Perry Ellis International, Inc. (NASDAQ:PERY) today reported
results for the third quarter and nine months ended October 31,
2008. Third Quarter Operations Review For the three months ended
October 31, 2008 (�third quarter of fiscal 2009�), total revenues
were $222.8 million, a $4.7 million reduction compared to $227.5
million reported in the third quarter of the fiscal year ended
October 31, 2007 (�third quarter of fiscal 2008�). Strong results
for the Perry Ellis brand, denim, golf and Hispanic categories
coupled with better than expected results in international and
licensing businesses were offset by (i) a $4.0 million increase in
markdowns and sales allowances to retail partners; (ii) a revenue
decline during the quarter of $4.5 million related to Chapter 11
filings or liquidation from multiple retailers; and (iii) overall
weakness in the specialty store distribution channel. Oscar
Feldenkreis, President and COO commented, �Several of our growth
platforms continue to perform according to plan, despite the
overall weakness at retail, demonstrating the strength of our
brands and the resiliency of our diversified business model. We
continue to innovate and deliver newness at retail, which is
driving consumer purchases and assisting us to mitigate the
downturn in consumer spending. The positive performances posted by
our denim, golf and Hispanic products are a testament to this.�
Gross margins improved by 25 basis points to 34.1% of net revenues
compared to the third quarter of fiscal 2008, primarily driven by
continued success in shifting from private label to branded
business. Gross profit decreased by $1.0 million to $75.9 million
compared to $76.9 million during the third quarter of fiscal 2008,
due to increases in markdowns and sales allowances. �Especially in
these highly promotional times, it is essential to have the power
of nationally recognized brands and the sophistication of
technologically advanced planning systems that allow us to rapidly
react to changes in the environment. The continuous improvement of
our gross margins is a direct consequence of Perry Ellis
International�s strategic shift towards branded product and the
successful implementation of our planning platform,� Mr.
Feldenkreis continued. Compared to the third quarter of fiscal
2008, operating expenditures grew by $3.9 million. This increase
includes the continuous investment in the Company�s women�s
contemporary business acquired in February of this year; $0.6
million in one-time expenses related to the strategic review
previously announced and a pre-tax impairment of $0.6 million in
marketable securities, which were previously classified as
available for sale, and deemed to be other than temporarily
impaired. As a result EBITDA, as adjusted, was $16.0 million for
the third quarter of fiscal 2009, compared to $20.8 million,
representing a reduction of $4.8 million over the same period last
year. A table showing the reconciliation of EBITDA and EBITDA, as
adjusted, to net income is attached. Net income for the third
quarter was $5.0 million, or $0.33 per fully diluted share compared
to net income of $8.5 million, or $0.55 per fully diluted share for
the comparable period last year. �We continue to believe that
investing in our key growth opportunities � particularly women�s
contemporary � will allow these businesses to contribute strongly
in the future. However, in light of the macroeconomic changes we
are all experiencing, we need to make adjustments to enhance our
profitability. The primary objective of the strategic review
launched late third quarter is to determine the correct allocation
of resources across our business portfolio, to ensure that we fund
those businesses with the most potential,� Mr. Feldenkreis
concluded. Balance Sheet and Liquidity review The Company remains
in outstanding financial position. Its recently renewed credit
facility provides a maximum of up to $200 million based on
collateral, with an initial availability of $125 million today,
against which it is currently borrowing $48.2 million. Its
debt-to-capital ratio at 43% is equal to the debt-to-capital ratio
for the same period last year. Excluding the $33.1 million related
to the acquisition of the women�s contemporary businesses, the
company achieved its tenth consecutive quarter of improvement in
its leverage ratios by reducing its debt-to-capital ratio from 43%
to 41% and its debt-to-asset ratio from 34% to 32% at the end of
the third quarter last year. �From a liquidity and leverage
standpoint, Perry Ellis International continues to strengthen its
balance sheet and is in an excellent position not only to weather
the current macroeconomic difficulties, but to take advantage of
the multiple opportunities we believe will be available once the
uncertainty in the environment subsides,� George Feldenkreis,
Chairman and CEO, commented. Inventories at $126.3 million
increased by 3% compared to $122.6 million as of October 31, 2007,
in line with the expected growth in net sales during the fourth
quarter of fiscal 2009. Accounts receivable, at $149.2 million,
increased by $2.6 million compared to the same period last year,
also in line with revenue increases of 1.3% during the first nine
months of fiscal 2009. Mr. Feldenkreis continued, �We are
conservatively managing our working capital. Both inventories and
accounts receivable are in excellent shape and in line with our
projections.� Nine months Operations Review For the nine months
ended on October 31, 2008 (�first nine months of fiscal 2009�),
total revenues increased by 1.3% to $660.0 million from $651.5
million during the same period last year. The Company also improved
gross profit margins by 52 basis points compared to the first nine
months ended on October 31, 2007 (�first nine months of fiscal
2008�). Due to the continued investment in Perry Ellis� growth
platforms � primarily women�s contemporary, Europe, retail and
e-commerce � the Company increased operating expenses by $19.8
million to $193.4 from $173.7 million during the first nine months
of fiscal 2008. Driven by these increases and the impairment of
marketable securities, net income declined from $18.3 million to
$8.7 million, a $9.6 million reduction compared to the first nine
months of fiscal 2008. Update on Strategic Review of
Underperforming Businesses As part of the recently announced
Strategic Review process, the Company reported that it has
identified SG&A reductions in the $14.0 to $15.0 million range
for fiscal 2010, up $9.0 million from the previously identified and
reported savings of $5.0 to $6.0 million related to the
consolidation of Tampa bottom�s production department, headcount
reduction in men�s specialty store businesses and rationalization
of real estate. The new identified initiatives include: Further
reduction in shared services cost structure and advertising and
promotion budget for men�s specialty store business Restructuring
of Perry Ellis Outlet operations Annualization of distribution cost
savings due to closing of Winnsboro distribution center Hiring
freeze and reduction of travel and other discretionary expenses
Most of the identified expenses in connection with this strategic
review are expected to be incurred during fourth quarter of fiscal
2009. Further savings initiatives within the Strategic Review
framework are currently under evaluation. �In light of the overall
economic slowdown, we have taken decisive action to adjust our cost
structure to a level adequately supporting our fiscal 2010
revenues. We are ensuring that our resources are allocated to those
businesses that contribute superior returns to our shareholders,�
Mr. Feldenkreis commented. Fiscal 2009 Guidance The Company
confirmed its previously announced fiscal 2009 earnings guidance in
the range of $0.90 to $1.10 per fully diluted share, including
one-time costs in the $0.10 to $0.15 range related to actions
identified during the strategic review. The Company also confirmed
its revenue guidance for fiscal 2009 in the $875 - $900 million
range. About Perry Ellis International Perry Ellis International,
Inc. is a leading designer, distributor and licensor of a broad
line of high quality men's, women's and children�s apparel,
accessories, and fragrances. The Company�s collection of dress and
casual shirts and tops, suit separates, sweaters, dresses, pants,
shorts, jeans wear, outerwear, swimwear, golf apparel and
activewear is available throughout all major levels of retail
distribution. Through its wholly owned subsidiaries, The Company
owns a portfolio of nationally and internationally recognized
brands including Perry Ellis�, Perry Ellis America�, Perry Ellis
Portfolio�, Jantzen�, Laundry by Shelli Segal�, C&C
California�, Cubavera�, Munsingwear�, Savane�, Farah�, Original
Penguin� by Munsingwear�, Grand Slam�, Natural Issue�, Pro Player�,
the Havanera Co.�, Axis�, Axist�, Manhattan�, John Henry�, Tricots
St. Raphael�, Mondo di Marco�, Redsand�, Gotcha�, and MCD�. The
Company enhances its roster of brands by licensing trademarks from
third parties including Dockers� for outerwear, Nike� and Jag� for
swimwear, and PING� and PGA TOUR� 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, the termination or non-renewal of any material
license agreements to which we are a party, changes in the costs of
raw materials, labor and advertising, our ability to carry out
growth strategies including expansion in international and direct
to consumer retail markets, the level of consumer spending for
apparel and other merchandise, our ability to compete, 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. PERRY ELLIS
INTERNATIONAL, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
(UNAUDITED) (amounts in 000's, except per share information) INCOME
STATEMENT DATA: � � � � Three Months Ended October 31, � � Nine
Months Ended October 31, 2008 2007 2008 2007 � Revenues Net sales $
216,232 $ 220,881 $ 641,398 $ 632,390 Royalty income � 6,583 �
6,582 � 18,665 � 19,138 Total revenues 222,815 227,463 660,063
651,528 Cost of sales � 146,915 � 150,541 � 437,359 � 435,095 Gross
profit 75,900 76,922 222,704 216,433 Operating expenses Selling,
general and administrative expenses 59,933 56,074 182,529 164,067
Depreciation and amortization � 3,551 � 3,492 � 10,898 � 9,594
Total operating expenses � 63,484 � 59,566 � 193,427 � 173,661
Operating income 12,416 17,356 29,277 42,772 Impairment on
marketable securities 580 - 2,563 - Interest expense � 4,355 �
4,069 � 13,134 � 13,890 � Income before minority interest and
income taxes 7,481 13,287 13,580 28,882 Minority interest 238 117
565 372 Income tax provision � 2,244 � 4,636 � 4,288 � 10,197 Net
income $ 4,999 $ 8,534 $ 8,727 $ 18,313 � Net income per share
Basic $ 0.34 $ 0.58 $ 0.59 $ 1.25 Diluted $ 0.33 $ 0.55 $ 0.57 $
1.16 � Weighted average number of shares outstanding Basic 14,752
14,704 14,673 14,685 Diluted 15,170 15,504 15,272 15,817 PERRY
ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
(UNAUDITED) (amounts in 000's) � BALANCE SHEET DATA: � As of
October 31, 2008 January 31, 2008 � Assets Current assets: Cash and
cash equivalents $ 7,729 $ 13,360 Accounts receivable, net 149,237
138,086 Inventories, net 126,327 136,431 Other current assets �
30,423 � � 19,283 � Total current assets � 313,716 � � 307,160 � �
Property and equipment, net 73,920 78,954 Intangible assets, net
221,961 192,656 Other assets � 5,986 � � 7,495 � � Total assets $
615,583 � $ 586,265 � � Liabilities and stockholders' equity
Current liabilities: Accounts payable $ 36,422 $ 52,041 Accrued
expenses and other liabilities 22,802 27,945 Accrued interest 2,094
5,200 Unearned revenues � 4,869 � � 4,104 � Total current
liabilities � 66,187 � � 89,290 � � � Long term liabilities: Senior
subordinated notes payable 149,367 149,244 Senior credit facility
48,221 - Real estate mortgage 24,801 26,066 Deferred pension
obligation 12,905 12,905 Unearned revenues and other liabilities �
30,788 � � 31,940 � Total long term liabilities � 266,082 � �
220,155 � � Total liabilities � 332,269 � � 309,445 � � Minority
interest � 3,260 � � 3,293 � � Stockholders' equity � Preferred
stock - - Common stock 160 147 Additional paid in capital 103,299
96,389 Retained earnings 188,288 179,561 Accumulated other
comprehensive income � (1,894 ) � 1,518 � Total 289,853 277,615 �
Common stock in treasury (9,799 ) (4,088 ) � � Total stockholders'
equity � 280,054 � � 273,527 � � Total liabilities and
stockholders' equity $ 615,583 � $ 586,265 � � � � � � PERRY ELLIS
INTERNATIONAL, INC. AND SUBSIDIARIES RECONCILIATION OF NET INCOME
AND GROSS PROFIT TO EBITDA(1) (UNAUDITED) (amounts in 000's) �
Three Months Ended October 31, � Nine Months Ended October 31, �
2008 � � � 2007 � � � 2008 � � � 2007 � � � Net income as reported
$ 4,999 $ 8,534 $ 8,727 $ 18,313 Plus: Depreciation and
amortization 3,551 3,492 10,898 9,594 Interest expense 4,355 4,069
13,134 13,890 Minority interest 238 117 565 372 Income tax
provision � 2,244 � � 4,636 � � 4,288 � � 10,197 � EBITDA 15,387
20,848 37,612 52,366 Impairment on marketable securities � 580 � �
- � � 2,563 � � - � EBITDA as adjusted $ 15,967 � $ 20,848 � $
40,175 � $ 52,366 � � � � � Gross profit $ 75,900 $ 76,922 $
222,704 $ 216,433 Less: Selling, general and administrative
expenses and impairment on equity securities � (60,513 ) � (56,074
) � (185,092 ) � (164,067 ) EBITDA 15,387 20,848 37,612 52,366
Impairment on marketable securities � 580 � � - � � 2,563 � � - �
EBITDA as adjusted $ 15,967 � $ 20,848 � $ 40,175 � $ 52,366 � � �
� � � Total revenues $ 222,815 $ 227,463 $ 660,063 $ 651,528 �
EBITDA margin percentage of revenues 7.2 % 9.2 % 6.1 % 8.0 % � � �
(1)EBITDA consists of earnings before interest, taxes,
depreciation, amortization and minority interest. EBITDA is not a
measurement of financial performance under accounting principles
generally accepted in the United States of America, and does not
represent cash flow from operations. EBITDA is presented solely as
a supplemental disclosure because management believes that it is a
common measure of operating performance in the apparel industry. �
"EBITDA as adjusted" consists of EBITDA adjusted for the impact of
the non-cash impairment of marketable securities. This impairment
is not of indicative of our ongoing operations and thus to get a
more comparable result with the operating performance of the
apparel industry, it has been removed from the calculation.
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