Perry Ellis International, Inc. (NASDAQ:PERY) today reported
results for the second quarter ended July 30, 2011 (“second quarter
of fiscal 2012”).
Second Quarter Results from Operations
For the second quarter of fiscal 2012, total revenues increased
33% to $214.4 million compared to $161.8 million in the comparable
prior year period ended July 31, 2010 (“second quarter of fiscal
2011”). Strength within men’s golf, women’s dresses under Laundry
by Shelli Segal, International in the U.K., and Mexico, and solid
increases in direct to consumer drove an 18% increase in organic
revenue for the quarter. In addition, the recently acquired
Rafaella business contributed approximately $22.8 million in
revenue for the second quarter of fiscal 2012.
Total gross profit for the quarter increased to $72.3 million
compared to $58.2 million in the comparable prior year period.
Gross margin was 33.7% for the quarter as compared to 36.0% last
year. The planned gross margin decrease was due to the
opportunistic revenue increases of lower gross margin program
businesses, the conversion of the Perry Ellis dress shirts and
small leather goods businesses from licensing to wholesale, the
decrease of our higher margin licensing business as a percentage of
total revenue mix, and the ladies business, including Rafaella.
This decrease was partially off-set by higher gross margins in both
direct to consumer and International. Furthermore, selling,
general, and administrative expenses as a percentage of total
revenues were 29.6% in the second quarter of fiscal 2012 compared
to 32.9% in the comparable prior year period, a 330 basis point
improvement reflecting leverage of corporate services.
“Expansion of our core businesses and the addition of Rafaella
women’s sportswear resulted in a strong profit for the second
quarter. We believe this exemplifies the success of our
diversification strategies and the ongoing strength of our growth
initiatives. We are very pleased to achieve this performance in
what traditionally has been an unprofitable quarter for our Company
and during what continues to be an uncertain domestic and global
economy,” commented Oscar Feldenkreis, President and COO.
Mr. Feldenkreis continued, “Our efforts in expanding our
international footprint are beginning to gain strong traction. Our
focus on direct to consumer was also productive as we achieved
solid gains in these businesses. We also successfully acquired six
top retail leases in an auction, which will be converted into full
price doors. These locations are scheduled to open at the start of
the holiday season.”
Net income attributable to Perry Ellis International, Inc.
increased 194% to $1.8 million, or $0.11 per fully diluted share
(“EPS”), compared to a net loss of ($2.0) million or ($0.15) per
share in the comparable prior year period.
Earnings before interest, taxes, depreciation, and amortization
(“EBITDA”) for the second quarter increased 81% to $8.9 million, or
4.1% of total revenues compared to $4.9 million, or 3.0% of total
revenue for the comparable prior year period (see attached
reconciliation "Table 2").
First Half Operations Review
For the six months ended July 30, 2011 (“first half of fiscal
2012”) total revenues increased 31.6% to $502.7 million, compared
to $382.1 million in the comparable prior year period. For the
first half of fiscal 2012, Rafaella contributed $61.8 million in
total revenue, while the Company’s core organic businesses grew
15.4%. This increase is attributable to the continued success
within the Company’s golf, Perry Ellis Collection, Hispanic, and
direct to consumer businesses.
EBITDA for the first half of fiscal 2012 increased 52% to $42.5
million, or 8.5% of total revenue, compared to $28.0 million, or
7.3% of total revenue, in the prior year. Rafaella delivered $9.4
million of EBITDA for the first half of fiscal 2012 and is
contributing significantly to the Company’s continued operating
margin improvement. Continued growth and expansion of the Company’s
core businesses added an additional $5.0 million to EBITDA, a 176%
improvement compared to the first half of fiscal 2011.
As reported under generally accepted accounting principles
(“GAAP”) net income attributable to Perry Ellis International, Inc.
for the first half of fiscal 2012 increased 87% to $17.2 million,
or $1.08 per fully diluted share, compared to $9.2 million or $0.66
per fully diluted share in the six months ended July 31, 2010
(“first half of fiscal 2011”).
Net income attributable to Perry Ellis International, Inc, as
adjusted, for the first half of fiscal 2012 (see attached
reconciliation “Table 1”) grew by 91.3% to $18.6 million compared
to $9.7 million last year. Net Income, as adjusted, excludes the
impact of the cost on early extinguishment of the senior
subordinated 2013 notes and duplicated interest from March 8, 2011
to April 6, 2011 associated with the interest during the time that
the retired debt and the new senior subordinated 2019 notes were
simultaneously outstanding.
Balance Sheet Update
The Company ended the second quarter of fiscal 2012 with $34.1
million in cash and cash equivalents and full availability under
its senior credit facility. Accounts receivable totaled $110.2
million compared to $85.3 million at July 31, 2010. This increase
includes the addition of the Rafaella sportswear business.
Excluding Rafaella, receivables increased by 23% in line with the
organic revenue increase for the quarter. The quality of the
receivables continues to be strong and the Company is pleased with
the financial strength of its current customer base.
Inventories were $211.5 million at quarter end including $21
million associated with the acquired Rafaella business. Excluding
Rafaella, the inventory increase reflects the Company’s planned
increases of additional weeks of supply in its replenishment and
program businesses totaling $22 million to support forward
business, $14 million in inventory for new businesses and retail
stores, early receipts totaling approximately $26 million for
holiday and spring inventory, and for inventory required for fall
shipping for third quarter sales. Inventory quality and aging
remains current.
Fiscal 2012 Guidance
The Company forecasts revenue exceeding $1.0 billion for full
fiscal year 2012. Total EBITDA for the year is expected to approach
$90 million, thereby approaching a 9.0% EBITDA margin for fiscal
2012.
Based on the Company’s first half of fiscal 2012 performance and
current business trends, the Company now expects earnings per
diluted share for full year fiscal 2012 in a range of $2.45 - $2.52
compared to previous guidance of $2.40 - $2.50.
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, as well as select
children’s apparel. The Company's collection of dress and casual
shirts, golf sportswear, sweaters, dress pants, casual pants and
shorts, jeans wear, active wear, dresses 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®, Rafaella®, 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®, Farah®, Anchor Blue® and
Miller’s Outpost®. 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," "believe," "budget," "contemplate," "continue,"
"could," "estimate," "expect," "guidance," "indicate," "intend,"
"may," "might," "plan," "possibly," "potential," "predict,"
"probably," "proforma," "project," "seek," "should," "target," 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, recent and future economic conditions,
including turmoil in the financial and credit markets, 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 protect our trademarks, 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 Six Months Ended July 30, 2011 July 31,
2010 July 30, 2011 July 31, 2010 Revenues
Net sales $ 208,596 $ 155,622 $ 491,371 $ 369,864 Royalty income
5,839 6,132 11,353 12,239
Total revenues 214,435 161,754 502,724 382,103 Cost of sales
142,167 103,601 333,486 245,206
Gross profit 72,268 58,153 169,238 136,897 Operating expenses
Selling, general and administrative expenses 63,370 53,249 126,745
108,875 Depreciation and amortization 3,424
3,018 6,613 6,137 Total operating expenses
66,794 56,267 133,358
115,012 Operating income 5,474 1,886 35,880 21,885 Cost on early
extinguishment of debt - 730 1,306 730 Interest expense
3,769 3,361 8,435 7,108
Net income before income taxes 1,705 (2,205 ) 26,139 14,047 Income
tax (benefit) provision (142 ) (317 ) 8,914
4,559 Net income 1,847 (1,888 ) 17,225 9,488 Less:
net income attributable to noncontrolling interest - 85 - 262
Net income (loss) attributable to Perry
Ellis International, Inc. $ 1,847 $ (1,973 ) $ 17,225 $
9,226 Net income (loss) attributable to Perry Ellis
International, Inc. per share Basic $ 0.12 $ (0.15 ) $ 1.16
$ 0.71 Diluted $ 0.11 $ (0.15 ) $ 1.08 $ 0.66
Weighted average number of shares outstanding Basic 15,289 13,170
14,855 13,019 Diluted 16,464 13,170 16,001 14,029
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES SELECTED
FINANCIAL DATA (UNAUDITED) (amounts in 000's)
BALANCE SHEET DATA: As of July 30, 2011
January 29, 2011
Assets Current assets: Cash
and cash equivalents $ 34,139 $ 18,524 Accounts receivable, net
110,196 129,534 Inventories 211,517 178,217 Other current assets
34,965 36,785 Total current assets 390,817
363,060 Property and equipment, net 54,992 55,077
Intangible assets 259,913 262,647 Other assets 8,545
4,946 Total assets $ 714,267 $ 685,730
Liabilities
and stockholders' equity Current liabilities: Accounts
payable $ 82,237 $ 73,890 Accrued expenses and other liabilities
24,625 30,650 Accrued interest payable 4,978 3,744 Unearned
revenues 4,279 4,438 Total current liabilities
116,119 112,722
Long term liabilities:
Senior subordinated notes payable, net 150,000 105,221 Senior
credit facility - 97,342 Real estate mortgages 25,492 25,793
Deferred pension obligation 12,325 13,120 Unearned revenues and
other long term liabilities 32,473 28,592 Total long
term liabilities 220,290 270,068 Total
liabilities 336,409 382,790
Equity
Total equity 377,858 302,940
Total liabilities and equity $ 714,267 $ 685,730
PERRY ELLIS INTERNATIONAL,
INC. AND SUBSIDIARIES Table 1 Reconciliation of the
three and six months ended July 30, 2011 and July 31, 2010 earnings
per share to adjusted earnings per share. (UNAUDITED)
(amounts in 000's) Three Months Ended Six
Months Ended July 30, 2011 July 31, 2010 July
30, 2011 July 31, 2010 Net income (loss) attributable to
Perry Ellis International, Inc. $ 1,847 $ (1,973 ) $ 17,225 $ 9,226
Plus: Cost on early extinguishment of debt - 730 1,306 730
Duplicate interest from March 8 to April 6, 2011 - - 745 - Less:
Tax benefit - (256 ) (718 ) (256 ) Net
income attributable to Perry Ellis International, Inc., as adjusted
$ 1,847 $ (1,499 ) $ 18,558 $ 9,700
Three Months Ended Six Months Ended July 30,
2011 July 31, 2010 July 30, 2011 July 31,
2010 Net income (loss) attributable to Perry Ellis
International, Inc. per share, diluted $ 0.11 $ (0.15 ) $ 1.08 $
0.66 Plus: Net per share cost on early extinguishment of debt $ - $
0.04 $ 0.05 $ 0.03 Net per share duplicate interest from March 8 to
April 6, 2011 $ - $ - $ 0.03 $ -
Net income (loss) attributable to Perry
Ellis International, Inc., as adjusted, per share, diluted
$ 0.11 $ (0.11 ) $ 1.16 $ 0.69
"Adjusted net income attributable to Perry
Ellis International, Inc. per share, diluted" consists of "net
income attributable to Perry Ellis International, Inc. per share,
diluted" adjusted for the impact of the cost on early
extinguishment of debt and the duplicate interest from March 8,
2011 to April 6, 2011 associated with the interest during the time
that the retired debt and the new debt were simultaneously
outstanding. These costs 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, net of taxes, from the calculation.
PERRY ELLIS
INTERNATIONAL, INC. AND SUBSIDIARIES Table 2
RECONCILIATION OF NET INCOME TO EBITDA(1) (UNAUDITED)
(amounts in 000's) Three Months Ended Six
Months Ended July 30, 2011 July 31, 2010 July
30, 2011 July 31, 2010 Net income (loss)
attributable to Perry Ellis International, Inc. $ 1,847 $ (1,973 )
$ 17,225 $ 9,226 Plus: Depreciation and amortization 3,424 3,018
6,613 6,137 Interest expense 3,769 3,361 8,435 7,108 Net income
attributable to noncontrolling interest - 85 - 262 Cost on early
extinguishment of debt - 730 1,306 730 Income (benefit) tax
provision (142 ) (317 ) 8,914
4,559 EBITDA $ 8,898 $ 4,904 $ 42,493 $
28,022 Gross profit $ 72,268 $ 58,153 $ 169,238 $
136,897 Less: Selling, general and administrative expenses
(63,370 ) (53,249 ) (126,745 ) (108,875 )
EBITDA 8,898 4,904 42,493
28,022 Total revenues $ 214,435 $
161,754 $ 502,724 $ 382,103 EBITDA margin percentage of
revenues 4.1 % 3.0 % 8.5 % 7.3 %
(1)
EBITDA consists of earnings before interest, taxes,
depreciation, amortization, cost on early extinguishment of debt,
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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