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| 8-K - FORM 8-K - WARNACO GROUP INC /DE/ | d431395d8k.htm |
| EX-99.3 - TRANSCRIPT OF VIDEO PRESENTATION - WARNACO GROUP INC /DE/ | d431395dex993.htm |
| EX-99.1 - JOINT PRESS RELEASE - WARNACO GROUP INC /DE/ | d431395dex991.htm |
 Growing Powerful Global Lifestyle Brands October 31, 2012
PVH Acquisition of Warnaco
Filed by The Warnaco Group, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934, as amended
Subject Company: The Warnaco Group, Inc.
(Commission File No. 001-10857)
EXHIBIT 99.2 |
 2
Safe Harbor
We (PVH Corp.) obtained or created the market and competitive position data used
throughout this presentation from research, surveys or studies conducted by third
parties, information provided by customers, and industry or general publications.
Industry publications and surveys generally state that they have obtained information from
sources believed to be reliable but do not guarantee the accuracy and completeness of
such information. While we believe that each of these studies and publications
and the other information we receive or review is reliable, we have not independently
verified such data and we do not make any representation as to the accuracy of
such information.
This presentation contains forward-looking statements and information about our
current and future prospects and our operations and financial results, which are based on
currently available information. The forward looking statements include assumptions
about our operations, such as cost controls and market conditions, and our
proposed
acquisition
of
The
Warnaco
Group,
Inc.
(“Warnaco”)
through
a
merger
(including
its
benefits,
results,
effects
and
timing)
that
may
not
be
realized.
Risks and uncertainties related to the proposed merger include, among others: the
risk that Warnaco’s stockholders do not approve the merger; the risk that regulatory
approvals
required
for
the
merger
are
not
obtained
or
are
obtained
subject
to
conditions
that
are
not
anticipated;
the
risk
that
the
other
conditions
to
the
closing
of
the
merger
are
not
satisfied;
potential
adverse
reactions
or
changes
to
business
relationships
resulting
from
the
announcement
or
completion
of
the
merger;
uncertainties
as to
the timing of the merger; competitive responses to the proposed merger; costs and
difficulties related to the integration of Warnaco’s businesses and operations with
PVH’s
business
and
operations;
the
inability
to
obtain,
or
delays
in
obtaining,
cost
savings
and
synergies
from
the
merger;
unexpected
costs,
charges
or
expenses resulting
from the merger;
litigation relating to the merger; the inability
to retain key personnel; and any changes in general economic and/or industry
specific conditions.
Additional
factors
that
could
cause
future
results
or
events
to
differ
from
those
we
expect
are
those
risks
discussed
under
Item
1A,
”Risk
Factors,”
in
PVH’s Annual
Report on Form 10-K for the fiscal year ended January 29, 2012, Warnaco’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2011, Warnaco’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2012, and other reports filed
by PVH and Warnaco with the Securities and Exchange Commission (SEC).
Please
read
our
“Risk
Factors”
and
other
cautionary
statements
contained
in
these
filings.
We
undertake
no
obligation
to
update
or
revise
any
forward-looking statements,
whether as a result of new information, the occurrence of certain events or
otherwise. As a result of these risks and others, actual results could vary significantly from those
anticipated in this presentation, and our financial condition and results of
operations could be materially adversely affected. This presentation also
includes non-GAAP financial measures, as defined under SEC rules. Reconciliations of these measures are included at the end of this presentation, as
well as in certain SEC filings as noted in this presentation,
which are available on our website at
www.pvh.com/investor_relations_press_releases.aspx and in our Current Reports
on Form 8-K furnished to the SEC in connection with our press releases, which are available on our website at www.pvh.com and the SEC’s website at www.sec.gov. |
 3
Additional Information
In connection with the proposed merger, we will file with the SEC a Registration
Statement on Form S-4 that will include a Proxy Statement of Warnaco and a
Prospectus of PVH, as well as other relevant documents concerning the proposed transaction. WARNACO STOCKHOLDERS ARE
URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING
THE MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION.
A free copy of the Proxy Statement/Prospectus, as well as other filings containing
information about PVH and Warnaco, may be obtained at the SEC’s Internet
site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from PVH at www.pvh.com under the
heading “Investors”
or from Warnaco by accessing Warnaco’s website at www.warnaco.com under the
heading “Investor Relations.” PVH and Warnaco and certain of their
directors and executive officers may be deemed to be participants in the solicitation of proxies from the
stockholders of Warnaco in connection with the merger. Information about the
directors and executive officers of PVH and their ownership of PVH common
stock is set forth in the proxy statement for PVH’s 2012 annual meeting of stockholders, as filed with the SEC on Schedule 14A on
May 10, 2012. Information about the directors and executive officers of Warnaco
and their ownership of Warnaco common stock is set forth in the proxy
statement for Warnaco’s 2012 annual meeting of stockholders, as filed with the SEC on Schedule 14A on April 11, 2012. Additional
information regarding the interests of those participants and other persons who may
be deemed participants in the transaction may be obtained
by
reading
the
Proxy
Statement/Prospectus
regarding
the
merger
when
it
becomes
available.
This
communication
shall
not
constitute
an offer to sell or the solicitation of an offer to sell or the solicitation of an
offer to buy any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of
1933, as amended. |
 4
Compelling Strategic Rationale
•
Creates an over $8 BN global branded lifestyle apparel company with significant
growth prospects,
driven
by
two
powerful
designer
brands–Calvin
Klein
and
Tommy
Hilfiger
•
Reunites the “House of Calvin Klein”
to ensure single brand vision
•
PVH will have strong operations in all major consumer markets worldwide
•
Warnaco’s operations in high growth markets of Asia and Latin America complement
PVH’s strong operating platforms in North America and Europe
•
Enhances revenue and EPS growth, and improves operating margins
•
Approximately $100 MM in annual run rate synergies and accretive
to earnings in year one
(1)
•
Proven track record of successful acquisitions and achieving financial targets
(1) Excluding one-time costs in year one of $100 MM.
|
 5
Transaction Overview
(1) Based off of non-GAAP EBITDA.
(2) Assumes $100 MM of annual run rate synergies less the earnings associated with the
potential loss of a license and excludes one-time costs in year one of $100 MM.
(3) Assumes year one synergies less the earnings associated with the potential loss of
a license and excludes one-time costs in year one of $100 MM. Terms
•
Warnaco
stockholders
will
receive
$51.75
per
share
in
cash
and
0.1822
PVH
common
stock
(fixed
ratio)
for
each
share
of
Warnaco
common
stock
•
Based
on
PVH’s
closing
stock
price
on
October
26
,
the
aggregate
value
of
the
consideration
is
$68.43
per
share
(value
at
signing)
•
Total
enterprise
value
of
approximately
$2.9
BN,
representing
9.0x
2012E
EBITDA
and
7.6x
2012E
EBITDA,
including
synergies
(1)(2)
Financing
•
$4.325 BN of committed financing
•
Anticipated financing consists of bank financing and a senior notes offering
Accretion
•
EPS
accretion
in
year
one
(FY
2013)
estimated
to
be
$0.35
,
excluding
one-time
costs
•
Approximately
$100
MM
of
annual
run
rate
synergies
achieved
over
three
years
•
One-time
integration
/
transaction
related
costs
of
approximately
$175
MM
over
three
years
Mgmt. / Board
•
PVH
existing
management
team
will
lead
company,
with
key
Warnaco
executives
expected
to
join
•
Helen
McCluskey
expected
to
join
PVH’s
Board
Target Closing
•
Early
2013,
subject
to
customary
closing
conditions,
including
Warnaco
stockholder
vote
and
regulatory
approvals
(1)
(3)
th |
 6
Transaction Provides Significant Value to Warnaco Stockholders
Transaction delivers significant immediate value and upside potential to Warnaco
stockholders
Upon
closing,
Warnaco
stockholders
will
own
approximately
10%
of
the
outstanding
common
stock
of
PVH
Powerful
opportunity
to
accelerate
Warnaco’s
strategic
growth
initiatives
Calvin
Klein
brand
unification
to
enhance
growth
prospects
globally
Leverage
proven
successes
and
strong
momentum
-
Emerging
markets
development
-
Direct-to-consumer
expansion
Combined
brand
portfolio
will
benefit
from
a
truly
global
infrastructure
and
scale
Unlocks
additional
potential
of
our
brands
and
business
•
•
•
•
•
• |
 7
With over $8 BN in pro forma revenues and over $1 BN in pro forma EBIT PVH will be one
of the largest and most profitable global apparel companies in the world
Source: FactSet except for PVH, WRC and PF PVH.
Note: PF PVH revenue assumes the elimination of the PVH royalty revenue and wholesale
revenues from PVH, as well as revenue associated with the potential loss of a license. PF PVH EBIT assumes $100 MM of annual run rate
synergies less the earnings associated with the potential loss of a license.
(1) Refer to Appendix for GAAP to non-GAAP reconciliation.
Creates an Over $8 BN Global Branded Lifestyle Apparel Company
|
 8
Strong Operations in Every Major Consumer Market Worldwide
•
Strong operating platforms in
every major consumer market
around the world
•
Regional headquarters in key
geographies
-
US and Canada
-
Europe
-
Asia
-
Latin America
•
Presence in over 100 countries
-
Direct operations in over
40 countries |
 9
(1)
Excludes unallocated corporate expenses.
Note: Pro forma results exclude performance attributable to potential loss of a
license. Transaction increases PVH’s presence in emerging markets,
particularly Asia and Latin America Complementary Regional Platforms and
Operational Expertise |
 10
Complementary Regional Platforms and Operational Expertise
ASIA
2012E CK Asia Revenue: >$525 MM
2009A-2012E Revenue CAGR: 19%
Key Growth Markets: China, India
LATIN AMERICA
2012E CK Latin America Revenue: >$200 MM
2009A-2012E Revenue CAGR: 30%
Key Growth Markets: Brazil, Mexico
Warnaco provides PVH significant scale and local operating platforms in high-growth
emerging markets where PVH is currently underpenetrated
Potential for PVH to leverage its supply chain, operations, processes and systems
expertise to drive further growth and margin improvement in these regions
PVH will leverage its expertise and infrastructure in North America and Europe to
restore growth and improve operating margins of the Calvin Klein Jeans and
Underwear businesses in these regions –
Opportunity
to
directly
operate
and
further
develop
Tommy
Hilfiger
in
these
regions
over
time
–
Enhance
product
design,
marketing
and
brand
presentation |
 11
•
Calvin Klein is one of the most powerful global mega
brands with $7.6 BN in 2011 global retail sales
–
Calvin
Klein
named
one
of
TIME
magazine’s
“Top 100 Icons in Fashion, Style and Design”
–
Significant brand awareness in every major
market around the world
•
51% of global retail sales generated
outside of North America
–
Over
$300 MM of global marketing spend
across Calvin Klein
brands continues to support
global growth
–
Product innovation, category extensions and a
cohesive global brand marketing message
continue to drive the brand
Reunites the House of Calvin Klein to Ensure Single Brand Vision
|
 12
Reunites the House of Calvin Klein to Ensure Single Brand Vision –
Global Retail Sales, 2003-2011
Transaction reinforces PVH
strategy to drive Calvin Klein
brand reach globally through new
customers, regions and channels
•
Since PVH acquired Calvin
Klein
in 2003, global retail
sales have grown 13%
compounded annually
•
Global retail sales expected
to grow 8%-10% annually at
retail over the next 5 years |
 13
Reunites the House of Calvin Klein to Ensure Single Brand Vision
•
Complete
control
of
brand
image
and
commercial
decisions
for
the
two
largest
apparel
categories
of
Calvin
Klein
–
jeans
and
underwear
–
for
the
first
time
–
Global collaboration and coordination of product design, merchandising,
supply chain and retail distribution
•
Better product merchandising and execution alignment with global
brand positioning and marketing
–
Reposition full price / off-price and club channels mix over next two years
–
Optimize lifestyle product assortment across categories, channels and regions
–
Eliminates complexities, allowing for better communication and direction
•
Single brand vision –
strengthens the brand globally
–
Improve brand image, positioning and execution across markets
–
Consistency across sportswear, jeanswear and accessories collections and
marketing worldwide
•
Remaining royalty stream of over $170 MM (pro forma) will be strengthened by
the broader Calvin Klein brand initiatives |
 14
PVH Positioned To Drive Long Term Revenue and EPS Growth
•
Fuel continued growth in
emerging markets
•
Focus on enhanced product
offering and execution
•
Continued direct-to-consumer
expansion
•
Increased brand support
•
Improved global coordination,
processes, systems and supply
chain
•
Strengthened momentum and
profitability in Europe and North
America
•
Leverage consistent profitability
and free cash flow from
Heritage Brands businesses
PVH Pro Forma Enhanced
Growth and Profitability
PVH Pro Forma Enhanced
Growth and Profitability
Drive Growth in
Warnaco’s Business
Drive Growth in
Warnaco’s Business
Synergies
Synergies
•
Expected pro forma revenue
growth of 6%-8% annually
•
Estimated accretion in year one
(anticipated
FY
2013)
of
$0.35
per share, excl. integration /
transaction related costs
–
Excludes earnings associated
with potential loss of license
•
Pro forma EPS growth in excess
of 15% annually
•
Continued strong cash flow
conversion
•
Ability to quickly de-lever
•
~$100 MM in annual run-rate
synergies
•
One-time integration /
transaction related costs of
approximately $175 MM to
achieve the synergies over 3
years
•
Primarily driven by domestic
business reduction of corporate
overhead / back office
•
Synergies realized over 3 years
(1) Reflects year one synergies, vs. $100 MM of annual run-rate synergies and
excludes one-time costs in year one of $100 MM. (1)
|
 15
PVH in 5 Years –
Global Retail Sales |
 16
History of Successful Acquisitions and Achieving Financial Targets
PVH has a proven track record of acquisitions
-
Calvin Klein (2003), Tommy Hilfiger (2010)
PVH will have repaid ~$1.0 BN of debt related to its Tommy Hilfiger acquisition by the
end of 2012E Tommy Hilfiger Acquisition
Tommy Hilfiger Acquisition
PVH Pro Forma For
Warnaco Transaction
PVH Pro Forma For
Warnaco Transaction
LTM EBITDA: ~$738 MM
(1)
Total Debt : $2.6 BN
Pro Forma Leverage: 3.6x
EBITDA: ~$870 MM
(1)
Total Debt: $1.6 BN
Leverage: 1.9x
Pro Forma PVH @
Closing –
May 2010
PVH Standalone
2012E
2012E EBITDA: ~$1.3 BN
(1)(2)
Total Debt: $4.3 BN
Pro Forma Leverage: 3.4x
(2)
(1)
Refer to Appendix for GAAP to non-GAAP reconciliation.
(2)
Including run-rate synergies less potential loss of license for pro forma
PVH. (3)
Excludes certain items. Reflects 2009 non-GAAP EPS of $2.83 (reconciled on
Form 8-K dated March 28, 2011) plus $0.30 of annualized accretion as estimated at the time of the Tommy Hilfiger acquisition.
(4)
Reflects the high end of the 2012E guidance. Excludes certain items. Reconciled
on Form 8-K dated 10/2/12. (5)
Reflects year one synergies vs. run-rate synergies of $100 MM and excludes
one-time costs in year one of $100 MM. EBITDA Growth:
+18%
De-Leveraging:
1.7x
Pro Forma EPS: $3.13
(3)
EPS: $6.37
(4)
Year 1 Accretion: $0.35 per
share, excl. one-time costs
(5)
EPS Growth:
+100% |
      17
Future Opportunities Outside Plan
Significant Revenue and Profit Upside Following Strategic Initiatives To Elevate the
Calvin Klein Brand
Significant Revenue and Profit Upside Following Strategic Initiatives To Elevate the
Calvin Klein Brand
Re-Establish Calvin Klein Jeans Leadership in North America and Europe
Re-Establish Calvin Klein Jeans Leadership in North America and Europe
Directly develop Tommy Hilfiger in Markets Where Warnaco Has an Established
Operating Platform –
Asia, Latin America
Directly develop Tommy Hilfiger in Markets Where Warnaco Has an Established
Operating Platform –
Asia, Latin America
Expand the Calvin Klein Category Breadth in Jeans, Sportswear and Accessories
Expand the Calvin Klein Category Breadth in Jeans, Sportswear and Accessories
Develop Tommy Hilfiger and Calvin Klein in New Geographies, Underpenetrated
Markets and Categories
Develop Tommy Hilfiger and Calvin Klein in New Geographies, Underpenetrated
Markets and Categories |
 18
Appendix |
 19
Appendix: GAAP to Non-GAAP EBITDA Reconciliation
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(Amount in dollars and in millions)
Tommy Hilfiger
Transaction
Warnaco Transaction
PVH Standalone
Warnaco Standalone
Combined
2009 PF
(1)
2012E
2012E
2012E PF
(2)
GAAP earnings before interest and taxes (EBIT)
450
$
715
$
198
$
794
$
Pre-tax non-recurring and
one-time items (3)
65
15
60
175
EBIT excluding non-recurring and one-time items and run-rate synergies
515
$
730
$
258
$
969
$
Run-rate synergies
40
-
-
100
EBIT excluding non-recurring and one-time items
555
730
258
$
1,069
Depreciation and amortization
183
140
200
EBITDA as presented
738
$
870
$
1,269
$
(2)
Combined pro forma full year estimate based on management estimates assuming the transaction
was completed on the first day of PVH’s 2012 fiscal year. (3)
Adjustments represent the elimination of restructuring and other items in 2009 and
2012. Adjustments for combined 2012E PF also include one-time integration/
transaction costs.
(1)
Combined pro forma full year results assuming the transaction was completed on the first day
of PVH’s 2009 fiscal year. |
 20
Growing Powerful Global Lifestyle Brands
|