<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 March 31, 1997
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
May 12, 1997 is as follows: 32,159,334
<PAGE> 2
DESIGNER HOLDINGS LTD.
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page No.
--------
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations
For the Three Months Ended
March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended
March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
Part II - Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</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>
MARCH 31, DECEMBER 31,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 53,734 $ 41,395
Receivables, net 113,050 109,407
Inventory 88,438 97,013
Deferred tax assets 11,534 11,998
Prepaid income taxes 2,137
Prepaid expenses and other
current assets 12,852 8,869
-------- --------
Total current assets 279,608 270,819
Property, plant and equipment, net 13,038 11,574
Prepaid royalties, net 4,200 4,588
Intangible assets, net 53,959 108,314
Deferred refinancing costs, net 6,596 6,744
Other assets 5,777 4,920
-------- --------
Total assets $363,178 $406,959
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,975 $ 27,447
Accrued expenses 23,818 24,007
Income taxes payable 2,295
--------
Total current liabilities 49,088 51,454
Licensing rights payable 48,614
Deferred tax liabilities 728 969
Company-Obligated Mandatorily Redeemable
Convertible Preferred Securities of Designer
Finance Trust Holding Solely Convertible
Debentures 120,000 120,000
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share;
authorized 75,000,000 shares; issued and
outstanding 32,159,334 shares 321 321
Paid-in capital 148,236 148,236
Retained earnings 44,805 37,365
-------- --------
Total stockholders' equity 193,362 185,922
-------- --------
Total liabilities and
stockholders' equity $363,178 $406,959
======== ========
</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
MARCH 31,
-----------------------------
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Net revenues $ 122,508 $ 114,636
Cost of goods sold 75,531 70,821
----------- -----------
Gross profit 46,977 43,815
Selling, general and administrative expenses 33,588 27,147
----------- -----------
Operating income 13,389 16,668
Interest expense, net 778 4,525
----------- -----------
Income before income taxes 12,611 12,143
Provision for income taxes 5,171 5,586
----------- -----------
Net income $ 7,440 $ 6,557
=========== ===========
Net income per share $ .23 $ .27
=========== ===========
Weighted average common shares outstanding 32,159,334 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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,440 $ 6,557
Adjustments to reconcile net income to
cash provided by (used in) operating activities:
Depreciation 556 163
Amortization 73 840
Deferred interest 607
Deferred income taxes 223 (4,789)
Changes in assets and liabilities:
Receivables (3,643) (590)
Inventory 8,575 (7,530)
Prepaid income taxes 2,137
Prepaid expenses 2,767 17
Prepaid royalties 500 500
Other assets (1,061) 27
Accounts payable (4,472) 8,572
Accrued expenses 1,873 (12,392)
Income taxes payable 2,295 (1,723)
-------- --------
Net cash provided by (used in) operating activities 17,263 (9,741)
-------- --------
Cash flows from investing activities:
Reimbursement of DKNY Jeans license payment 6,000
Deposit (6,750)
Payment for Calvin Klein Outlet Stores purchase (2,062)
Additions to property, plant and equipment (2,020) (925)
-------- --------
Net cash used in investing activities (4,832) (925)
-------- --------
Cash flows from financing activities:
Increase in revolving credit loans 12,266
Repayment of term loan (1,250)
Payment of stock issuance costs (350)
Payment of financing costs (92)
-------- --------
Net cash (used in) provided by financing activities (92) 10,666
-------- --------
Net increase in cash 12,339 --
Cash, beginning of period 41,395 --
-------- --------
Cash, end of period $ 53,734 $ --
======== ========
</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:
The accompanying condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). 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. All
significant intercompany balances and transactions have been eliminated. 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 1996 Form 10-K.
2. INVENTORY:
Inventory consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------- -------
<S> <C> <C>
Raw materials $ 2,051 $ 2,742
Work-in-process 1,807 2,616
Finished goods 84,580 91,655
------- -------
$88,438 $97,013
======= =======
</TABLE>
3. DKNY LICENSE:
On September 27, 1996, the Company entered into a 30-year licensing agreement
(the "DKNY Jeans License") with a subsidiary of Donna Karan International Inc.
("Donna Karan International") for the exclusive production, sale and
distribution of mens, womens and, with certain exceptions, childrens jeanswear
under the DKNY Jeans Label (the "DKNY Jeans Label").
On March 5, 1997, the DKNY Jeans License was terminated by mutual consent of the
parties to the agreement. In connection with the termination, Donna Karan
International returned to the Company the initial license payment of $6,000 and
a prepaid royalty payment of $1,260. The Company also received approximately
$3,100 as reimbursement for costs and expenses incurred under the DKNY Jeans
License, including overhead costs, samples purchased and all previously
developed patterns, concepts, sales plans and other materials related to the
DKNY Jeans Label. Additionally, Donna Karan International assumed all fabric
commitments made by the Company in connection with the DKNY Jeans License and
released the Company from all obligations for future payments and services under
the agreement.
As a result of the termination, the intangible licensing rights and licensing
rights payable were removed from the accounts in the first quarter of 1997,
resulting in the reversal of the interest discount amortized in 1996 of $877.
This reversal is included in interest expense, net in the condensed consolidated
statements of operations for the three months ended March 31, 1997.
Additionally, 1996 start-up costs of approximately $885 related to the DKNY
Jeans License were recovered. This recovery is included in selling, general and
administrative expenses in the condensed consolidated statements of operations
for the three months ended March 31, 1997.
4. CREDIT AGREEMENTS:
On April 16, 1997, the Company signed a commitment letter with a new lender for
an aggregate commitment of $200,000 (the "New Credit Facility") which will
consist of a revolving credit facility, which includes a $45,000 sub-limit for
the issuance of letters of credit and an annual $30,000 sub-limit for
acquisition financing. The borrowings under the New Credit Facility will expire
on the fifth anniversary of the closing date thereof. The interest rates on the
New Credit Facility will be at either the Prime Rate or the Federal Funds Rate,
plus an applicable margin, or LIBOR plus an applicable margin. The commitment
letter expires on June 30, 1997.
The New Credit Facility will replace the existing facility of $150,000, limited
in the aggregate to specified percentages of eligible factored receivables and
inventory, as defined, and with respect to letters of credit, limited to
$45,000.
6
<PAGE> 7
5. INCOME TAXES:
The lower effective tax rate in 1997 (41%), compared to 1996 (46%), is
principally attributable to lower state and local income taxes.
6. RECENTLY ISSUED ACCOUNTING STANDARDS:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share ("SFAS 128"), which
simplifies existing computational guidelines, revises disclosure requirements
and increases the comparability of earnings per share data on an international
basis. The statement is effective for periods ending after December 15, 1997 and
requires restatement of all prior-period earnings per share data presented.
Earnings per share calculated under SFAS 128 would be the same as reported
earnings per share.
7. COMMITMENTS AND CONTINGENCIES:
RIO AND BILL BLASS LICENSES:
Rio Sportswear has a licensing agreement with Bill Blass Ltd. to use the Bill
Blass labels in connection with the manufacture, distribution and sale of womens
jeans and jeans-related skirts, dresses and jackets in the Western Hemisphere
(the "Bill Blass Agreement"). The Bill Blass Agreement requires royalty fee
payments based on percentages of sales, as defined, subject to a minimum annual
royalty fee payment of $1,000. The Bill Blass Agreement expires on December 31,
1997 and contains an option to renew for an additional three-year period and a
further option to renew for an additional ten-year period for which minimum
annual royalty fee payments during such ten-year period will increase to $1,500.
The Bill Blass Agreement also contains annual minimum net sales requirements
that, if not maintained, would allow Bill Blass Ltd. to terminate the Bill Blass
Agreement.
In December 1995, Rio Sportswear entered into an agreement (the "Sublicense
Agreement"), commencing January 1, 1996, and amended March 11, 1997, to (i)
sublicense its rights under the Bill Blass Agreement, (ii) grant a license of
its Rio tradename for use on a full line of products, exclusive of certain
womens shirts and tops and childrenswear, and (iii) place the manufacture of its
private label business, all with a manufacturer affiliated with a primary
supplier to the company (the "Sublicensee").
Under the terms of the Sublicense Agreement, Rio Sportswear will earn a royalty
fee based on sales orders accepted by the manufacturer. The Sublicense Agreement
requires minimum annual royalty fee payments in addition to the minimum
royalties payable to Bill Blass of approximately $1,600. The initial term of the
agreement expires on December 31, 2008 and is renewable for five additional
ten-year periods.
The amount of the minimum annual royalty payments due under the Sublicense
Agreement is sufficient to recover the amount of goodwill included in intangible
assets applicable to the Rio and Bill Blass businesses. However, the minimum
royalty payments related to the Bill Blass business is dependent upon the
Company renewing the Bill Blass Agreement which expires on December 31, 1997.
The Company is in discussions with Bill Blass Ltd. and expects to negotiate a
new agreement for the continuation of the license. If negotiations are not
successful, it is possible that the Bill Blass Agreement could expire on
December 31, 1997, and the Company would write down its goodwill related to the
Bill Blass Labels which, at March 31, 1997, was approximately $10,100. With
respect to the Rio license, the sublicensee has elected to curtail distribution
of products sold under the Rio label in 1997. The Company has notified the
sublicensee that it must fulfill its commitment to minimum royalties due under
the Sublicense Agreement.
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. 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.
The Company is a defendant in various other lawsuits arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
these matters will not have a material effect on the financial statements of the
Company.
7
<PAGE> 8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(In thousands, except share data)
CERTAIN STATEMENTS CONTAINED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT ARE MADE
PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS
AND UNCERTAINTIES WHICH MAY CAUSE THE COMPANY'S ACTUAL RESULTS IN FUTURE PERIODS
OR PLANS FOR FUTURE PERIODS TO DIFFER MATERIALLY FROM WHAT IS CURRENTLY
ANTICIPATED. THOSE RISKS INCLUDE, AMONG OTHERS, GENERAL COMPETITIVE FACTORS AND
A SOFTENING OF RETAILER OR CONSUMER ACCEPTANCE OF THE COMPANY'S PRODUCTS.
GENERAL
The results of operations for the three months ended March 31, 1997 reflect net
revenues generated and expenses incurred from the sale of Calvin Klein Jeans
Label products, net revenues generated and expenses incurred from the operation
of Outlet Stores, Inc. (d/b/a CK Outlet Stores), as well as royalty income
earned and certain contractual expenses incurred related to sales of (i) Rio
label and Bill Blass label products, which the Company licensed effective
January 1, 1996 to Commerce Clothing Company, L.L. C. ("Commerce Clothing "),
(ii) Calvin Klein Jeans Label childrens apparel, within the United States, for
which the Company entered into a sub-licensing agreement effective January 1,
1996 with Commerce Clothing and (iii) certain other licensing agreements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, statement of
operations data as a percentage of net revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
----- -----
(Unaudited)
<S> <C> <C>
Net revenues 100.0% 100.0%
Cost of goods sold 61.7 61.8
----- -----
Gross profit 38.3 38.2
Selling, general and administrative expenses 27.4 23.7
----- -----
Operating income 10.9% 14.5%
===== =====
</TABLE>
Net Revenues. Net revenues for the three months ended March 31, 1997 were
$122,508, which represented an increase of $7,872 or 6.9% over net revenues for
the three months ended March 31, 1996 of $114,636. Net revenues in the 1997
quarter included $104,463 from the sale of Calvin Klein Jeans and CK/Calvin
Klein Jeans products, and $8,841 from the sale of CK/Calvin Klein Khakis
products (collectively "Calvin Klein Jeans Labels"), totaling $113,304. This
represents a net decrease of $301 compared to net revenue of $113,605 generated
from the sale of Calvin Klein Jeans Label products during the three months ended
March 31, 1996. This slight net sales decrease is comprised of an increase in
khaki net sales of $2,436, offset by a decrease in jeanswear net sales of
$2,737. This decrease in jeanswear sales is a result of the Company's strategic
decision to tighten the Company's product distribution in order to reinforce the
exclusivity of the Calvin Klein Jeanswear brand and to position its business for
increased long-term profitability. The Company experienced sales growth for the
three months ended March 31, 1997, as compared to the prior year period, in the
womens (including petites) and juniors lines, which was offset by a decline in
the mens line, specifically in jeanswear sales, as the Company reduced jeanswear
distribution to specialty stores which carried its mens line. The quarter ended
March 31, 1996 included $1,330 of sales to the CK Outlet Stores, which were
acquired by the Company in November 1996.
The Company recorded $7,410 of net revenues from the CK Outlet Stores during the
three months ended March 31, 1997.
Royalty income earned during the three months ended March 31, 1997 was
approximately $1,794. The 1996 comparable quarter contained approximately $642
of royalty income. This increase is a result of additional sublicensing
arrangements in effect during the three months ended March 31, 1997 as compared
to the prior year quarter. The Company anticipates that royalty income will
continue to increase during the remainder of 1997, as additional sublicensing
arrangements, covering territories such as Latin America, begin to generate
royalty earnings.
Gross Profit. Gross profit was $46,977 for the three months ended March 31,
1997, an increase of $3,162 from the 1996 comparable quarter gross profit of
$43,815. The gross profit percentage was 38.3% for the 1997 quarter, an increase
8
<PAGE> 9
from 38.2% in the 1996 quarter. The gross profit percentage on the sale of
Calvin Klein Jeans Label products was 38.0% for the 1997 quarter, compared to
38.2% in the 1996 quarter. The lower 1997 gross margin is impacted by the costs
of using both an independent overseas sourcing agent as well as our own overseas
sourcing agent during the 1997 quarter. The Company established its own office
in Hong Kong during the fourth quarter of 1996 to more effectively manage Asian
production, quality control and prices. The Company expects to discontinue use
of the independent overseas sourcing agent by the second half of 1997.
The CK Outlet Stores generated gross profit of approximately 40.1% during the
1997 quarter.
Selling, general and administrative. Selling, general and administrative
("SG&A") expenses were $33,588 or 27.4% of net revenues for the three months
ended March 31, 1997, an increase of $6,441 from $27,147 or 23.7% of net
revenues for the three months ended March 31, 1996. SG&A expenses related to the
sale of Calvin Klein Jeans Label products were $30,676, or 26.8% of net revenues
for the 1997 quarter, compared with $26,042, or 22.8% of net revenues for the
comparable 1996 quarter. The increased SG&A expenses related to the Calvin Klein
Jeans label products in the 1997 quarter, as compared to the 1996 quarter, are
attributable to costs associated with the installation and operation of the
shop-in-shops in department stores, increased distribution costs, and general
increased costs necessary to support the business growth. The Company expects to
continue to incur costs during the remainder of 1997 related to a shop-in-shop
maintenance program and a retail store specialist program.
Offsetting the increase in SG&A expenses is $885 representing the recovery of
start-up costs related to the license agreement with Donna Karan International.
On March 5, 1997, the license was terminated by mutual agreement and the Company
was reimbursed for all expenses incurred in connection with the start-up of that
business.
The CK Outlet Stores incurred approximately $3,201 of SG&A expenses for the
three months ended March 31, 1997, which represented approximately 43.2% of net
sales contributed by that company. The Company anticipates that SG&A expenses
for the CK Outlet Stores will remain at this level in the foreseeable future, as
the Company opens additional CK Outlet Stores and incurs related start-up costs.
As the Company realizes sales growth from its investment, it anticipates that
its SG&A expenses related to the CK Outlet Stores, as a percentage of net sales,
will decrease.
Interest expense, net. Interest expense for the three months ended March 31,
1997 was $778, as compared to $4,525 for the three months ended March 31, 1996.
This decrease is due to the payment in full of amounts outstanding under the
revolving credit facility, the term loan and the senior subordinated debt with
the net proceeds of the initial public offering in May 1996 and the sale of the
6% Convertible Trust Originated Preferred Securities (the "Preferred
Securities") in November 1996.
Interest expense also includes the reversal of $877 of imputed interest related
to the non-interest bearing licensing rights payable recorded pursuant to the
license agreement with Donna Karan International. The license agreement was
terminated by mutual agreement on March 5, 1997.
Provision for income taxes. The provision for income taxes was $5,171 or 41.0%
of pre-tax income for the three months ended March 31, 1996, as compared to
$5,586 or 46.0% of pre-tax income for the three months ended March 31, 1996. The
lower effective tax rate in 1997, as compared to 1996, is principally
attributable to lower state and local income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's future business growth will be accomplished through continued
investments in working capital (primarily receivables and inventory), capital
expenditures, costs related to continued upgrading of distribution and
management information systems and costs related to the shop-in-shop program. In
addition, the Company will require funds for the opening of additional CK Outlet
Stores.
The Company's current credit agreement (the "Credit Agreement") provides the
Company with a revolving credit facility for the issuance of loans and letters
of credit up to $150,000, limited, in the aggregate, to specified percentages of
eligible factored receivables and inventory, as defined, and, with respect to
open letters of credit, limited to $45,000 At March 31, 1997, there were no
amounts outstanding under the Credit Agreement, except for $13,560 for open
letters of credit.
On April 16, 1997, the Company signed a commitment letter with a new lender for
a $200,000 credit facility (the "New Credit Facility") for loans, which includes
a $45,000 sub-limit for the issuance of letters of credit and an annual $30,000
sub-limit for acquisition financing. The New Credit Facility will expire on the
fifth anniversary of the closing date
9
<PAGE> 10
thereof. The interest rates on the New Credit Facility will be at either the
Prime Rate or the Federal Funds rate, plus an applicable margin, or LIBOR plus
an applicable margin. The commitment letter expires on June 30, 1997. The New
Credit Facility will replace the Company's existing $150,000 revolving credit
facility.
The Company currently finances its operations primarily through cash flows
generated from operations and, prior to the November 6, 1996 offering of
Preferred Securities, from daily borrowings under its revolving credit facility.
During the three months ended March 31, 1997 and 1996, the Company generated
cash from operating activities of $17,263 and used cash in operating activities
of $9,741, respectively. The 1997 period reflects an improved working capital
position, primarily as a result of continued inventory management.
Net cash used in investing activities during the three months ended March 31,
1997 and 1996 was $4,832 and $925, respectively. The increase in investing
activities consisted primarily of capital expenditures for equipment for
distribution facilities and leasehold improvements, the final payment for the
purchase of the CK Outlet Stores and a deposit related to an acquisition
opportunity. As previously stated, the Company continues to pursue acquisitions.
In the first quarter of 1997, a refundable deposit was made in connection with
one such opportunity. However, there can be no assurance that this transaction
or any other transaction under consideration will materialize. These
expenditures were offset by the reimbursement from Donna Karan International
Inc. of the initial license payment made in 1996 of $6,000.
During the three months ended March 31, 1997, the Company used approximately $92
in financing activities, which consisted of costs related to the issuance of the
Preferred Securities. Net cash provided by financing activities during the three
months ended March 31, 1996 was $10,666, which consisted primarily of increases
in revolving credit loans.
The Company believes that its sources of financing, including the proceeds from
the offering of Preferred Securities and the borrowings available under the
existing revolving credit facility or the New Credit Facility , are adequate to
fund its current level of operations and its expected growth through 1998. The
Company currently plans to install approximately 200-250 Calvin Klein Jeans
Label shop-in-shops during 1997 at an estimated aggregate cost of approximately
$7,000. The Company also expects to incur capital expenditures for opening
additional CK Outlet Stores of approximately $5,000 during 1997, as well as
additional general 1997 capital expenditures of approximately $5,000.
Furthermore, the Company will require funds to complete any future acquisitions.
These costs will be funded from cash flows generated from operations or from
borrowings under a credit agreement.
SEASONALITY
The Company's business is affected by general seasonal trends that are
characteristic of the apparel industry. In the Company's segment of the apparel
industry, sales typically are higher in the first and third quarters and lower
in the second and fourth quarters.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Incorporated by reference to Note 7 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
None.
(b). Reports on Form 8-K
A report on Form 8-K was filed with the Securities and Exchange Commission
dated March 5, 1997, which contained Item 5.
11
<PAGE> 12
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: May 15, 1996 By: /s/ Maurice Dickson
-------------------------------------
Maurice Dickson
Executive Vice President, Treasurer and
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 53,734
<SECURITIES> 0
<RECEIVABLES> 134,949
<ALLOWANCES> (21,899)
<INVENTORY> 88,438
<CURRENT-ASSETS> 279,608
<PP&E> 15,987
<DEPRECIATION> (2,949)
<TOTAL-ASSETS> 363,178
<CURRENT-LIABILITIES> 49,088
<BONDS> 120,000
0
0
<COMMON> 321
<OTHER-SE> 193,041
<TOTAL-LIABILITY-AND-EQUITY> 363,178
<SALES> 120,714
<TOTAL-REVENUES> 122,508
<CGS> 75,531
<TOTAL-COSTS> 75,531
<OTHER-EXPENSES> 33,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 778
<INCOME-PRETAX> 12,611
<INCOME-TAX> 5,171
<INCOME-CONTINUING> 7,440
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,440
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
