<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _________________
Commission File Number 1-11707
DESIGNER HOLDINGS LTD.
(Exact name of registrant as specified in its charter)
Delaware 13-3818542
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1385 Broadway, 3rd Floor
New York, New York 10018
(Address of principal executive offices)
212-556-9600
(Registrant's telephone number, including area code)
Copies of all communications to:
Designer Holdings Ltd.
1385 Broadway, 3rd floor
New York, New York 10018
212-556-9600
Attention: John J. Jones, Esq., General Counsel
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of the registrant's Common Stock as of
August 13, 1996 is as follows: 32,159,334
<PAGE> 2
DESIGNER HOLDINGS LTD.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30,
1996 and 1995 4
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
Part II - Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DESIGNER HOLDINGS LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Receivables, net $100,186 $118,400
Inventory 85,844 69,510
Deferred tax assets 12,701 8,065
Prepaid expenses and other
current assets 6,589 3,625
-------- --------
Total current assets 205,320 199,600
Property, plant and equipment, net 8,242 4,953
Prepaid royalties, net 5,363 6,084
Intangible assets, net 55,839 34,880
Other assets 4,218 5,297
-------- --------
Total assets $278,982 $250,814
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt $ 5,000 $ 5,000
Revolving credit loans 43,297 97,016
Accounts payable 31,244 24,857
Accrued expenses 20,947 30,090
Income taxes payable -- 10,966
-------- --------
Total current liabilities 100,488 167,929
Long-term debt, less current portion 8,750 50,403
Deferred tax liabilities 269 --
-------- --------
Total liabilities 109,507 218,332
-------- --------
Commitments and contingencies
Stockholder's equity:
Common stock, par value $.01 per share;
authorized 75,000,000 shares; issued and
outstanding 32,159,334 and 24,233,868 shares
pursuant to the stock split in April 1996 321 242
Paid-in capital 148,296 20,121
Retained earnings 20,858 12,119
-------- --------
Total stockholder's equity 169,475 32,482
-------- --------
Total liabilities and
stockholder's equity $278,982 $250,814
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
DESIGNER HOLDINGS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenues $ 104,967 $ 91,087 $ 219,603 $ 174,491
Cost of goods sold 65,700 65,101 136,521 123,517
----------- ----------- ----------- -----------
Gross profit 39,267 25,986 83,082 50,974
Selling, general and administrative
expenses 27,938 20,117 55,085 36,814
----------- ----------- ----------- -----------
Operating income 11,329 5,869 27,997 14,160
Interest expense 3,110 3,894 7,635 5,689
----------- ----------- ----------- -----------
Income before income taxes 8,219 1,975 20,362 8,471
Provision for income taxes 3,781 1,049 9,367 4,500
----------- ----------- ----------- -----------
Net income before
extraordinary item 4,438 926 10,995 3,971
Extraordinary loss on
debt extinguishment 2,256 -- 2,256 --
----------- ----------- ----------- -----------
Net income $ 2,182 $ 926 $ 8,739 $ 3,971
=========== =========== =========== ===========
Net income per share before
extraordinary item $ .15 $ .04 $ .41 $ .16
=========== =========== =========== ===========
Net income per share $ .07 $ .04 $ .33 $ .16
=========== =========== =========== ===========
Weighted average common shares
outstanding 29,420,233 24,233,868 26,827,051 24,233,868
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
<PAGE> 5
DESIGNER HOLDINGS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1996 1995
--------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,739 $ 3,971
Adjustments to reconcile net income to
cash (used in) operating activities:
Depreciation 571 237
Amortization 1,438 842
Loss on disposal of fixed assets -- 91
Deferred interest (1,653) 400
Deferred income taxes (3,572) (1,609)
Extraordinary item 4,103 --
Changes in assets and liabilities:
Receivables 18,214 (44,923)
Inventory (16,334) (37,220)
Prepaid expenses (2,964) (1,044)
Prepaid royalties 1,000 1,000
Other assets (1,294) 177
Accounts payable 6,387 2,521
Accrued expenses (12,346) 16,352
Income taxes payable (10,966) 1,011
--------- --------
Net cash (used in) operating activities (8,677) (58,194)
--------- --------
Cash flows from investing activities:
Purchases of equipment (2,657) (1,138)
--------- --------
Net cash (used in) investing activities (2,657) (1,138)
--------- --------
Cash flows from financing activities:
Payment of notes payable to related party -- (45,181)
Payments to factor -- (4,602)
(Decrease) increase in revolving credit loans (53,719) 69,210
(Repayment of) proceeds from term loan (10,000) 25,000
(Repayment of) proceeds from subordinated debt (30,000) 30,000
Payments of notes payable to factor -- (10,000)
Distributions to stockholders/partners -- (1,495)
Financing costs paid -- (5,027)
Proceeds from sale of common stock 119,700 --
Payment of debt retirement costs (2,998) --
Payment of stock issuance costs (11,649) --
--------- --------
Net cash provided by financing activities 11,334 57,905
--------- --------
Net increase (decrease) in cash -- (1,427)
Cash, beginning of period -- 1,432
--------- --------
Cash, end of period $ -- $ 5
========= ========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE> 6
DESIGNER HOLDINGS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Designer Holdings Ltd. (the "Company") was incorporated on March 27, 1995 for
the purpose of consolidating the ownership interests of Rio Sportswear, Inc.
("Rio Sportswear") and Jeanswear Holdings, Inc., the holding company for Calvin
Klein Jeanswear Company. As of June 30, 1996, 52.1% of the Company's outstanding
common stock was owned by New Rio L.L.C. ("New Rio"), whose controlling
equityholders are Arnold H. Simon, President and Chief Executive Officer of the
Company, and Charterhouse Equity Partners II, L.P. All significant intercompany
balances and transactions have been eliminated.
The accompanying condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, these statements include all
adjustments, consisting only of normal recurring accruals, considered necessary
for a fair presentation of financial position, results of operations and cash
flows. Results of operations for interim periods are not necessarily indicative
of results for the full year.
The year-end condensed consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. The condensed consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's registration statement on Form S-1, as amended (SEC
File No.33-2236), declared effective by the SEC on May 9, 1996.
2. INITIAL PUBLIC OFFERING AND STOCK SPLIT:
On May 9, 1996, the Company consummated an initial public offering of 13,800,000
shares of its common stock for $18.00 per share. Of the total shares offered,
the Company sold 6,650,000 shares and New Rio sold 7,150,000 shares. Net
proceeds to the Company, after underwriting discounts and expenses, were
approximately $108.1 million. Net proceeds to the Company were used primarily to
reduce indebtedness, including approximately $37.0 million to retire a
subordinated loan, including approximately $3.0 million relating to a prepayment
penalty, and $71.1 million to reduce indebtedness under the credit agreement.
The prepayment penalty and the write-off of deferred financing costs associated
with the subordinated loan, which aggregated approximately $2.3 million, net of
applicable tax effects, is reported as an extraordinary loss in the second
quarter of 1996.
In contemplation of the initial public offering of the Company's common stock,
on April 22, 1996, the Company increased the number of shares of authorized
common stock to 75,000,000 shares, par value $.01 per share, and effected a
24,234-for-one stock split of its common stock. All share and per share amounts
included in the accompanying condensed consolidated financial statements of the
Company have been restated to reflect the foregoing.
6
<PAGE> 7
3. INVENTORY:
Inventory is stated at the lower of cost, determined by the average cost method,
or market, and consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Raw materials $ 645 $ 1,536
Work-in-process 3,132 4,091
Finished goods 82,067 63,883
------- -------
$85,844 $69,510
======= =======
</TABLE>
4. FINANCING:
The Company finances its operations under a credit agreement which provides for
borrowings under a revolving credit facility and a term loan which may be
terminated by the Company or its lenders in the year 2000. On March 29, 1996,
the revolving credit facility was permanently increased from $115.0 million to
$150.0 million.
5. INCOME TAXES:
The higher effective tax rate in 1995, compared to 1996, was principally
attributable to a valuation allowance on net operating loss benefits of Rio
Sportswear. The results of operations of Rio Sportswear were not included in the
consolidated tax returns of the Company until April 1995, when Rio Sportswear
became a subsidiary of the Company.
6. COMMITMENTS AND CONTINGENCIES:
CKJ LICENSE AMENDMENTS:
On April 22, 1996, the exclusive license from Calvin Klein, Inc. ("CKI") for
certain types of sportswear (the "CKJ License") was amended to provide for,
among other things, the (i) modification of the term of the CKJ License from a
ten-year initial term with four ten-year renewal terms to a forty-year term with
one ten-year renewal term, (ii) modification of net sales thresholds, (iii)
extension of the term of the CKJ License for the khaki collection from ten years
to forty years, (iv) granting to the Company the non-exclusive right to sell
caps for the term of the CKJ License, (v) expansion of the geographical
territory for the khaki collection, (vi) addition of certain territories in
Central and South America to the CKJ License, and (vii) liberalization of
certain covenants. In addition, the minimum annual royalty fee payments of
$4,500 in 1995 will increase over the term of the CKJ License to $22,000 for
years 31 through 40.
As consideration for such amendments, the Company issued 1,275,466 shares of
non-voting common stock to CKI. Such shares are convertible at any time upon
notice to the Company into an equal number of shares of voting common stock. CKI
has agreed to hold such shares for at least 18 months subsequent to May 9, 1996,
the effective date of the registration statement relating to the initial public
offering of the Company's common stock, although the Company has granted CKI
certain "piggyback" registration rights that can be exercised at any time after
the shares are converted into voting common stock. The value of the shares
issued to CKI of $20,203 will be recorded as capitalized licensing rights and
amortized over forty years, the adjusted term of the CKJ License.
EMPLOYMENT AGREEMENT:
As of April 22, 1996, the Company entered into an employment agreement with Mr.
Simon, which became effective on May 9, 1996, the effective date of the
registration statement relating to the initial public offering of the Company's
common stock. The agreement, which expires on December 31, 1998, provides for
Mr. Simon to be President and Chief Executive Officer of the Company at an
annual base salary of not less than $1,500. The agreement also provides for an
annual cash bonus
7
<PAGE> 8
based on a percentage of adjusted earnings before interest, taxes and certain
non-cash charges (as defined). In addition, upon certain events of termination
and change in control of the Company, the agreement provides that Mr. Simon will
be entitled to certain payments, provided that the maximum amount payable shall
not exceed $9,000 in the aggregate.
LITIGATION:
In 1990, an action was filed against Rio Sportswear and certain other defendants
alleging, among other things, that Rio Sportswear infringed a patent held by the
plaintiffs relating to acid wash processes used in the manufacture of jeanswear
having a random fade effect. Similar suits are pending against the major
manufacturers of such jeanswear. The plaintiffs seek damages against all
defendants in unspecified amounts. No trial date has been set. Rio Sportswear
had received a proposal from plaintiffs offering to settle the litigation, which
was subsequently withdrawn, and Rio Sportswear made a counterproposal, which has
also been withdrawn. There can be no assurance that plaintiffs will make or
consider further settlement proposals with respect to the litigation. If the
parties are unable to reach a settlement, Rio Sportswear intends to contest the
action vigorously. The outcome of litigation is inherently unpredictable and, in
the event that no settlement is reached and Rio Sportswear is found to have
infringed the patent in suit, damages and attorney's fees could be assessed
against Rio Sportswear. No assurance can be given that such damages and fees
would not have a material adverse effect upon the Company's results of
operations or cash flows in the period in which the judgement is rendered;
however, the Company believes that any such damages and fees would not have a
material adverse effect upon the Company's financial position.
7. STOCK OPTION PLAN
The Company's Board of Directors and the sole voting stockholder have approved
the Designer Holdings Ltd. 1996 Stock Option and Incentive Plan ("the Stock
Plan"). Pursuant to the Stock Plan, executive officers, key employees and
consultants of the Company are eligible to receive awards of stock options,
stock appreciation rights, limited stock appreciation rights and restricted
stock. The Company has reserved 2,363,200 shares of common stock for issuance of
awards under the Stock Plan. In May 1996, options to purchase approximately
1,575,000 shares of common stock at an exercise price of $18.00 per share were
granted.
8
<PAGE> 9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(In thousands, except share data)
RESULTS OF OPERATIONS
The results of operations for the three and six months ended June 30, 1996
reflect net revenue generated and expenses incurred from the sale of Calvin
Klein Jeans Label products, as well as royalty income earned and certain
contractual expenses incurred related to sales of (1) Rio label and Bill Blass
label products, which the Company licensed effective January 1, 1996 to Commerce
Clothing Company, L.L. C. ("Commerce Clothing "), (2) Calvin Klein Jeans Label
childrens apparel, for which the Company entered into a sub-licensing agreement
effective January 1, 1996 with Commerce Clothing, within the United States, and
(3) certain other licensing agreements.
The following table sets forth, for the periods indicated, statement of
operations data as a percentage of net revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1996 1995 1996 1995
----- ----- ----- -----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 62.6 71.5 62.2 70.8
----- ----- ----- -----
Gross profit 37.4 28.5 37.8 29.2
Selling, general and
administrative expenses 26.6 22.1 25.1 21.1
----- ----- ----- -----
Operating income 10.8% 6.4% 12.7% 8.1%
===== ===== ===== =====
</TABLE>
Net Revenues. Net revenues for the three months ended June 30, 1996 were $105.0
million, which represented an increase of $13.9 million or 15.2% over net
revenues for the three months ended June 30, 1995 of $91.1 million. Net revenues
in the 1996 quarter included $98.7 million from the sale of Calvin Klein Jeans
and CK/Calvin Klein Jeans products, and $4.6 million from the sale of CK/Calvin
Klein Jeans Khakis products (collectively "Calvin Klein Jeans Labels"), totaling
$103.3 million. This represents an increase of $37.8 million compared to revenue
of $65.5 million recorded during the three months ended June 30, 1995. The
increased level of net revenues generated by the sales of Calvin Klein Jeans
Label products during the 1996 quarter, as compared to the 1995 quarter, was
principally attributable to an increase in the volume of products sold to a
larger number of department stores and specialty retail stores. This broadening
of product distribution into an increased number of doors was experienced across
all of the major lines in which the products are sold.
Royalty income earned during the three months ended June 30, 1996 was $1.5
million. The 1995 comparable quarter reflected no significant royalty income.
Net revenue from the sale of the Rio and Bill Blass label products during the
1995 comparable quarter was $25.6 million.
Net revenues for the six months ended June 30, 1996 were $219.6 million, which
represented an increase of $45.1 million or 25.9% over net revenues for the six
months ended June 30, 1995 of $174.5 million. Net revenues for the first half of
1996 included $205.8 million from the sale of Calvin Klein Jeans and CK/Calvin
Klein Jeans products, and $11.1 million from the sale of CK/Calvin Klein Jeans
Khakis products (collectively "Calvin Klein Jeans Labels"), an total increase of
$96.9 million over the first half of 1995.
9
<PAGE> 10
Royalty income earned during the six months ended June 30, 1996 was $2.1
million. The 1995 comparable period reflected no significant royalty income. Net
revenue from the sale of the Rio and Bill Blass label products during the six
months ended June 30, 1995 was $53.1 million. The Company had waived payment of
approximately $1.2 million of royalty income due for the first quarter of 1996
under both Commerce Clothing agreements.
Gross Profit. Gross profit was $39.3 million for the three months ended June 30,
1996, an increase of $13.3 million from the 1995 comparable quarter gross profit
of $26.0 million. The gross profit percentage was 37.4% for the 1996 quarter, an
increase from 28.5% in the 1995 quarter. The gross profit percentage on the
Calvin Klein Jeans Label products was 37.3% for the 1996 quarter, compared to
34.2% in the 1995 quarter. This margin improvement is primarily a result of
overall operating efficiencies achieved through better sourcing of product, more
efficient distribution of product and more timely delivery to retailers. The
overall gross profit percentage was further improved due to the absence in the
1996 quarter of gross profit generated by the sale of Rio and Bill Blass
products, due to the above-mentioned license agreement. The 1995 quarter
contained a gross profit percentage of 13.9% related to the sale of these
products.
Gross profit was $83.1 million for the first half of 1996, an increase of $32.1
million from the first half of 1995 gross profit of $51.0 million. The gross
profit percentage was 37.8% for the first half of 1996, an increase from 29.2%
recorded for the first half of 1995. The first half of 1996 gross profit
percentage on the Calvin Klein Jeans Label products was 37.8%, an increase
compared with the 1995 first half of 36.2%, primarily due to the operating
efficiencies described above. The overall gross profit percentage was further
improved due to the absence in the first half of 1996 of gross profit generated
by the sale of Rio and Bill Blass products, due to the above-mentioned license
agreement. The 1995 quarter contained a gross profit percentage of 13.2% related
to the sale of these products.
Selling, general and administrative. Selling, general and administrative
("SG&A") expenses were $27.9 million or 26.6% of net revenues for the three
months ended June 30, 1996, an increase of $7.8 million from $20.1 million or
22.1% for the three months ended June 30, 1995. The increased expenses were
primarily driven by the increased sales volume and the associated higher levels
of advertising, design and royalty expenses incurred in connection with the CKJ
License, as well as continued increased costs necessary to build the
infrastructure to support increased sales volume and future growth. SG&A
expenses as a percentage of net revenues also increased as a result of the 1996
quarter including costs related to selling and marketing the Rio and Bill Blass
products, against which the Company will recognize royalty income instead of net
revenues, due to the Company's license and sublicense agreement.
SG&A expenses were $55.1 million or 25.1% of net revenues for the first half of
1996, an increase of $18.3 million from $36.8 million or 21.1% for the first
half of 1995. These increases are due to the above-mentioned reasons.
Interest expense. Interest expense for the three months ended June 30, 1996 was
$3.1 million, as compared to $3.9 million for the three months ended June 30,
1995. This decrease is due to the reduction of amounts outstanding under the
revolving credit facility and the term loan with the net proceeds of the IPO
effective May 9, 1996.
Interest expense was $7.6 million for the first half of 1996, as compared to
$5.7 million for the first half of 1995. This increase is a result of the higher
working capital requirements and increased borrowings under the revolving credit
facility associated with the higher sales volume achieved during
10
<PAGE> 11
the first half of 1996 as compared with that of the previous year, partially
offset by the interest savings yielded by the application of the net proceeds of
the IPO to pay down existing debt.
Provision for income taxes. The provision for income taxes was $3.8 million or
46.0% of pre-tax income for the three months ended June 30, 1996, as compared to
$1.0 million or 53.1% of pre-tax income for the three months ended June 30,
1995. The higher effective tax rate in the 1995 quarter was principally
attributable to a valuation allowance on net operating loss benefits of Rio
Sportswear. The results of operations of Rio Sportswear were not included in the
consolidated tax return of the Company until April 1995, when Rio became a
subsidiary of the Company
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary funding requirements are to finance continued business
growth through investments in working capital (primarily receivables and
inventory), capital expenditures related to upgrading the distribution and
management information systems, costs related to the shop-in-shop program, and
debt service.
During the six months ended June 30, 1996 and 1995, the Company used $8.7
million and $63.2 million, respectively, in operating activities. The higher use
of cash during the 1995 period was primarily driven by the build-up of inventory
and receivables, as the Company began to realize its growth strategy and
objectives. The first half of 1996, however, reflected more of a seasonal sales
pattern.
Net cash used in investing activities during the first half of 1996 and
1995 was $2.7 million and $.9 million, respectively. The increase in investing
activities consisted of capital expenditures primarily for equipment for
distribution facilities and leasehold improvements.
Net cash provided by financing activities during the first half of 1996 and 1995
was $11.3 million and $62.7 million, respectively. The first half of 1995
reflected the proceeds of the term loan and the subordinated debt which was used
to repay then outstanding debt, as well as increased borrowings under the
revolving credit agreement. The first half of 1996 reflected the net proceeds of
the IPO and the application of such proceeds to repay the subordinated debt and
a portion of amounts outstanding under the credit agreement.
The Company finances its operations under a credit agreement, consisting of a
revolving credit facility, which was permanently increased from $115.0 million
to $150 million, and a term loan. At June 30, 1996, the Company had amounts
outstanding under the credit agreement of approximately $68.8 million, comprised
of approximately $43.3 million outstanding under the revolving credit facility,
approximately $11.8 million for open letters of credit and approximately $13.7
million outstanding under the term loan.
On May 9, 1996, the Company consummated an initial public offering of 13,800,000
shares of its common stock for $18.00 per share. Of the total shares offered,
the Company sold 6,650,000 shares and New Rio L.L.C. sold 7,150,000 shares. Net
proceeds to the Company, after underwriting discounts and expenses, were
approximately $108.1 million. Net proceeds to the Company increased liquidity by
reducing indebtedness, including approximately $37.0 million to retire the
subordinated loan and a reduction in the revolving credit and term loans of
approximately $71.1 million. The Company believes that the funds available under
its existing credit agreement are adequate to fund its current level of
operations and its expected growth through 1997; however, the Company may need
to seek additional financing if it adds other designer brands or licenses, or
makes significant acquisitions. Additionally, the Company will need to seek
additional financing to support continued expansion in 1998 and later years.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Incorporated by reference to Note 6 to the Condensed Consolidated Financial
Statements included in Part I, Item 1 of this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
Exhibit 27 - Financial Data Schedule.
(b). Reports on Form 8-K
None
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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.
Designer Holdings Ltd.
Date: August 14, 1996 By: /s/ MAURICE DICKSON
-----------------------------------------
Maurice Dickson
Executive Vice President, Treasurer and
Chief Financial Officer
13
<PAGE> 14
EXHIBIT INDEX
EXHIBIT NO DESCRIPTION
27 FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 121,186 121,186
<ALLOWANCES> (21,000) (21,000)
<INVENTORY> 85,844 85,844
<CURRENT-ASSETS> 205,320 205,320
<PP&E> 9,744 9,744
<DEPRECIATION> (1,502) (1,502)
<TOTAL-ASSETS> 278,982 278,982
<CURRENT-LIABILITIES> 100,488 100,488
<BONDS> 8,750 8,750
0 0
0 0
<COMMON> 321 321
<OTHER-SE> 169,154 169,154
<TOTAL-LIABILITY-AND-EQUITY> 278,982 278,982
<SALES> 103,474 217,468
<TOTAL-REVENUES> 104,967 219,603
<CGS> 65,700 136,521
<TOTAL-COSTS> 65,700 136,521
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,110 7,635
<INCOME-PRETAX> 8,219 20,362
<INCOME-TAX> 3,781 9,367
<INCOME-CONTINUING> 4,438 10,995
<DISCONTINUED> 0 0
<EXTRAORDINARY> 2,256 2,256
<CHANGES> 0 0
<NET-INCOME> 2,182 8,739
<EPS-PRIMARY> .07 .33
<EPS-DILUTED> .07 .33
</TABLE>
