DKI GUIDANCE GIVEN IN RECENT SEC FILING
Byline: Vicki M. Young
NEW YORK — Donna Karan International in a filing on Friday with the Securities and Exchange Commission provided guidance estimates of a 53.6 percent jump in operating income and a 3.7 percent increase in total revenue for the current calendar year.
The filing was made in connection with the company’s planned acquisition by LVMH Moet Hennessy Louis Vuitton for $243 million. Including the already-acquired Gabrielle Studio, the privately held licensor of the Donna Karan trademarks, LVMH’s total payout to own the Donna Karan operation was $643 million.
According to the filing, the company is projecting operating income of $42.4 million, or a 53.6 percent increase from last year’s estimated $27.6 million. Excluding an estimated $26.8 million royalty payment to Gabrielle Studio, operating income would have been up 22.7 percent to $69.2 million from last year’s estimated $53.5 million. Last year’s royalty payment to Gabrielle Studio is estimated at $25.9 million.
As reported, LVMH on Jan. 17 closed on its $400 million acquisition of Gabrielle Studio from Donna Karan, the designer and her late husband, Stephan Weiss. Weiss passed away in June. The original price of Gabrielle was $450 million, however, as an incentive to get the DKI deal done quickly, Karan and Weiss agreed to reduce the price of Gabrielle Studio by $50 million if the DKI deal could be done by June. The $50 million sum more than offsets the extra $2.25 a share that LVMH ponied up to the public shareholders of DKI.
In April, DKI signed a definitive merger agreement with LVMH to acquire all of the outstanding common stock of DKI for $10.75 per share in cash, or approximately $243 million. The per share offer represented a premium of 26 percent over the $8.50 price initially proposed by LVMH, and a 120 percent premium over DKI’s closing stock price on Dec. 15, 2000, the day before LVMH submitted its original merger proposal.
Total revenue for 2001 was projected to increase 3.7 percent to $706.4 million from the estimated $681 million tallied last year. Included in the total revenue projection are estimates of $516.2 million in wholesale sales, $138 million in retail sales and $52.2 million in licensing income. Estimates for last year include $506.1 million in wholesale sales, $131.4 million in retail sales and $43.5 million in licensing income. Back in 1997, the earliest figures posted in the filing, wholesale sales were $539.9 million, retail sales $70.5 million and licensing income just $9.6 million.
For the year ended Dec. 31, 2000, U.S. revenues accounted for 66 percent of the company’s total revenues. Also listed was Japan at just 3 percent and revenue from other regions of the world at 31 percent.
As of Aug. 11, 2000, the designer and her late husband held the most shares of DKI stock, 5.2 million shares, or 23.8 percent. Other individual owners included: Takihyo at 3.2 million shares, or 14.4 percent; Saudi Prince Al-Waleed at 1.5 million shares, or 6.8 percent; Tamio Taki at 1.1 million, or 4.8 percent; Frank Mori at 875,600 shares, or 4 percent, and now ex-chief executive officer John Idol at 449,800 shares, or 2 percent. Other directors and officers collectively held 130,900 shares, or less than 1 percent of DKI’s total shares.
Prince Al Waleed, whose $10 million gift to help the families of the victims of the Sept. 11 attacks on the World Trade Center was turned down by New York City Mayor Rudolph Giuliani, has a reputation as a value-oriented investor. He bought his 6.8 percent stake in DKI in September 1997, worth about $24.2 million. At the acquisition price, his shares are worth $16.1 million. Among his other investments are a 5.7 percent stake in Saks Fifth Avenue and a 9 percent stake in Citicorp.
The largest institutional holder on Aug. 11, 2000 was Royce & Associates at 781,000 shares, or 3.5 percent. Dimensional Fund held 696,000 shares or 3.1 percent. Other sizeable institutional holders — Barclays Bank, Gelfand Maxus, College Retire Equities, Mellon Private Asset Management and Invesco — each held less than 1 percent.
Karan will continue as chief designer and retain her creative leadership in the company. LVMH plans to continue to operate DKI as an autonomous lifestyle company in the LVMH Fashion Group. The company’s largest licensees are Liz Claiborne for DKNY Jeans, Activewear and CITY DKNY, and Estee Lauder for cosmetics. The company also has licensees for outerwear, hosiery, intimate apparel, home accessories, eyewear and children’s apparel.
LVMH in May tapped Giuseppe (Pino) Brusone to take over as chief executive officer from John Idol, who said at the time that he would resign upon the completion of the proposed merger. Idol, who was with DKI for four years, left the company in July with a $12.2 million severance package, according to an SEC filing. He gets $6.3 million from DKI and $5.9 million from LVMH.
Idol has since assumed the ceo post at Kasper ASL, the Secaucus, N.J.-based women’s suit and sportswear maker and owner of the Anne Klein, Kasper and Albert Nipon brands.