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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 3, 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 1-11752
ST. JOHN KNITS, INC.
(Exact Name of Registrant as Specified in its Charter)
California 95-2245070
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification Number)
17422 Derian Avenue, Irvine, California 92614
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (714) 863-1171
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
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The number of outstanding shares of registrant's Common Stock, no par value, was
16,634,548 shares as of November 4, 1997.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
See "Exhibit Index."
(b) Reports on Form 8-K.
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
ST. JOHN KNITS, INC.
(Registrant)
By: /s/ Bob E. Gray
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Bob E. Gray
Chairman of the Board and
Chief Executive Officer
By: /s/ Roger G. Ruppert
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Roger G. Ruppert
Senior Vice President - Finance,
Chief Financial Officer
Dated: November 12, 1997
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EXHIBIT INDEX
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Exhibit Sequentially
Number Description of Exhibit Numbered Page
- ------- ---------------------------------------------- -------------
<S> <C> <C>
10.1* Distribution Agreement dated June 11, 1997
by and between the Company and Gary Farn, Ltd.
10.2* Joint Venture Agreement dated July 17, 1997
between the Company and Commercial Development
Co., Ltd.
10.3* License and Distribution Agreement dated as of
August 1, 1997 between the Company and
St. John Co., Ltd.
10.4* Limited Liability Company Agreement for Amen
Wardy Home Stores, LLC dated August 5, 1997,
among the Company, AWH Direct, LLC, Amen Wardy,
Sr., Amen Wardy, Jr., Amen Wardy Home, Inc.,
Bob Hightower and Amen Wardy Home Stores, LLC
10.5* Product Design and Development Agreement dated
August 5, 1997 among the Company, Amen Wardy,
Sr. and Amen Wardy, Jr.
18.1 Letter to the Company from Arthur Andersen LLP,
dated November 7, 1997, regarding a change in
accounting principles
27.1* Financial Data Schedule
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* Incorporated by reference from the Form 10-Q for the quarterly period
ended August 3, 1997, as filed with the Securities and Exchange
Commission on September 16, 1997.
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EXHIBIT 18.1
[LETTERHEAD OF ARTHUR ANDERSEN]
November 7, 1997
St. John Knits, Inc.
2722 Michelson Drive
Irvine, California 92715
Re: Form 10-Q Report for the quarter ended August 3, 1997.
Ladies and Gentlemen:
This letter is written to meet the requirements of Regulation S-K calling for a
letter from a registrant's independent accountants whenever there has been a
change in accounting principle or practice.
We have been informed that the Company changed its inventory valuation method
from the last-in, first-out (LIFO) method to the first-in, first-out, (FIFO)
method. According to the management of the Company, this change was made for
the following reasons:
1. Management has investigated several other public companies in the apparel
industry and has determined that the FIFO method of inventory valuation is
a more generally accepted accounting method in the industry. Out of a total
of seventeen public companies in the apparel industry investigated, sixteen
utilize the FIFO method to value their inventories. Included in this list
are Donna Karan, Polo Ralph Lauren Enterprises, Gucci, Tommy Hilfiger and
Jones Apparel Group, all of whom are considered to be most directly
comparable to St. John Knits, Inc.
2. The FIFO method effectively matches the Company's revenues and costs in
the appropriate financial reporting period. The frequency of the Company's
inventory turns each year (five on average) has significantly reduced the
impact of inflation on the valuation of inventory using the LIFO method.
Inventory values essentially reflect current costs (FIFO), as most are
replaced every two to three months.
3. Practically, the time and effort spent by the Company utilizing the LIFO
method has resulted in insignificant differences from the FIFO method.
The Company's inventory has increased significantly since 1991, however the
LIFO reserve has decreased from approximately $801,000 in 1991 to
approximately $363,000 in 1996.
4. The Company's inventory production process has become more efficient in the
past few years. An increased reliance on automation has more than offset
any effect of increased labor costs and therefore results in a decreasing
impact of the difference between the LIFO method and the FIFO method.
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[LETTERHEAD OF ARTHUR ANDERSEN]
St. John Knits, Inc.
Page 2
November 7, 1997
5. The overall effect of the change is immaterial to the Company's financial
statements.
We are of the opinion that the Company's change in method of accounting is to an
acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is more preferable under
your circumstances. In arriving at this opinion, we have relied on the business
judgment and business planning of your management.
We have not audited the application of this change to the financial statements
of any period subsequent to November 7, 1996. Further, we have not examined and
do not express any opinion with respect to your financial statements for the
nine months ended August 3, 1997.
Please feel free to contact us with any questions at (714) 757-3100.
Very truly yours
/s/ ARTHUR ANDERSEN LLP
