S&P keeps Tommy Hilfiger on negative watch

Standard & Poor's said Tommy Hilfiger USA Inc.'s BB- corporate credit rating remains on CreditWatch with negative implications, where it was placed on Nov. 3, 2004.

The rating reflects S&P's concern regarding the company's negative operating trends, including the decline in revenues and pre-tax earnings in recent periods.

The U.S. Attorney's office for the Southern District of New York was conducting an investigation regarding the company's commission payments to a foreign subsidiary. On Aug. 11, 2005, Tommy Hilfiger announced it settled the investigation by agreeing to pay about $18.1 million in taxes and interest and will file amended tax returns for the fiscal years 2001 to 2004.

The company just filed its 10-K for the fiscal year ended March 2005 and a 10-Q for the quarter ended June 2005 with the Securities and Exchange Commission, S&P said. There was an adverse opinion from the company's CPAs with respect to internal controls over financial reporting for the fiscal year ended March 2005.

The company remains highly concentrated in department stores in this division and experienced a lower level of orders during the quarter, though its international and retail businesses experienced continued revenue growth.

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