NEW YORK — "Tommy's Troubles" might be a better name for his reality TV series.
As Tommy Hilfiger Corp. reported a 45.9 percent drop in its preliminary net income for fiscal 2005, it disclosed Wednesday that it is in discussions with state and local tax authorities in New York and state authorities in New Jersey to settle an income-tax issue for its subsidiary, Tommy Hilfiger Licensing Inc. THLI is a Delaware intangible holding company that collects royalties from third parties and affiliated companies that use the Hilfiger trademark.
This latest development is unrelated to the investigation by the U.S. Attorney's Office into Hilfiger's buying office commissions, which has resulted in 11 purported shareholder class-action lawsuits against the company as well as current and former officers and directors of the firm. Hilfiger said Wednesday it intends to "defend itself vigorously" against the shareholders' claims, which have since been consolidated.
With respect to the U.S. Attorney's Office investigation, the THLI matter and other tax issues, Hilfiger expects to record net provisions of $30 million to $40 million. The company said it can't predict the ultimate impact these matters or the securities class-action lawsuit may have on its business, financial condition, results of operation, cash flow or historical financial statements. In this regard, Hilfiger hasn't completed its required analysis as to whether any restatement or adjustments would be required under generally accepted accounting principles.
The company said it has delayed filing its fourth-quarter and full-year financial statements with the Securities and Exchange Commission due to the government's investigation. The reports are expected to be filed on or before Aug. 10.
Hilfiger said that fiscal 2005 preliminary pretax income dropped 45.9 percent on a revenue decrease of 4.9 percent. The company revised its fiscal 2006 earnings and sales outlooks, citing in part a decline in orders from U.S. department stores.
For the 12 months ended March 31, the firm said preliminary pretax income totaled $92 million, compared with $170 million the year prior. Results in the latest year included expenses totaling $36 million related to legal fees; exiting the young men's and H Hilfiger wholesale businesses; a restructuring of the company's wholesale business, and the closing of the company's Secaucus, N.J., facility.
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