SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended (Commission File Number): 1-4814
July 29, 1995
ARIS INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 22-1715274
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
675 Third Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 338-9858
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section 13 or 15 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 ___
------
Number of shares of Common Stock outstanding 11,925,416
At July 29, 1995
<PAGE>
ARIS INDUSTRIES, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a. Consolidated Balance Sheets as of July
29, 1995, January 28, 1995 and July 30, 1994 ................ 3
b. Consolidated Statement of Operations for the
Twenty-Six Weeks Ended July 29, 1995 and July 30, 1994 ...... 4
c. Consolidated Statement of Operations for the
Thirteen Weeks Ended July 29, 1995 and July 30, 1994 ........ 5
d. Consolidated Statements of Cash Flows for the
Twenty-Six Weeks Ended July 29, 1995 and July 30, 1994 ...... 6
e. Condensed Notes to Consolidated Financial Statements ........ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................... 16
Item 2. Changes in Securities ....................................... 16
Item 3. Defaults upon Senior Securities ............................. 16
Item 4. Submission of Matters to a Vote of Security Holders ......... 16
Item 5. Other Information ........................................... 16
Item 6. Exhibits and Reports on Form 8-K ............................ 16
SIGNATURES ................................................................ 17
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<TABLE>
ARIS INDUSTRIES INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-----------------------------
<CAPTION>
July 29, January 28, July 30,
1995 1995 1994
ASSETS (Unaudited) (Audited) (Unaudited)
------------ ----------- ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 2,563,000 $ 3,086,000 $ 2,407,000
Cash--restricted .......................................... -- 10,000 110,000
Receivables ............................................... 14,329,000 19,129,000 29,508,000
Inventories ............................................... 44,474,000 35,280,000 32,830,000
Prepaid expenses and other current assets ................. 2,375,000 1,672,000 3,551,000
------------ ----------- ------------
Total current assets ............................ 63,741,000 59,177,000 68,406,000
PROPERTY, PLANT AND EQUIPMENT, NET .......................... 14,114,000 14,144,000 14,749,000
OTHER ASSETS ................................................ 888,000 813,000 564,000
COSTS IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED ........ 24,190,000 24,620,000 25,050,000
------------ ----------- ------------
TOTAL ASSETS ................................................ $102,933,000 $98,754,000 $108,769,000
============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade acceptances and notes payable ....................... $ 12,842,000 $ 2,417,000 $ 11,498,000
Accounts payable--trade ................................... 8,997,000 10,108,000 9,886,000
Accrued expenses and other current liabilities ............ 4,976,000 6,694,000 5,714,000
Current portion of long term debt ......................... 4,339,000 4,979,000 2,480,000
------------ ----------- ------------
Total current liabilities ....................... 31,154,000 24,198,000 29,578,000
OTHER LIABILITIES ........................................... 1,586,000 1,706,000 1,717,000
LONG TERM DEBT, LESS CURRENT PORTION ........................ 64,248,000 64,239,000 68,753,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.01: 50,000,000 shares
authorized; issued and outstanding 11,925,416 ........... 119,000 119,000 119,000
Additional paid-in capital ................................ 44,061,000 44,061,000 44,061,000
Accumulated deficit ....................................... (36,987,000) (34,330,000) (34,259,000)
Cumulative foreign currency translation adjustment ........ (1,248,000) (1,239,000) (1,200,000)
------------ ----------- ------------
Total stockholders' equity ...................... 5,945,000 8,611,000 8,721,000
------------ ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $102,933,000 $98,754,000 $108,769,000
============ =========== ============
</TABLE>
See condensed notes to consolidated financial statements
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<PAGE>
ARIS INDUSTRIES INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
Twenty Six Weeks Ended
--------------------------
July 29, July 30,
1995 1994
----------- --------
NET REVENUES ........................... $ 75,898,000 $90,922,000
OPERATING COSTS:
Cost of sales ........................ 59,520,000 70,312,000
Selling and administrative ........... 13,918,000 14,560,000
Production facility shutdown costs ... 531,000 --
------------ -----------
TOTAL OPERATING COSTS .................. 73,969,000 84,872,000
------------ -----------
INCOME BEFORE INTEREST AND DEBT EXPENSE,
AND INCOME TAXES .................... 1,929,000 6,050,000
INTEREST AND DEBT EXPENSE, NET ......... 4,620,000 3,408,000
------------ -----------
INCOME/(LOSS) BEFORE INCOME TAXES ...... (2,691,000) 2,642,000
INCOME TAXES ........................... (34,000) 355,000
------------ -----------
NET INCOME/(LOSS) ...................... ($ 2,657,000) $ 2,287,000
============ ===========
PER SHARE DATA:
Net Income/(Loss) ................... ($ 0.22) $ 0.19
Weighted average number of common
and common equivalent shares ........ 11,925,416 11,925,416
See condensed notes to consolidated financial statements
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<PAGE>
ARIS INDUSTRIES INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
Thirteen Weeks Ended
----------------------------
July 29, July 30,
1995 1994
----------- -----------
NET REVENUES ................................... $38,511,000 $45,513,000
----------- -----------
OPERATING COSTS:
Cost of sales ................................ 29,645,000 35,086,000
Selling and administrative ................... 7,155,000 7,632,000
Production facility shutdown costs ........... 531,000 --
----------- -----------
TOTAL OPERATING COSTS .......................... 37,331,000 42,718,000
----------- -----------
INCOME BEFORE INTEREST AND DEBT EXPENSE,
AND INCOME TAXES ............................ 1,180,000 2,795,000
INTEREST AND DEBT EXPENSE, NET ................. 2,452,000 1,749,000
----------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES ............. (1,272,000) 1,046,000
INCOME TAXES ................................... 56,000 134,000
----------- -----------
NET INCOME/(LOSS) .............................. ($1,328,000) $ 912,000
=========== ===========
PER SHARE DATA:
Net Income/(Loss) ............................ ($0.11) $0.08
Weighted average number of common
and common equivalent shares ................ 11,925,416 11,925,416
See condensed notes to consolidated financial statements
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<PAGE>
ARIS INDUSTRIES INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
Twenty Six Weeks Ended
-----------------------
July 29, July 30,
1995 1994
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(Loss)................................... ($2,657,000) $ 2,287,000
Adjustments to reconcile net income/(loss)
net cash used in operating activities:
Depreciation and amortization .................... 1,592,000 1,513,000
Change in assets and liabilities:
(Increase)/decrease in cash--restricted .......... 10,000 (75,000)
(Increase)/ decrease in receivables .............. 4,800,000 (13,227,000)
Increase in inventories .......................... (9,194,000) (2,951,000)
Increase in prepaid expenses and
other current assets ........................... (703,000) (1,742,000)
(Increase)/decrease in other assets .............. (75,000) 38,000
Increase in trade acceptances .................... 1,425,000 2,699,000
Decrease in accounts payable--trade .............. (1,111,000) (1,754,000)
Decrease in accrued expenses and other
current liabilities ............................ (1,718,000) (243,000)
Increase/(decrease) in other liabilities ......... (108,000) 56,000
---------- -----------
Total Adjustments........................... (5,082,000) (15,686,000)
---------- -----------
Net cash used in operating activities....... (7,739,000) (13,399,000)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................... (1,106,000) (3,831,000)
---------- -----------
Net cash used in investing activities....... (1,106,000) (3,831,000)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt ............... (669,000) (753,000)
Proceeds from issuance of long term debt ........... -- 2,500,000
Proceeds from issuance of note payable ............. 9,000,000 7,000,000
---------- -----------
Net cash provided by financing activities... 8,331,000 8,747,000
---------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ............. (9,000) (109,000)
NET DECREASE IN CASH AND CASH EQUIVALENTS ........... (523,000) (8,592,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...... 3,086,000 10,999,000
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............ $2,563,000 $ 2,407,000
========== ===========
CASH PAID DURING THE YEAR FOR:
Interest ......................................... $4,526,000 $ 3,235,000
Income Taxes ..................................... 149,000 305,000
See condensed notes to consolidated financial statements
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<PAGE>
ARIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of July 29, 1995 and July 30, 1994, the
consolidated statements of operations for the twenty-six and thirteen-week
periods ended July 29, 1995 and July 30, 1994, and the consolidated statements
of cash flows for the twenty-six week periods ended July 29, 1995 and July 30,
1994 were all prepared by the Company without audit. In management's opinion,
adjustments consisting of only normal recurring adjustments necessary to present
fairly the financial position, results of operations and changes in cash flows
for these periods have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or abridged in this submission. It is suggested, therefore,
that these consolidated statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended January 28, 1995. The operating results for the
twenty-six and thirteen-week periods ended July 29, 1995 are not necessarily
indicative of the operating results for the full fiscal year ending February 3,
1996.
2. DEBT SERVICE
The Company's principal long-term indebtedness includes the debt obligations of
the Company to Heller Financial, Inc. ("Heller"), BNY Financial Corporation
("BNY") and AIF-II, L.P., a Delaware limited partnership and an affiliate of
Apollo Advisors, L.P. ("AIF II").
o On June 30, 1993, the Company entered into a Senior Secured Note Agreement
with Heller pursuant to which Heller received a note in the original
principal amount of $50,857,148 to be repaid over seven years, with interest
at 2% over prime. Heller retained a pledge of the stock (but not the assets)
of certain the Company's subsidiaries: Europe Craft Imports, Inc. ("ECI"),
Perry Manufacturing Company ("Perry") and Above the Belt, Inc. ("ATB", whose
operations were discontinued in 1993). Heller's note will amortize on the
following schedule beginning at the fourth fiscal quarter commencing October
1994. Additionally, the Company must make annual prepayments equal to 50% of
certain "excess cash flow" for the preceding four fiscal quarters.
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<PAGE>
Year Amount
---- ------
1994 ................... $ 1,000,000
1995 ................... 3,000,000
1996 ................... 4,000,000
1997 ................... 6,000,000
1998 ................... 8,000,000
1999 ................... 10,000,000
2000 ................... 18,857,000
o On June 30, 1993, the Company entered into a Series A Junior Secured Note
Agreement with BNY, pursuant to which BNY received a nine-year, $7 million
note, bearing interest at a rate of 7% per annum. BNY shares with AIF II a
second lien on Heller's collateral. BNY's note will amortize in six annual
installments, payable on November 3 of each year commencing in 1997 as
follows:
Year Amount
---- ------
1997 ................... $ 300,000
1998 ................... 300,000
1999 ................... 500,000
2000 ................... 600,000
2001 ................... 1,100,000
2002 ................... 4,200,000
o On June 30, 1993 the Company entered into a Series B Junior Secured Note
Agreement with AIF II, pursuant to which AIF II received a $7.5 million note
bearing interest at 13% per annum. AIF II shares with BNY a second lien on
Heller's collateral. AIF II's note will be amortized in two equal
installments payable on November 3 in each of 2001 and 2002.
Once the Heller obligations are paid in full, AIF II and BNY will share in
mandatory prepayments based upon 50% of certain "excess cash flows".
The Company's agreements with Heller, BNY and Apollo contain certain affirmative
and negative covenants on the operation of the Company. The Company has in the
past and recently sought and obtained amendments to certain of these covenants
to adjust to seasonal and other performance factors and the Company may seek
additional amendments in the future.
On September 6, 1995, Aris and its wholly owned subsidiary, Marlene Industries
Corporation, completed all required payments under the Composition Agreement
dated October 11, 1991 with Marlene's trade creditors.
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<PAGE>
3. COSTS IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
Cost in excess of fair value of net assets acquired (goodwill) represents the
unamortized excess of the cost of acquiring a business over the fair values of
the net assets received at the date of acquisition. Amortization expense is
computed by use of the straight-line method over an estimated life of 40 years.
The Company continuously evaluates goodwill for any potential impairment. The
Company assesses the recoverability of goodwill by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through projected undiscounted future results.
4. INVENTORIES
July 29 January 28 July 30
1995 1995 1994
------- ---------- --------
(In Thousands)
Finished goods ................... $29,612 $18,818 $22,327
Work-in process .................. 6,030 8,304 3,685
Raw materials .................... 8,832 8,158 6,818
------- ------- -------
$44,474 $35,280 $32,830
======= ======= =======
5. INCOME TAXES
Due to a significant net operating loss carryforward, the Company does not
anticipate paying any federal income taxes for the fiscal year ending February
3, 1996, except for the alternative minimum income tax which was part of the
1986 Tax Reform Act. Approximately $93,000,000 of tax net operating loss
carryforwards remain to offset future federal taxable income.
SFAS 109 requires a valuation allowance to be recognized for those deferred tax
assets that may not be realized. At July 29, 1995, the Company had gross
deferred tax assets of approximately $39,500,000. At this time, the Company has
determined that such a valuation allowance be equal to the gross federal
deferred tax asset, except for a portion of the alternative minimum tax credit
carryforwards. The alternative minimum tax credit carryforwards do not expire,
and in the Company's opinion, it is more likely than not that a portion of this
credit carryforward will be realized. The valuation allowance was increased by
$1,000,000 in connection with the increase in net operating loss carryforwards
due to the loss incurred for the twenty-six weeks ended July 29, 1995.
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<PAGE>
6. PER SHARE DATA
Income per share for the thirteen and twenty-six week periods ended July 29,
1995 was computed based upon the weighted average number of common shares
outstanding during such period. Anti-dilutive common stock equivalents were not
included in the computation.
7. CONTINGENCIES
A former sales employee of ECI instituted a lawsuit in June, 1992, against ECI
claiming alleged sales commissions in the amount of approximately $1,700,000,
which action is pending in the U.S. District Court for the Eastern District of
Michigan. The Company and ECI believe this claim is entirely without merit and
ECI is vigorously defending this action. However, the Company cannot predict the
ultimate outcome of this litigation.
In addition, the Company and/or its subsidiaries, in the ordinary course of
their business, from time to time may be the subject of, or a party to, various
legal actions involving private interests. The Company and/or its subsidiaries
believe that any ultimate liability arising from any such actions which may be
pending will not have a material adverse effect on its consolidated financial
position at July 29, 1995.
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<PAGE>
ARIS INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
------------
The following analysis of the financial condition and results of operations of
Aris Industries, Inc. (the "Company") should be read in conjunction with the
consolidated financial statements, including the notes thereto, included on
pages 3 through 10 of this report.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
As of July 29, 1995, the Company had working capital of approximately
$32,587,000 as compared to $34,979,000 at January 28, 1995 and $38,828,,000 at
July 30, 1994. The decrease in working capital from January 28, 1995 to July 29,
1995 is attributable primarily to the Company's operating loss during such
periods.
During the twenty-six weeks ended July 29, 1995, the Company financed its
capital expenditures and debt repayments principally through internally
generated funds and credit facilities. The Company believes that its current
cash resources, together with available credit facilities and income from
operations, assuming the Company's present business plans are met and assuming
the Company's working capital facilities are renewed as they have been in the
past on an annual basis, are sufficient for the Company's capital expenditure
program and debt retirements as well as ongoing working capital needs, for the
remainder of the current fiscal year. To achieve its business plans, the Company
feels that it will be necessary for the present negative retail environment to
improve and for the Company not to be impacted by unseasonably warm weather as
it was last year.
DEBT SERVICE AND CAPITAL NEEDS
The Company's principal long-term indebtedness includes the debt obligations of
the Company to Heller Financial, Inc. ("Heller"), BNY Financial Corporation
("BNY") and AIF-II, L.P., a Delaware limited partnership and an affiliate of
Apollo Advisors, L.P. ("AIF II").
o On June 30, 1993, the Company entered into a Senior Secured Note Agreement
with Heller pursuant to which Heller received a note in the original
principal amount of $50,857,148, to be repaid over seven years, with interest
at 2% over prime. Heller retained a pledge of the stock (but not the assets)
of certain of the Company's subsidiaries: Europe Craft Imports,
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<PAGE>
Inc. ("ECI"), Perry Manufacturing Company ("Perry") and Above the Belt, Inc.
("ATB", whose operations were discontinued in 1993). Heller's note will
amortize on the following schedule beginning at the fourth fiscal quarter
commencing October 1994. Additionally, the Company must make annual
prepayments equal to 50% of certain "excess cash flow" for the preceding four
fiscal quarters.
Year Amount
---- ------
1994 .................. $ 1,000,000
1995 .................. 3,000,000
1996 .................. 4,000,000
1997 .................. 6,000,000
1998 .................. 8,000,000
1999 .................. 10,000,000
2000 .................. 18,857,000
o On June 30, 1993, the Company entered into a Series A Junior Secured Note
Agreement with BNY, pursuant to which BNY received a nine-year, $7 million
note, bearing interest at a rate of 7% per annum. BNY shares with AIF II a
second lien on Heller's collateral. BNY's note will amortize in six annual
installments, payable on November 3 of each year commencing in 1997 as
follows:
Year Amount
---- ------
1997 .................. $ 300,000
1998 .................. 300,000
1999 .................. 500,000
2000 .................. 600,000
2001 .................. 1,100,000
2002 .................. 4,200,000
o On June 30, 1993, the Company entered into a Series B Junior Secured Note
Agreement with AIF II pursuant to which AIF II received a $7.5 million note
bearing interest at 13% per annum. AIF II shares with BNY a second lien on
Heller's collateral. AIF II's note will be amortized in two equal
installments payable on November 3 in each of 2001 and 2002.
Once the Heller obligations are paid in full, AIF II and BNY will share in
mandatory prepayments based upon 50% of certain "excess cash flows".
The Company's agreements with Heller, BNY and AIF II contain certain affirmative
and negative covenants on the operation of the Company. The Company has in the
past and recently sought and obtained amendments to certain of these covenants
to adjust to seasonal and other performance factors and the Company may seek
additional amendments in the future.
On September 6, 1995, Aris and its wholly owned subsidiary, Marlene Industries
Corporation, completed all required payments under the
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<PAGE>
Composition Agreement dated October 11, 1991 with Marlene's trade creditors.
RESULTS OF OPERATIONS
The Company reported a net loss of $2,657,000 and $1,328,000 for the twenty-six
and thirteen weeks ended July 29, 1995, respectively, compared to net income of
$2,287,000 and $912,000, respectively, for the comparable periods in the prior
year, and income from operations of $1,929,000 and $1,180,000 for the twenty-six
and thirteen weeks ended July 29, 1995, compared to $6,050,000 and $2,795,000
for the comparable periods in the prior year. As discussed below, these
decreases are due to a decrease in sales at Perry Manufacturing Company of
$8,161,000 for the twenty-six weeks ended July 29, 1995 as compared to the
twenty-six weeks ended July 30, 1994 and $4,814,000 for the thirteen weeks ended
July 29, 1995 as compared to the thirteen weeks ended July 30, 1994, which
caused a related loss of gross profit, as reorders by major customers did not
materialize because of the unusually adverse retail environment, along with the
loss of sales from a customer who went out of business during the fiscal year
ended January 28, 1995. In addition, lower sales and margins continued at ECI
for the second quarter due to the unseasonable spring weather and a general
slowdown in the retail apparel environment.
The Company's revenues decreased from $90,922,000 during the twenty-six week
period ended July 30, 1994 to $75,898,000 during the twenty-six week period
ended July 29, 1995. The Company's revenues decreased from $45,513,000 during
the thirteen week period ended July 30, 1994 to $38,511,000 during the thirteen
week period ended July 29, 1995.
The revenue decrease of $15,024,000 for the twenty-six week period ended July
29, 1995 compared to the same period last year resulted from the decrease in
revenues at Perry of $8,161,000 and the decrease in revenues at ECI of
$6,863,000 for the twenty-six week period ended July 29, 1995 compared to the
same period in the prior year. The revenue decrease at Perry was primarily
attributable to reorders from major retail chains on successful programs which
were not repeated in the twenty-six weeks ended July 29, 1995 by these customers
due to the unusually adverse retail environment and the loss of a customer which
went out of business and which had contributed $5,000,000 in sales during the
twenty-six week period ended July 30, 1994. Several factors contributed to the
significant reduction of ECI's revenues: The unseasonable spring weather and a
general slowdown in the retail apparel environment.
The revenue decrease of $7,002,000 for the thirteen week period ended July 29,
1995 compared to the same period last year resulted from the decrease in
revenues at Perry of $4,814,000 and a decrease in revenues at ECI of $2,188,000
for the thirteen week period ended July 29, 1995 compared to the same period in
the prior year. The revenue decrease at Perry was primarily attributable to
reorders
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<PAGE>
from major retail chains on successful programs which were not repeated
in the thirteen weeks ended July 29, 1995 by these customers due to the
unusually adverse retail environment. In addition, a large customer which had
contributed $3,266,000 in sales during the thirteen week period ended July 30,
1994 went out of business during the fiscal year ended January 28, 1995. ECI's
decrease in revenues for the thirteen weeks ended July 29, 1995 was due to the
unseasonable spring weather and a general slowdown in the retail apparel
environment.
Cost of sales for the twenty-six week period ended July 29, 1995 as a percentage
of revenue was 78.4% compared to 77.3% of revenues for the twenty-six week
period ended July 30, 1994. This was due to lower margins at both ECI and Perry.
At ECI, margins were affected by the unseasonable spring weather and a general
slowdown in the retail apparel environment which put additional pressure on
selling margins. These conditions did not exist in the comparable period in the
prior year. Perry's margins were adversely affected by the unusually adverse
retail environment that caused customers to shift orders to future periods which
in turn caused some unfavorable manufacturing variances. These conditions did
not exist in the comparable periods in the prior year.
Cost of sales for the thirteen week period ended July 29, 1995 as a percentage
of revenue was 77.0% compared to 77.1% of revenues for the thirteen week period
ended July 30, 1994. This was due to lower margins at ECI. At ECI, margins were
adversely affected by the unseasonable spring weather and general slowdown in
the retail apparel environment as discussed above.
Selling and administrative expenses as a percentage of revenues for the
twenty-six and thirteen week periods ended July 29, 1995 was 18.3% and 18.6%
compared to 16.0% and 16.8% for the twenty-six and thirteen weeks ended July 30,
1994. This percentage increase was due to a decrease in sales that could not be
offset by a corresponding decrease in expenses due to the fixed nature of much
of the Company's expense structure. Selling and administrative expenses for the
twenty-six week period ended July 29, 1995 were $13,918,000 compared to
$14,560,000 for the twenty-six week period ended July 30, 1994, a decrease of
$642,000 or 4.4%. Selling and administrative expenses for the thirteen week
period ended July 29, 1995 were $7,155,000 compared to $7,632,000 for the
thirteen week period ended July 30, 1994, a decrease of $477,000 or 6.3%.
Perry has restructured one of its Latin American facilities whose production
capacity has been wound down and continues to function as a warehouse.
Management continues to evaluate the feasibility of a continued presence in this
location.
Interest and debt expense for the twenty-six and thirteen week periods ended
July 29, 1995 increased by $1,212,000 or 35.6% and $703,000 or 40.2% compared to
the twenty-six and thirteen week periods ended July 30, 1994. This increase is
primarily due to
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<PAGE>
increases in the prime lending rate by as much as 300 basis points from the
comparable period last year for both Aris' and Perry's variable rate debt. In
addition, due to the softness in the retail environment, Perry and ECI had to
borrow earlier this year from their lenders than for the comparable period last
year.
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<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
------- -----------------
NONE
Item 2. Changes in Securities
------- ---------------------
NONE
Item 3. Defaults upon Senior Securities
------- -------------------------------
NONE
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
NONE
Item 5. Other Information
------- -----------------
NONE
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) Exhibits--NONE
(b) Reports on Form 8-K--Current Report on Form 8-K filed June 12, 1995 with
respect to an amendment to the Company's Senior Secured Note Agreement
with Heller Financial, Inc., which amendment adjusted certain financial
covenants so that they would be more advantageous to the Company and
added a fixed charge coverage financial covenant.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ARIS INDUSTRIES, INC.
(Registrant)
Date: September 11, 1995 By /s/ PAUL SPECTOR
----------------------------
Paul Spector,
Senior Vice President
Chief Financial Officer
By /s/ VINCENT F. CAPUTO
----------------------------
Vincent F. Caputo,
Vice President
Assistant Secretary and
Assistant Treasurer
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ARIS INDUSTRIES, INC.
(Registrant)
Date: September 11, 1995 By_____________________________
Paul Spector,
Senior Vice President
Chief Financial Officer
By_____________________________
Vincent F. Caputo,
Vice President
Assistant Secretary and
Assistant Treasurer
-18-
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