Perry Ellis International, Inc. (NASDAQ:PERY) today reported
results for the fourth quarter (“fourth quarter of fiscal 2010”)
and the fiscal year ended January 31, 2010 (“fiscal 2010”).
Fiscal 2010 Results
Fiscal 2010 revenues were in line with company guidance at
$754.2 million versus $851.3 million reported in the prior year
ended January 31, 2009 (“fiscal 2009”). The company reported net
income of $13.2 million or $1.01 per fully diluted share, compared
to a net loss of $12.9 million or $.89 per fully diluted share, for
the comparable period last year.
“Fiscal 2010 was a turnaround year for Perry Ellis
International,” commented Oscar Feldenkreis, President and Chief
Operating Officer. “We delivered earnings ahead of expectations
during a very challenging economic downturn. We also took the
initiative to seek out new business opportunities such as the
Callaway & Pierre Cardin license agreements. We expect to see
2011 as a breakout year to capitalize on these opportunities as
well as our core growth platforms.”
Overall gross margins for fiscal 2010 improved 30 bps to 33.0%
compared to 32.7% in fiscal 2009. The margin expansion was mainly
driven by a mix of higher margin branded product, the exiting of
several low profit private label programs, the exit of some
underperforming businesses, the introduction of Callaway Golf
direct sales and reduced sales and operational allowances resulting
from strong product performance and improved operational
efficiencies.
Cost reduction initiatives and strict expense controls
throughout fiscal 2010 resulted in selling, general and
administrative expense reductions of $36 million. Selling, general
and administrative expenses at $200.4 million represented a 15%
reduction compared to $236.8 million for fiscal 2009. As a result
of these cost reductions, the company achieved fiscal 2010 earnings
before interest, tax, impairments, depreciation and amortization
(“adjusted EBITDA”) of $48.7 million, a $3.2 million or 7% increase
over fiscal 2009. A table showing the reconciliation of EBITDA to
net income is attached.
Fourth Quarter Fiscal 2010 Results
Overall, fourth quarter results were ahead of internal plans and
above analyst consensus in adjusted EBITDA and EPS. Total revenue
for the quarter was $196.4 million, a 3% increase compared to
$191.2 million reported in the fourth quarter of fiscal 2009. The
increase is attributable to a turnaround of Perry Ellis Collection
at department stores, initial shipments of Callaway and TOP-FLITE®
spring product, as well as improved performance in direct to
consumer businesses, primarily the Perry Ellis and Original Penguin
retail stores. These increases were slightly offset by the planned
exit of certain mass merchant programs and the exit of licenses in
outerwear and green grass golf.
Reduced levels of markdown support coupled with strong
performance of branded businesses at retail positively impacted
gross margins, improving them to 35.5% during the quarter compared
to 29.0% for the comparable quarter last year, representing a 650
bps improvement. Fourth quarter adjusted EBITDA was $20.1 million
compared to $2.4 million, a $17.7 million dollar improvement, over
the same period last year. A table showing the reconciliation of
adjusted EBITDA to net income is attached. Net income was $8.5
million, or $.64 per fully diluted share, compared to a loss of
$21.6 million or $1.58 per fully diluted share during the forth
quarter of fiscal 2009.
“We feel that we are past the worst and most severe global
economic recession the country and the industry have ever seen, and
we are very proud of our fiscal 2010 and fourth quarter earnings.
Our performance was driven by the strength of our brands, the
continued implementation and execution of all of our growth
strategies, and because of the dedication and hard work of all of
our associates around the world. All of these factors have ensured
that Perry Ellis International will continue to emerge as an
industry leader and deliver even better results in the current
fiscal year,” commented George Feldenkreis, Chairman and Chief
Executive Officer.
Balance Sheet and Liquidity Review
Disciplined working capital management allowed the company to
finish the year with its strongest balance sheet and liquidity
position in 10 years. Generating $88.8 million in cash from
operations and a free cash flow of $85.1 million during the year
allowed the company to fully pay down its senior credit facility
and also retire $21 million in senior notes, which the company
expects will represent approximately $1.8 million in interest
savings annually. Additionally, the company ended the year with
$18.3 million in cash, an increase of $9.5 million year over
year.
Proactive planning and inventory discipline during fiscal 2010
allowed the company to reduce its inventories by $26.8 million, or
19%, compared to fiscal 2009 with total inventory of $112.3
million. Inventory turns increased to 4.72 times, compared to 4.25
times last year, due to a consistent flow of inventory and the
timely clearance of aged goods. Accounts receivable were reduced to
$139.9 million compared to $142.9 million as of January 31, 2009.
This represents a $3.0 million or 2% reduction, a positive trend in
relation to revenue growth in the quarter.
“As the macroeconomic environment and consumer confidence
continues to show signs of improvement, Perry Ellis International
will continue to be proactive and take decisive actions to continue
strengthening our financial position and prepare ourselves for
success in the years ahead,” commented Mr. Feldenkreis.
Fiscal 2011 Guidance
The company announced that for the twelve months ending January
31, 2011 (“fiscal 2011”) it anticipates earnings per fully diluted
share in the range of $1.25 - $1.40 and revenues to be in the range
of $770 - $790 million for the year, representing a low- to
mid-single-digit increase. Additionally, with the exit of
underperforming businesses in fiscal 2010 along with new higher
margin growth initiatives such as Callaway, gross margins are
expected to continue to improve throughout fiscal 2011.
“We are very excited about our multiple growth opportunities
this year as we see most of our customers experiencing increased
sales. Perry Ellis is experiencing the strongest sell thrus in the
department store channel we have seen in years and we continue to
capitalize on our position as the number one premier golf apparel
supplier in the country. We also continue to read and meet the
needs of the Hispanic consumer very well. Our retail and e-commerce
operations showed 19% growth in gross profit during the fourth
quarter compared to last year and we are also starting to see the
turnaround in our contemporary businesses. All of this coupled with
the new opportunities such as Callaway, Pierre Cardin, &
Collegiate should position us extremely well for 2010,” commented
George Feldenkreis.
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® by Munsingwear®, Grand Slam®, Natural
Issue®, Pro Player®, the Havanera Co.®, Axis®, Tricots St.
Raphael®, Gotcha®, Girl Star®, MCD® John Henry®, Mondo di Marco®,
Redsand®, Manhattan®, Axist® and Farah®. The Company enhances its
roster of brands by licensing trademarks from third parties
including Pierre Cardin® for men’s sportswear, Nike® and Jag® for
swimwear, and Callaway®, 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 Years Ended January 30, 2010
January 31, 2009 January 30, 2010 January 31,
2009 Revenues Net sales $ 190,045 $ 184,470 $ 729,217 $
825,868 Royalty income 6,393 6,764
24,985 25,429 Total revenues 196,438 191,234 754,202
851,297 Cost of sales 126,769 135,687
505,104 573,046 Gross profit 69,669 55,547 249,098
278,251 Operating expenses Selling, general and administrative
expenses 49,578 54,311 200,356 236,840 Depreciation and
amortization 3,320 3,886 13,625 14,784 Impairment on long-lived
assets 254 22,299 254 22,299
Total operating expenses 53,152 80,496
214,235 273,923 Operating income (loss) 16,517
(24,949 ) 34,863 4,328 Impairment on marketable securities - 234 -
2,797 Cost on early extinguishment of debt 357 - 357 - Interest
expense 4,076 4,357 17,371
17,491 Income (loss) before income taxes 12,084
(29,540 ) 17,135 (15,960 ) Income tax (benefit) provision
3,508 (7,970 ) 3,615 (3,682 ) Net income
(loss) 8,576 (21,570 ) 13,520 (12,278 ) Less: net income
attributed to noncontrolling interest 88 47 353 612
Net income (loss) attributed to
Perry Ellis International, Inc.
$ 8,488 $ (21,617 ) $ 13,167 $ (12,890 ) Net income (loss)
attributed to Perry Ellis International, Inc. per share Basic $
0.67 $ (1.58 ) $ 1.04 $ (0.89 ) Diluted $ 0.64 $ (1.58 ) $ 1.01 $
(0.89 ) Weighted average number of shares outstanding Basic
12,730 13,650 12,699 14,416 Diluted 13,351 13,650 13,005 14,416
PERRY ELLIS INTERNATIONAL, INC.
AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)
(amounts in 000's)
BALANCE SHEET DATA: As of January 30,
2010 January 31, 2009
Assets Current assets:
Cash and cash equivalents $ 18,269 $ 8,813 Accounts receivable, net
139,934 142,870 Inventories 112,315 139,074 Other current assets
24,822 31,508 Total current assets
295,340 322,265 Property and
equipment, net 60,467 70,222 Intangible assets 200,315 201,229
Other assets 5,194 5,870 Total
assets $ 561,316 $ 599,586
Liabilities and
stockholders' equity Current liabilities: Accounts
payable $ 65,203 $ 45,826 Accrued expenses and other liabilities
20,576 23,825 Accrued interest payable 4,482 5,336 Current portion
- real estate mortgages 11,021 494 Unearned revenues 6,002
5,654 Total current liabilities 107,284
81,135
Long term
liabilities: Senior subordinated notes payable 129,870 149,409
Senior credit facility - 54,415 Real estate mortgages 13,712 24,686
Deferred pension obligation 17,237 17,708 Unearned revenues and
other long-term liabilities 23,097 20,132
Total long-term liabilities 183,916
266,350 Total liabilities 291,200
347,485
Stockholders' equity
Preferred stock - - Common stock 161 160 Additional paid-in-capital
107,527 103,933 Retained earnings 179,838 166,671 Accumulated other
comprehensive loss (3,655 ) (6,306 ) Treasury stock at cost
(17,415 ) (15,664 ) Total Perry Ellis International, Inc.
stockholders' equity 266,456 248,794 Noncontrolling interest
3,660 3,307 Total stockholders' equity 270,116
252,101 Total liabilities and
stockholders' equity $ 561,316 $ 599,586
PERRY ELLIS INTERNATIONAL, INC.
AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO
EBITDA(1)
(UNAUDITED)
(amounts in 000's)
Three Months Ended Years Ended
January 30, 2010 January 31, 2009 January
30, 2010 January 31, 2009 Net income
(loss) attributed to Perry Ellis International, Inc. $ 8,488 $
(21,617 ) $ 13,167 $ (12,890 ) Plus: Depreciation and amortization
3,320 3,886 13,625 14,784 Interest expense 4,076 4,357 17,371
17,491 Cost on early extinguishment of debt 357 - 357 - Net income
attributable to noncontrolling interest 88 47 353 612 Income tax
(benefit) provision 3,508 (7,970 ) 3,615
(3,682 ) EBITDA 19,837 (21,297 ) 48,488 16,315 Impairment on
marketable securities - 234 - 2,797 One-time non-recurring
restructuring costs - 1,176 - 4,147 Impairment on long-lived assets
254 22,299 254 22,299
EBITDA as adjusted $ 20,091 $ 2,412 $ 48,742 $ 45,558
(1) EBITDA consists of earnings before interest, cost on
early extinguishment of debt, taxes, depreciation, amortization and
noncontrolling 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
and the one-time non-recurring restructuring costs. These are not
indicative of our ongoing operations and thus to get a more
comparable result with the operating performance of the apparel
industry, they have been removed from the calculation.
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