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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
September 30, 2000
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.)
1411 BROADWAY, NEW YORK, NEW YORK 10018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 642-4300
--------------
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 79,665,407
As of November 10, 2000
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<PAGE>
ARIS INDUSTRIES, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a. Consolidated Condensed Balance Sheets as of
September 30, 2000 and December 31, 1999 3
b. Consolidated Condensed Statements of Operations
for the Three-Months Ended September 30, 2000
and September 30, 1999 4
c. Consolidated Condensed Statements of Operations
for the Nine-Months Ended September 30, 2000
and September 30, 1999 5
d. Consolidated Condensed Statements of Cash Flows
for the Nine-Months Ended September 30, 2000
and September 30, 1999 6
e. Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of
Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 21
<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
(in thousands, except per share data) 2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,824 $ 1,109
Receivables, net 39,018 34,004
Inventories 27,388 18,233
Prepaid expenses and other current assets 2,171 2,509
--------- ---------
Total current assets 70,401 55,855
Property and equipment, net 11,903 10,752
Goodwill, net 36,646 37,894
Other assets 1,517 1,616
--------- ---------
TOTAL ASSETS $ 120,467 $ 106,117
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under revolving credit facility $ 42,565 $ 25,485
Current portion of long-term debt 9,100 2,600
Current portion of capitalized lease obligations 947 1,755
Accounts payable 28,931 14,591
Accrued expenses and other current liabilities 4,513 4,005
--------- ---------
Total current liabilities 86,056 48,436
Long-term debt 6,342 14,342
Capitalized lease obligations 1,946 1,818
Other liabilities 2,411 2,270
--------- ---------
Total liabilities 96,755 66,866
========= =========
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value: 10,000 shares authorized; none
issued and outstanding -- --
Common stock, $.01 par value: 100,000 shares authorized
79,665 issued and outstanding at September 30, 2000
and 79,434 issued and outstanding at December 31, 1999 797 794
Additional paid-in capital 80,603 80,324
Accumulated deficit (57,383) (41,399)
Unearned compensation (305) (468)
--------- ---------
Total stockholders' equity 23,712 39,251
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 120,467 $ 106,117
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements
-3-
<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine- Nine-
Months Ended Months Ended
September 30, September 30,
2000 1999
------------- -------------
(in thousands, except per share data)
<S> <C> <C>
NET SALES $ 145,348 $ 116,326
COST OF SALES (98,517) (84,440)
--------- ---------
GROSS PROFIT 46,831 31,886
COMMISSION AND LICENSING INCOME 1,913 1,359
--------- ---------
INCOME BEFORE OPERATING EXPENSES, INTEREST EXPENSE AND INCOME
TAX (PROVISION) BENEFIT 48,744 33,245
OPERATING EXPENSES:
SELLING AND ADMINISTRATIVE EXPENSES (57,382) (29,256)
START-UP COSTS (1,757) (215)
RESTRUCTURING AND OTHER COSTS (1,502) (8,309)
--------- ---------
LOSS BEFORE INTEREST EXPENSE AND INCOME TAX
(PROVISION) BENEFIT (11,897) (4,535)
INTEREST EXPENSE, NET (4,047) (2,734)
--------- ---------
LOSS BEFORE INCOME TAX (PROVISION) BENEFIT (15,944) (7,269)
INCOME TAX (PROVISION) BENEFIT (40) 137
--------- ---------
NET LOSS ($ 15,984) ($ 7,132)
========= =========
BASIC NET LOSS PER SHARE: ($ 0.20) ($ 0.15)
--------- ---------
DILUTED NET LOSS PER SHARE: ($ 0.20) ($ 0.15)
--------- ---------
PER SHARE DATA:
Weighted average shares outstanding - Basic 79,553 47,168
Weighted average shares outstanding - Diluted 79,553 47,168
</TABLE>
See accompanying notes to consolidated condensed financial statements
-4-
<PAGE>
ARIS INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three- Three-
Months Ended Months Ended
September 30, September 30,
2000 1999
------------- -------------
(in thousands, except per share data)
<S> <C> <C>
NET SALES $ 58,262 $ 62,869
COST OF SALES (41,749) (44,551)
-------- --------
GROSS PROFIT 16,513 18,318
COMMISSION AND LICENSING INCOME 752 823
-------- --------
INCOME BEFORE OPERATING EXPENSES, INTEREST EXPENSE AND INCOME
TAX BENEFIT (PROVISION) 17,265 19,141
OPERATING EXPENSES:
SELLING AND ADMINISTRATIVE EXPENSES (18,741) (13,748)
START-UP COSTS (124) (215)
RESTRUCTURING AND OTHER COSTS (249) (308)
-------- --------
(LOSS) INCOME BEFORE INTEREST EXPENSE AND INCOME TAX
BENEFIT (PROVISION) (1,849) 4,870
INTEREST EXPENSE, NET (1,544) (1,145)
-------- --------
(LOSS) INCOME BEFORE INCOME TAX BENEFIT (PROVISION) (3,393) 3,725
INCOME TAX BENEFIT (PROVISION) 31 (450)
-------- --------
NET (LOSS) INCOME ($ 3,362) $ 3,275
======== ========
BASIC NET (LOSS) INCOME PER SHARE: ($ 0.04) $ 0.05
-------- --------
DILUTED NET (LOSS) INCOME PER SHARE: ($ 0.04) $ 0.05
-------- --------
PER SHARE DATA:
Weighted average shares outstanding - Basic 79,625 67,602
Weighted average shares outstanding - Diluted 79,625 71,170
</TABLE>
See accompanying notes to consolidated condensed financial statements
-5-
<PAGE>
ARIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine- Nine-
Months Ended Months Ended
September 30, September 30,
2000 1999
------------- -------------
(In thousands, except per share data)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($15,984) ($7,132)
-------- --------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 4,346 1,400
Issuance of notes in lieu of interest -- 108
Non-cash stock based compensation 329 97
Impairment of goodwill and other intangibles -- 3,750
Change in assets and liabilities:
Increase in receivables (5,014) (28,538)
(Increase) / decrease in inventories (9,155) 6,329
Decrease / (increase) in prepaid expenses and other current assets 307 (1,140)
Increase in other assets (233) (119)
Increase / (decrease) in accounts payable 14,340 (4,079)
Increase / (decrease) in accrued expenses and other current liabilities 508 (4,798)
Increase in other liabilities 141 703
-------- --------
Total Adjustments 5,569 (26,287)
-------- --------
Net cash used in operating activities (10,415) (33,419)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,682) (2,400)
Payment for acquisition of Lola, Inc., net of cash acquired of $153 (10,247)
-------- --------
Net cash used in investing activities (3,682) (12,647)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt and capital leases (2,384) (4,583)
Book overdraft 753
Stock options exercised 116 264
Proceeds from long-term loan 10,000
Increase in deferred financing costs (406)
Proceeds from the issuance of common stock 20,000
Common stock issuance costs paid (1,461)
Increase in borrowings under revolving credit facility 17,080 21,153
-------- --------
Net cash provided by financing activities 14,812 45,720
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 715 (346)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,109 1,112
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,824 $ 766
======== ========
Non-Cash Investing and Financing Activities:
The Company acquired the capital stock of Lola, Inc., for $20,955 as follows:
Fair value of assets acquired $ 36,984
Cash paid for assets acquired, net (10,247)
Issued 6,500 Common Shares valued at $1.50 per share (9,750)
Granted options to purchase 1,150,000 shares of Common Stock (805)
--------
Liabilities assumed $ 16,182
========
Capital Lease Obligations Incurred $ 235 $ 1,850
======== ========
Exchange of Series B Secured Notes for Common Stock $ 4,864
========
</TABLE>
See accompanying notes to consolidated condensed financial statements
-6-
<PAGE>
ARIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated condensed financial statements as of September 30, 2000 and for
the three and nine-month periods ended September 30, 2000 and 1999, are
unaudited and reflect all adjustments consisting of normal recurring
adjustments, except for restructuring and other costs (See Note 7) which are, in
the opinion of management, necessary for a fair presentation of financial
position, operating results and cash flows for the periods.
The consolidated condensed balance sheet as of December 31, 1999 was derived
from audited financial statements but does not include all disclosures required
by generally accepted accounting principles. The accompanying consolidated
condensed financial statements have been prepared in accordance with accounting
standards appropriate for interim financial statements and should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. The
operating results for the three and nine-month periods ended September 30, 2000
are not necessarily indicative of the operating results for the year ending
December 31, 2000.
2. LIQUIDITY AND BUSINESS RISKS
The consolidated condensed financial statements have been prepared on a basis of
accounting assuming that the Company will continue as a going concern, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The Company as of September 30, 2000 has a working
capital deficit of $15,655,000, has incurred losses for the nine-months ended
September 30, 2000 of $15,984,000 and has negative cash flows from operations
for the nine-months ended September 30, 2000 of $10,415,000. In addition, as of
September 30, 2000, the Company was not in compliance with certain debt covenant
requirements. The continued liquidity of the Company is dependent upon obtaining
sufficient financing in order to fund operations and meet its debt obligations
when due.
The Company was not in compliance, as of September 30, 2000, with certain
financial covenants contained in its financing agreements. The Company has
obtained waivers from its lenders, of certain covenant non-compliance at
September 30, 2000. The company expects that it will need to obtain further
waivers of certain financial covenants from these lenders for December 31, 2000.
As a result, the Company has classified the long-term portion of its term loan
with these lenders as a current liability. However, the lead lender has
indicated to the Company its intentions not to call the term loan or borrowings
outstanding under the revolving line of credit and to continue to work with the
Company to provide the appropriate waivers needed to maintain the financing
available to the company under the financing agreement. In connection with the
waivers obtained for the September 30, 2000 reporting period, the Company has
agreed to raise additional equity financing of $20 million of which $10 million
is to be provided in each of January and February of 2001. The Company has
identified several potential sources of such financing who has indicated an
interest in investing in the Company. The Company is pursuing discussions with
such parties. In addition, the Company's Chief Executive Officer has agreed to
extend to March 2001 his $3 million limited guarantee to the lenders. These
actions are intended to achieve profitable operations and provide the Company
with sufficient financing to pay its debts as they become due. However, these
can be no assurance in this regard.
3. THE SIMON TRANSACTION
On February 26, 1999, the Company issued: (i) 24,107,145 shares of Common Stock
of the Company and 2,093,790 shares of Series A Preferred Stock of the Company
(which shares were converted into 20,937,900 shares of Common Stock on July 29,
1999), for $20,000,000 and (ii) redeemed the Series B Junior Secured Note (which
represented a total indebtedness of $10,658,000) in exchange for $4,000,000 in
cash and an aggregate of 5,892,856 shares of
7
<PAGE>
Common Stock and 512,113 shares of Series A Preferred Stock (which shares were
converted into 5,121,130 shares of Common Stock on July 29, 1999), (the "Simon
Purchase Transaction").
4. ACQUISITIONS
On August 10, 1999, the Company consummated the merger of Lola, Inc. ("Lola"), a
California corporation, with and into Europe Craft Imports, Inc. ("ECI"), a New
Jersey corporation (the "Merger"), which is wholly owned by the Company.
Concurrent with the closing, ECI contributed all of the assets formerly owned by
Lola to XOXO Clothing Company, Incorporated, a Delaware corporation ("XOXO")
that is wholly owned by ECI. Lola's business consisted principally of the
manufacture and sale of women's apparel and accessories principally under the
"XOXO" name.
In connection with the acquisition, Lola's shareholders received $10,000,000 in
cash, 6,500,000 shares of the Company's common stock, valued at $1.50 per share
at the time of the acquisition, and options to purchase 1,150,000 shares of the
Company's common stock (valued at $805,000). In addition, the Company incurred
acquisition expenses which approximated $473,000. The acquisition was accounted
for under the purchase method of accounting, and accordingly, the operating
results of Lola have been included in the Company's consolidated results of
operations from the date of acquisition. The excess of the purchase price over
the fair values of assets acquired and liabilities assumed amounted to
$22,774,000 and has been recorded as goodwill. The goodwill is being amortized
over a twenty year useful life using the straight line method. In conjunction
with the merger, the Company obtained a $10,000,000 term loan and increased its
line of credit from $65,000,000 to $80,000,000 with a financial institution.
5. DEBT
The Company's long-term indebtedness consists, in part, of its obligations to
BNY Financial Corporation ("BNY") under the Series A Junior Secured Note
Agreement dated June 30, 1993,as amended, pursuant to which BNY is currently
owed $6,942,000 plus interest at the rate of 7% per annum, with a final maturity
date of November 3, 2002. The principal of BNY's Note is payable on November 3
of each year as follows:
YEAR AMOUNT
2000 $ 600,000
2001 $1,100,000
2002 $5,242,000
The Company has received a forbearance on the $600,000 principal payment that
was due on November 3, 2000. The due date for the principal payment has been
extended to the earlier of i) five
8
<PAGE>
business days after the date on which BNY demands payment from the Company or
ii) January 2, 2001. The Company has paid BNY the interest payment that was due
on November 3, 2000. BNY is also entitled to receive mandatory prepayments based
upon 50% of certain "excess cash flows" of the Company, as defined in the
Company's note agreements with BNY.
The Company entered into a Financing Agreement with CIT Commercial Services
Group, Inc. and certain other financial institutions, whereby such lenders
agreed to provide a revolving credit facility of up to $65,000,000, for working
capital, loans and letters of credit financing, which expires on February 26,
2002. The obligations under the Financing Agreement are collateralized by liens
on substantially all of the assets of the Company. For revolving credit loans,
interest accrues at the bank's prime rate. For Eurodollar loans, interest
accrues at a rate per annum equal to the Eurodollar rate (as defined) plus 2.5%.
The Agreement contains various financial and other covenants and conditions,
including, but not limited to, limitations on paying dividends, making
acquisitions and incurring additional indebtedness.
In connection with the XOXO transaction (See Note 4), the Company's Financing
Agreement was amended in August 1999 to increase the revolving credit line to
$80,000,000, and to provide for a term loan of $10,000,000. The term loan bears
interest at prime plus one-half percent and is payable in quarterly installments
of $500,000, plus interest, commencing January 1, 2000, with a balloon payment
of $5,500,000 on February 26, 2002, the maturity date. The Company is required
to make certain mandatory prepayments based upon "excess cash flows" as defined
in the amendment to the loan agreement.
During April 2000, the Company entered into an amendment of its Financing
Agreement with CIT Commercial Services Group, Inc. and certain other financial
institutions, under which the lenders waived compliance with certain covenant
requirements which the Company was not in compliance with at December 31, 1999,
amended the covenants for the year ended December 31, 2000 and increased the
interest rates on the Company's revolving credit facility to prime plus
one-quarter percent and the term loan to prime plus three-quarter percent.
Additionally, the amendment provides for an overadvance facility based on
seasonal needs. In connection with the waivers and amendment, the Company's
chief executive officer agreed to provide a personal guarantee on $3 million of
indebtedness outstanding under the Financing Agreement. In connection with the
covenant waivers received on November 13, 2000, the Company's Chief Executive
Officer has agreed to extend his guarantee through March 6, 2001.
In June 2000, First A.H.S. Acquisition Corp. ("AHS") a company owned by the
Company's chief executive officer entered into an agreement (the "Letter of
Credit Agreement") with the Company's principal commercial lender to facilitate
the opening of up to $17,500,000 in letters of credit for the purchase of
inventory. Pursuant to the Letter of Credit Agreement, AHS will purchase
inventory which will be held at the Company's warehouse facilities. Such
inventory will be sold to the Company at cost when the Company is ready to ship
the merchandise to the customer. As of and for the nine-months ended September
30, 2000, the Company purchased $3,894,000 from AHS, owes AHS $1,298,000 and is
holding $6,000,000 of inventory which the Company will purchase in the fourth
quarter of fiscal 2000. In connection with the Letter of Credit Agreement, the
Chief Executive Officer of the Company has guaranteed up to $7,000,000 of AHS
obligations to the Company's principal commercial lender.
9
<PAGE>
The Company was not in compliance, as of September 30, 2000, with certain
financial covenants contained in its Financing Agreements. On November 13, 2000,
the Company received waivers from its lenders of such financial covenants for
the period ended September 30, 2000 (See Note 2).
6. START-UP COSTS OF NEW LICENSING OPERATIONS
During the nine-months ended September 30, 2000, the Company incurred $1,757,000
of start-up costs relating to various license agreements for which product
launches are scheduled for years 2000 and 2001. These start-up costs consist of
salaries, samples and related supplies directly attributable to newly licensed
operations. The Company expects to continue to incur such costs during the
remainder of fiscal 2000 and fiscal 2001 in connection with several of its new
license arrangements.
7. RESTRUCTURING AND OTHER COSTS
During the nine-months ended September 30, 2000, the Company recorded charges of
$1,502,000 associated with the continuing restructuring of its corporate office
and distribution facilities. These charges before taxes relate primarily to
employee severance costs.
During the quarter ended March 31, 1999, in connection with the Simon Purchase
Transaction, the Company was required to obtain a consent from the licensor of
its Perry Ellis licenses. As a condition to granting its consent, such licensor
required that the terms of its licenses be shortened. Based on the negative
undiscounted net cash flows expected to be derived from these licenses over
their revised terms, intangible assets associated with the acquisition of these
licenses of $3,750,000 (included in goodwill) was deemed impaired and
written-off. In addition, the Company made a severance payment of approximately
$2,401,000 pursuant to the Retention Agreement between the Company and its
former president.
During the quarters ended June 30, 1999 and September 30, 1999, the Company
incurred charges of $1,850,000 and $308,000, respectively, in connection with
the restructuring of its operations. The major components of the restructuring
charges relate to severance pay, estimated costs to exit and sub-lease certain
facilities and impairment charges related to fixed assets at the vacated
facilities.
The Company is considering further restructuring plans for its operations to
reduce costs and achieve profitability. In this regard, the Company has decided
in the fourth quarter of fiscal 2000 to consolidate certain functions in New
York and California. While the Company continues to further develop its plans,
these actions will result in further restructuring and other costs in the fourth
quarter of fiscal 2000, which may include charges for the impairment of certain
assets.
10
<PAGE>
8. INVENTORIES
September 30, 2000 December 31, 1999
------------------ -----------------
(In Thousands) (In Thousands)
Finished Goods $ 20,880 $ 14,040
Work-in process 3,041 1,196
Raw materials 3,467 2,997
---------- ----------
$ 27,388 $ 18,233
========== ==========
9. PER SHARE DATA
Basic (loss) income per common share is computed by dividing net (loss) income
available for common shareholders, by the weighted average number of shares of
common stock outstanding during each period. Diluted (loss) income per share is
computed assuming the conversion of stock options and warrants with a market
value greater than the exercise price, except when the conversion of such stock
options and warrants would be anti-dilutive.
Nine-Months Ended
-------------------------------------
September 30, September 30,
2000 1999
------------- --------------
(In thousands except per share data)
NUMERATOR:
Net loss ............................. $(15,984) $(7,132)
DENOMINATOR:
Basic weighted average shares
outstanding ........................ 79,553 47,168
EFFECT OF DILUTED SECURITIES:
Stock Options ........................ -- --
-------- -------
Diluted weighted average shares
outstanding........................ 79,553 47,168
======== =======
Basic net (loss) per share.............. $ (0.20) $ (0.15)
======== =======
Diluted net (loss) per share............ $ (0.20) $ (0.15)
======== =======
11
<PAGE>
Three-Months Ended
------------------------------------
September 30, September 30,
2000 1999
--------------- ---------------
(In thousands except per share data)
NUMERATOR:
Net (loss) / income......... $(3,362) $ 3,275
DENOMINATOR:
Basic weighted average shares
outstanding .......... 79,625 67,602
EFFECT OF DILUTED SECURITIES:
Stock Options -- 3,568
------- --------
Diluted weighted average
shares outstanding.......... 79,625 71,170
======= ========
Basic net (loss) per share.... $ (0.04) $ 0.05
======= ========
Diluted net (loss) per share... $ (0.04) $ 0.05
======= ========
Options and warrants to purchase 10,711,645 and 9,832,611 shares of Common Stock
were outstanding as of September 30, 2000 and September 30, 1999, respectively,
but were not included in the computation of diluted earnings per share because
the effect would be anti-dilutive.
10. COMMITMENTS AND CONTINGENCIES
Licensing Agreements
The Company has been granted several license agreements to manufacture and
distribute men's, women's and boys' outerwear, sportswear and activewear
products bearing the licensors' labels. The agreements expire at various dates
through 2011. The Company is required to make royalty and advertising payments
based on a percentage of sales, as defined in the respective agreements, subject
to minimum payment thresholds. Future minimum royalty and advertising payments
required under the license agreements are as follows (in thousands):
2000............................. $ 2,563
2001............................. 3,104
2002............................. 3,884
2003............................. 4,445
2004............................. 3,380
Thereafter ...................... 9,939
------
Total minimum royalty
and advertising payments ...... $27,315
=======
12
<PAGE>
In April 2000, Perry Ellis International and the Company mutually agreed not to
continue the "Perry Ellis America" Jeanswear license after the Year 2000.
Simultaneous with this agreement, the Company and Perry Ellis International
agreed to renew the Company's Loungewear License Agreement through December 31,
2003. The Company is currently in negotiations with Perry Ellis International to
terminate such license.
The Company signed an agreement on October 24, 2000, providing for the
termination of the Company's license to produce and market products under the
"Fubu" name. The licensor forgave approximately $1,800,000 in license royalties
payable in exchange for the termination of the license, 1,000,000 shares of the
Company's common stock (estimated market value $300,000) and other
considerations resulting in a gain of approximately $1,500,000 which will be
recorded in the fourth quarter of fiscal 2000. Additionally, the licensor
accepted responsibility for certain shipments of "Fubu" products.
The Company also informed J.B. Stetson & Co. that it does not plan to
manufacture products under the license agreement which grants one of the
Company's subsidiaries the right to utilize the Stetson name.
Contingencies
The Company is party to various lawsuits incurred in the ordinary course of its
business. Management believes that the financial statements adequately provide
for the potential of adverse outcomes in these proceedings. In addition, in
September 2000, the Company was served with a summons and complaint in an action
brought by Sara Lee Corporation in the United States District Court in the
Southern District of New York alleging that the Company's Wonder Pant product,
which the Company plans to launch in December 2000 or early 2001, infringes on
Sara Lee's trademark rights to "Wonder Bra". Management believes that it has a
meritorious defense in this action, and that any unfavorable outcome will not
have a material adverse effect on the Company's financial condition, results of
operations and cash flows.
13
<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") for the three and nine-month periods ended
September 30, 2000 and September 30, 1999 should be read in conjunction with the
consolidated condensed financial statements, including the notes thereto,
included on pages 3 through 13 of this report.
FORWARD LOOKING STATEMENTS
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature, are
intended to be, and are hereby identified as, "forward looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended by Public Law 104-67. The Company cautions readers that
forward looking statements, including without limitation, those relating to the
Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, and income, are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward looking statements, due to several important factors
herein identified, among others, and other risks and factors identified from
time to time in the Company's reports filed with the Securities and Exchange
Commission.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company had a working capital deficit of
approximately $15,655,000 as compared to a working capital surplus of
approximately $7,419,000 at December 31, 1999. The decrease in working capital
was primarily due to the Company's net loss incurred in the nine-months ended
September 30, 2000 and a reclassification of the Company's term loan in the
amount of $6,500,000 to current liabilities. These conditions are further
discussed below. During the nine months ended September 30, 2000, the Company
financed its working capital requirements and capital expenditures principally
through its credit facility as supplemented by the Letter of Credit Agreement
between a company owned by the Company's chief executive officer and its
principal commercial lender (see Page 15).
On February 26, 1999, simultaneous with the closing of the Simon Purchase
Transaction, the Company and its subsidiaries entered into a Financing Agreement
with CIT Commercial Services Group, Inc. ("CIT") and certain other financial
institutions, whereby such lenders agreed to provide a revolving credit facility
of up to $65,000,000 for working capital, loans and letters of credit financing,
which expires on February 26, 2002. The obligations under the Financing
Agreement are collateralized by liens on substantially all of the assets of the
Company. For revolving
14
<PAGE>
credit loans, interest accrues at the bank's prime rate. For Eurodollar loans,
interest accrues at a rate per annum equal to the Eurodollar rate plus 2.5%. The
agreement evidencing the line of credit contains various financial and other
covenants and conditions, including, but not limited to, limitations on paying
dividends, making acquisitions and incurring additional indebtedness.
In connection with the XOXO transaction, the Company's Financing Agreement was
amended to increase the revolving credit line to $80,000,000, and to provide for
a term loan of $10,000,000. The term loan bears interest, which is paid monthly,
at prime plus one-half percent and principal is payable in quarterly
installments of $500,000, commencing January 1, 2000, with a balloon payment of
$5,500,000 on February 26, 2002, the maturity date. The Company is required to
make certain mandatory prepayments based upon "excess cash flows" as defined in
the amendment to the loan agreement.
During April 2000, the Company entered into an amendment of its Financing
Agreement with CIT Commercial Services Group, Inc. and certain other financial
institutions, under which the lenders waived compliance with certain covenant
requirements which the Company was not in compliance with at December 31, 1999,
amended the covenants for the year ended December 31, 2000 and increased the
interest rates on the Company's revolving credit facility to prime plus
one-quarter percent and the term loan to prime plus three-quarter percent.
Additionally, the amendment provides for an overadvance facility based on
seasonal needs. In connection with the waivers and amendment, the Company's
chief executive officer agreed to provide a personal guarantee on $3 million of
indebtedness outstanding under the Financing Agreement. In connection with the
covenant waivers received on November 13, 2000 (see below) the Company's chief
executive officer has agreed to extend his guarantee through March 6, 2001.
In June 2000, First A.H.S. Acquisition Corp. ("AHS") a company owned by the
Company's chief executive officer entered into an agreement (the "Letter of
Credit Agreement") with the Company's principal commercial lender to facilitate
the opening of up to $17,500,000 in letters of credit for the purchase of
inventory. Pursuant to the Letter of Credit Agreement, AHS will purchase
inventory which will be held at the Company's warehouse facilities. Such
inventory will be sold to the Company at cost when the Company is ready to ship
the merchandise to the customer. As of and for the nine-months ended September
30, 2000, the Company purchased $3,894,000 from AHS, owes AHS $1,298,000 and is
holding $6,000,000 of inventory which the Company will purchase in the fourth
quarter of fiscal 2000. In connection with the Letter of Credit Agreement, the
chief executive officer of the Company has guaranteed up to $7,000,000 of AHS
obligations to the Company's principal commercial lender.
The Company was not in compliance, as of September 30, 2000, with certain
financial covenants contained in its financing agreements. The Company has
obtained waivers from its lenders, of such covenant non-compliance at September
30, 2000. The Company expects that it will need to obtain further waivers of
certain financial covenants from these lenders for December 31, 2000. As a
result, the Company has classified the long-term portion of its term loan with
these lenders as a current liability. However, the lead lender has indicated to
the Company its intentions not to call the term loan or borrowings outstanding
under the revolving line of credit and to continue to work with the Company to
provide the appropriate waivers needed to maintain the financing available to
the company under the financing agreement. In connection with the waivers
obtained for the September 30, 2000 reporting period, the Company has agreed to
raise additional equity financing of $20 million of which $10 million is to be
provided in each of January and February of 2001. The Company has identified
several potential sources of such financing who has indicated an interest in
investing in the Company. The Company is pursuing discussions with such parties.
In addition, the Company's Chief Executive Officer has agreed to extend to March
2001 his $3 million limited guarantee to the lenders. These actions are intended
to achieve profitable operations and provide the Company with sufficient
financing to pay its debts as they become due. However, these can be no
assurance in this regard.
The Company's long-term indebtedness consists of its
15
<PAGE>
obligations to BNY Financial Corporation ("BNY") under the Series A Junior
Secured Note Agreement dated June 30, 1993, pursuant to which BNY is owed
$6,942,000, including $1,042,000, representing the quarterly interest payments
that were deferred for the period February 1, 1996 through January 31, 1998 by
agreement with BNY in September 1997, plus interest at the rate of 7% per annum,
with a final maturity date of November 3, 2002. The principal of BNY's Note is
payable on November 3 of each year as follows:
YEAR AMOUNT
---- ------
2000 $ 600,000
2001 $1,100,000
2002 $5,242,000
The Company has received a forbearance on the $600,000 principal payment that
was due on November 3, 2000. The due date for the principal payment has been
extended to the earlier of i) five business days after the date on which BNY
demands payment from the Company or ii) January 2, 2001. The Company has paid
BNY the interest payment that was due on November 3, 2000. BNY is also entitled
to receive mandatory prepayments based upon 50% of certain "excess cash flows"
of the Company as defined in the Company's note agreements with BNY.
The consolidated condensed financial statements have been prepared assuming that
the Company will continue as a going concern, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of business. The
Company as of September 30, 2000 has a working capital deficit of $15,655,000,
has incurred losses for the nine-months ended September 30, 20000 of $15,984,000
and had negative cash flows from operations for the nine-months ended September
30, 2000 of $10,415,000. The Company continues to take actions in response to
these matters. To further reduce costs, management has reduced its headcount and
will consolidate certain functions in New York and California. The continued
liquidity of the Company is dependent upon obtaining sufficient financing in
order to fund operations and meet its debt obligations when due.
RESULTS OF OPERATIONS
The Company reported net losses of $3,362,000 and $15,984,000 for the three and
nine-month periods ended September 30, 2000 respectively, compared to net income
of $3,275,000 and a net loss of $7,132,000 for the three and nine-month periods
ended September 30, 1999.
The decrease in profitability for the three month period ended September 30,
2000 was due to i) lower sales combined with a reduction in gross profit margin
which led to an overall reduction in gross profit, ii) an increase in selling
and administrative expenses which includes the costs of operating twelve XOXO
Outlet Stores and iii) an increase in interest expense.
For the three-months ended September 30, 1999, the net income was primarily
attributable to increased sales and margins relating to the "Fubu" and "Members
Only" product lines along with a reduction of interest expense due to the
conversion of the Apollo debt to equity and the reduction of borrowing due to
the infusion of funds
16
<PAGE>
from the Simon Transaction. This was partially offset by the Company's
restructuring and other charges relating to the consolidation of operations and
facilities. Such charges consisted of severance pay, estimated costs to exit and
sub-lease facilities and impairment charges related to fixed assets at the
vacated facilities.
The increase in the net loss for the nine-month period ended September 30, 2000
was primarily due to an increase in interest expense in the amount of
$1,313,000; an increase in start-up costs of $1,542,000 associated with new
licensing arrangements for which product launches are scheduled for later in
fiscal 2000 and 2001, which the Company had not yet incurred in last years
comparable period. In addition, the Company opened twelve XOXO outlet stores,
since the acquisition of XOXO on August 10, 1999, which incurred significant
selling and administrative expenses. These increases were offset by higher gross
profit and reduced restructuring costs.
For the nine-months ended September 30, 1999 the net loss was primarily
attributable to the Company's restructuring and other charges of $8,309,000
which consisted of (i) $2,401,000 relating to a severance payment made pursuant
to a Retention Agreement between the Company and its former President, (ii) a
non-recurring charge of $3,750,000 in connection with the write off of impaired
goodwill and (iii) additional charges of $2,158,000 relating to the
consolidation of operations and facilities.
NET SALES
The Company's net sales decreased from $62,869,000 during the three-months ended
September 30, 1999 to $58,262,000 during the three- months ended September 30,
2000. This decrease of $4,607,000 was primarily due to declines in the Company's
own "Members Only" branded product line of $10,100,000, a decrease of $5,235,000
in private label sales, lower sales of the Company "Fubu" product lines of
$2,805,000 and lower sales of the Company's "Perry Ellis" lines of $2,693,000.
The Company continues to be hurt by the soft retail apparel environment and its
"Members Only" outerwear lines were also negatively impacted by warming
temperatures throughout the country during its peak selling season. These
decreases in sales were offset by a sales increase of $11,048,000 at the
Company's XOXO division, the operations of which were included for the entire
quarter of the current year, (XOXO was acquired by the Company on August 10,
1999), including XOXO outlet and retail store sales. In addition, the Company's
net sales were positively impacted by $2,885,000 in sales attributable to the
roll out of the Company's new "Baby Phat" product line and $2,293,000
attributable to the roll out of the Company's "Brooks Brothers" golfwear product
line.
The Company's net sales increased from $116,326,000 during the nine-months ended
September 30, 1999 to $145,348,000 during the nine-months ended September 30,
2000. This increase of $29,022,000 was primarily due to the inclusion of XOXO's
sales (XOXO was acquired by the Company on August 10, 1999) of $55,078,000,
including XOXO outlet and retail store sales. In addition, the Company's net
sales were positively impacted by $6,929,000 in sales
17
<PAGE>
attributable to the roll out of the Company's new "Baby Phat" product line and
$2,355,000 attributable to the roll out of the Company's "Brooks Brothers"
golfwear product line. These increases in sales were offset by sales decreases
in the "FUBU" product line of $14,650,000, $11,177,000 in the "Members Only"
product lines, $6,689,000 in private label sales and a decrease of $2,824,000 in
the Company's "Perry Ellis" product lines. The Company continues to be hurt by
the soft retail apparel environment and its "Members Only" outerwear lines was
also negatively impacted by warming temperatures throughout the country during
its peak selling season.
GROSS PROFIT
Gross Profit for the three-months ended September 30, 2000 was $16,513,000 or
28.3% of net sales compared to $18,318,000 or 29.1% of net sales for the
three-months ended September 30, 1999. Gross profit margins were negatively
impacted by lower margins on the Company's "FUBU" and "Perry Ellis" product
lines which suffered from a lack of consumer demand. Gross profit was positively
impacted by sales of higher margin XOXO (XOXO was acquired by the Company on
August 10, 1999) and sales of "Baby Phat" products. Sales of the "Baby Phat"
product line commenced in April 2000. In addition, gross profit was positively
impacted as a percentage of sales by higher margins on lower sales of the
Company's own "Members Only" branded product lines.
Gross Profit for the nine-months ended September 30, 2000 was $46,831,000 or
32.2% of net sales compared to $31,886,000 or 27.4% of net sales for the
nine-months ended September 30, 1999. Gross profit was positively impacted by
sales of higher margin XOXO (XOXO was acquired by the Company on August 10,
1999) and "Baby Phat" products. Sales of the "Baby Phat" product line commenced
in April 2000. In addition, gross profit was positively impacted by higher
margins on sales of the Company's own "Members Only" branded product lines.
Gross profit margins were negatively impacted by lower margins on the Company's
"FUBU" and "Perry Ellis" product lines which suffered from a lack of consumer
demand.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and Administrative expenses were $18,741,000 or 32.2% of net sales for
the three-months ended September 30, 2000 compared to $13,748,000 or 21.9% of
net sales for the three-months ended September 30, 1999. The increase in Selling
and Administrative expenses is attributable to the inclusion of XOXO's Selling
and Administrative expenses (XOXO was acquired on August 10, 1999) which include
approximately $1,100,000 of depreciation and goodwill amortization including
XOXO store operations. In addition, Selling and Administrative expenses have
increased due to the inclusion of the XOXO Retail and Outlet Stores which have
incurred significant selling and administrative expenses as a percentage of
store sales due to the store's limited market exposure in the short time that
they have been operating. Also, the Company incurred $808,000 of selling and
administrative expenses attributable to the Company's "Brooks Brothers" golfwear
18
<PAGE>
product line which started shipping in June 2000.
Selling and Administrative expenses were $57,382,000 or 39.5% of net sales for
the nine-months ended September 30, 2000 compared to $29,256,000 or 25.2% of net
sales for the nine-months ended September 30, 1999. The increase in Selling and
Administrative expenses is attributable to the inclusion of XOXO's Selling and
Administrative expenses (XOXO was acquired on August 10, 1999) which include
approximately $2,958,000 of depreciation and goodwill amortization including
XOXO store operations. In addition, Selling and Administrative expenses have
increased due to the inclusion of the XOXO Retail and Outlet Stores which have
incurred significant selling and administrative expenses due to the store's
limited market exposure in the short time that they have been operating. Also,
the Company incurred $1,462,000 of selling and administrative expenses
attributable to the Company's "Brooks Brothers" golfwear product line which
started shipping in June 2000.
START-UP COSTS OF NEW LICENSING OPERATIONS
During the three and nine-month periods ended September 30, 2000, the Company
incurred $124,000 and $1,757,000 respectively, of start-up costs relating to
various license agreements for newly launched product lines and product launches
that are scheduled for later in years 2000 and 2001. These start-up costs
consist of salaries, samples and related supplies directly attributable to newly
licensed operations. The Company expects to continue to incur such costs during
the remainder of fiscal 2000 and 2001 in connection with several of its new
license arrangements.
RESTRUCTURING AND OTHER COSTS
During the three and nine-month periods ended September 30, 2000, the Company
recorded charges of $249,000 and $1,502,000, respectively, associated with the
continuing restructuring of its corporate office and distribution facilities.
These charges before taxes relate primarily to employee severance costs.
During the three and nine-month periods ended September 30, 1999, the Company
recorded charges of $308,000 and $8,309,000, respectively which consisted of (i)
$2,401,000 relating to a severance payment made pursuant to a Retention
Agreement between the Company and its former President, (ii) a non-recurring
charge of $3,750,000 in connection with the write off of impaired goodwill (See
Note 6) and (iii) additional charges of $2,158,000 relating to the consolidation
of operations and facilities.
The Company is considering further restructuring plans for its operations to
reduce costs and achieve profitability. In this regard, the Company has decided
in the fourth quarter of fiscal 2000 to consolidate certain of its
administrative offices and showrooms in New York with its facilities in
California. While the Company continues to further develop its plans, these
actions will result in further restructuring and other costs in the fourth
quarter of fiscal 2000, which may include charges for the impairment of certain
assets.
INTEREST EXPENSE
Interest expense for the three-months ended September 30, 2000 increased by
$399,000 or 34.8% compared to the three-month period ended September 30, 1999.
This increase was due to interest on the Company's $10,000,000 Term Loan dated
August 10, 1999, the date of
19
<PAGE>
the XOXO acquisition, an increase in borrowings on the Company's revolving
credit facility, as well as increases in the prime lending rate from 7.75% as of
September 30, 1999 to 9.50% as of September 30, 2000. In addition, the amendment
to the Company's Financing Agreement increased the interest rate on the
Company's revolving credit facility from prime to prime plus one-quarter percent
and increased the interest rate on the Company's term loan from prime plus
one-half percent to prime plus three-quarter percent.
Interest expense for the nine-months ended September 30, 2000 increased by
$1,313,000 or 48.0% compared to the nine-month period ended September 30, 1999.
This increase was due to interest on the Company's $10,000,000 Term Loan dated
August 10, 1999, the date of the XOXO acquisition, an increase in borrowings on
the Company's working capital facility, as well as increases in the prime
lending rate from 7.75% as of September 30, 1999 to 9.50% as of September 30,
2000. In addition, the amendment to the Company's Financing Agreement increased
the interest rate on the Company's revolving credit facility from prime to prime
plus one-quarter percent and increased the interest rate on the Company's term
loan from prime plus one-half percent to prime plus three-quarter percent.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various lawsuits in the ordinary course of its business.
Management believes that the financial statements adequately provide for the
potential of adverse outcomes in these proceedings. In addition, in September
2000, the Company was served with a summons and complaint in an action brought
by Sara Lee Corporation in the United States District Court in the Southern
District of New York alleging that the Company's Wonder Pant product, which the
Company plans to launch in December 2000 or early 2001, infringes on Sara Lee's
trademark rights to "Wonder Bra". Management believes that it has a meritorious
defense in this action, and that any unfavorable outcome will not have a
material adverse effect on the Company's financial condition, results of
operations and cash flows.
In November 2000, the Company and certain of its officers were served with a
summons and complaint in an action commenced by Arthur Dorfman and Joel
Heimsohen in the United States District Court for the Southern District of New
York alleging that the Plaintiffs, who are former independent sales
representatives of the company, were terminated from their positions in
violation of age discrimination laws. The Company intends to vigorously defend
this action and believes that the claims are without merit.
ITEM 2 CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
20
<PAGE>
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports were filed under Form 8-K
21
<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: November 13, 2000 By /S/ PAUL SPECTOR
------------------------------------
Paul Spector
Chief Financial Officer / Treasurer
22
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Filed as Indicated Exhibit
to Document Referenced in
Exhibit No. Description Footnote No.
----------- ----------- ---------------------------
<S> <C> <C>
2. Second Amended Joint Plan of Reorganization dated March (3)
26, 1993, as amended May 11 and June 9, 1993
(Note: Annexes omitted)
3.3 Restated Certificate of Incorporation filed on June 30, 1993 (3)
3.4 Amended and Restated By-Laws effective June 30, 1993 (3)
3.5 Amended and Restated Certificate of Incorporation filed on (22)
July 29, 1999 increasing the authorized shares
4.1 Specimen Certificate Evidencing Common Stock. (1)
10.67 Series A Junior Secured Note Agreement dated as of June (3)
30, 1993 between Registrant and BNY Financial Corporation.
10.68 Series A Junior Secured Note dated as of June 30, 1993 (3)
issued by Registrant to BNY Financial Corporation.
10.72 Secondary Pledge Agreement dated as of June 30, 1993 (3)
between Registrant, BNY Financial Corporation and AIF II,
L.P.
10.76 Equity Registration Rights Agreement dated as of June 30, (3)
1993 among Registrant and the Holders of Registered Shares
Referred to Therein.
10.79 Severance Agreement dated April 3, 1991 between (3)
Registrant and Paul Spector.
10.80 1993 Stock Incentive Plan of Registrant, as amended by (3)
Amendment No. 1 thereto dated June 24, 1993.
10.99 Warrant dated September 30, 1996 issued by Aris Industries, (10)
Inc. to Heller Financial, Inc.
10.101 Amendment dated May 5, 1997 to Series A Junior Secured (11)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
10.103 Amendment dated June 18, 1997 to Series A Junior Secured (13)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
10.105 Asset Purchase Agreement dated as of July 15, 1997 among (14)
Davco Industries, Inc., as Seller, Steven Arnold and
Christopher Healy as Shareholders of Seller, and Aris
Management Corp. (n/k/a ECI Sportswear, Inc.), as
Purchaser.
10.106 Shareholders Agreement dated as of July 15, 1997 among (14)
Davco Industries, Inc., Steven Arnold, Christopher Healy,
Aris Management Corp. (n/k/a ECI Sportswear, Inc.), the
Registrant, Apollo Aris Partners, L.P. and Charles S. Ramat.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Filed as Indicated Exhibit
to Document Referenced in
Exhibit No. Description Footnote No.
----------- ----------- ---------------------------
<S> <C> <C>
10.107 Amendment dated July 18, 1997 to Series A Junior Secured (14)
Note Agreement dated as of June 30, 1993 between
Registrant and BNY Financial Corporation.
10.109 Amendment executed September 12, 1997 to Series A and (15)
Series B Junior Secured Note Agreements dated as of June
30, 1993 between Registrant, BNY Financial Corporation
and AIF, L.P.
10.111 Securities Purchase Agreement, dated as of February 26, (17)
1999, between Aris Industries, Inc., Apollo Aris Partners,
L.P., AIF, L.P., The Simon Group, L.L.C. and Arnold
Simon.
10.112 Shareholders Agreement, dated as of February 26, 1999, (17)
between Aris Industries, Inc., Apollo Aris Partners, L.P.,
AIF, L.P., The Simon Group, L.L.C. and Charles S. Ramat.
10.113 Equity Registration Rights Agreement, dated as of February (17)
26, 1999, between Aris Industries, Inc., Apollo Aris
Partners, L.P., AIF, L.P., The Simon Group, L.L.C. and
Charles S. Ramat.
10.114 Retention Agreement dated as of February 18, 1999 by and (17)
between Aris Industries, Inc. and Charles S. Ramat.
10.115 Financing Agreement dated February 26, 1999 by and (18)
among the Company and its Subsidiaries and CIT
Commercial Group, Inc. and the other Financial Industries
named therein.
10.116 Employment Agreement effective as of March 1, 1999 with (19)
Arnold Simon
10.117 Employment Agreement effective as of March 1, 1999 with (19)
David Fidlon
10.118 Agreement of Lease made as of April 22, 1999 by and (19)
between Erika Realty Trust, as Landlord, and Registrant, as
Tenant, for premises located at 89 West Rodney French
Blvd., New Bedford, Ma.
10.119 First Amendment to CIT Financing Agreement dated as of (20)
March 25, 1999.
10.120 Employment Agreement effective as of June 7, 1999 with (20)
Joseph Purritano
10.121 Agreement and Plan of Merger dated July 19, 1999 by and (21)
among Aris Industries, Inc., XOXO Acquisition Corp. and
Lola, Inc. and its shareholders ("Agreement and Plan of
Merger"). The exhibits and schedules to the Agreement and
Plan of Merger are listed on the last page of such Agreement.
Such exhibits and schedules have not been filed by the
Registrant, who hereby undertakes to file such exhibits and
schedules upon request of the Commission.
10.122 Amendment No. 1 to Agreement and Plan of Merger (21)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Filed as Indicated Exhibit
to Document Referenced in
Exhibit No. Description Footnote No.
----------- ----------- ---------------------------
<S> <C> <C>
10.123 Employment Agreement by and among the Registrant, ECI, (21)
ECI Sportswear, Inc. and XOXO and Gregg Fiene, dated
August 10, 1999
10.124 Employment Agreement by and among the Registrant, ECI, (21)
ECI Sportswear, Inc. and XOXO and Hollis Fiene, dated
August 10, 1999
10.125 Shareholders' Agreement by and among the Registrant, The (21)
Simon Group, LLC, Gregg Fiene, Michele Bohbot and Lynn
Hanson, dated August 10, 1999
10.126 Amendment No. 2 to Financing Agreement by and among (21)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO;
the Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated August 10,
1999
10.127 Amended and Restated 1993 Stock Option Plan (16)
10.128 Amendment No. 3 to Financing Agreement by and among (23)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO; the
Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated February
15, 2000
10.129 Waiver and Consent to Financing Agreement by and among (23)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO;
the Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated April 1,
2000.
10.130 Amendment No. 4 to Financing Agreement by and among (23)
Aris Industries, Inc., Europe Craft Imports, Inc., ECI
Sportswear, Inc., Stetson Clothing Company, Inc., XOXO;
the Financial Institutions from time to time party to the
Financing Agreement, as Lenders; and the CIT
Group/Commercial Services, Inc. as Agent, dated April 30,
2000.
10.131 Employment Agreement effective as of May 26, 2000 with (24)
Maurice Dickson
10.132 Employment Agreement effective as of June 13, 2000 with (24)
Steven Feiner
(1) Filed as the indicated Exhibit to the Annual Report of the Company on Form
10-K for the fiscal year ended February 2, 1991 and incorporated herein by
reference.
(2) Omitted.
(3) Filed as the indicated Exhibit to the Report on Form 8-K dated June 30,
1993 and incorporated herein by reference.5
</TABLE>
25
<PAGE>
(4)-(9) Omitted.
(10) Filed as the indicated Exhibit to the Report on Form 8-K dated September
30, 1996 and incorporated herein by reference.
(11) Filed as the indicated Exhibit to the Annual Report of the Company on
Form 10-K for the fiscal year ended December 31, 1996 and incorporated
herein by reference.
(12) Omitted.
(13) Filed as the indicated Exhibit to the Report on Form 8-K dated June 18,
1997 and incorporated herein by reference.
(14) Filed as the indicated Exhibit to the Report on Form 8-K dated July 15,
1997 and incorporated herein by reference.
(15) Filed as the indicated Exhibit to the Report on Form 8-K dated September
12, 1997 and incorporated herein by reference.
(16) Files as Annex A to the Company's Proxy Statement filed with the
Commission on May 27, 1999, and incorporated herein by reference.
(17) Filed as the indicated Exhibit to the Report on Form 8-K dated February
26, 1999 and incorporated herein by reference.
(18) Filed as the indicated Exhibit to the Annual Report of the Company on
Form 10-K for the year ended December 31, 1998 and incorporated herein
by reference.
(19) Filed as the indicated Exhibit to the Report on Form 10-Q dated
March 31, 1999 and incorporated herein by reference.
(20) Filed as the indicated Exhibit to the Report on Form 10Q dated June 30,
1999 and incorporated herein by reference.
(21) Filed as the indicated Exhibit to the Report on Form 8-K dated August
10, 1999 and incorporated herein by reference
(22) Filed as the indicated Exhibit to the Report on Form 10Q dated September
30, 1999 and incorporated herein by reference.
(23) Filed as the indicated Exhibit to the Report on Form 10Q dated March 31,
2000 and incorporated herein by reference.
(24) Filed as the indicated Exhibit to the Report on Form 10Q dated June 30,
2000 and incorporated herein by reference.
26
