Phillips-Van Heusen Corporation Reaches Agreement in Principle with Warnaco for Calvin...
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Phillips-Van Heusen Corporation Reaches Agreement in Principle with Warnaco for Calvin Klein, Inc. to Assume Operation of Calvin Klein Collection Business and Grant Additional Licensing Rights to Warnaco Warnaco to Make $38.5 Million Payment to PVH NEW YORK--(Business Wire)--Phillips-Van Heusen Corporation (NYSE: PVH), today announced that it has reached an agreement in principle with The Warnaco Group, Inc. pursuant to which Warnaco would transfer to PVH's Calvin Klein, Inc. subsidiary the shares of Confezioni Moda Italia S.r.l. (CMI). CMI is the licensee of the Calvin Klein Collection business. Under the agreement, CKI would also grant Warnaco certain new licenses and expand certain existing license rights. By acquiring CMI, CKI would regain complete control over the Calvin Klein Collection business. The transaction is targeted to close in mid-January 2008. "We are thrilled with the prospect of bringing our men's and women's Calvin Klein Collection business back in house and operate the brand directly. We are committed to the long-term objective of building the Calvin Klein Collection brand into one of the world's top global luxury businesses," said Tom Murry, President and Chief Operating Officer, Calvin Klein, Inc. Mr. Murry continued, "We are very fortunate to have creative directors Francisco Costa (women's Collection), Italo Zucchelli (men's Collection), and Ulrich Grimm (men's and women's Collection shoes and accessories), as well as a very highly regarded brand image and significant brand awareness around the world. Our strategy would be to leverage these assets strategically, region by region, through a combination of multi-brand and Calvin Klein Collection freestanding stores operated by strategic partners and supported by CKI's strong, on-going marketing and public relations initiatives." Commenting on this transaction, Emanuel Chirico, Chairman and Chief Executive Officer of PVH, said, "We believe that reuniting the Calvin Klein Collection business with the brand's creative directors is important for maintaining the halo that the Collection brand provides to the other Calvin Klein brand businesses." Warnaco is currently obligated to acquire the shares of CMI in January 2008 and to operate the Calvin Klein Collection business through 2013. PVH has agreed in principle that CKI will acquire the shares of CMI from Warnaco and grant Warnaco new and expanded rights. Warnaco would make a payment of $38.5 million to PVH. The payment would be amortized into income and used to offset projected losses for the Calvin Klein Collection business. The Collection business would be expected to have no material financial impact on PVH. The Company would acquire CMI free of all debt and would pay Warnaco an amount based on the net working capital of CMI. CKI would also expect to create additional executive roles to support the business, including the appointment of a brand president, once the transaction is finalized. Fabio Fusco, presently the Milan-based CEO of Calvin Klein Collection, would be expected to remain in that role and would report directly to Mr. Murry. CKI would seek the opening of additional freestanding Calvin Klein Collection stores over the next three years, which would be dependent upon securing appropriate locations and experienced retail partners. Currently, Calvin Klein Collection has stores located around the world including the Madison Avenue flagship store in New York City operated by CKI, as well as stores in Milan, Dubai, and Beijing operated by partners. The agreement in principle also provides for further expansion of CKI's longstanding relationship with Warnaco by providing for CKI and Warnaco to enter into several new licenses and extensions of existing licenses. The additional licensed rights would include the rights to operate Calvin Klein Jeans accessories retail stores in Europe, Asia and Latin America and ck Calvin Klein accessories retail stores in Europe and Latin America; e-commerce rights for Calvin Klein Jeans in the Americas, Europe and Asia and e-commerce rights in Europe, Asia and Latin America for Calvin Klein Jeans accessories; and a sublicense and distribution agreement for Calvin Klein Golf apparel and golf-related accessories through CKI's licensee, Windsong Golf LLC, in department stores, specialty stores and other channels in Asia. None of the agreements discussed in this press release is final. All of the agreements are subject to negotiation and the execution of definitive documentation, which in turn would be subject to closing conditions that would include that all the agreements need to become effective for any of the transactions to be completed. Calvin Klein, Inc. is one of the leading fashion design and marketing studios in the world. It designs and markets women's and men's designer collection apparel and a range of other products that are manufactured and marketed through an extensive network of licensing agreements and other arrangements worldwide. Brands/lifestyles include Calvin Klein Collection, ck Calvin Klein, Calvin Klein, Calvin Klein Jeans, and Calvin Klein Underwear. Product lines under the various Calvin Klein brands include apparel, accessories, shoes, sleepwear, hosiery, socks, swimwear, belts, eyewear, watches, jewelry, coats, suits and fragrances, as well as products for the home. Phillips-Van Heusen Corporation is one of the world's largest apparel companies. It owns and markets the Calvin Klein brand worldwide. It is the world's largest shirt and neckwear company and markets a variety of goods under its own brands, Van Heusen, Calvin Klein, IZOD, ARROW, Bass and G.H. Bass & Co., and its licensed brands, including Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, unlisted, A Kenneth Cole Production, BCBG Max Azria, BCBG Attitude, MICHAEL Michael Kors, Sean John, Chaps, Donald J. Trump Signature Collection, JOE Joseph Abboud, Tommy Hilfiger, Perry Ellis Portfolio, DKNY and, beginning in Fall 2008, Timberland. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements in this press release, including, without limitation, statements relating to the Company's future revenues and earnings, plans, strategies, objectives, expectations and intentions, as well as statements relating to the Company's proposed acquisition of the rights to operate the Calvin Klein Collection business and its expectations regarding the potential benefits of such a transaction, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated, including, without limitation, the following: (i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company, including, without limitation, with respect to reaching final agreement on terms to the proposed transactions discussed in this press release that are terms acceptable to the Company; (ii) the levels of sales of the Company's apparel, footwear and related products, both to its wholesale customers and in its retail stores, and the levels of sales of the Company's licensees at wholesale and retail, and the extent of discounts and promotional pricing in which the Company and its licensees are required to engage, all of which can be affected by weather conditions, changes in the economy, fuel prices, reductions in travel, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, repositionings of brands by the Company's licensors and other factors; (iii) the Company's plans and results of operations will be affected by the Company's ability to manage its growth and inventory, including the Company's ability to realize revenue growth from developing and growing its existing Calvin Klein business, and, if the transactions discussed in this press release are consummated, the Company's ability to realize any benefits from them and avoid the losses experienced by the recent licensees of the Calvin Klein Collection business; (iv) the Company's operations and results could be affected by quota restrictions and safeguard controls (which, among other things, could limit the Company's ability to produce products in cost-effective countries that have the labor and technical expertise needed), the availability and cost of raw materials (particularly petroleum-based synthetic fabrics, which are currently in high demand), the Company's ability to adjust timely to changes in trade regulations and the migration and development of manufacturers (which can affect where the Company's products can best be produced), and civil conflict, war or terrorist acts, the threat of any of the foregoing or political and labor instability in the United States or any of the countries where the Company's products are or are planned to be produced; (v) disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas; (vi) acquisitions and issues arising with acquisitions and proposed transactions, including without limitation, the ability to integrate an acquired entity, or new operations such as the Calvin Klein Collection business (if acquired), into the Company with no substantial adverse affect on the acquired entity's or the Company's existing operations, employee relationships, vendor relationships, customer relationships or financial performance; (vii) the failure of the Company's licensees to market successfully licensed products or to preserve the value of the Company's brands, or their misuse of the Company's brands and (viii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimate regarding revenues or earnings, whether as a result of the receipt of new information, future events or otherwise. Calvin Klein, Inc. Malcolm Carfrae, 212-292-9799 SVP, Global Communications OR Jennifer Crawford, 212-292-9795 VP, Corporate Communications OR Phillips-Van Heusen Corporation Michael Shaffer, 212-381-3523 EVP & CFO Copyright Business Wire 2007
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