PERRY ELLIS INTERNATIONAL INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended July 31, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-21764

PERRY ELLIS INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in its Charter)

Florida

59-1162998

(State or other jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

3000 N.W. 107 Avenue

Miami, Florida

33172

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (305) 592-2830

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

The number of shares outstanding of the registrant’s common stock is 9,453,527 (as of September 7, 2004).

PERRY ELLIS INTERNATIONAL, INC.

INDEX


		PAGE
PART I: FINANCIAL INFORMATION

Item 1:

Consolidated Balance Sheets (Unaudited) as of July 31, 2004 and January 31, 2004		1

Consolidated Statements of Operations (Unaudited) for the three and six months ended July 31, 2004 and 2003		2

Consolidated Statements of Cash Flows (Unaudited) for the six months ended July 31, 2004 and 2003		3

Notes to Unaudited Consolidated Financial Statements		4

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

Item 3:

Quantitative and Qualitative Disclosures About Market Risk		26

Item 4:

Controls and Procedures		28

PART II: OTHER INFORMATION		29

Item 1:

Legal Proceedings		29

Item 2:

Unregistered Sale of Equity Securities and Use of Proceeds		29

Item 3:

Defaults Upon Senior Securities		29

Item 4:

Submission of Matters to a Vote of Security Holders		29

Item 5:

Other Information		30

Item 6:

Exhibits		30

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in thousands, except share data)


	July 31, 2004	January 31, 2004
ASSETS
Current Assets:

Cash and cash equivalents	$ 34,726	$ 1,011
Accounts receivable, net	98,437	115,678
Inventories, net	78,455	110,910
Deferred income taxes	8,752	9,621
Prepaid income taxes	3,548	5,002
Other current assets	6,189	6,418

Total current assets	230,107	248,640

Property and equipment, net	44,163	39,093
Intangible assets, net	160,635	152,266
Deferred income taxes	21,148	28,591
Other	6,549	11,811

TOTAL	$462,602	$480,401

LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$ 22,798	$ 31,644
Accrued expenses	17,576	16,350
Accrued interest payable	4,380	3,740
Unearned revenues	1,025	984
Other current liabilities	3,612	2,991

Total current liabilities	49,391	55,709


Senior subordinated notes payable	146,826	150,454
Senior secured notes payable	59,319	60,389
Senior credit facility	—	34,715
Real estate mortgage	11,600	11,600
Deferred pension obligation	15,574	15,734

Total long-term liabilities	233,319	272,892

Total liabilities	282,710	328,601

Minority Interest	1,071	917

Stockholders’ Equity:
Preferred stock $.01 par value; 5,000,000 shares authorized; no shares issued or outstanding	—	—
Common stock $.01 par value; 100,000,000 shares authorized; 9,453,527 shares issued and outstanding as of July 31, 2004 and 8,470,700 shares issued and 8,435,013 outstanding as of January 31, 2004	95	85
Additional paid-in-capital	87,488	66,074
Retained earnings	90,897	85,335
Accumulated other comprehensive income	341	322

Total	178,821	151,816
Common stock in treasury at cost; no shares as of July 31, 2004 and 35,687 shares as of January 31, 2004	—	(933	)

Total stockholders’ equity	178,821	150,883

TOTAL	$462,602	$480,401

See Notes to Unaudited Consolidated Financial Statements

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except per share data)


	Three Months Ended July 31,						Six Months Ended July 31,
	2004			2003			2004		2003
Revenues
Net sales	$	121,049		$	87,066		$	313,153	$	188,932
Royalty income		5,317			5,699			10,632		12,111

Total revenues		126,366			92,765			323,785		201,043
Cost of sales		88,499			64,852			223,115		136,397

Gross profit		37,867			27,913			100,670		64,646
Operating expenses
Selling, general and administrative expenses		36,528			27,297			81,401		48,906
Depreciation and amortization		1,534			1,413			3,039		2,525

Total operating expenses		38,062			28,710			84,440		51,431

Operating (loss) income		(195	)		(797	)		16,230		13,215
Interest expense		3,756			3,391			7,201		8,354

Income (loss) before minority interest and income taxes		(3,951	)		(4,188	)		9,029		4,861
Minority interest		95			(20	)		154		26
Income tax provision (benefit)		(1,403	)		(1,533	)		3,313		1,841

Net income (loss)	$	(2,643	)	$	(2,635	)	$	5,562	$	2,994

Net income (loss) per share
Basic	$	(0.29	)	$	(0.36	)	$	0.63	$	0.43

Diluted	$	(0.29	)	$	(0.36	)	$	0.59	$	0.40

Weighted average number of shares outstanding
Basic		9,126			7,373			8,787		6,919
Diluted		9,126			7,373			9,466		7,512

See Notes to Unaudited Consolidated Financial Statements

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)


	Six Months Ended July 31,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,562		$	2,994
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,606			2,005
Provision for bad debt		641			335
Tax benefit from exercise of stock options		379			—
Amortization of debt issue costs		564			557
Amortization of bond discount		101			182
Deferred income taxes		3,078			1,378
Minority interest		154			26
Other		—			180
Changes in operating assets and liabilities (net of effects of acquisition transaction):
Accounts receivable, net		16,600			10,723
Inventories, net		32,455			5,241
Other current assets and prepaid income taxes		1,683			(1,840	)
Other assets		(101	)		(634	)
Accounts payable and accrued expenses		(8,887	)		(8,138	)
Accrued interest payable		640			(149	)
Other current liabilities and unearned revenues		662			678
Deferred pension obligation		(160	)		—

Net cash provided by operating activities		55,977			13,538

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(5,979	)		(3,268	)
Payment on purchase of intangible assets		(3,565	)		—
Payment for acquired businesses, net of cash acquired		—			(31,221	)

Net cash used in investing activities:		(9,544	)		(34,489	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance		21,159			—
Borrowings from senior credit facility		80,237			101,243
Payments on senior credit facility		(114,952	)		(80,879	)
Proceeds from exercise of stock options		819			1,155

Net cash (used in) provided by financing activities:		(12,737	)		21,519

Effect of exchange rate changes on cash and cash equivalents		19			73

NET INCREASE IN CASH		33,715			641
CASH AT BEGINNING OF PERIOD		1,011			4,683

CASH AT END OF PERIOD	$	34,726		$	5,324

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	7,160		$	7,721

Income taxes	$	120		$	205

NON-CASH FINANCING AND INVESTING ACTIVITIES:
Change in fair value of mark-to-market interest rate swap/option	$	4,799		$	884

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents