Perry Ellis International, Inc. (NASDAQ:PERY) today reported
results for the fourth quarter (�fourth quarter of fiscal 2009�)
and the fiscal year ended January 31, 2009 (�fiscal 2009�).
For the fourth quarter of fiscal 2009, the Company reported a
net loss of $21.6 million, or $1.58 per diluted share, compared to
net income of $9.9 million, or $0.65 per fully diluted share for
the comparable period last year. The loss in the fourth quarter of
fiscal 2009 included:
� � � (i) � � � a non-cash pre-tax charge to reduce the reported
value of certain trademarks and leasehold improvements of $22.3
million, or $1.17 per diluted share; (ii) a non-cash impairment of
marketable securities of $234 thousand, or $0.01 per share; and
(iii) a one-time non-recurring restructuring cost of $1.2 million,
or $0.06 per share related to its Strategic Review process.
Adjusted to exclude the non-cash and non-recurring charges, the
Company achieved fourth quarter earnings before interest, tax,
depreciation and amortization (�EBITDA�) of $2.4 million, a net
loss of $4.6 million and a net loss of $0.34 per share. A
reconciliation table of fiscal 2009 and fourth quarter of fiscal
2009 net loss and earnings per share from GAAP to earnings
excluding non-cash impairment asset charges, non-recurring and
restructuring costs is included.
For fiscal 2009, the Company reported a net loss of $12.9
million or $0.89 per diluted share, including:
� � � (i) � � � a non-cash impairment of marketable securities of
$2.8 million, or $0.15 per share incurred primarily during the
second quarter; (ii) a one-time non-recurring restructuring cost of
$4.1 million, or $0.21 per share related to its Strategic Review
process, reorganization of the European division and infrastructure
development of its women�s division, which was acquired in February
2008. These costs were primarily incurred during the second and
fourth quarters of fiscal 2009; and (iii) a non-cash pre-tax charge
to reduce the value of certain trademarks and leasehold
improvements of $22.3 million, or $1.17 per diluted share.
Excluding the above charges, the Company achieved EBITDA of
$45.6 million, net income of $9.6 million and net earnings per
fully diluted share of $0.65. This compares to fiscal 2008 EBITDA
of $75.8 million, net income of $28.2 million and earnings per
fully diluted share of $1.80. A reconciliation table of fiscal 2009
and fourth quarter of fiscal 2009 net loss and earnings per share
from GAAP to earnings excluding non-cash impairment asset charges,
non-recurring and restructuring costs is included.
Fourth Quarter Operations Review
Oscar Feldenkreis, President and COO, commented, �We started
fiscal 2009 with strong revenue growth and gross margin
improvements; when the environment started to deteriorate we were
able to maintain our performance through the first nine months of
the year. However, consistent with the retail industry in general,
the highly promotional holiday season led to the most challenging
quarter we have seen. Our sales and gross margins were
significantly affected by the pull-back in consumer spending and
the strategy of certain retailers to accelerate the promotional
cycle of products during the holiday season while simultaneously
curtailing inventory receipts.�
For the three months ended January 31, 2009, total revenues were
$191.2 million, a 10% reduction compared to $212.3 million reported
in the fourth quarter of the fiscal year ended January 31, 2008
(�fourth quarter of fiscal 2008�). Although some of our platforms
reported above-plan results, these were offset by:
� � � (i) � � �
Revenue decline of $6.4 million
related to replenishment of private label bottoms business;
(ii) Planned exit of several brands at the men�s specialty store
channel due to difficulties to get insurance on credit for this
channel; and the (iii) Highly promotional environment at the
department store channel, primarily affecting our Perry Ellis
brand.
Gross profit declined from $75.2 million to $55.5 million
compared to the fourth quarter of fiscal 2008, driven by a higher
level of markdowns and sales allowances to retail partners and the
overall reduction in gross sales. Gross margins declined from 35.4%
to 29.0%, negatively affected by the liquidation at below cost
product previously sold in the specialty store channel and
retailers who filed for Chapter 11 this year.
Mr. Feldenkreis continued, �Even in today�s environment, the
consumer is still buying newness, strong brands, and affordable,
high-quality product, which is the foundation we have developed at
Perry Ellis. The value proposition of our brands remains highly
attractive to consumers and led to record shipments to retailers
like Kohl�s and J.C. Penney. In addition, some of our businesses
such as Perry Ellis in men�s and Nike in swim continued to gain
market share in this tough environment.�
As expected, selling, general and administrative (�SG&A�)
expenses grew during the fourth quarter by $2.5 million, primarily
driven by:
� � � (i) � � � $1.2 million in one-time costs related to severance
and exiting of redundant offices; and (ii) $4.2 million in
recurring operating expenses related to our new women�s
contemporary division.
These expenses were partially offset by initial results of the
cost saving initiatives related to the Strategic Review process
implemented during the third quarter of fiscal 2009.
�We are pleased to see the initial results of our restructuring
initiatives. More than ever, we are committed to the strict control
of expenses and investments to make sure that we are a much
stronger company once the economy starts to improve,� Mr.
Feldenkreis concluded.
In the fourth quarter of fiscal 2009, the Company recorded
expenses for depreciation and amortization of $3.9 million,
compared to $3.7 million during the same period last year.
During the required impairment evaluation under the U.S.
generally accepted accounting principles (�GAAP�), the Company
recorded a non-cash pre-tax impairment charge of $22.3 million
during the fourth quarter of fiscal 2009. This charge is the result
of the application of the impairment testing to certain trademarks
and leasehold improvements primarily related to brands sold through
the specialty store channel and by retailers who filed for chapter
11 during fiscal 2009 (�non-cash trademark and leasehold
improvement charges�).
�These impairment charges have no impact on our cash flow,
operations or compliance with debt covenants,� George Feldenkreis,
Chairman and CEO, stated. �Our portfolio of brands remains well
positioned to navigate these turbulent times, and we have
initiatives in place to make our company more efficient by reducing
costs. We are focused on the execution of our long term growth
strategies and remain confident in the strength of our business
model,� Mr. Feldenkreis continued.
Driven by these non-cash trademark and leasehold improvement
charges and the one-time costs related to severance and exiting of
redundant offices, the Company recorded a GAAP operating loss of
$24.9 million during the fourth quarter of fiscal 2009, compared to
GAAP operating income of $19.7 million during the same period last
year.
Balance Sheet and Liquidity Review
Proactive cash flow, inventory and account receivable management
has allowed the Company to remain in a solid financial
position.
�We managed our business with strict liquidity discipline and
controlled capital, inventory and expenses during fiscal 2009. We
remain comfortable with our management of working capital and our
capitalization ratios. Management is closely working with our
retail partners and taking a disciplined and proactive approach to
control both inventories and our receivables,� Mr. Feldenkreis
continued. �As we turn the page from a very difficult fiscal year
2009, we have taken decisive action during the fourth quarter and
now have all necessary charges implemented. We are beginning 2010
very focused on executing our initiatives to drive earnings.�
Inventories at $139.1 million increased by 2% compared to $136.4
million as of January 31, 2008 and remain in-line with our
projected shipments for the first quarter of 2010. Inventory turns
improved from 4.2 in fiscal 2008 to 4.3 turns during fiscal 2009.
Accounts receivable, at $142.9 million, increased by $4.8 million
compared to January 31, 2008. The Company�s
current-assets-to-current-liabilities ratio improved from 3.4 to
4.0 compared to the same period last year. At year end, the Company
had $66.1 million in excess availability on its asset-based credit
facility.
Fiscal 2009 Operations Results
Perry Ellis International reported total revenues for fiscal
2009 of $851.3 million, a 1.5% decline compared to the $863.9
million reported for the fiscal year ended January 31, 2008
(�fiscal 2008�). A record year for swim, licensing and e-commerce
divisions, and our golf and Hispanic brands, were offset by:
� � � (i) � � �
Increase of $8.8 million, or 12%,
in markdowns and sales allowances to retail partners;
(ii) Planned decrease of $32 million in private label bottoms in
the mass distribution channel, plus slowdown of replenishment
programs in department stores; (iii) Sales reduction of $8.4
million related to the exiting of the men�s specialty store
channel; (iv) Planned revenue decrease of $8 million due to the
licensing of Perry Ellis dress shirt business; (v) Decrease of $4.8
million on ASI/Corporate and Green Grass channels for PING brand;
and (vi) Order cancellation from retailers filing for Chapter 11
during the year.
Gross margin decreased by 107 basis points to 32.7% from 33.8%
in fiscal 2008, driven by a highly promotional holiday season and
liquidation of inventory below cost, both primarily during the
fourth quarter.
During fiscal 2009, SG&A increased by $21 million, primarily
driven by recurring expenses of $18.2 million due to the new
women�s contemporary platform and $3.8 million in operating
expenses related to the addition of eight new retail stores. These
increases were partially offset by strategic expense reductions - a
hiring freeze and cancelation of management incentive bonuses,
reduction in advertising and promotion and increased discipline in
purchases of samples and design expenses.
In addition, the Company also incurred $6.9 million in one-time,
non-recurring expenses during fiscal 2009:
� � � (i) � � � One-time restructuring and setup costs of $4.1
million related to: a. � � Restructuring costs of European
operations during the second quarter; b. Severance and exiting
costs related to Strategic Review cost savings initiatives; and c.
Initial setup costs related to the women�s contemporary platform
during second quarter; and (ii) Non-cash impairment of marketable
securities charges of $2.8 million for the year.
Excluding the non-cash trademark and leasehold improvement
charges, non-cash impairment of marketable securities and one-time
restructuring and set-up costs, the Company recorded EBITDA of
$45.6 million, compared to $75.8 during the same period last year.
Including non-cash impairment charges and non-recurring costs, the
Company recorded EBITDA of $16.3 million. A table showing the
reconciliation of EBITDA to net income is attached.
GAAP operating income for fiscal 2009 � including non-cash
trademark and leasehold improvement charges and the one-time costs
related to severance and exiting of redundant offices - was $4.3
million compared to $62.5 million during fiscal 2008.
Fiscal 2010 Guidance
The Company announced that given the current uncertainty in the
macroeconomic environment, it will temporarily suspend its policy
of providing annual guidance until there is further clarity in the
consumer and retail environment.
�We are confident about our prospects for fiscal 2010 and remain
committed to maximizing shareholder value. We have the right
diversification strategy, and we have taken all necessary actions
to adjust our cost structure to the new economic realities,� Mr.
Feldenkreis mentioned.
Mr. Feldenkreis concluded, �Several of our business platforms
keep delivering strong results, such as swim, denim, golf, and
Hispanic brands. Our penetration at all channels of distribution
also continues producing positive results, and the turn around of
our women�s contemporary and retail platforms are well
underway.�
�At this stage for this year, we anticipate a high single to low
double digit decline in revenues, with improvement in gross margins
during the second half of the year, and SG&A reduction of
approximately $20 million dollars thanks to the cost reductions
derived from our Strategic Review process. However, it is not
prudent for us to generate expectations at this stage or commit to
a firm guidance, as we need to see how the consumer reacts to
governmental actions aimed at improving confidence and how our
spring/summer products perform at retail. As soon as the
uncertainty decreases, we will resume our annual guidance
policy.�
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�, Jantzen�, Laundry� by
Shelli Segal, C&C California�, Cubavera�, Munsingwear�,
Savane�, Original Penguin�, Grand Slam�, Natural Issue�, Pro
Player�, the Havanera Co. �, Axis�, Tricots St. Raphael�, Gotcha�,
Girl Star� 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 January
31, Year Ended January 31, 2009 2008
2009 2008 � Revenues Net sales $ 184,470 $ 206,075 $
825,868 $ 838,465 Royalty income � 6,764 � � 6,263 � 25,429 � �
25,401 Total revenues 191,234 212,338 851,297 863,866 Cost of sales
� 135,687 � � 137,137 � 573,046 � � 572,232 Gross profit 55,547
75,201 278,251 291,634 Operating expenses Selling, general and
administrative expenses 54,311 51,806 236,840 215,873 Depreciation
and amortization 3,886 3,684 14,784 13,278 Impairment on long-lived
assets � 22,299 � � - � 22,299 � � - Total operating expenses �
80,496 � � 55,490 � 273,923 � � 229,151 Operating (loss) income
(24,949 ) 19,711 4,328 62,483 Impairment on marketable securities
234 - 2,797 - Interest expense � 4,357 � � 3,704 � 17,491 � �
17,594 � (Loss) income before minority interest and income taxes
(29,540 ) 16,007 (15,960 ) 44,889 Minority interest 47 559 612 931
Income tax provision � (7,970 ) � 5,588 � (3,682 ) � 15,785 Net
(loss) income $ (21,617 ) $ 9,860 $ (12,890 ) $ 28,173 � Net (loss)
income per share Basic $ (1.58 ) $ 0.67 $ (0.89 ) $ 1.92 Diluted $
(1.58 ) $ 0.65 $ (0.89 ) $ 1.80 � Weighted average number of shares
outstanding Basic 13,650 14,630 14,416 14,675 Diluted 13,650 15,165
14,416 15,657
�
PERRY ELLIS INTERNATIONAL, INC.
AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)
(amounts in 000's)
� �
BALANCE SHEET DATA: � As of January 31, 2009 January 31,
2008 �
Assets Current assets: Cash and cash
equivalents $ 8,813 $ 13,360 Accounts receivable, net 142,870
138,086 Inventories, net 139,074 136,431 Other current assets �
31,508 � � 19,283 � Total current assets � 322,265 � � 307,160 � �
Property and equipment, net 70,222 78,954 Intangible assets, net
201,229 192,656 Other assets � 5,870 � � 7,495 � � Total assets $
599,586 � $ 586,265 � �
Liabilities and stockholders' equity
Current liabilities: Accounts payable $ 45,826 $ 52,041
Accrued expenses and other liabilities 24,319 27,945 Accrued
interest 5,336 5,200 Unearned revenues � 5,654 � � 4,104 � Total
current liabilities � 81,135 � � 89,290 � � �
Long term
liabilities: Senior subordinated notes payable 149,409 149,244
Senior credit facility 54,415 - Real estate mortgage 24,686 26,066
Deferred pension obligation 17,708 12,905 Unearned revenues and
other liabilities � 20,132 � � 31,940 � Total long term liabilities
� 266,350 � � 220,155 � � Total liabilities � 347,485 � � 309,445 �
� Minority interest � 3,307 � � 3,293 � �
Stockholders'
equity � Preferred stock - - Common stock 160 147 Additional
paid in capital 103,933 96,389 Retained earnings 166,671 179,561
Accumulated other comprehensive income � (6,306 ) � 1,518 � Total
264,458 277,615 � Common stock in treasury (15,664 ) (4,088 ) � �
Total stockholders' equity � 248,794 � � 273,527 � � Total
liabilities and stockholders' equity $ 599,586 � $ 586,265 �
�
PERRY ELLIS INTERNATIONAL, INC.
AND SUBSIDIARIES
�
Reconciliation of fiscal 2009
and fourth quarter of fiscal 2009 net loss and earnings per share
from GAAP to earnings excluding non-cash impairment asset charges,
non-recurring and restructuring costs
(UNAUDITED)
(amounts in 000's)
� � �
Three Months Ended January 31, Year Ended January
31, 2009 2008 2009 2008 Net (loss)
income as reported $ (21,617 ) $ 9,860 $ (12,890 ) $ 28,173 Plus:
Impairment on marketable securities 234 2,797 Impairment on
trademarks and leasehold improvements 22,299 22,299 One-time
non-recurring restructuring costs 1,176 4,147 Minus: Tax benefit on
non-cash impairments (6,720 ) (6,720 )
�
� � � �
Net (loss) income excluding
non-cash impairment asset charges and non-recurring costs
$ (4,628 ) $ 9,860 $ 9,632 � $ 28,173 � � Net (loss) income as
reported $ (21,617 ) $ 9,860 $ (12,890 ) $ 28,173 Net (loss) per
share, diluted as reported $ (1.58 ) $ 0.65 $ (0.89 ) $ 1.80 �
Net (loss) income excluding
non-cash impairment asset charges and non-recurring costs
$ (4,628 ) $ 9,860 $ 9,632 $ 28,173
Net (loss) per share excluding
non-cash impairment asset charges and non-recurring costs,
diluted
$ (0.34 ) $ 0.65 $ 0.65 $ 1.80 � Weighted average number of shares
outstanding Basic 13,650 14,630 14,416 14,675 Diluted 13,650 15,165
14,867 15,657 �
Three Months Ended January 31, Year Ended
January 31, 2009 2008 2009 2008 Net
(loss) per share, diluted as reported $ (1.58 ) $ 0.65 $ (0.89 ) $
1.80 Plus: Net per share impairment on marketable securities $ 0.01
$ 0.15 Net per share impairment on trademarks and leasehold
improvements $ 1.17 $ 1.17 Net per share one-time non-recurring
restructuring costs $ 0.06 $ 0.21
�
� � � �
Net (loss) per share excluding
non-cash impairment asset charges and non-recurring costs,
diluted
$ (0.34 ) $ 0.65 $ 0.65 � $ 1.80
�
PERRY ELLIS INTERNATIONAL, INC.
AND SUBSIDIARIES
RECONCILIATION OF NET INCOME
AND GROSS PROFIT TO EBITDA(1)
(UNAUDITED)
(amounts in 000's)
� � � �
Three Months Ended January 31, Year Ended January
31, 2009 2008 2009 2008 � � Net
(loss) income as reported $ (21,617 ) $ 9,860 $ (12,890 ) $ 28,173
Plus: Depreciation and amortization 3,886 3,684 14,784 13,278
Interest expense 4,357 3,704 17,491 17,594 Minority interest 47 559
612 931 Income tax (benefit) provision � (7,970 ) � 5,588 � (3,682
) � 15,785 EBITDA (21,297 ) 23,395 16,315 75,761 Impairment on
marketable securities 234 - 2,797 - One-time non-recurring
restructuring costs 1,176 - 4,147 - Impairment on long-lived assets
� 22,299 � � - � 22,299 � � - EBITDA as adjusted $ 2,412 � $ 23,395
$ 45,558 � $ 75,761 � � � (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 and long-lived assets. This impairment is
associated with the turmoil in the global economy and 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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