Exhibit 99.1
Perry Ellis International Announces Results for Third Quarter Fiscal Year 2010
| | • | | EPS, net income and EBITDA ahead of consensus – Earnings of $0.31 per fully diluted share, net income of $4.1 million and EBITDA of $12.3 million compared to consensus earnings per share of $0.21, net income of $2.6 million and EBITDA of $10.5 million, respectively |
| | • | | Further operating expense reduction of $11.5 million – 18% below last year |
| | • | | Strong controls drive inventory reduction of $28.5 million – 23% below last year |
| | • | | Continued balance sheet strength and liquidity position – $25.5 million in cash and senior credit facility fully available with no borrowings at quarter’s end |
| | • | | Company increases earnings per share range for full fiscal year to $0.80 to $0.95 from the previous range of $0.70 to $0.85 |
Perry Ellis International, Inc. (NASDAQ:PERY) today reported results for the third quarter and nine months ended October 31, 2009.
Third Quarter Results from Operations
“We are pleased to report results slightly ahead of plan for the third quarter of fiscal 2010. This is a validation to the strength of our brands, the benefit of our diversified business model, the power of our niche strategy and the decisiveness of our actions,” commented Oscar Feldenkreis, President and COO of Perry Ellis International. “As the global economy begins to emerge from this deep recession, the Company is well on its way to reverting to a growth pattern. We see the current holiday season as the beginning of the recovery.”
For the three months ended October 31, 2009 (“third quarter of fiscal 2010”), earnings per fully diluted share at $0.31 represented a decrease of $0.02 compared to $0.33 for the third quarter ended October 31, 2008 (“third quarter of fiscal 2009”). This compares positively to Thomson’s First Call consensus of earnings at $0.21 per fully diluted share for the Company during the third quarter of fiscal 2010. Earnings per fully diluted share were positively affected by a reduced number of shares outstanding and a tax benefit attributable to the reduction in unrecognized tax benefits related to the Company’s foreign operations. At $4.1 million, earnings for the third quarter of fiscal 2010 declined $0.9 million compared to $5.0 million for the same period last year.
The cost reduction initiatives launched at the end of fiscal year 2009 and strict expense controls during the third quarter of fiscal 2010 resulted in operating expense reductions of $11.5 million. Operating expenses at $52.0 million represented an 18% reduction compared to $63.5 million for the third quarter of fiscal 2009. These reductions contributed to earnings before interest, tax, depreciation and amortization (“EBITDA”) for the quarter of $12.3 million. A table showing the reconciliation of EBITDA to net income is attached.
As a result of strict inventory controls and reduced operational chargebacks, the Company’s gross margins for the third quarter of fiscal 2010 expanded to 34.2%, an improvement of 10 basis points compared to 34.1% for the same period the prior year.
“We are pleased with our gross margin improvements for this quarter. Despite margin pressures we have experienced throughout this fiscal year, our investment in information systems and our proactive management of the supply chain has more than offset them,” Mr. Feldenkreis continued.
Total revenues for the third quarter of fiscal 2010 were on plan at $178.5 million. These results represented a $44.3 million revenue decline compared to $222.8 million reported in the third quarter of fiscal 2009.
Compared to third quarter last year, the Company increased revenues in certain businesses including:
| | (i) | Continued strong performance at Kohl’s with above plan sell-thru for GrandSlam and increased penetration of Hispanic brand Centro; |
| | (ii) | Increased door penetration at mid-tier for the re-launched John Henry brand; |
| | (iii) | Improved comps for same store sales at Perry Ellis and Original Penguin direct-to-consumer divisions; |
| | (iv) | Initial shipments for Callaway Fall ’09 product at department stores; and |
| | (v) | Above plan performance for Laundry by Shelli Segal and leather accessories under the Perry Ellis brand at the department store channel. |
Mr. Feldenkreis commented, “Our Perry Ellis Collection, mid-tier brands, golf and Hispanic businesses all reported a strong third quarter and are positioned for growth in the holiday and spring seasons. We are excited about our fourth quarter prospects.”
These results were offset by the overall weakness in the department store and luxury distribution channel, particularly for the swim category, plus the planned and previously announced reductions in the following businesses:
| | (i) | Door count reduction for Perry Ellis Collection by exiting of unprofitable doors at the department store distribution channel, accounting for $14.2 million for the quarter; |
| | (ii) | Planned exit of mass merchant private label business accounting for approximately $11.8 million; |
| | (iii) | Anticipated exiting of PING golf business at the corporate channel of $4 million; |
| | (iv) | Departure of multiple retailers which filed for Chapter 11 during fiscal 2009, accounting for revenues of approximately $1.7 million; |
| | (v) | Exit of the Dockers outerwear license and men’s specialty store business of approximately $6.5 million for the same period last year. |
“Based on current trends, we are confident that the third quarter marks the final quarter of revenue declines for our Company. Initial readings point to a solid holiday season and a strong first quarter for fiscal 2011. As the economy rebounds, we believe that the
decisive actions taken during these challenging times have positioned Perry Ellis International as a stronger, more efficient and better managed company for fiscal 2011 and beyond,” Mr. Feldenkreis concluded.
Balance Sheet and Liquidity Review
For the third consecutive quarter, the Company improved its balance sheet and remains in an outstanding financial position. The continued discipline in working capital management allowed the Company to keep its senior credit facility unutilized, providing $125 million in availability at the end of the third quarter. Additionally, the Company reported $25.5 million in cash and cash equivalents.
Proactive retail planning and inventory discipline allowed the Company to reduce its inventories by $28.5 million, or 22.5%, compared to October 31, 2008, ending the quarter with total inventory of $97.9 million. Inventory turns increased to 4.52 times, compared to 4.28 times last year. Accounts receivable were reduced to $123.6 million, compared to $149.2 million as of October 31, 2008. This represents a $25.6 million or 17.1% reduction, in line with the net sales reduction for the quarter.
“We remain committed to conservatively managing our working capital, while generating strong operational cashflow,” George Feldenkreis, Chairman and CEO, commented. “Our decisive financial management has positioned Perry Ellis International in its best shape in recent years.”
Nine Months Operations Review
For the nine months ended on October 31, 2009 (“first nine months of fiscal 2010”), total revenues decreased by 15.5% to $557.8 million from $660.1 million during the same period last year. This decrease includes lost revenues of approximately $82.5 million due to retailers filing for bankruptcy protection during fiscal 2009, the exit of the PING and Dockers licenses and the men’s specialty store distribution channel, the licensing out of the Perry Ellis dress shirts business and the exit of multiple private label programs, primarily at Wal-Mart. Due to the highly promotional environment pervasive in the consumer goods industry, coupled with inventory liquidation of exited businesses during the first nine months of fiscal 2010, the Company also reported a decrease in gross profit margins of 157 basis points compared to the first nine months ended on October 31, 2008 (“first nine months of fiscal 2009”).
Revenue and gross profit declines have been partially offset by the cost reduction process initiated during fiscal 2009 and continued throughout fiscal 2010. Compared to the first nine months of fiscal 2009, the Company reduced its operating expenses by $32.3 million, or 17%, to $161.1 million. Net income for the period declined from $8.7 million to $4.7 million, a $4.0 million reduction compared to the first nine months of fiscal 2009.
Fiscal 2010 Guidance
Better than expected results during the third quarter of fiscal 2010 have allowed the Company to increase its earnings guidance to the range of $0.80 to $0.95 per fully diluted share, from the previously announced $0.70 to $0.85 range, for fiscal year 2010.
“Despite the uncertainty in the consumer environment, we continue to perform at our growth platforms and deliver on our cost cutting initiatives,” Mr. Feldenkreis continued. “Although we keep trending ahead of our internal plans, we remain conservative in this uncertain environment and our current guidance reflects this.”
The Company also confirmed its guidance for fiscal 2010 of total revenues decreasing in the low double digit range, but revenue growth and gross margin improvements for the remainder of the current year. Finally, the Company announced that it will provide fiscal 2011 guidance after the end of the current holiday season.
“We are cautiously optimistic about fiscal 2011. Next year should see Perry Ellis International returning to a solid growth path, with gross margins expanding and operational leverage resulting from expense control initiatives executed throughout this year as well as new business initiatives. As we move along during this critical holiday season, we will provide our guidance for next year.” Mr. Feldenkreis concluded.
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®, 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 Dockers® for outerwear, Nike® and JAG® for swimwear, and Callaway®, PING® and PGA 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, tradenames 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.
CONTACT:
Perry Ellis International Inc. /Investor Relations
Francisco G. Hoffmann, 305-873-1365
SOURCE: Perry Ellis International
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 31, 2009 | | | October 31, 2008 | | October 31, 2009 | | October 31, 2008 |
Revenues | | | | | | | | | | | | | |
Net sales | | $ | 172,154 | | | $ | 216,232 | | $ | 539,172 | | $ | 641,398 |
Royalty income | | | 6,397 | | | | 6,583 | | | 18,592 | | | 18,665 |
| | | | | | | | | | | | | |
Service fees | | | - | | | | - | | | - | | | - |
| | | | | | | | | | | | | |
Total revenues | | | 178,551 | | | | 222,815 | | | 557,764 | | | 660,063 |
Cost of sales | | | 117,564 | | | | 146,915 | | | 378,335 | | | 437,359 |
| | | | | | | | | | | | | |
Gross profit | | | 60,987 | | | | 75,900 | | | 179,429 | | | 222,704 |
Operating expenses | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 48,704 | | | | 59,933 | | | 150,778 | | | 182,529 |
Cost of services | | | - | | | | - | | | | | | - |
Depreciation and amortization | | | 3,292 | | | | 3,551 | | | 10,305 | | | 10,898 |
Impairment on long-lived assets | | | - | | | | - | | | - | | | - |
| | | | | | | | | | | | | |
Total operating expenses | | | 51,996 | | | | 63,484 | | | 161,083 | | | 193,427 |
| | | | | | | | | | | | | |
Operating income | | | 8,991 | | | | 12,416 | | | 18,346 | | | 29,277 |
Impairment on marketable securities | | | - | | | | 580 | | | - | | | 2,563 |
Interest expense | | | 4,711 | | | | 4,355 | | | 13,295 | | | 13,134 |
| | | | | | | | | | | | | |
| | | | |
Income before income taxes | | | 4,280 | | | | 7,481 | | | 5,051 | | | 13,580 |
Income tax (benefit) provision | | | (26 | ) | | | 2,244 | | | 107 | | | 4,288 |
| | | | | | | | | | | | | |
Net income | | | 4,306 | | | | 5,237 | | | 4,944 | | | 9,292 |
| | | | |
Less: net income attributed to noncontrolling interest | | | 168 | | | | 238 | | | 265 | | | 565 |
| | | | | | | | | | | | | |
Net income attributed to Perry Ellis International, Inc. | | $ | 4,138 | | | $ | 4,999 | | $ | 4,679 | | $ | 8,727 |
| | | | | | | | | | | | | |
| | | | |
Net income attributed to Perry Ellis International, Inc. per share | | | | | | | | | | | | | |
Basic | | $ | 0.33 | | | $ | 0.34 | | $ | 0.37 | | $ | 0.59 |
| | | | | | | | | | | | | |
Diluted | | $ | 0.31 | | | $ | 0.33 | | $ | 0.36 | | $ | 0.57 |
| | | | | | | | | | | | | |
| | | | |
Weighted average number of shares outstanding | | | | | | | | | | | | | |
Basic | | | 12,695 | | | | 14,752 | | | 12,688 | | | 14,673 |
Diluted | | | 13,230 | | | | 15,170 | | | 12,889 | | | 15,272 |
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(amounts in 000’s)
BALANCE SHEET DATA:
| | | | | | | | |
| | | As of | |
| | | October 31, 2009 | | | January 31, 2009 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 25,519 | | | $ | 8,813 | |
Accounts receivable, net | | | 123,623 | | | | 142,870 | |
Inventories | | | 97,865 | | | | 139,074 | |
Deferred income taxes | | | | | | | - | |
Prepaid income taxes | | | | | | | - | |
Other current assets | | | 29,487 | | | | 31,508 | |
| | | | | | | | |
Total current assets | | | 276,494 | | | | 322,265 | |
| | | | | | | | |
| | |
Property and equipment, net | | | 63,666 | | | | 70,222 | |
Intangible assets | | | 200,315 | | | | 201,229 | |
Deferred income taxes | | | | | | | - | |
Other assets | | | 5,567 | | | | 5,870 | |
| | | | | | | | |
| | |
Total assets | | $ | 546,042 | | | $ | 599,586 | |
| | | | | | | | |
| | |
Liabilities and stockholders’ equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 37,963 | | | $ | 45,826 | |
Accrued expenses and other liabilities | | | 24,345 | | | | 23,825 | |
Senior credit facility | | | | | | | - | |
Accrued interest payable | | | 1,866 | | | | 5,336 | |
Current portion - real estate mortgages | | | 11,067 | | | | 494 | |
Income taxes payable | | | | | | | - | |
Deferred income taxes | | | | | | | | |
Unearned revenues | | | 5,771 | | | | 5,654 | |
Other current liabilities | | | | | | | | |
| | | | | | | | |
Total current liabilities | | | 81,012 | | | | 81,135 | |
| | | | | | | | |
| | |
Long term liabilities: | | | | | | | | |
Senior subordinated notes payable | | | 149,787 | | | | 149,409 | |
Senior secured notes payable | | | | | | | - | |
Senior credit facility | | | - | | | | 54,415 | |
Real estate mortgages | | | 13,780 | | | | 24,686 | |
Deferred pension obligation | | | 17,942 | | | | 17,708 | |
Unearned revenues and other long-term liabilities | | | 23,319 | | | | 20,132 | |
| | | | | | | | |
Total long-term liabilities | | | 204,828 | | | | 266,350 | |
| | | | | | | | |
| | |
Total liabilities | | | 285,840 | | | | 347,485 | |
| | | | | | | | |
| | |
Stockholders’ equity | | | | | | | | |
| | |
Preferred stock | | | - | | | | - | |
Common stock | | | 161 | | | | 160 | |
Additional paid-in-capital | | | 106,237 | | | | 103,933 | |
Retained earnings | | | 171,350 | | | | 166,671 | |
Accumulated other comprehensive loss | | | (3,703 | ) | | | (6,306 | ) |
Treasury stock at cost | | | (17,415 | ) | | | (15,664 | ) |
| | | | | | | | |
Total Perry Ellis International, Inc. stockholders’ equity | | | 256,630 | | | | 248,794 | |
| | |
Noncontrolling interest | | | 3,572 | | | | 3,307 | |
| | | | | | | | |
Total stockholders’ equity | | | 260,202 | | | | 252,101 | |
| | | | | | | | |
| | |
Total liabilities and stockholders’ equity | | $ | 546,042 | | | $ | 599,586 | |
| | | | | | | | |
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 31, 2009 | | | October 31, 2008 | | October 31, 2009 | | October 31, 2008 |
| | | | |
Net income attributed to Perry Ellis International, Inc. | | $ | 4,138 | | | $ | 4,999 | | $ | 4,679 | | $ | 8,727 |
Plus: | | | | | | | | | | | | | |
Depreciation and amortization | | | 3,292 | | | | 3,551 | | | 10,305 | | | 10,898 |
Interest expense | | | 4,711 | | | | 4,355 | | | 13,295 | | | 13,134 |
Net income attributable to noncontrolling interest | | | 168 | | | | 238 | | | 265 | | | 565 |
Income tax (benefit) provision | | | (26 | ) | | | 2,244 | | | 107 | | | 4,288 |
| | | | | | | | | | | | | |
EBITDA | | | 12,283 | | | | 15,387 | | | 28,651 | | | 37,612 |
Impairment on marketable securities | | | - | | | | 580 | | | - | | | 2,563 |
One-time non-recurring restructuring costs | | | - | | | | 560 | | | - | | | 2,971 |
Impairment on long-lived assets | | | - | | | | - | | | - | | | - |
| | | | | | | | | | | | | |
EBITDA as adjusted | | $ | 12,283 | | | $ | 16,527 | | $ | 28,651 | | $ | 43,146 |
| | | | | | | | | | | | | |
| (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. |
“EBITDA as adjusted” consists of EBITDA adjusted for the impact of the non-cash impairment of marketable securities and long-lived assets. This impairment is “EBITDA as adjusted” consists of EBITDA adjusted for the impact of the non-cash impairment of marketable securities and the one-time non-recurring restructuring costs. These 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 from the calculation.
