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PVH Opens Calvin’s Books

Phillips-Van Heusen filed an amended SEC form Tuesday providing an in-depth look at the financial condition of its latest purchase, Calvin Klein Inc.

NEW YORK — Phillips-Van Heusen Corp. on Tuesday filed an amended Securities and Exchange Commission filing that provided an in-depth peek at the financial condition of its latest acquisition, Calvin Klein Inc.

The form was filed because of the impracticality of including the information when PVH filed its original Form 8-K, just two weeks after it completed its Feb. 12 purchase of CKI for $438 million.

As part of the purchase price, the filing said, designer Calvin Klein will receive contingent purchase price payments for 15 years based on a percentage of total worldwide net sales of products bearing any of the CK brands, and received a nine-year warrant to purchase 320,000 shares of PVH’s common stock at $28 per share.

In the calendar year 2002, CKI lost $1.1 million, compared with a $19.5 million loss in 2001. The company posted a $24.4 million profit in 2000. Total revenues were down last year by 3.8 percent to $172 million from $178.8 million. Included were royalty and design revenues that dipped slightly to $118.1 million from $118.4 million, while sales from retail and wholesale sources fell to $46 million from $52 million. Other revenues — which include deferred revenue and commissions earned by the company’s advertising division — also fell slightly to $8 million from $8.4 million. Total revenues in 2000 were $228.8 million, with CKI grabbing $154.4 million in royalty and design revenues, $64.8 million in sales and $9.5 million in other revenue.

On the sales front, wholesale sales last year dropped by 20 percent to $26.4 million from $33.6 million in 2001, while retail sales increased by 6.4 percent to $19.5 million from $18.4 million. In 2000, wholesale sales were $45.2 million and retail sales were $19.6 million.

Combining PVH and CKI yearend results for the period ended Feb. 2, on a pro forma basis, PVH would have posted income of $38 million, or 58 cents a diluted share, which included PVH’s income of $30.4 million, CKI’s $1.1 million loss and a pro forma adjustment of $8.7 million. Total revenues would have been $1.58 billion. The contribution from PVH was $1.4 billion, including $1.39 billion in sales and $10.8 million from royalty and related revenue.

The SEC filing said that net revenues at CKI are recognized from wholesale product sales upon customer acceptance and that reserves for estimated returns, markdown allowances, discounts and doubtful accounts are provided when sales are recorded. In addition, retail store revenues are recognized at the time of sale. Shipping and handling charges invoiced to customers are included within net sales, while shipping and handling costs incurred by CKI are included in selling, general and administrative expenses.

In related PVH news, Standard & Poor’s Ratings Services assigned a “BB” rating to PVH’s proposed $150 million senior unsecured notes maturing in 2013. Proceeds from the offering will be used to repay the company’s $125 million acquisition term loan relating to the CKI acquisition and for working capital purposes.

S&P said that PVH’s $325 million revolving credit facility and 7.75 percent senior debentures due in 2023, which are secured by the company’s assets, represent more than 20 percent of total assets.

The ratings agency said the CKI acquisition represents a unique opportunity for PVH and that credit measures will be restored within a year of the deal.

The agency pointed out that CKI, together with its network of licensing partners, generates more than $3 billion in annual retail sales worldwide and that the royalty stream is estimated to be $120 million.