SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 6, 1996
SUPREME INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 0-21764 59-1162998
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7495 N.W. 48th Street
MIAMI, FLORIDA 33166
(Address of principal executive offices)
Registrant's telephone number, including area code: (305) 592-2830
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Premiumwear, Inc. (Formerly Munsingwear, Inc.).
Report of Independent Public Accountants.
Statements of Assets Sold as of January 6, 1996 and January 7,
1995.
Statements of Direct Revenues and Expenses for the Years Ended
January 6, 1996, January 7, 1995 and January 1, 1994.
Notes to Statements.
(b) Pro Forma Financial Information.
Pro Forma Condensed Balance Sheet as of July 31, 1996.
Pro Forma Condensed Income Statement for the Six Months Ended
July 31, 1996.
Pro Forma Condensed Income Statement for the Year Ended January 31,
1996.
Notes to Pro Forma Condensed Financial Statements.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PremiumWear, Inc.:
We have audited the accompanying statements of assets sold of the retail,
specialty, national and golf strategic business units of PremiumWear, Inc.
(formerly Munsingwear, Inc.) as of January 6, 1996 and January 7, 1995, and the
related statements of direct revenues and expenses for each of the three fiscal
years in the period ended January 6, 1996. These statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
The accompanying statements were prepared to present the assets sold of
PremiumWear, Inc.'s retail, specialty, national and golf strategic business
units pursuant to the purchase agreement described in Note 1 and direct revenues
and expenses and are not intended to be a complete presentation of PremiumWear,
Inc.'s retail, specialty, national and golf strategic business units' financial
position, results of operations and cash flows.
In our opinion, the statements referred to above present fairly, in all material
respects, the assets sold of PremiumWear, Inc's retail, specialty, national and
golf strategic business units, pursuant to the purchase agreement referred to in
Note 1, as of January 6, 1996 and January 7, 1995, and the direct revenues and
expenses for each of the three fiscal years in the period ended January 6, 1996,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
November 18, 1996
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<TABLE>
<CAPTION>
PREMIUMWEAR, INC.
RETAIL, SPECIALTY, NATIONAL AND GOLF
STRATEGIC BUSINESS UNITS
Statements of Assets Sold (Note1)
(Dollars in Thousands)
JANUARY 6, JANUARY 7,
1996 1995
---------- ----------
<S> <C> <C>
TRADEMARKS, net of accumulated amortization of $1,274 and
$1,010 $ 3,923 $ 4,187
INVENTORIES 8,405 11,284
EQUIPMENT, net of accumulated depreciation of $176 and $96 243 214
------- --------
ASSETS SOLD $12,571 $ 15,685
======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
PREMIUMWEAR, INC.
RETAIL, SPECIALTY, NATIONAL AND GOLF
STRATEGIC BUSINESS UNITS
Statements of Direct Revenues
and Expenses (Note 2)
For the Years Ended January 6, 1996,
January 7, 1995 and January 1, 1994
(Dollars in Thousands)
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
REVENUES:
Net sales $35,184 $35,804 $36,992
Royalties 4,273 4,172 3,243
------- ------- -------
39,457 39,976 40,235
COST OF GOODS SOLD 29,592 28,258 27,680
------- ------- -------
Gross Profit 9,865 11,718 12,555
DIRECT OPERATING EXPENSES 5,529 5,195 5,400
------- ------- -------
Excess of direct revenues over expenses $ 4,336 $ 6,523 $ 7,155
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
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PREMIUMWEAR, INC.
RETAIL, SPECIALTY, NATIONAL AND GOLF
STRATEGIC BUSINESS UNITS
Notes to Statements
January 6, 1996 and January 7, 1995
(Dollars in Thousands)
1. BACKGROUND AND BASIS OF PRESENTATION:
The accompanying statements have been prepared for the purpose of presenting the
assets sold of the retail, specialty, national and golf strategic business units
(collectively, SBUs) of PremiumWear, Inc. (PremiumWear or the Seller - formerly
Munsingwear, Inc.), pursuant to the Asset Purchase and Management Agreements
(the Agreements) dated as of May 22, 1996 between PremiumWear and Supreme
International Corporation (the Buyer) and its related direct revenues and
expenses for each of the three fiscal years in the period ended January 6, 1996.
Consummation of the transaction occurred on September 6, 1996. Pursuant to the
Agreements, PremiumWear sold to the Buyer the intangible rights which include
certain license agreements and certain inventories and fixed assets directly
related to the SBUs in exchange for consideration totaling approximately $18
million. In addition, as part of the Agreements, PremiumWear changed its name
from Munsingwear, Inc. The Seller retained certain inventories and all accounts
receivable and liabilities related to the SBUs.
The SBUs' products are sold and distributed principally in the United States.
These products are also sold and distributed in North America, Europe and Asia.
The accompanying statements are derived from the historical accounting records
of PremiumWear, and present the assets sold of PremiumWear's SBUs in accordance
with the Agreements, as of January 6, 1996 and January 7, 1995, and direct
revenues and expenses for each of the three fiscal years in the period ended
January 6, 1996, and are not intended to be a complete presentation of the SBUs'
financial position, results of operations and cash flows. These results may not
be indicative of the results after the acquisition by the Buyer.
PremiumWear historically has not maintained the SBUs as a separate business unit
and has not allocated indirect operating cost information.
The statements of direct revenues and expenses include revenues and expenses
directly attributable to the SBUs. Direct operating expenses consist principally
of marketing, sales commissions, advertising, warehouse expenses and
amortization of intangible expenses. The statements do not include indirect
selling, general and administrative, research and development, interest and
income tax expenses.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE
Sales are recorded as revenues, net of a provision for estimated returns, when
goods are shipped to the customer. Royalties are recognized as earned. Sales to
one customer in 1995 and 1994 were 17% and 21%, respectively, of net sales. In
1996, no single customer represented more than 10% of the SBUs' net sales.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventoriable costs include raw materials, labor and related manufacturing
overhead expenses.
Inventories consisted of (in thousands): JANUARY 6, JANUARY 7,
---------- ----------
1996 1995
------ -------
Raw materials $ 680 $ 1,591
Work in progress 320 1,121
Finished goods 7,405 8,572
------ -------
$8,405 $11,284
====== =======
The amounts presented in the accompanying statements related to inventories
reflect estimates, which management believes were reasonable and appropriate in
the circumstances, of the portion of such balances that were associated with the
sold SBUs. Management does not believe that such estimates would have differed
materially from actual amounts had it been practicable to specifically identify
such actual amounts.
OTHER ESTIMATES
The preparation of statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the statements and the reported amounts of
revenues and expenses during the reporting period. The ultimate results could
differ from those estimates.
ADVERTISING AND PROMOTIONAL EXPENSES
Advertising and promotional expenses are charged to direct operating expenses
during the periods in which they are incurred. Total direct advertising and
promotional expense was approximately $1,176, $560 and $821 for the fiscal years
ended January 6, 1996, January 7, 1995 and January 1, 1994, respectively.
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PRO FORMA FINANCIAL INFORMATION
On September 6, 1996, Supreme International Corporation (the "Company")
completed the Munsingwear acquisition, which was accounted for using the
purchase method of accounting. The following unaudited pro forma condensed
consolidated income statements and other operating data for the six months ended
July 31, 1996 and the year ended January 31, 1996 assume that the Munsingwear
acquisition was consummated as of the beginning of each of the periods presented
and include certain adjustments to the historical consolidated income statements
of the Company to give effect to the acquisition of trademarks, other intangible
assets and other acquired assets, the payment of the purchase price in such
acquisition, the related issuances of additional indebtedness by the Company,
and increased amortization of intangible assets. The following unaudited pro
forma condensed consolidated balance sheet as of July 31, 1996, reflects the
Munsingwear acquisition, the payment of the purchase price in such acquisition
and the related issuances of additional indebtedness by the Company, as if such
transaction had occurred on July 31, 1996.
The unaudited pro forma financial data should be read in conjunction with the
notes thereto and the historical Consolidated Financial Statements of the
Company (including the notes thereto) and the other historical financial
information included in the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1996. The pro forma adjustments are based upon available
information and certain assumptions that the management of the Company believes
are reasonable. The pro forma results of operations for the six months ended
July 31, 1996 and the year ended January 31, 1996 are not necessarily indicative
of the results of operations that would have been achieved had the transactions
reflected therein been consummated prior to the periods in which they were
completed, or that might be attained in the future.
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<TABLE>
<CAPTION>
PRO FORMA CONDENSED BALANCE SHEET
JULY 31, 1996
(UNAUDITED)
HISTORICAL ADJUSTMENTS (1) PRO FORMA
------------ --------------- -------------
<S> <C> <C> <C>
Cash $ 375,345 $ -- $ 375,345
Accounts receivable, net 21,838,215 -- 21,838,215
Inventories 27,192,496 373,952 27,566,448
Deferred income taxes 828,313 -- 828,313
Other current assets 2,020,484 -- 2,020,484
Property and equipment, net 2,135,567 10,000 2,145,567
Intangible assets, net 1,090,856 18,274,405 19,365,261
Other 641,057 -- 641,057
----------- ----------- -----------
Total assets $56,122,333 $18,658,357 $74,780,690
=========== =========== ===========
Accounts Payable $ 2,312,588 $ -- $ 2,312,588
Accrued expenses 979,126 -- 979,126
Other current liabilities 111,628 -- 111,628
Long-term debt 8,483,595 18,658,357 27,141,952
Preferred stock -- -- --
Common stock 43,490 -- 43,490
Additional paid-in capital 27,419,474 -- 27,419,474
Retained earnings 16,772,432 -- 16,772,432
----------- ----------- -----------
Total liabilities and stockholders' equity $56,122,333 $18,658,357 $74,780,690
=========== =========== ===========
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
PRO FORMA CONDENSED INCOME STATEMENT
(UNAUDITED)
HISTORICAL SIX MONTHS ENDED
------------------------------
PREMIUMWEAR,
COMPANY INC.(1)
----------- ------------
JULY 31, JULY 6,
1996 1996 COMBINED ADJUSTMENTS PRO FORMA
----- ---- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues $68,366,693 $22,266,000 $90,632,693 $ -- $90,632,693
Cost of goods sold 53,568,705 16,723,000 70,291,705 -- 70,291,705
----------- ----------- ----------- ----------- -----------
Gross profit 14,797,988 5,543,000 20,340,988 -- 20,340,988
Selling, general and
administrative expenses 10,621,052 2,253,000 12,874,052 268,663 (2) 13,142,715
----------- ----------- ----------- ----------- -----------
Operating income 4,176,936 3,290,000 7,466,936 (268,663) 7,198,273
Interest expense 452,994 -- 452,994 769,657 (3) 1,222,651
----------- ----------- ----------- ----------- -----------
Income before income 3,723,942 3,290,000 7,013,942 (1,038,320) 5,975,622
taxes
Provision for 1,420,000 -- 1,420,000 850,736 (4) 2,270,736
income taxes ----------- ----------- ----------- ----------- -----------
Net income $ 2,303,942 $ 3,290,000 $ 5,593,942 $ (1,889,056) $ 3,704,886
=========== =========== =========== ============ ===========
Net income per share (5) $0.52 $0.84
=========== ===========
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
PRO FORMA CONDENSED INCOME STATEMENT
(UNAUDITED)
HISTORICAL YEARS ENDED
----------------------
PREMIUMWEAR,
COMPANY INC. (1)
------------ -----------
JANUARY 31, JANUARY 6,
1996 1996 COMBINED ADJUSTMENTS PRO FORMA
------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues $121,079,823 $39,457,000 $160,536,823 $ -- $160,536,823
Cost of goods sold 92,144,575 29,592,000 121,736,575 -- 121,736,575
------------ ----------- ------------ ----------- ------------
Gross profit 28,935,248 9,865,000 38,800,248 -- 38,800,248
Selling, general and
administrative expenses 19,602,165 5,529,000 25,131,165 571,445 (2) 25,702,610
------------ ----------- ------------ ----------- ------------
Operating income 9,333,083 4,336,000 13,669,083 (571,445) 13,097,638
Interest expense 2,223,869 -- 2,223,869 1,539,314 (3) 3,763,183
------------ ----------- ------------ ----------- ------------
Income before income taxes 7,109,214 4,336,000 11,445,214 (2,110,759) 9,334,455
Provision for income taxes 2,685,663 -- 2,685,663 861,430 (4) 3,547,093
------------ ----------- ------------ ----------- ------------
Net income $ 4,423,551 $ 4,336,000 $ 8,759,551 $(2,972,189) $ 5,787,362
============ =========== ============ =========== ============
Net income per share (5) $1.13 $1.48
============ ============
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
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NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(1) To record the fair value of assets acquired in the Munsingwear acquisition .
The purchase price of approximately $18 million was financed through
borrowings.
(2) To adjust amortization for the trademarks and other intellectual property
acquired in the Munsingwear acquisiton ($456,860 semiannually and $913,720
annually) over their estimated useful lives of twenty years. In addition, to
adjust depreciation for the equipment acquired ($1,000 semiannually and
$2,000 annually) over their estimated useful lives of five years.
(3) To record interest expense on the debt incurred in the Munsingwear
acquisition. (See Note 1 above).
(4) To record the aggregate tax effect of the Munsingwear acquisition at an
assumed rate of 38%.
(5) Per share amounts were computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during each period (4,391,942 for the six months ended July 31,
1996 and 3,912,774 for the year ended January 31,1996) as if the Munsingwear
acquisition was consummated as of the beginning of each period.
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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 hereunto duly authorized.
SUPREME INTERNATIONAL CORPORATION
Date: November 18, 1996 /S/ RICHARD L. DUNN
-------------------
Richard L. Dunn
Vice President, Finance and
Chief Financial Officer
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