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Perry Ellis International Reports Second Quarter Fiscal 2013 Results

The Company ended the quarter with $82 million in cash and cash equivalents and full availability under its senior credit facility. Inventories at quarter end totaled $164.7 million, a reduction of $44.4 million or 21% compared to $209.1 million as of July 30, 2011. As a result of the disciplined management of inventory, the Company ended the period with a net debt to total capitalization of approximately 20% as compared to 27% for the comparable prior year period.

Fiscal 2013 Guidance

The Company remains comfortable with revenue guidance ranging from $990 million to $1 billion for full fiscal year 2013.

The Company has updated its outlook for the full fiscal year expecting diluted EPS as adjusted in a range of $1.75 to $1.80. This updated guidance principally reflects the impact for the transition to service the new distribution channels in the expanded Callaway agreement, and to a lesser extent continued promotional activity in its collection businesses into the fall season.

The Company has a positive outlook as it transitions from a service fee model with Callaway to a direct sales model. Assuming the new channels of distribution positions the Company for continued growth in the future and it expects for the transition to be a positive earnings contributor beginning in spring 2013.

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), Original Penguin(R) by Munsingwear(R),Jantzen(R), Laundry by Shelli Segal(R), C&C California(R), Rafaella(R), Ben Hogan(R), Grand Slam(R), Savane(R), Axist(R), Manhattan(R), Farah(R),Cubavera(R), the Havanera Co.(R), Centro(R), Solero(R), John Henry(R), Munsingwear(R), Natural Issue(R), Pro Player(R), Axis(R), Tricots St. Raphael(R), Gotcha(R), Girl Star(R), MCD(R), Mondo di Marco(R), Redsand(R), Anchor Blue(R) and Miller's Outpost(R). The Company enhances its roster of brands by licensing trademarks from third parties, including: Nike(R) and Jag(R) for swimwear, and Callaway(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 Six Months Ended
July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
 
Revenues
Net sales $ 203,090 $ 208,596 $ 462,106 $ 491,371
Royalty income   6,347     5,839     12,854   11,353
Total revenues 209,437 214,435 474,960 502,724
Cost of sales   140,112     142,167     317,895   333,486
Gross profit 69,325 72,268 157,065 169,238
Operating expenses
Selling, general and administrative expenses 66,103 63,370 132,450 126,745
Depreciation and amortization   3,472     3,424     6,890   6,613
Total operating expenses   69,575     66,794     139,340   133,358
Operating (loss) income (250 ) 5,474 17,725 35,880
Costs on early extinguishment of debt - - - 1,306
Interest expense   3,513     3,769     7,322   8,435
 
Net (loss) income before income taxes (3,763 ) 1,705 10,403 26,139
Income tax (benefit) provision   (1,321 )   (142 )   3,169   8,914
Net (loss) income $ (2,442 ) $ 1,847   $ 7,234 $ 17,225
 
Net (loss) income, per share
Basic $ (0.17 ) $ 0.12   $ 0.49 $ 1.16
Diluted $ (0.17 ) $ 0.11   $ 0.47 $ 1.08
 
Weighted average number of shares outstanding
Basic 14,703 15,289 14,672 14,855
Diluted 14,703 16,464 15,265 16,001

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(amounts in 000's)
 
BALANCE SHEET DATA:
 
As of
July 28, 2012 January 28, 2012
 
Assets
Current assets:
Cash and cash equivalents $ 82,363 $ 24,116
Accounts receivable, net 127,676 145,563
Inventories 164,661 198,264
Other current assets   30,700   33,733
Total current assets   405,400   401,676
 
Property and equipment, net 54,362 56,496
Intangible assets, net 248,753 242,634
Goodwill 13,794 13,794
Other assets   9,432   9,595
 
Total assets $ 731,741 $ 724,195
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 93,975 $ 80,253
Accrued expenses and other liabilities 26,792 23,142
Accrued interest payable 4,007 4,186
Unearned revenues   4,709   4,179
Total current liabilities   129,483   111,760
 
 
Long term liabilities:
Senior subordinated notes payable, net 150,000 150,000
Senior credit facility - 21,679
Real estate mortgages 24,726 25,114
Deferred pension obligation 17,135 17,326
Unearned revenues and other long-term liabilities   34,215   31,821
Total long-term liabilities   226,076   245,940
 
Total liabilities   355,559   357,700
 
Equity
   
Total equity   376,182   366,495
 
Total liabilities and equity $ 731,741 $ 724,195

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
Table 1
Reconciliation of the three and six months ended July 28, 2012 and July 30, 2011 (loss) earnings per share to adjusted earnings per share.
(UNAUDITED)
(amounts in 000's)
         
Three Months Ended Six Months Ended
July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
Net (loss) income $ (2,442) $ 1,847 $ 7,234 $ 17,225
Plus:
Costs on exited brands, distribution center and sourcing office 1,800 - 3,306 -
Costs associated with voluntary early retirement 2,420 - 2,420 -
Costs on early extinguishment of debt - - - 1,306
Duplicate interest from March 8 to April 6, 2011 - - - 745
Less:
Tax benefit (1,612) - (2,187) (718)
Net income, as adjusted $ 166 $ 1,847 $ 10,773 $ 18,558
 
 
Costs on exited brands, distribution center and sourcing office
 
July 28, 2012 July 30, 2011 July 28, 2012 July 30, 2011
Net (loss) income per share, diluted $ (0.17) $ 0.11 $ 0.47 $ 1.08
Net per share cost on exited brands, distribution center and sourcing office 0.08 - 0.13 -
Net per share costs associated with voluntary early retirement 0.10 - 0.10 -
Net per share costs on early extinguishment of debt - - - $ 0.05
Net per share duplicate interest from March 8 to April 6, 2011 - - - $ 0.03
Adjustment for using diluted share count (1) - - - $ -
Adjusted net income per share, diluted $ 0.01 $ 0.11 $ 0.70 $ 1.16
 

 

 

(1) The calculation of diluted shares for the purpose of generating GAAP EPS does not include any antidilutive items (options, SARs and restricted stock) that would result in a lower loss per share. Since the non-GAAP adjustments would result in projected adjusted net income, these items would become dilutive to EPS. This adjustment represents the impact of including these dilutive items in the calculation of diluted shares for generating the adjusted EPS.

 
"Adjusted net income per share, diluted" consists of "net income per share, diluted" adjusted for the impact of the costs of exiting certain brands, distribution center, sourcing office, costs associated with voluntary early retirement, early extinguishment of debt and duplicate interest from March 8, 2011 to April 6, 2011, the time during which the retired debt and the new debt were simultaneously outstanding. These costs are not indicative of our core 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.




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