2006 Annual Report
Comparison of 4-Year Cumulative Total Return*
The Warnaco Group, Inc. compared to select indices
* $100 invested on 2/5/03 in stock or on 1/31/03 in index-including reinvestment of dividends. Year ending December 31.
Results of Operations
Net Revenues Gross Profit Gross Profit as a percentage of net revenues Selling,General and Administrative Expenses (SG&A) SG&A as a percentage of net revenues Operating Income Diluted Income per share: Income from continuing operations Fiscal 2006 $1,827,486 692,172 37.9% 551,064 30.2% $ 130,312 $ 1.57 Fiscal 2005 $1,475,735 500,868 33.9% 388,366 26.3% $ 107,422 $ 1.19 Fiscal 2004 $1,406,408 468,532 33.3% 368,640 26.2% $ 98,741 $ 1.05
Certain statements in this AnnualReport may contain “forward-looking statements” as defined by the Securities and Exchange Commission (SEC). Such statements are not historical facts, but are predictions about the future which inherently involve risks and uncertainties, and these risks and uncertainties could cause actual results to differ from those contained in the forward-looking statements. Descriptions and discussions of theserisks and uncertainties can be found in our annual and quarterly SEC filings. The paper used for this annual report is certified by the Forest Stewardship Council and was manufactured using acid and chlorine-free pulp that came from well-managed forests and other controlled sources.
Fiscal 2006 was a year of solid progress for Warnaco, marked by a number ofnotable accomplishments. We advanced our long-term strategic objectives of building our global platform and growing our direct-to-consumer businesses. Specifically, we acquired and integrated the Calvin Klein® Jeans and related businesses in Europe and Asia and further expanded our reach by increasing our total international business from 29% of net revenues in Fiscal 2005 to 43% in Fiscal 2006.Additionally, our global sourcing initiative progressed, which led to improved gross margins. Finally, and most importantly, we focused on investing our resources on the brands in our portfolio that we believe have the greatest growth and profit potential. All of these measures were undertaken to enhance shareholder value by building a stronger platform for future growth. Power Brands, Global Reach: TheKeys to Success We believe that sustainable, long-term growth is best achieved through the development of “power brands” and a corresponding worldwide business platform to support them. To accomplish this, we remain committed to enhancing our existing global business platform, expanding into new geographies, and growing our direct-to-consumer network. Nowhere was the success of this strategy moreevident than in the performance of our Calvin Klein businesses during the year. With global reach in major categories and a channel strategy that includes significant penetration in both wholesale and directto-consumer, our Calvin Klein Underwear, Jeans and related businesses collectively generated revenues in excess of $1 billion. Calvin Klein Underwear had a terrific year. Revenues grew 17% tonearly $400 million worldwide, and we saw significant increases in penetration in both new and existing markets. The fall 2007 launch of Steel, our latest men’s offering supported by a marketing campaign featuring Oscar-nominated actor Djimon Honsou, is sure to create worldwide attention for this franchise. Over time, we believe that our focus on product innovation and standard-setting marketingwill help us to achieve our near term goal of $500 million in Calvin Klein Underwear revenues worldwide. The integration of the acquired Calvin Klein Jeans and related businesses in Europe and Asia proceeded ahead of plan and contributed $314 million to Warnaco’s Fiscal 2006 net revenues. The acquisition also accelerated the expansion of our international direct-to-consumer initiative and...