Perry Ellis International, Inc. (NASDAQ:PERY) today reported
results for the third quarter and nine months ended October 29,
2011. For the three months ended October 29, 2011 (“third quarter
of fiscal 2012”), total revenues were $248.4 million a 23% increase
compared to $201.3 million reported in the third quarter ended
October 30, 2010 (“third quarter of fiscal 2011”). Rafaella
contributed approximately $38.4 million in revenue while all other
businesses delivered core organic growth of 5%. Net income
attributable to Perry Ellis International, Inc. for the third
quarter was $6.5 million, or $0.40 per fully diluted share (“EPS”),
compared to $7.2 million or $0.51 per share in the third quarter of
fiscal 2011.
Strong sales results in the Company’s golf, Hispanic,
accessories, women’s contemporary dress, and direct-to-consumer
businesses were offset by approximately $5.0 million of unshipped
product associated with Rafaella and the Company’s European
business due to weather issues.
In addition, unusually high levels of promotional activity in
women’s better sportswear and product assortment challenges for
both Rafaella and Perry Ellis Collection, led to increased
markdowns for both businesses during the months of October and into
November compared to the third quarter of fiscal 2011 and the first
half of fiscal 2012.
SG&A expense increased 21% compared to the third quarter of
fiscal 2011, to $66.4 million. As a percent of total revenue
SG&A declined 50 basis points to 26.7%. Throughout the third
quarter, the Company continued to invest in its brands and
businesses such as Perry Ellis and direct-to-consumer, with
additional investment in areas such as marketing, full price retail
store openings, retail specialists, and the management team. The
Company also incurred additional business development expenditures
related to both domestic and international opportunities that
impacted the quarter. These investments added approximately 140
basis points of SG&A to total revenue during the quarter.
Oscar Feldenkreis, President & COO commented “Our goal for
the Perry Ellis brand has been to expand its domestic focus in
product offering, performance, and distribution. We recently hired
a president as well as a chief merchant for the brand and both have
a proven track record with deep industry experience. We have opened
two full-price flagship stores in California to showcase the full
product line as well as carry “premium” Perry Ellis Collection
apparel that will also be available in select department store
doors. Perry Ellis is at an inflection point and further enhancing
the brand’s positioning through investments in management,
marketing, and retail support will be required in order to expand
the brand both domestically as well as on a global scale.”
“We are pleased with the Rafaella women’s product assortment for
next spring and summer. We accelerated their transition onto the
Company’s enterprise resource planning system at the end of the
quarter. We believe the planning and merchandising capabilities of
our systems will provide the ability to execute by assortment plans
translating from the showroom to the retail floor driving improved
results,” continued Mr. Feldenkreis.
Third Quarter Highlights
Gross profit increased 15% to $82.5 million for the third
quarter of fiscal 2012 compared to $71.6 million in the third
quarter of fiscal 2011 while gross margin declined 240 basis points
to 33.2% of net revenues. Higher levels of markdowns and customer
allowances decreased gross margin by approximately 1%. In addition,
approximately $1.7 million of unshipped gross profit dollars for
the quarter adversely affected total Company gross profit.
Earnings before interest, taxes, depreciation, and amortization
(“EBITDA”) for the third quarter was $16.1 million compared to
$16.9 million for the third quarter of fiscal 2011 (see attached
reconciliation "Table 2"). The impact of unshipped revenue,
promotional activity, and increased investment in the business
impacted EBITDA by approximately $7.2 million. Net income
attributable to Perry Ellis International, Inc. for the third
quarter was $6.5 million, or $0.40 per fully diluted share (“EPS”),
compared to $7.2 million or $0.51 per share in the third quarter of
fiscal 2011.
Balance Sheet & Liquidity Review
“From a liquidity and leverage standpoint Perry Ellis
International continues strengthening its balance sheet and is in
an excellent position to take full advantage of any strategic
opportunities that may become available while at the same time
investing in international markets and other key growth drivers
such as direct-to-consumer,” George Feldenkreis, Chairman and CEO,
commented.
Cash and cash equivalents at quarter end were $21.4 million.
Accounts receivable totaled $149.8 million compared to $117.7
million in the third quarter of fiscal 2011. This increase includes
$21.6 million associated with the Rafaella sportswear business. The
quality of the receivables continues to be strong and the financial
strength of the current customer base is extremely solid.
Inventories were $200.3 million at quarter end including $14.0
million associated with the acquired Rafaella business. This
compares to total inventory of $178.2 million at January 29, 2011
and $128.5 million at October 30, 2010. Excluding Rafaella, the
inventory increase over prior year period reflects $12.0 million of
additional weeks of supply in bottoms replenishment business, $10.0
million of swim inventory associated with early production for cost
advantages, $12.0 million in inventory for new businesses and
retail stores and early receipts totaling approximately $11.0
million for early spring inventory. Excluding these items the
inventory increase is earmarked for fourth quarter shipments.
Inventory quality is high and aging remains current.
Nine Month Operations Review
For the nine months ended October 29, 2011 total revenues
increased 28.8% to $751.1 million, compared to $583.4 million in
the comparable prior year period Rafaella contributed $100.1
million in total revenue while the Company’s core organic
businesses grew 11.6%.
EBITDA for the first nine months of fiscal 2012 increased 30.5%
to $58.6 million, or 7.8% of total revenue, compared to $44.9
million, or 7.7% of total revenue, in the prior year.
As reported under generally accepted accounting principles
(“GAAP”) net income attributable to Perry Ellis International, Inc.
for the first nine months of fiscal 2012 increased 45% to $23.7
million, or $1.47 per fully diluted share, compared to $16.4
million or $1.16 per fully diluted share in the nine months ended
October 30, 2010.
Net income attributable to Perry Ellis International, Inc, as
adjusted, for the first nine months of fiscal 2012 (see attached
reconciliation “Table 1”) grew by 49% to $25.1 million compared to
$16.9 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.
Fiscal 2012 Guidance
George Feldenkreis, Chairman & CEO, commented
“While our Perry Ellis business had a challenging third
quarter, overall the product has been superior and executed well
over the last four seasons and we believe this longer trend is more
indicative of the type of performance that can be expected of the
brand. Supported by its basics and core bottoms business Rafaella
has traditionally seen lower levels of markdowns and sales
allowances compared to larger competitors that dominate the zone.
However, our recent product assortment challenges were created by a
lack of execution from the showroom to the retail floor and we
expect to see elevated levels of markdowns driven by this in the
fourth quarter. We have addressed the brand direction and expect to
be back on track for the spring/summer seasons. We remain confident
in our ability to present strong selling deliveries in both our
Perry Ellis Collection and Rafaella product lines.”
“We will also realize additional business development and
investment activities in the fourth quarter adding approximately
$3.5 million - $4.0 million to the Company’s overall SG&A
expenses,” continued Mr. Feldenkreis.
Based on the performance for the first nine months of the year
and its expectations for the fourth quarter, the Company currently
expects fiscal 2012 total revenue of approximately $1.0 billion,
EBITDA in a range of approximately $75 million to $80 million and
fully diluted adjusted earnings per share at or above $2.00. This
compares to prior guidance of $90 million in EBITDA and fully
diluted adjusted earnings per share in the range of $2.45 to
$2.52.
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(R), Jantzen(R), Laundry by Shelli
Segal(R), C&C California(R), Rafaella(R), Cubavera(R),
Centro(R), Solero(R), Munsingwear(R), Savane(R), Original
Penguin(R) by Munsingwear(R), Grand Slam(R), Natural Issue(R), Pro
Player(R), the Havanera Co.(R), Axis(R), Tricots St. Raphael(R),
Gotcha(R), Girl Star(R), MCD(R), John Henry(R), Mondo di Marco(R),
Redsand(R), Manhattan(R), Axist(R), Farah(R), Anchor Blue(R) and
Miller's Outpost(R). The Company enhances its roster of brands by
licensing trademarks from third parties, including: Pierre
Cardin(R) for men's sportswear, Nike(R) and Jag(R) for swimwear,
and Callaway(R), TOP-FLITE(R), PGA TOUR(R) and Champions Tour(R)
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 Nine Months
Ended October 29, 2011 October 30, 2010
October 29, 2011 October 30, 2010 Revenues Net
sales $ 242,116 $ 194,856 $ 733,487 $ 564,720 Royalty income
6,304 6,421 17,657 18,660 Total revenues
248,420 201,277 751,144 583,380 Cost of sales 165,970
129,690 499,456 374,896 Gross profit 82,450 71,587
251,688 208,484 Operating expenses Selling, general and
administrative expenses 66,356 54,713 193,101 163,588 Depreciation
and amortization 3,369 2,973 9,982
9,110 Total operating expenses 69,725 57,686
203,083 172,698 Operating income 12,725 13,901 48,605 35,786
Cost on early extinguishment of debt - - 1,306 730 Interest expense
3,868 3,181 12,303 10,289 Net
income before income taxes 8,857 10,720 34,996 24,767 Income tax
provision 2,348 3,407 11,262 7,966 Net
income 6,509 7,313 23,734 16,801 Less: net income
attributable to noncontrolling interest - 138 - 400
Net income attributable to Perry Ellis International,
Inc. $ 6,509 $ 7,175 $ 23,734 $ 16,401 Net income
attributable to Perry Ellis International, Inc. per share Basic $
0.42 $ 0.54 $ 1.58 $ 1.25 Diluted $ 0.40 $ 0.51 $ 1.47 $ 1.16
Weighted average number of shares outstanding Basic 15,317
13,190 15,009 13,076 Diluted 16,391 14,193 16,131 14,084
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED) (amounts in
000's) BALANCE SHEET DATA: As of October
29, 2011 January 29, 2011
Assets Current
assets: Cash and cash equivalents $ 21,408 $ 18,524 Accounts
receivable, net 149,787 129,534 Inventories 200,299 178,217 Other
current assets 35,246 36,785 Total current assets
406,740 363,060 Property and equipment, net
56,157 55,077 Intangible assets 259,670 262,647 Other assets
8,627 4,946 Total assets $ 731,194 $ 685,730
Liabilities and stockholders' equity Current
liabilities: Accounts payable $ 74,302 $ 73,890 Accrued
expenses and other liabilities 22,137 30,650 Senior credit facility
24,086 - Accrued interest payable 1,264 3,744 Unearned revenues
4,332 4,438 Total current liabilities 126,121
112,722
Long term liabilities: Senior
subordinated notes payable, net 150,000 105,221 Senior credit
facility - 97,342 Real estate mortgages 25,251 25,793 Deferred
pension obligation 11,488 13,120 Unearned revenues and other long
term liabilities 33,229 28,592 Total long term
liabilities 219,968 270,068 Total liabilities
346,089 382,790
Equity
Total equity 385,105 302,940 Total liabilities
and equity $ 731,194 $ 685,730
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES Table
1 Reconciliation of the three and nine months ended October
29, 2011 and October 30, 2010 earnings per share to adjusted
earnings per share. (UNAUDITED) (amounts in
000's) Three Months Ended Nine Months
Ended October 29, 2011 October 30, 2010
October 29, 2011 October 30, 2010 Net income
attributable to Perry Ellis International, Inc. $ 6,509 $ 7,175 $
23,734 $ 16,401 Plus: Cost on early extinguishment of debt - -
1,306 730 Duplicate interest from March 8 to April 6, 2011 - - 745
- Less: Tax benefit - - (718 ) (255 )
Net income attributable to Perry Ellis International, Inc., as
adjusted $ 6,509 $ 7,175 $ 25,067 $ 16,876
Three Months Ended Nine Months Ended
October 29, 2011 October 30, 2010 October 29,
2011 October 30, 2010 Net income attributable to Perry
Ellis International, Inc. per share, diluted $ 0.40 $ 0.51 $ 1.47 $
1.16 Plus: Net per share cost on early extinguishment of debt $ - $
- $ 0.05 $ 0.03 Net per share duplicate interest from March 8 to
April 6, 2011 $ - $ - $ 0.03 $ - Net income attributable to Perry
Ellis International, Inc., as adjusted, per share, diluted
$ 0.40 $ 0.51 $ 1.55 $ 1.19
"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 Nine Months
Ended October 29, 2011 October 30, 2010
October 29, 2011 October 30, 2010 Net
income attributable to Perry Ellis International, Inc. $ 6,509 $
7,175 $ 23,734 $ 16,401 Plus: Depreciation and amortization 3,369
2,973 9,982 9,110 Interest expense 3,868 3,181 12,303 10,289 Net
income attributable to noncontrolling interest - 138 - 400 Cost on
early extinguishment of debt - - 1,306 730 Income tax provision
2,348 3,407 11,262
7,966 EBITDA $ 16,094 $ 16,874 $ 58,587
$ 44,896 Gross profit $ 82,450 $ 71,587 $ 251,688 $
208,484 Less: Selling, general and administrative expenses
(66,356 ) (54,713 ) (193,101 ) (163,588 )
EBITDA 16,094 16,874 58,587
44,896 Total revenues $ 248,420
$ 201,277 $ 751,144 $ 583,380 EBITDA margin percentage of
revenues 6.5 % 8.4 % 7.8 % 7.7 % (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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