Phillips-Van Heusen Corporation Reaches Agreement in Principle with Warnaco for Calvin...

Mon Dec 10, 2007 4:46pm EST

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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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