þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Quarterly Period Ended July 1, 2006 | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 13-2622036 | |
(State or other jurisdiction
of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
650 Madison Avenue,
New York, New York |
10022
(Zip Code) |
|
(Address of principal executive offices) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o |
2
July 1,
April 1,
2006
2006
(millions)
(unaudited)
$
429.2
$
285.7
349.7
484.2
525.6
485.5
33.6
32.4
102.3
90.7
1,440.4
1,378.5
541.6
548.8
9.9
705.4
699.7
253.1
258.5
234.2
203.2
$
3,184.6
$
3,088.7
$
203.6
$
202.2
86.0
46.6
308.2
314.3
291.0
280.4
888.8
843.5
20.5
20.8
183.5
174.8
1,092.8
1,039.1
0.7
0.7
0.4
0.4
760.4
783.6
1,454.2
1,379.2
(156.1
)
(87.1
)
32.2
15.5
(42.7
)
2,091.8
2,049.6
$
3,184.6
$
3,088.7
3
Table of Contents
Three Months Ended
July 1,
July 2,
2006
2005
(millions, except per share data)
(unaudited)
$
903.3
$
694.6
50.3
57.3
953.6
751.9
(422.1
)
(337.5
)
531.5
414.4
(390.3
)
(333.2
)
(5.6
)
(1.0
)
(2.2
)
(398.1
)
(334.2
)
133.4
80.2
(1.1
)
(4.4
)
(2.5
)
3.8
2.9
0.8
1.8
(4.0
)
(1.4
)
128.5
81.0
(48.3
)
(30.3
)
$
80.2
$
50.7
$
0.76
$
0.49
$
0.74
$
0.48
105.1
103.0
108.1
105.5
$
0.05
$
0.05
$
(32.2
)
$
(27.7
)
4
Table of Contents
Three Months Ended
July 1,
July 2,
2006
2005
(millions)
(unaudited)
$
80.2
$
50.7
37.8
28.7
(2.7
)
(7.0
)
4.0
1.4
0.3
(1.8
)
7.5
4.9
0.8
0.2
2.2
0.2
(0.9
)
(1.3
)
2.1
141.6
175.0
(34.8
)
(47.2
)
37.4
(20.5
)
(43.7
)
7.4
231.8
190.7
2.1
(34.5
)
(32.6
)
(32.4
)
(32.6
)
(1.2
)
(0.7
)
(5.3
)
(5.2
)
(67.6
)
(1.6
)
8.3
25.6
3.7
(62.1
)
18.1
6.2
(4.4
)
143.5
171.8
285.7
350.5
$
429.2
$
522.3
5
Table of Contents
1.
Description
of Business
2.
Basis of
Presentation
6
Table of Contents
3.
Summary
of Significant Accounting Policies
7
Table of Contents
Three Months Ended
July 1,
July 2,
2006
2005
(millions)
$
107.5
$
100.0
67.8
55.0
(81.3
)
(76.9
)
1.3
(1.2
)
$
95.3
$
76.9
8
Table of Contents
Three Months Ended
July 1,
July 2,
2006
2005
(millions)
$
7.5
$
11.0
0.8
0.2
(0.3
)
(1.2
)
0.3
(0.4
)
$
8.3
$
9.6
Three Months Ended
July 1,
July 2,
2006
2005
(millions)
105.1
103.0
3.0
2.5
108.1
105.5
4.
Recently
Issued Accounting Standards
9
Table of Contents
5.
Acquisitions
10
Table of Contents
6.
Inventories
July 1,
April 1,
2006
2006
(millions)
$
9.5
$
6.0
22.6
22.0
493.5
457.5
$
525.6
$
485.5
7.
Restructuring
11
Table of Contents
Lease and
Contract
Termination
Costs
(millions)
$
1.2
2.2
(0.8
)
$
2.6
8.
Derivative
Financial Instruments
12
Table of Contents
13
Table of Contents
9.
Stockholders
Equity
Three Months Ended
July 1,
July 2,
2006
2005
(millions)
$
2,049.6
$
1,675.7
80.2
50.7
25.3
(33.7
)
(8.6
)
23.1
96.9
40.1
(5.2
)
(5.2
)
(67.6
)
(1.6
)
18.1
34.1
$
2,091.8
$
1,743.1
10.
Stock-Based
Compensation
14
Table of Contents
Three Months Ended
July 1,
July 2,
2006
2005
(a)
(millions)
$
(7.5
)
$
(4.9
)
$
2.9
$
1.9
Three Months Ended
July 1, 2006
(millions, except
per share data)
$
(2.6
)
1.0
$
(1.6
)
$
(0.02
)
$
(0.01
)
$
(3.7
)
$
3.7
$
43.0
$
(43.0
)
(a)
Prior to the adoption of FAS 123R and in accordance with
existing accounting principles, the Company recognized
stock-based compensation expense in connection with both
service-based and performance-based restricted stock units, as
well as for shares of restricted stock.
(b)
Prior to the adoption of FAS 123R, benefits of tax
deductions in excess of recognized compensation costs were
reported as operating cash flows. FAS 123R requires excess
tax benefits to be reported as a financing cash inflow rather
than a reduction of taxes paid.
(c)
Unearned compensation was eliminated against additional paid-in
capital as part of the adoption of FAS 123R.
15
Table of Contents
Three Months Ended
July 2, 2005
(millions, except
per share amounts)
$
50.7
3.0
(6.7
)
$
47.0
$
0.49
$
0.48
$
0.46
$
0.45
16
Table of Contents
Three Months Ended
July 1,
July 2,
2006
2005
4.6
5.2
33.4
%
29.1
%
0.39
%
0.53
%
4.9
%
3.7
%
$
19.18
$
14.25
Weighted-Average
Aggregate
Number of
Weighted-Average
Remaining
Intrinsic
Shares
Exercise Price
Contractual Term
Value
(thousands)
(in years)
(millions)
8,268
$
28.69
819
$
55.40
(321
)
$
25.80
(15
)
$
33.97
8,751
$
31.28
6.3
$
233.0
8,444
$
30.72
6.1
$
229.5
6,246
$
26.23
5.5
$
197.8
17
Table of Contents
Restricted Stock
Service-Based RSUs
Performance-Based RSUs
Weighted-Average
Weighted-Average
Weighted-Average
Number
Grant Date
Number
Grant Date
Number of
Grant Date
of Shares
Fair Value
of Shares
Fair Value
Shares
Fair Value
(thousands)
(thousands)
(thousands)
180
$
24.47
550
$
34.46
806
$
39.38
100
$
55.43
557
$
53.72
(63
)
$
34.23
180
$
24.47
650
$
37.69
1,300
$
45.77
Restricted Stock
Service-Based RSUs
Performance-Based RSUs
$
3.0
$
13.8
$
44.3
2.4
2.6
2.2
11.
Commitments
and Contingencies
18
Table of Contents
19
Table of Contents
20
Table of Contents
12.
Segment
Reporting
21
Table of Contents
Three Months Ended
July 1,
July 2,
2006
2005
(millions)
$
491.2
$
337.2
412.1
357.4
50.3
57.3
$
953.6
$
751.9
$
90.3
$
46.3
64.6
35.6
26.4
35.2
181.3
117.1
(45.7
)
(36.9
)
(2.2
)
$
133.4
$
80.2
(a)
Consists of restructuring charges relating entirely to the
Retail segment.
Three Months Ended
July 1,
July 2,
2006
2005
(millions)
$
13.2
$
8.2
15.4
12.4
1.2
1.4
8.0
6.7
$
37.8
$
28.7
22
Table of Contents
13.
Additional
Financial Information
Three Months Ended
July 1,
July 2,
2006
2005
(millions)
$
0.8
$
4.1
$
6.5
$
41.7
23
Table of Contents
Item 2.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
our anticipated growth strategies;
our plans to expand internationally;
our plans to open new retail stores;
our ability to make strategic acquisitions of certain selected
licensees;
our intention to introduce new products or enter into new
licensing alliances;
anticipated effective tax rates in future years;
future expenditures for capital projects;
our ability to continue to maintain our brand image and
reputation;
our ability to continue to initiate cost cutting efforts and
improve profitability;
our efforts to improve the efficiency of our distribution
system; and
our ability to refinance our Euro debt on favorable terms by
November 2006.
24
Table of Contents
Overview.
This section provides a general
description of our business, as well as a discussion of
transactions affecting comparability that we believe are
important in understanding our results of operations and
financial condition and in anticipating future trends.
Results of operations.
This section provides
an analysis of our results of operations for the three-month
periods ended July 1, 2006 and July 2, 2005.
Financial condition and liquidity.
This
section provides an analysis of our cash flows for the
three-month periods ended July 1, 2006 and July 2,
2005, as well as a discussion of our financial condition and
liquidity as of July 1, 2006. The discussion of our
financial condition and liquidity includes (i) our
available financial capacity under our credit facility,
(ii) a summary of our key debt compliance measures and
(iii) any material changes in financial condition and
certain contractual obligations since April 1, 2006.
Market risk management.
This section discusses
any significant changes since the end of Fiscal 2006 in our
interest rate and foreign currency exposures, the types of
derivative instruments used to hedge those exposures, or in
underlying market conditions.
Critical accounting policies.
This section
discusses any significant changes since the end of Fiscal 2006
in our accounting policies considered to be important to our
financial condition and results of operations and which require
significant judgment and estimates on the part of management in
their application. In addition, all of our significant
accounting policies, including our critical accounting policies,
are summarized in Notes 3 and 4 to our audited financial
statements included in our Fiscal 2006 Annual Report on
Form 10-K.
25
Table of Contents
Three Months
Three Months
Ended
Ended
July 1,
July 2,
July 1,
July 2,
2006
2005
2006
2005
(millions)
$
953.6
$
751.9
100.0
%
100.0
%
(422.1
)
(337.5
)
(44.3
)
(44.9
)
531.5
414.4
55.7
55.1
(390.3
)
(333.2
)
(40.9
)
(44.3
)
(5.6
)
(1.0
)
(0.6
)
(0.1
)
(2.2
)
(0.2
)
133.4
80.2
14.0
10.7
(1.1
)
(0.1
)
(4.4
)
(2.5
)
(0.5
)
(0.3
)
3.8
2.9
0.4
0.4
0.8
1.8
0.1
0.2
(4.0
)
(1.4
)
(0.4
)
(0.2
)
128.5
81.0
13.5
10.8
(48.3
)
(30.3
)
(5.1
)
(4.1
)
$
80.2
$
50.7
8.4
%
6.7
%
$
0.76
$
0.49
$
0.74
$
0.48
(a)
Includes depreciation expense of $32.2 million and
$27.7 million for the three-month periods ended
July 1, 2006 and July 2, 2005, respectively.
26
Table of Contents
Three Months Ended
July 1,
July 2,
Increase/
2006
2005
(Decrease)
% Change
(millions)
$
491.2
$
337.2
$
154.0
45.7
%
412.1
357.4
54.7
15.3
50.3
57.3
(7.0
)
(12.2
)
$
953.6
$
751.9
$
201.7
26.8
%
the inclusion of $67 million of revenue from the newly
acquired Polo Jeans and Footwear Businesses;
an $87 million aggregate increase in our global menswear,
womenswear and domestic childrenswear businesses, primarily
driven by strong growth in our Lauren product line, and the
effects from the successful domestic launch of our Chaps for
women and boys product lines; and
a $1 million decrease in revenues due to an unfavorable
foreign currency effect, primarily relating to the strengthening
of the U.S. dollar in comparison to the Euro in Fiscal 2007.
an aggregate $23 million increase in comparable full-price
and outlet store sales. This increase was driven by a 5.0%
increase in comparable full-price store sales and an 8.4%
increase in comparable outlet store sales, partially relating to
higher seasonal sales associated with the Easter holiday that
fell in the first quarter of Fiscal 2007. Excluding an
unfavorable $2 million effect on revenues from foreign
currency exchange rates, comparable full-price store sales
increased 5.9% and comparable outlet store sales increased 9.0%.
a net increase in store count of 13 stores compared to the prior
period, to a total of 295 stores, as several new openings were
offset by the closure of certain Club Monaco stores in the
fourth quarter of Fiscal 2006; and
an $11 million increase in sales at Polo.com.
the loss of licensing revenues from our Polo Jeans Business and
Footwear Business now included as part of the Wholesale segment;
and
a decline in Home licensing royalties as a result of lower sales
and minimum royalty payments from licensees.
27
Table of Contents
higher payroll-related expenses (excluding stock-based
compensation) of approximately $24 million principally
relating to increased selling costs associated with higher
retail sales and our worldwide retail store expansion, and
higher investment in infrastructure to support the ongoing
growth of our businesses;
the inclusion of SG&A costs for our newly acquired Footwear
and Polo Jeans Businesses;
higher brand-related marketing and facilities costs to support
the ongoing growth of our businesses;
higher depreciation costs of approximately $5 million in
connection with our capital expenditures and global
expansion; and
incremental stock-based compensation expense of approximately
$3 million as a result of the adoption of FAS 123R as
of April 2, 2006 (refer to Note 10 to the unaudited
consolidated financial statements contained elsewhere herein).
28
Table of Contents
Three Months Ended
July 1,
July 2,
Increase/
2006
2005
(Decrease)
% Change
(millions)
$
90.3
$
46.3
$
44.0
95.0
%
64.6
35.6
29.0
81.5
26.4
35.2
(8.8
)
(25.0
)
181.3
117.1
64.2
54.8
(45.7
)
(36.9
)
(8.8
)
(23.8
)
(2.2
)
(2.2
)
NM
$
133.4
$
80.2
$
53.2
66.3
%
29
Table of Contents
30
Table of Contents
31
Table of Contents
32
Table of Contents
33
Table of Contents
Item 3.
Quantitative
and Qualitative Disclosures About Market Risk.
Item 4.
Controls
and Procedures.
34
Table of Contents
Item 1.
Legal
Proceedings.
35
Table of Contents
Item 1A.
Risk
Factors.
Item 2.
Unregistered
Sales of Equity Securities and Use of Proceeds.
Total Number of
Maximum Number
Shares Purchased
(or Approximate Dollar Value)
as Part of Publicly
of Shares That May Yet be
Total Number of
Average Price
Announced Plans
Purchased Under the Plans
Shares
Purchased
(1)
Paid per Share
or Programs
or Programs (in millions)
71,300
$
59.05
71,300
$
95.8
228,700
58.46
228,700
82.4
910,595
(2)
56.43
884,800
32.4
1,210,595
1,184,800
(1)
Except as noted below, these purchases were made on the open
market under the Companys current Class A Common
Stock repurchase program, which was first publicly announced on
February 2, 2005. This program provides for the repurchase,
from time to time, of up to an aggregate of $100 million of
Class A Common Stock, and does not have a fixed termination
date
(2)
Includes 25,795 shares surrendered to, or withheld by, the
Company in satisfaction of withholding taxes in connection with
the vesting of an award under the Companys 1997 Long-Term
Stock Incentive Plan.
Item 5.
Other
Information.
36
Table of Contents
Item 6.
Exhibits.
Cliff Restricted Performance Share
Unit Award Overview containing the standard terms of restricted
performance share awards under the Stock Incentive Plan.
Stock Option Award
Overview U.S. containing the standard terms of
stock option awards under the Stock Incentive Plan.
Pro-Rata Restricted Performance
Share Unit Award Overview containing the standard terms of
restricted performance share awards under the Stock Incentive
Plan.
Amendment as of June 30,
2006, to the Companys 1997 Long-Term Stock Incentive Plan,
as Amended and Restated as of August 12, 2006.
Certification of Ralph Lauren,
Chairman and Chief Executive Officer, pursuant to 17 CFR
240.13a-14(a).
Certification of Tracey T. Travis,
Senior Vice President and Chief Financial Officer, pursuant to
17 CFR
24013a-14(a).
Certification of Ralph Lauren,
Chairman and Chief Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Certification of Tracey T. Travis,
Senior Vice President and Chief Financial Officer, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
37
Table of Contents
By:
Chief Financial Officer
(Principal Financial and
Accounting Officer)
38
1. | For selected executives, to link a portion of their long-term incentive to the achievement of specific corporate performance objectives. | |
2. | To attract and retain individuals of superior talent. |
1
2
% of Target | ||||||||
Performance | % of Goal | Cliff RPSUs | ||||||
Level | Achieved | Vested | ||||||
Threshold
|
70 | % | 75 | % | ||||
Target
|
100 | % | 100 | % | ||||
Maximum
|
110 | % | 150 | % |
3
Year Granted | Performance Period | Year Paid 1 | ||
FY05
|
FY05 FY07 | FY08 | ||
FY06
|
FY06 FY08 | FY09 | ||
FY07
|
FY07 FY09 | FY10 |
1 If at least a Threshold level of performance is achieved. |
4
Year | Performance | Performance | Vested | Year | ||||||||||||||||
Granted | # Cliff RPSUs | Period | Level | Percentage | Vested | # Shares | ||||||||||||||
FY05
|
1,000 | FY05 FY07 | Target | 100 | % | FY08 | 1,000 | |||||||||||||
FY06
|
1,000 | FY06 FY08 | 70 | % | 75 | % | FY09 | 750 | ||||||||||||
FY07
|
1,000 | FY07 FY09 | 110 | % | 150 | % | FY10 | 1,500 |
Total Cliff RPSUs | Total Shares | |||||||||||||||
Granted | Vested | |||||||||||||||
|
3,000 | 3,250 |
| Receiving shares of RL stock without paying any exercise price. |
| The number of Cliff RPSUs vesting can range from 75% (Threshold) to 150% (Maximum) of the target shares granted. |
| Any increase in Polos stock price above the grant price increases the value of the award. |
5
If Stock Price at Payout Reaches: | ||||||||||||||||||||
Number of Shares | $55 | $58 | $60 | $62 | ||||||||||||||||
Value at Threshold Performance
|
750 | $ | 41,250 | $ | 43,500 | $ | 45,000 | $ | 46,500 | |||||||||||
|
||||||||||||||||||||
Value at Target Performance
|
1,000 | $ | 55,000 | $ | 58,000 | $ | 60,000 | $ | 62,000 | |||||||||||
|
||||||||||||||||||||
Value at Maximum Performance
|
1,500 | $ | 82,500 | $ | 87,000 | $ | 90,000 | $ | 93,000 | |||||||||||
|
6
Event | Status of Awards | |||
Retirement Beginning at age 55
Disability Death |
| In the case of retirement, disability or death, a pro-rated 1 Target number of Cliff RPSUs will be determined. | ||
|
| These pro-rated Cliff RPSUs will vest at the end of the three-year period and vesting will be based on the actual degree of achievement. If performance against the cumulative three-year goal does not reach the Threshold level, then the pro-rated Cliff RPSUs will be forfeited. | ||
|
||||
|
| All remaining Cliff RPSUs are forfeited. | ||
|
||||
Involuntary Termination
|
| All unvested Cliff RPSUs are forfeited. | ||
|
||||
Dismissal for Cause
|
| All vested Cliff RPSUs not yet distributed are forfeited. | ||
|
| All unvested Cliff RPSUs are forfeited. | ||
|
||||
Voluntary Resignation
|
| All unvested Cliff RPSUs are forfeited. |
1 | For purposes of the Cliff RPSU program, the pro-rated portion will be determined by taking the number of months worked during the corresponding three fiscal years, dividing it by 36, and then multiplying the resulting decimal by the number of Cliff RPSUs scheduled to vest for that grant. |
7
8
| Earnings or other financial information; | |
| Changes in dividend policy; | |
| Stock splits; | |
| Mergers and acquisitions; | |
| Major new contracts or product-line introductions; | |
| Litigation involving substantial amounts of money; or | |
| Changes in management |
9
| In and out trading in securities of the Company. Any Company stock purchased in the market must be held for a minimum of six months, and ideally longer. (Note that the Securities and Exchange Commission (SEC) has a short-swing profit recapture rule that effectively prohibits Executive Officers and members of the Board of Directors from selling any Company stock within six months of a purchase. The Company has extended this prohibition to all employees. The receipt of shares pursuant to the vesting of Cliff RPSU awards is not considered a purchase under the SECs rule. | |
| Short sales (i.e., selling stock one does not own and then borrowing the shares to make delivery.) | |
| Buying or selling puts or calls (i.e., making commitments to buy or sell securities at a specified price for a fixed period of time.) |
10
1. | Motivate key contributors to continuously improve the Companys performance. which should ultimately result in increased shareholder value. | |
2. | Attract and retain individuals of superior talent. | |
3. | Enable individuals to participate in the long-term growth and financial success of the Company. |
1
2
3
If Future Stock Price Reaches: | ||||||||||||||||
$55 | $58 | $60 | $62 | |||||||||||||
Gain per Share
(assumes all shares
granted have
vested)
|
$ | 0 | $ | 3 | $ | 5 | $ | 7 | ||||||||
|
||||||||||||||||
Total Gain
|
$ | 0 | $ | 3,000 | $ | 5,000 | $ | 7,000 | ||||||||
|
4
| Cash Exercise : Paying cash for the exercise price. | ||
| Cashless Exercise : Exercising stock options and paying for the exercise by simultaneously selling the stock and retaining the net gain. | ||
| Stock-for-Stock Exchange : Delivering shares of Polo Ralph Lauren stock that you have owned for at least six months and that are not subject to any pledge or other security interest, to pay for the exercise price. |
5
Event | Vested Options | Unvested Options | ||||||
Normal Retirement
Age 65 |
| Up to three years to exercise any vested stock options after retirement, provided they do not expire sooner. The options expire after the three years. | | All unvested stock options are forfeited. | ||||
|
||||||||
Early
Retirement
Age 55 with seven or more yearsof service |
| Up to one year to exercise vested options after early retirement, provided they do not expire sooner. The options expire at the end of the one year. However, any vested options are forfeited if a participant goes to work for a competitor. | | All unvested stock options are forfeited. | ||||
|
||||||||
Disability
Death |
| In the case of disability, participants have up to three years to exercise any vested stock options after long-term disability begins, provided they do not expire sooner. The options expire if not exercised within the three years. | | Unvested options continue to vest according to the original vesting schedule (one-third each year for three years). If not exercised, once vested, within three years of the date of death or disability, the options expire. | ||||
|
| In the case of death, the estate has up to three years to exercise any vested stock options, provided they do not expire sooner. Options expire if not exercised after within the three years. | ||||||
|
||||||||
Involuntary Termination (1)
|
| Up to three months to exercise any vested stock options, provided they do not expire sooner. | | All unvested stock options are forfeited. | ||||
|
||||||||
Dismissal for Cause
Voluntary Resignation |
| All vested stock options are forfeited as of the date of termination. | | All unvested stock options are forfeited. |
(1) | Refers to termination by Polo without cause and when the employee has executed a general release with terms satisfactory to the Company. |
6
7
| Earnings or other financial information; | |
| Changes in dividend policy; | |
| Stock splits; | |
| Mergers and acquisitions; | |
| Major new contracts or product-line introductions; | |
| Litigation involving substantial amounts of money; or | |
| Changes in management |
8
| In and out trading in securities of the Company. Any Company stock purchased in the market must be held for a minimum of six months, and ideally longer. (Note that the Securities and Exchange Commission (SEC) has a short-swing profit recapture rule that effectively prohibits Executive Officers and members of the Board of Directors from selling any Company stock within six months of a purchase we have simply extended this prohibition to all employees. Exercise of options with an exercise price above the then current market price of the stock, however, is not considered a purchase under the SECs rule.) | |
| Short sales (i.e., selling stock one does not own and then borrowing the shares to make delivery.) | |
| Buying or selling puts or calls (i.e., making commitments to buy or sell securities at a specified price for a fixed period of time.) |
9
1. | Motivate you to help the Company achieve performance goals by linking equity-based compensation to Corporate results. | ||
2. | Continue to attract and retain individuals of superior talent to support the Corporations ongoing success. |
1
2
If Stock Price Reaches: | ||||||||||||||||||||
Number of Shares | $55 | $58 | $60 | $62 | ||||||||||||||||
Value
(assumes all
|
||||||||||||||||||||
shares granted have
vested)
|
450 | $ | 24,750 | $ | 26,100 | $ | 27,000 | $ | 27,900 |
| Net Earnings or Net Income (before or after taxes) | |
| Basic or Diluted Earnings Per Share | |
| Net Operating Profit | |
| Net Revenue or Net Revenue Growth | |
| Gross Profit or Gross Profit Growth | |
| Return on Assets |
3
Performance | Performance | |||||
Grant Date | Vesting | Period | Measure and Level of Achievement | |||
FY07 (June 2006
|
1st third of Award | Fiscal 2007 | Net Income Before Income Tax (NIBT) at Threshold (80% of Target) | |||
grant date)
|
2nd third of Award | Fiscal 2008 | Net Income Before Income Tax (NIBT) at Threshold (80% of Target) | |||
|
Final third of Award | Fiscal 2009 | Net Income Before Income Tax (NIBT) at Threshold (80% of Target) |
4
% of Fiscal Year | % of Shares | |||||||
Goal Achieved | Performance Level | Vested | ||||||
Less than 80% of Corporate NIBT Target
|
Below Threshold | 0 | ||||||
|
||||||||
80% or better of Corporate NIBT Target
|
Threshold or above | 100 | % |
| If the level of performance achieved is at or above the NIBT Threshold (80% of Target) in any given year, then the one-third of the Pro-Rata RPSUs eligible to vest for that fiscal year will vest, and actual shares of Polo Ralph Lauren stock will be distributed to you. | |
| If the level of performance is below Threshold for that fiscal year, the Pro-Rata RPSUs that would have been eligible for vesting in that fiscal year will be forfeited, and there is no opportunity to earn them in other years. However, vesting opportunities for subsequent years will not be impacted, regardless of whether the performance Threshold is met for the current year. |
5
# Pro-Rata | # Pro-Rata | |||||||||||||||||||
RPSUs | Performance | RPSUs | ||||||||||||||||||
Performance | Eligible to | Level | Vesting | Vested and | Date of | |||||||||||||||
Period | Vest | Achieved 1 | Percentage | Delivered | Vesting | |||||||||||||||
FY07
|
150 | Threshold | 100 | % | 150 | June 2007 | ||||||||||||||
FY08
|
150 | Below Threshold | 0 | % | 0 | N/A | ||||||||||||||
FY09
|
150 | Threshold | 100 | % | 150 | June 2009 | ||||||||||||||
Totals
|
450 | 300 |
1 | Threshold refers to attaining at least 80% of the Corporate NIBT goal. |
# of Pro-Rata | ||||||||||||||||||||
RPSUs | 1/3 of Pro-Rata RPSU Eligible to Vest 1 | |||||||||||||||||||
Year Granted | Granted | June 2007 | June 2008 | June 2009 | ||||||||||||||||
|
FY07 | 450 | 150 | 150 | 150 | |||||||||||||||
|
June 2006 | |||||||||||||||||||
|
FY08 | 480 | | 160 | 160 | |||||||||||||||
|
June 2007 | |||||||||||||||||||
|
FY09 | 420 | | | 140 | |||||||||||||||
|
June 2008 | |||||||||||||||||||
|
Total Pro-Rata | 1,350 | 150 | 310 | 450 | |||||||||||||||
|
RPSUs |
1 | If at least Threshold (80% of Target) Corporate performance is achieved |
6
7
Event | Status of Awards | |||
Retirement Beginning at age 55
Disability Death |
| In the fiscal year of retirement, disability or death, a pro-rated1 number of the Pro-Rata RPSUs for that fiscal year will be determined and will vest at their normal vesting date, assuming Threshold or better Corporate performance is achieved. If Corporate performance does not reach the Threshold level, then the pro-rated RPSUs will be forfeited. | ||
|
||||
|
| All remaining Pro-Rata RPSUs (for that fiscal year and any other fiscal years remaining) are forfeited. | ||
|
||||
Involuntary Termination (without cause)
|
| All unvested Pro-Rata RPSUs are forfeited. | ||
|
||||
Dismissal for Cause
|
| All vested Pro-Rata RPSUs not yet distributed are forfeited. | ||
|
||||
|
| All unvested Pro-Rata RPSUs are forfeited. | ||
|
||||
Voluntary Resignation
|
| All unvested Pro-Rata RPSUs are forfeited. |
1 | For purposes of the Pro-Rata RPSU program, the pro-rated portion will be determined by taking the number of months worked in the fiscal year, dividing it by 12, and then multiplying the resulting decimal by the number of Pro-Rata RPSUs scheduled to vest for that fiscal year. |
8
9
| Earnings or other financial information; | |
| Changes in dividend policy; | |
| Stock splits; | |
| Mergers and acquisitions; | |
| Major new contracts or product-line introductions; | |
| Litigation involving substantial amounts of money; or | |
| Changes in management |
10
| In and out trading in securities of the Company. Any Company stock purchased in the market must be held for a minimum of six months and ideally longer. (Note that the Securities and Exchange Commission (SEC) has a short-swing profit recapture rule that effectively prohibits Executive Officers and members of the Board of Directors from selling any Company stock within six months of a purchase. The Company has extended this prohibition to all employees. The receipt of shares pursuant to the vesting of Pro-Rata RPSU awards is not considered a purchase under the SECs rule.) |
| Short sales (i.e., selling stock one does not own and then borrowing the shares to make delivery.) |
| Buying or selling puts or calls (i.e., making commitments to buy or sell securities at a specified price for a fixed period of time.) |
11
1. | The first sentence of Section 1 of the Plan is hereby amended to read in its entirety as follows: |
2. | The definition of Participant in Section 2 of the Plan is hereby amended to read in its entirety as follows: |
3. | The first sentence of Section 4(a) of the Plan is hereby amended by inserting, immediately after the phrase shall be 26,000,000;, the following: |
4. | The first sentence of Section 4(e) of the Plan is hereby amended by replacing the word shares with the word Shares. |
5. | The last sentence of Section 4(e) of the Plan is hereby amended to read in its entirety as follows: |
6. | Section 5 of the Plan is hereby amended to read in its entirety as follows: |
7. | Clause (ii) of Section 8(d) of the Plan is hereby amended to read in its entirety as follows: |
8. | Clause (ii) of Section 9(d) of the Plan is hereby amended to read in its entirety as follows: |
9. | Clause (ii) of Section 10(c) of the Plan is hereby amended to read in its entirety as follows: |
10. | Section 11(c) of the Plan is hereby amended by inserting the word that immediately preceding the phrase is (are) to apply to the Company. | ||
11. | Section 11(d)(vi)(i) of the Plan is hereby amended by inserting the word a immediately preceding the phrase Performance Compensation Award. | ||
12. | The first proviso of Section 12(b) of the Plan is hereby amended by modifying the phrase that would impair the rights of any Participant or any holder or |
beneficiary of any Option theretofore granted to read as follows: that would impair the rights of any Participant or any holder or beneficiary of any Award theretofore granted. | |||
13. | Section 14(a)(iii) of the Plan is hereby amended by (a) replacing the phrase Incentive Options with the phrase Incentive Stock Options; (b) replacing grantee with Grantee; and (c) replacing option each time it appears with Option. |
/s/
|
RALPH LAUREN |
/s/
|
TRACEY T. TRAVIS |
/s/
|
RALPH LAUREN |