Perry Ellis International, Inc. (NASDAQ:PERY): -- Reports second
quarter earnings in line with management's plan; strong gross
profit margin improvement -- Confirms proforma earnings view in
range of $2.30-$2.40 per fully diluted share, annual revenue view
at lower end of previously announced range of $860-$870 million
Perry Ellis International, Inc. (NASDAQ:PERY) today reported
results for the second quarter ended July 31, 2006 ("second quarter
of fiscal 2007"), which were in line with management's previously
announced plans, and included a 320 basis point improvement in
gross profit margin and a 27 basis point improvement in EBITDA
margin. Second quarter total revenues were $171.0 million, compared
to $190.0 million, a 10.0% decrease versus the comparable period
last year. The decline in total revenues during the quarter was
anticipated in management's fiscal 2007 plan, and was primarily a
result of previously announced reductions of private label and
branded programs at a national mid tier chain, the impact of
Federated Department Store door closures due to the May Company
merger integration and a reduction in off price sales. These
factors also impacted total revenues for the six month period ended
July 31, 2006, which were $385.0 million, compared to $415.6
million, a 7.4% decrease versus the comparable period last year.
Due to the seasonality of the Company's business, second quarter
results historically result in losses. For the second quarter of
fiscal 2007, the net loss was $0.25 per fully diluted share. This
result was the same as the loss per fully diluted share reported
during the same period last year, because improved gross margin
performance offset the impact of lower total revenues.
Additionally, the second quarter of fiscal 2007 results include a
reduction of $0.02 per share for the adoption of Statement of
Financial Accounting Standards ("SFAS") 123R requiring the
expensing of stock options. These costs are not reflected in prior
year results. For the first half ended July 31, 2006, earnings were
$0.34 per fully diluted share compared to earnings of $0.65 per
fully diluted share for the comparable period last year. Proforma
earnings for the first half of fiscal 2007 were $0.53 per fully
diluted share. Proforma results exclude the impact of $3.0 million
in debt extinguishment costs ($0.19 per fully diluted share)
incurred as a result of the March 2006 repayment of the Company's
$57 million senior secured notes. The Company believes that
proforma results provide a more meaningful comparison of financial
performance. A table showing the reconciliation of actual to
proforma results is attached. Additionally, first half fiscal 2007
proforma and reported first half of fiscal 2007 earnings per share
include expenses of $0.04 per share related to the adoption of SFAS
123R, requiring the expensing of stock options. These costs are not
reflected in prior year results. George Feldenkreis, chairman and
chief executive officer commented: "We continue to perform on plan
despite the impact of retailer consolidation. We are pleased with
the significant improvement of our gross profit margins, which is a
result of great products performing exceptionally well at retail,
as well as improved production planning and sourcing. We also
continue to effectively manage our working capital, by
significantly reducing inventory levels and improving inventory
turns. Lastly, we continue to improve processes to lower our
expense levels, which resulted in lower first half operating
expenses versus last year, despite start-up investments in the
outerwear and swim divisions as a result of our recently added
Dockers(R) and JAG(R) license agreements, as well as the expensing
of stock options." Oscar Feldenkreis, vice-chairman, president and
chief operating officer stated: "We are excited about our growth
opportunities and expect to resume strong growth in our fourth
quarter across multiple product categories and channels. We are
particularly enthused by the expected growth in swim, outerwear,
Perry Ellis(R) sportswear, international and direct retail. Our
Perry Ellis Collection sportswear is the leading indicator of
consumer interest in the brand, and this business continues to
trend up. The Collection's strong current retail performance,
coupled with retailers' response to the spring 2007 deliveries we
unveiled during August's Men's Market Week, fuel the excitement in
Perry Ellis. Consequently, most department stores are planning for
double digit Perry Ellis growth this spring." He concluded:
"Although a variety of issues are weighing on consumer spending, we
are confident that our standout brands will continue to claim a
substantial share of the market. Our focused investments in our
brands' marketing will attract consumers to our various lifestyle
concepts and continuously improved product offerings." About Perry
Ellis International Perry Ellis International, Inc. is a leading
designer, distributor and licensor of a broad line of high quality
men's and women's apparel, accessories, and fragrances. The
company's collection of dress and casual shirts, golf sportswear,
sweaters, dress and casual pants and shorts, jeans wear, active
wear and men's and women's swimwear is available through all major
levels of retail distribution. The company, through its wholly
owned subsidiaries, owns a portfolio of nationally and
internationally recognized brands including Perry Ellis(R),
Jantzen(R), Cubavera(R), Munsingwear(R), Savane(R), Original
Penguin(R), Grand Slam(R), Natural Issue(R), Pro Player(R), the
Havanera Co.(R), Axis(R), Tricots St. Raphael(R), Gotcha(R), Girl
Star(R) and MCD(R). The company enhances its roster of brands by
licensing trademarks from third parties including Dockers(R) for
outerwear, Nike(R) and JAG(R) for swimwear, and PING(R) and PGA
TOUR(R) for golf apparel. Additional information on the company is
available at http://www.pery.com. Safe Harbor Statement We caution
readers that the forward-looking statements (statements which are
not historical facts) in this release are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are based on current
expectations rather than historical facts and they are indicated by
words or phrases such as "anticipate," "could," "may," "might,"
"potential," "predict," "should," "estimate," "expect," "project,"
"believe," "plan," "envision," "continue," "intend," "target,"
"contemplate," or "will" and similar words or phrases or comparable
terminology. We have based such forward-looking statements on our
current expectations, assumptions, estimates and projections. While
we believe these expectations, assumptions, estimates and
projections are reasonable, such forward-looking statements are
only predictions and involve known and unknown risks and
uncertainties, and other factors that may cause actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking statements, many of which are beyond our
control. These factors include: general economic conditions, a
significant decrease in business from or loss of any of our major
customers or programs, anticipated and unanticipated trends and
conditions in our industry, including the impact of recent or
future retail and wholesale consolidation, the effectiveness of our
planned advertising, marketing and promotional campaigns, our
ability to contain costs, disruptions in the supply chain, our
future capital needs and our ability to obtain financing, our
ability to integrate acquired businesses, trademarks, tradenames
and licenses, our ability to predict consumer preferences and
changes in fashion trends and consumer acceptance of both new
designs and newly introduced products, changes in the costs of raw
materials, labor and advertising, our ability to carry out growth
strategies, the level of consumer spending for apparel and other
merchandise, our ability to compete, the termination or non-renewal
of any material license agreements to which we are a party,
exposure to foreign currency risk and interest rate risk, possible
disruption in commercial activities due to terrorist activity and
armed conflict, and other factors set forth in Perry Ellis
International's filings with the Securities and Exchange
Commission. Investors are cautioned that all forward-looking
statements involve risks and uncertainties, including those risks
and uncertainties detailed in Perry Ellis' filings with the SEC.
You are cautioned not to place undue reliance on these
forward-looking statements, which are valid only as of the date
they were made. We undertake no obligation to update or revise any
forward-looking statements to reflect new information or the
occurrence of unanticipated events or otherwise. -0- *T PERRY ELLIS
INTERNATIONAL, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
(UNAUDITED) (amounts in 000's, except per share information) INCOME
STATEMENT DATA: Three Months Ended Six Months Ended July 31, July
31, ------------------ ------------------ 2006 2005 2006 2005
-------- -------- -------- -------- Revenues Net sales $165,699
$184,298 $373,953 $404,692 Royalty income 5,323 5,686 11,067 10,892
-------- -------- -------- -------- Total revenues 171,022 189,984
385,020 415,584 Cost of sales 117,176 136,146 260,725 288,819
-------- -------- -------- -------- Gross profit 53,846 53,838
124,295 126,765 Operating expenses Selling, general and
administrative expenses 49,947 50,017 99,768 101,106 Depreciation
and amortization 2,765 2,223 5,450 4,463 -------- -------- --------
-------- Total operating expenses 52,712 52,240 105,218 105,569
-------- -------- -------- -------- Operating income 1,134 1,598
19,077 21,196 Costs on early extinguishment of debt - - 2,963 -
Interest expense 4,755 5,411 10,650 10,781 -------- --------
-------- -------- (Loss) income before minority interest and income
taxes (3,621) (3,813) 5,464 10,415 Minority interest 145 125 144
368 Income tax (benefit) provision (1,309) (1,534) 1,863 3,560
-------- -------- -------- -------- Net (loss) income $ (2,457) $
(2,404) $ 3,457 $ 6,487 ======== ======== ======== ======== Net
(loss) income per share Basic $ (0.25) $ (0.25) $ 0.36 $ 0.68
======== ======== ======== ======== Diluted $ (0.25) $ (0.25) $
0.34 $ 0.65 ======== ======== ======== ======== Weighted average
number of shares outstanding Basic 9,636 9,512 9,622 9,489 Diluted
9,636 9,512 10,146 10,013 *T -0- *T PERRY ELLIS INTERNATIONAL, INC.
AND SUBSIDIARIES SELECTED FINANCIAL DATA (UNAUDITED) (amounts in
000's) BALANCE SHEET DATA: As of ----------------------- July 31,
January 31, 2006 2006 ----------- ----------- Assets Current
assets: Cash and cash equivalents $ 7,222 $ 9,412 Accounts
receivable, net 106,298 152,529 Inventories, net 116,298 126,413
Other current assets 20,154 16,239 ---------- ---------- Total
current assets 249,972 304,593 ---------- ---------- Property and
equipment, net 68,987 66,592 Intangible assets, net 183,096 183,090
Other assets 13,055 15,739 ---------- ---------- Total assets $
515,110 $ 570,014 ========== ========== Liabilities and
stockholders' equity Current liabilities: Accounts payable $ 39,387
$ 51,763 Accrued expenses and other liabilities 18,007 16,441
Accrued interest 5,182 6,743 Unearned revenues 1,459 1,096
---------- ---------- Total current liabilities 64,035 76,043
---------- ---------- Long term liabilities: Senior subordinated
notes payable 148,996 148,914 Senior secured notes payable - 56,923
Senior credit facility 34,000 40,391 Real estate mortgage 26,791
12,336 Deferred pension obligation 13,721 13,721 Lease payable long
term 347 452 ---------- ---------- Total long term liabilities
223,855 272,737 ---------- ---------- Total liabilities 287,890
348,780 ---------- ---------- Minority interest 1,998 1,854
---------- ---------- Stockholders' equity Preferred stock - -
Common stock 97 96 Additional paid in capital 91,945 90,084
Retained earnings 132,436 128,979 Accumulated other comprehensive
income 744 221 ---------- ---------- Total stockholders' equity
225,222 219,380 ---------- ---------- Total liabilities and
stockholders' equity $ 515,110 $ 570,014 ========== ========== *T
-0- *T PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA (1) (UNAUDITED) (amounts in
000's) Three Months Ended Six Months Ended July 31, July 31,
------------------ ------------------ 2006 2005 2006 2005 --------
-------- -------- -------- Net (loss) income as reported $ (2,457)
$ (2,404) $ 3,457 $ 6,487 Plus: Depreciation and amortization 2,765
2,223 5,450 4,463 Interest expense 4,755 5,411 10,650 10,781 Costs
on early extinguishment of debt - - 2,963 - Minority interest 145
125 144 368 Income tax provision (1,309) (1,534) 1,863 3,560
-------- -------- -------- -------- EBITDA $ 3,899 $ 3,821 $ 24,527
$ 25,659 ======== ======== ======== ======== Total revenues
$171,022 $189,984 $385,020 $415,584 EBITDA margin percentage of
revenues 2.28% 2.01% 6.37% 6.17% (1) EBITDA consists of earnings
before interest, costs on early extinguishment of debt, taxes,
depreciation, amortization and minority interest. EBITDA is not a
measurement of financial performance under generally accepted
accounting principles, and does not represent cash flow from
operations. Accordingly, you should not regard this figure as an
alternative to cash flows as a measure of liquidity. EBITDA is
presented solely as a supplemental disclosure because management
believes that it is a common measure of operating performance in
the apparel industry. *T -0- *T PERRY ELLIS INTERNATIONAL, INC. AND
SUBSIDIARIES RECONCILIATION OF DILUTED EARNINGS PER SHARE TO
PROFORMA DILUTED EARNINGS PER SHARE (2) (UNAUDITED) Three Months
Ended Six Months Ended July 31, July 31, ------------------
------------------ 2006 2005 2006 2005 -------- -------- --------
-------- Diluted (loss) earnings per share view $ (0.25) $ (0.25) $
0.34 $ 0.65 Plus: Effect of debt extinguishment costs, net of tax
effect $ - $ - $ 0.19 $ - -------- -------- -------- --------
Proforma diluted (loss) earnings per share view $ (0.25) $ (0.25) $
0.53 $ 0.65 ======== ======== ======== ======== (2) Proforma
diluted earnings per share for the six months ended July 31, 2006,
consists of diluted earnings per share excluding the effect of
approximately $3.0 million ($1.9 million, net of taxes) for debt
extinguishment costs related to the call of our $57 million senior
secured notes. Proforma diluted earnings per share is not a
measurement of financial performance under generally accepted
accounting principles. Accordingly, you should not regard this
figure as an alternative to actual diluted earnings per share.
Proforma diluted earnings per share is presented solely as a
supplemental disclosure. Additionally, proforma diluted earnings
per share and diluted earnings per share for the three and six
months ended July 2006 include expenses of $0.02 and $0.04 per
share, respectively related to the adoption of SFAS 123R, which
requires the expensing of stock options. Such expense was not
recognized in the prior period as SFAS 123R was implemented on
February 1, 2006. *T
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