SEGMENT REPORTING

3 Months Ended

Apr. 01, 2017

SEGMENT REPORTING

SEGMENT REPORTING

10.    SEGMENT REPORTING

The Company operates its kate spade new york and JACK SPADE NEW YORK brands through one operating segment in North America and three operating segments internationally: Japan, Asia (excluding Japan) and Europe. The Company’s Adelington Design Group reportable segment is also an operating segment. The three reportable segments described below represent the Company’s activities for which separate financial information is available and which is utilized on a regular basis by the Company’s CODM to evaluate performance and allocate resources. In identifying the Company’s reportable segments, the Company considers its management structure and the economic characteristics, products, customers, sales growth potential and long-term profitability of its operating segments. As such, the Company configured its operations into the following three reportable segments:

· KATE SPADE North America segment – consists of the Company’s kate spade new york and JACK SPADE NEW YORK brands in North America.

· KATE SPADE International segment– consists of the Company’s kate spade new york and JACK SPADE NEW YORK brands in International markets (principally in Japan, Asia (excluding Japan), Europe and Latin America).

· Adelington Design Groupsegment – primarily consists of exclusive arrangements to supply jewelry for the LIZ CLAIBORNE and MONET brands.

The Company’s Chief Executive Officer has been identified as the CODM. The Company’s measure of segment profitability is Adjusted EBITDA of each reportable segment. Accordingly, the CODM evaluates performance and allocates resources based primarily on Segment Adjusted EBITDA. Segment Adjusted EBITDA excludes: (i) depreciation and amortization; (ii) charges due to streamlining initiatives, brand-exiting activities and acquisition related costs; and (iii) losses on asset disposals and impairments. The costs of all corporate departments that serve the respective segment are fully allocated, other than non-cash share-based compensation expense. The Company does not allocate amounts reported below Operating income to its reportable segments, other than equity loss in equity method investees. The Company’s definition of Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The accounting policies of the Company’s reportable segments are the same as those described in Note 1 – Basis of Presentation. Sales are reported based on a destination basis. The Company, as licensor, also licenses to third parties the right to produce and market products bearing certain Company-owned trademarks; the resulting royalty income is included within the results of the associated segment.

				Adjusted
Dollars in thousands	Net Sales		% to Total	EBITDA		% of Sales
Three Months Ended April 1, 2017 (13 Weeks)
KATE SPADE North America	$	217,398	80.1%	$	22,788	10.5	%
KATE SPADE International		48,976	18.1%		7,778	15.9	%
Adelington Design Group		4,851	1.8%		507	10.5	%
Totals	$	271,225	100.0%
Three Months Ended April 2, 2016 (13 Weeks)
KATE SPADE North America	$	218,677	79.7%	$	24,587	11.2	%
KATE SPADE International		48,883	17.8%		8,537	17.5	%
Adelington Design Group		6,862	2.5%		2,185	31.8	%
Totals	$	274,422	100.0%

The following table provides a reconciliation to Net Income:

	Three Months Ended
	April 1, 2017		April 2, 2016
In thousands	(13 Weeks)		(13 Weeks)
Reportable Segments Adjusted EBITDA:
KATE SPADE North America	$	22,788	$	24,587
KATE SPADE International (a)		7,778		8,537
Adelington Design Group		507		2,185
Total Reportable Segments Adjusted EBITDA		31,073		35,309
Depreciation and amortization, net (b)		(11,485)		(10,721)
Loss on asset disposals and impairments, net		(6,767)		(206)
Share-based compensation		(6,199)		(7,910)
Equity loss included in Reportable Segments Adjusted EBITDA		260		1,241
Operating Income		6,882		17,713
Other income (expense), net (a)		607		(247)
Interest expense, net		(4,545)		(4,996)
Provision for income taxes		1,750		1,554
Discontinued operations, net of income taxes		165		720
Net Income	$	1,359	$	11,636

^(a) Amounts include equity in the losses of the Company’s equity method investees of $0.3 million and $1.2 million for the three months ended April 1, 2017 and April 2, 2016, respectively.

^(b) Excludes amortization included in Interest expense, net.

GEOGRAPHIC DATA:

Dollars in thousands	Net Sales		% to Total
Three Months Ended April 1, 2017 (13 Weeks)
Domestic	$	213,313	78.6	%
International		57,912	21.4	%
Total	$	271,225	100.0	%
Three Months Ended April 2, 2016 (13 Weeks)
Domestic	$	218,190	79.5	%
International		56,232	20.5	%
Total	$	274,422	100.0	%

There were no significant changes in segment assets during the three months ended April 1, 2017.