Perry Ellis International, Inc. (NASDAQ:PERY) today reported
results for the third quarter and nine months ended October 30,
2010.
Third Quarter Operations Review
For the three months ended October 30, 2010 (“third quarter of
fiscal 2011), total revenues increased 13% to $201.3 million,
compared to $178.6 million in the third quarter ended October 31,
2009 (“third quarter of fiscal 2010”). Revenue increases were
realized across numerous businesses- led by strong performance
within Perry Ellis branded businesses, golf, retail and bottoms
businesses.
“Our impressive third quarter results remain a testament to the
strength of our brands and the resiliency of our diversified
business model,” commented Oscar Feldenkreis, President and Chief
Operating Officer of Perry Ellis International. “Focus on brands,
product innovation and analytical planning systems have lead to a
successful formula. Our partnership with all our major retail
customers has enabled us to identify enhancements to drive business
opportunities, which is evident in the results we reported
today.”
Gross profit for the quarter was $71.6 million - an increase of
17% or $10.6 million compared to third quarter last year- resulting
in gross margins improving by 140 basis points to 35.6% compared to
34.2% last year. Gross margin expansion for the quarter was driven
by continued focus on inventory planning and optimizing sell
through rates across retail doors.
Earnings before interest, tax, depreciation, and amortization
(“EBITDA”) for the third quarter of fiscal 2011 grew 37% to $16.9
million compared to $12.3 million during the comparable period last
year. This increase represents an EBITDA margin of 8.4% for the
quarter. A table showing the reconciliation of EBITDA to net income
is attached. In addition, the Company recognized a 73% increase in
net income to $7.2 million representing $0.51 per fully diluted
share for the quarter, compared to net income of $4.1 million and
$0.31 per fully diluted share in the third quarter last year.
Balance Sheet Review
The Company remained in an outstanding financial position at
quarter end. Disciplined working capital management provided for
full availability under the senior credit facility. In addition,
the Company reported $13.7 million in cash and cash
equivalents.
Strategic inventory purchases to secure pricing and capacity
resulted in quarter end inventory of $128.5 million, representing a
31% increase over third quarter last year and in-line with Company
expectations. The increase was the result of the Company’s plan to
accelerate the receipt of goods in anticipation of possible price
increases. Approximately $15 million or half of the increase is for
goods to be shipped in fiscal 2012.
Nine Months Operations Review
For the nine months ended October 30, 2010 total revenue
increased 5% to $583.4 million from $557.8 million during the nine
months ended October 31, 2009. Throughout the first nine months of
fiscal 2011 the Company’s continued focus and strategy on driving
sales of higher margin branded businesses paved the way for a solid
350 basis point improvement in gross margin to 35.7% compared to
32.2% last year.
The Company also saw a significant increase in net income to
$16.4 million, an increase of almost 250% compared to net income of
$4.7 million last year. This reflects a 250 basis point improvement
in EBITDA margin to 7.6% for the first nine months of the year
compared to last year.
Fiscal 2011 Guidance
The Company is increasing its fiscal 2011 earnings guidance
based on better than expected year to date results. The Company
currently expects diluted earnings per share in the range of $1.72
- $1.80 from the previously announced full fiscal 2011 year range
of $1.53 - $1.68.
Revenues are expected to surpass $785 million for the full
year.
“We are extremely pleased with our results through the third
quarter of fiscal 2011. We have successfully executed in the core
platforms as well as the new business initiatives we launched
coming into the year. We continue to remain optimistic as to
performance of our brands and product categories going into the
holiday season,” commented George Feldenkries, Chairman and Chief
Executive Officer of Perry Ellis International.
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®, Centro®, Solero®,
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®, TOP-FLITE®, PGA TOUR® and
Champions 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, trade names 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 Nine Months Ended
October 30, 2010 October 31, 2009 October
30, 2010 October 31, 2009 Revenues Net
sales $ 194,856 $ 172,154 $ 564,720 $ 539,172 Royalty income
6,421 6,397 18,660 18,592 Total
revenues 201,277 178,551 583,380 557,764 Cost of sales
129,690 117,564 374,896 378,335 Gross
profit 71,587 60,987 208,484 179,429 Operating expenses Selling,
general and administrative expenses 54,713 48,704 163,588 150,778
Depreciation and amortization 2,973 3,292
9,110 10,305 Total operating expenses 57,686
51,996 172,698 161,083 Operating income
13,901 8,991 35,786 18,346 Cost on early extinguishment of debt - -
730 - Interest expense 3,181 4,711
10,289 13,295 Income before income taxes 10,720 4,280
24,767 5,051 Income tax (benefit) provision 3,407 (26
) 7,966 107 Net income 7,313 4,306 16,801 4,944
Less: net income attributed to noncontrolling interest 138
168 400 265 Net income attributed to
Perry Ellis International, Inc. $ 7,175 $ 4,138 $ 16,401 $
4,679 Net income attributed to Perry Ellis International,
Inc. per share Basic $ 0.54 $ 0.33 $ 1.25 $ 0.37 Diluted $
0.51 $ 0.31 $ 1.16 $ 0.36 Weighted average number of
shares outstanding Basic 13,190 12,695 13,076 12,688 Diluted 14,193
13,230 14,084 12,889
PERRY ELLIS INTERNATIONAL, INC. AND
SUBSIDIARIES SELECTED FINANCIAL DATA (UNAUDITED)
(amounts in 000's) BALANCE SHEET DATA:
As of October 30, 2010 January 30, 2010
Assets Current assets: Cash and cash equivalents $
13,691 $ 18,269 Accounts receivable, net 117,706 139,934
Inventories 128,544 112,315 Other current assets 23,358
24,822 Total current assets 283,299 295,340
Property and equipment, net 56,351 60,467 Intangible assets
200,315 200,315 Other assets 5,005 5,194 Total
assets $ 544,970 $ 561,316
Liabilities and equity
Current liabilities: Accounts payable $ 51,391 $ 65,203
Accrued expenses and other liabilities 24,326 31,597 Accrued
interest payable 1,418 4,482 Unearned revenues 5,789
6,002 Total current liabilities 82,924 107,284
Long term liabilities: Senior subordinated notes
payable 105,311 129,870 Real estate mortgages 25,938 13,712
Deferred pension obligation 14,487 17,237 Unearned revenues and
other long-term liabilities 25,671 23,097 Total
long-term liabilities 171,407 183,916 Total
liabilities 254,331 291,200
Equity:
Total stockholders' equity 290,639 270,116
Total liabilities and stockholders' equity $ 544,970 $ 561,316
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA(1) (UNAUDITED)
(amounts in 000's) Three Months Ended
Nine Months Ended October 30, 2010
October 31, 2009 October 30, 2010
October 31, 2009
Net income attributed to Perry Ellis International,
Inc. $ 7,175 $ 4,138 $ 16,401 $ 4,679 Plus: Depreciation and
amortization 2,973 3,292 9,110 10,305 Interest expense 3,181 4,711
10,289 13,295 Net income attributable to noncontrolling interest
138 168 400 265 Income tax (benefit) provision 3,407
(26 ) 7,966 107 EBITDA $ 16,874
$ 12,283 $ 44,166 $ 28,651 Gross
profit $ 71,587 $ 60,987 $ 208,484 $ 179,429 Less: Selling, general
and administrative expenses and cost on early extinguishment of
debt (54,713 ) (48,704 ) (164,318 )
(150,778 ) EBITDA $ 16,874 $ 12,283 $ 44,166 $
28,651 Total revenues $ 201,277 $ 178,551 $
583,380 $ 557,764 EBITDA margin percentage of revenues 8.4 %
6.9 % 7.6 % 5.1 % (1 ) EBITDA consists of earnings before
interest, 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.
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