, and (iii) deliver an opinion of counsel to the effect that each of
this Agreement and such Guarantee has been duly authorized and executed by such
subsidiary and constitutes the legal, valid and binding obligation of such
subsidiary. The "Credit Facilities" means the 1997 Credit Facility and the 1999
Credit Facility, each by and among the Issuer, The Chase Manhattan Bank, as
agent, and other financial institutions, each as in effect of the date hereof,
and as each such agreement may be amended, renewed, extended, substituted,
refinanced, replaced, supplemented or otherwise modified from time to time. The
"1997 Credit Facility" means the Company's $225.0 million revolving line of
credit, and the "1999 Credit Facility" means the Company's $100.0 million senior
credit facility consisting of a $20.0 million revolving line of credit and an
$80.0 million term loan.
Section 17. Notes Held by a Paying Agent. Each of the Agent and each
Paying Agent, in its individual or other capacity, may become the owner or
pledgee of the Notes with the same rights it would have if it were not acting as
Agent or Paying Agent hereunder and may
13
<PAGE>
engage or be interested in any financial or other transaction with the Issuer
and may act on, or as a depositary, trustee or agent for, any committee or body
of holders of Notes or other obligations of the Issuer as freely as if it were
not appointed hereunder.
Section 18. Consolidation, Merger or Transfer. The Issuer may (or
may cause a Guarantor to), without the consent of the Noteholders, merge or
consolidate with any other corporation or dispose of all or substantially all of
its assets to any other corporation, provided that the successor corporation
assumes all obligations of the Issuer under the Notes and this Agreement (or,
with respect to a Guarantor, all of the obligations under such Guarantee) and
certain other conditions set forth in the Terms and Conditions are met.
Section 19. Counterparts. This Agreement may be executed by the
parties hereto in any number of counterparts, and by each of the parties hereto
in separate counterparts, each such counterpart, when so executed and delivered,
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 20. Governing Law. This Agreement is to be delivered and
performed in, and shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of New York.
Section 21. Submission to NY Jurisdiction. Each of the parties to
this Agreement hereby irrevocably submits to the non-exclusive jurisdiction of
any New York State or United States Federal court sitting in New York City, the
Borough of Manhattan over any suit, action or proceeding arising out of or
relating to this Agreement or the Notes. Each of the parties hereto irrevocably
waives, to the fullest extent permitted by law, any objection which it may have
to the laying of the venue of any such suit, action or proceeding brought in
such a court and any claim that any such suit, action or proceeding brought in
such a court has been brought in an inconvenient forum. As long as any of the
Notes or any of the Coupons appertaining thereto remain outstanding, the Issuer
and the Guarantors will at all times have either a registered office or an
authorized agent in New York City, at which or upon whom process may be served
in any suit, action or proceeding arising out of or relating to this Agreement
or any Note or any of the Coupons appertaining thereto. Service of process at
such office or upon such agent and written notice of such service mailed or
delivered to the Issuer and the Guarantors shall to the extent permitted by law
be deemed in every respect effective service of process upon the Issuer and the
Guarantors in any such suit, action or proceeding.
14
<PAGE>
Section 22. Modification of Fiscal Agency Agreement and Notes. This
Agreement, the Terms and Conditions or the Guarantees may be amended by the
Issuer and the Agent, without the consent of the holder of any Note or Coupon,
for the purposes of curing any ambiguity, or of curing, correcting or
supplementing any defective provisions contained herein or therein or in any
other manner which the Issuer may deem necessary or desirable and which will not
be inconsistent with the Notes or any Coupons and which will not adversely
affect the interests of the holders of Notes or any Coupons.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by their officers thereunto duly authorized, all as
of the day and year first above written.
Issuer:
Polo Ralph Lauren Corporation
By: ___________________________________________
Guarantors:
The Ralph Lauren Womenswear Company, L.P.
By: Polo Ralph Lauren Womenswear, Inc., its
General Partner
By: _____________________________________
Name:
Title:
Polo Retail, LLC
By: Fashions Outlet of America, Inc., its sole
Member
By: _____________________________________
Name:
Title:
Fashions Outlet of America, Inc.
By: ___________________________________________
Name:
Title:
16
<PAGE>
The Polo/Lauren Company, L.P.
By: PRL International, Inc., its
General Partner
By: _____________________________________
Name:
Title:
PRL International, Inc.
By: ___________________________________________
Name:
Title:
RL Fragrances, LLC
By: PRL International, Inc., its sole
Member
By: _____________________________________
Name:
Title:
PRL USA Holdings, Inc.
By: ___________________________________________
Name:
Title:
PRL Fashions, Inc.
By: ___________________________________________
Name:
Title:
PRL USA, Inc.
By: ___________________________________________
Name:
Title:
17
<PAGE>
Ralph Lauren Home Collection, Inc.
By: ___________________________________________
Name:
Title:
PRL Financial Corporation
By: ___________________________________________
Name:
Title:
Agent:
The Bank of New York,
as Fiscal Agent
By: ___________________________________________
Name:
Title:
18
<PAGE>
Schedule I
Guarantors
The Ralph Lauren Womenswear Company, L.P., a Delaware limited partnership
Polo Retail, LLC, a Delaware limited liability company
Fashions Outlet of America, Inc., a Delaware corporation
The Polo/Lauren Company, L.P., a New York limited partnership
PRL International, Inc., a Delaware corporation
RL Fragrances, LLC, a Delaware limited liability company
PRL USA Holdings, Inc., a Delaware corporation
PRL Fashions, Inc., a Delaware corporation
PRL USA, Inc., a Delaware corporation
Ralph Lauren Home Collection, Inc., a Delaware corporation
PRL Financial Corporation, a Delaware corporation
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 345,330
<SECURITIES> 0
<RECEIVABLES> 143,249
<ALLOWANCES> 14,341
<INVENTORY> 343,210
<CURRENT-ASSETS> 898,798
<PP&E> 547,736
<DEPRECIATION> 212,835
<TOTAL-ASSETS> 1,419,651
<CURRENT-LIABILITIES> 235,935
<BONDS> 276,705
0
0
<COMMON> 1,004
<OTHER-SE> 752,809
<TOTAL-LIABILITY-AND-EQUITY> 1,419,651
<SALES> 1,307,996
<TOTAL-REVENUES> 1,488,605
<CGS> 762,635
<TOTAL-COSTS> 762,635
<OTHER-EXPENSES> 521,105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,597
<INCOME-PRETAX> 195,268
<INCOME-TAX> 79,574
<INCOME-CONTINUING> 115,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 3,967
<NET-INCOME> 111,727
<EPS-BASIC> 1.13
<EPS-DILUTED> 1.13
</TABLE>
