SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-21764
SUPREME INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-1162998
(State or other jurisdiction of (IRS Employer Identification
Incorporation or organization) Number)
7495 NW 48TH STREET
MIAMI, FLORIDA 33166
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 592-2830
Former name, former address and fiscal year, if changed since last report
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 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 is 6,534,431
(as of September 11, 1997).
<PAGE>
SUPREME INTERNATIONAL CORPORATION
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1:
Consolidated Balance Sheets
as of July 31, 1997 (Unaudited) and January 31, 1997 1
Consolidated Statements of Income (Unaudited)
for the three and six months ended July 31, 1997 and July 31, 1996 2
Consolidated Statements of Cash Flows (Unaudited)
for the six months ended July 31, 1997 and July 31, 1996 3
Notes to Consolidated Financial Statements 4
ITEM 2:
Management's Discussion and Analysis
of Financial Condition and Results of Operations 7
PART II: OTHER INFORMATION 10
Signatures 12
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
1997 JANUARY 31,
ASSETS (UNAUDITED) 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 912,342 $ 755,798
Accounts receivable, net 28,185,035 28,807,236
Inventories 29,983,040 32,200,522
Deferred income taxes 668,658 668,658
Other current assets 2,262,590 1,525,695
------------ ------------
Total current assets 62,011,665 63,957,909
PROPERTY AND EQUIPMENT, net 2,482,175 2,138,088
INTANGIBLE ASSETS, net 19,679,574 19,858,692
OTHER 2,768,714 2,203,601
------------ ------------
TOTAL $ 86,942,128 $ 88,158,290
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,441,051 $ 5,584,924
Accrued expenses 1,324,765 2,063,040
Borrowings under credit facilities 0 6,812,629
Current portion of long-term debt 30,872,903 25,136,801
Other current liabilities 494,210 785,422
------------ ------------
Total liabilities 36,132,929 40,382,816
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value; 1,000,000 shares
authorized; no shares issued or outstanding - -
Common stock - $.01 par value; 10,000,000 shares
authorized; 4,543,333 and 4,535,587 shares issued and
outstanding less 187,046 and 184,300 of treasury stock
at July 31 and January 31, 1997, respectively 43,563 43,513
Common stock dividend distributable (see Note 5) 21,781 -
Additional paid-in capital 27,476,902 27,419,452
Retained earnings 23,266,953 20,312,509
------------ ------------
Total stockholders' equity 50,809,199 47,775,474
------------ ------------
TOTAL $ 86,942,128 $ 88,158,290
============ ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 42,037,105 $ 31,159,255 $ 90,877,818 $ 68,967,075
COST OF GOODS SOLD 32,550,086 24,405,469 69,551,025 53,568,705
------------ ------------ ----------- -----------
GROSS PROFIT 9,487,019 6,753,786 21,326,793 15,398,370
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 7,561,798 5,392,843 15,202,309 11,221,434
------------ ------------ ----------- -----------
OPERATING INCOME 1,925,221 1,360,943 6,124,484 4,176,936
INTEREST EXPENSE 602,111 239,931 1,306,015 452,994
------------ ------------ ----------- -----------
INCOME BEFORE INCOME TAXES 1,323,110 1,121,012 4,818,469 3,723,942
PROVISION FOR INCOME TAXES 496,577 432,000 1,842,244 1,420,000
------------ ------------ ----------- -----------
NET INCOME $ 826,533 $ 689,012 $ 2,976,225 $ 2,303,942
============ ============ =========== ===========
NET INCOME PER SHARE (SEE NOTE 5) $ 0.12 $ 0.10 $ 0.45 $ 0.35
============ ============ =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES (SEE NOTE 5) 6,631,283 6,611,700 6,612,527 6,587,913
============ ============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31,
1997 1996
---- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,976,225 $ 2,303,942
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,053,076 60,732
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable, net 622,201 (2,278,796)
Decrease in inventories 2,217,482 4,998,707
Increase in other current assets (736,895) (854,731)
Increase in other assets (565,113) (352,934)
(Decrease) Increase in accounts payable and accrued expenses (2,882,148) 478,983
Decrease in other current liabilities (291,212) (110,038)
------------ ------------
Net cash provided by operating activities 2,393,616 4,245,865
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (870,629) (85,640)
Additions to intangible assets (347,416) -
Purchase of an apparel manufacturer and distributor - (3,657,435)
------------ -------------
Net cash used in investing activities (1,218,045) (3,743,075)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in borrowings under credit facilities (6,812,629) -
Proceeds from long-term debt 24,824,674 1,515,652
Payments on long-term debt (19,088,572) -
Proceeds from exercise of stock options 57,500 -
Purchase of treasury stock - (1,901,630)
------------ ------------
Net cash used in financing activities (1,019,027) (385,978)
------------ ------------
NET INCREASE IN CASH 156,544 116,812
CASH AT BEGINNING OF PERIOD 755,798 258,533
------------ ------------
CASH AT END OF PERIOD $ 912,342 $ 375,345
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,382,125 $ 431,227
============ =============
Income taxes $ 2,545,382 $ 1,894,659
============ =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
SUPREME INTERNATIONAL CORPORATION
ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and
therefore do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and
changes in cash flows in conformity with generally accepted accounting
principles. The unaudited consolidated financial statements should be
read in conjunction with the audited financial statements and related
notes included in the Registrant's Annual Report on Form 10-K for the
year ended January 31, 1997. In the opinion of management, the
unaudited consolidated financial statements contain all adjustments
necessary for a fair presentation for the interim period presented and
all such adjustments are of a normal and recurring nature. The results
of operations for the six months ended July 31, 1997 are not
necessarily indicative of the results which may be expected for the
entire fiscal year.
Certain amounts of the prior period have been reclassified to conform
to current year presentations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),
EARNINGS PER SHARE. The statement is effective for financial statements
for periods ending after December 15, 1997, and changes the method in
which earnings per share will be determined. Adoption of this statement
by the Company will not have a material impact on earnings per share.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 129 ("SFAS No. 129"),
DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE. The statement is
effective for financial statements for periods ending after December
15, 1997, and requires explanation of the pertinent rights and
privileges of the various securities outstanding. Adoption of this
statement by the Company will not have a material impact on its
consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 ("SFAS No. 130"), REPORTING
COMPREHENSIVE INCOME. The statement is effective for fiscal years
beginning after December 15, 1997, and requires the reporting and
display of comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of general-purpose financial
statements. Adoption of this statement by the Company will not have a
material impact on the consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131 ("SFAS No. 131"), DISCLOSURE
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. The statement
is effective for financial statements for periods beginning after
December 15, 1997, and requires information about operating segments in
annual financial statements and selected information about operating
segments in interim financial reports issued to shareholders. It also
demands for related disclosure about products and services,
geographical areas, and major customers. Adoption of this statement by
the Company will not have a material impact on the consolidated
financial statements.
4
<PAGE>
2. INVENTORY
Inventories are stated at lower of cost or market on a First-in
First-out basis and consist of:
<TABLE>
<CAPTION>
JULY 31, 1997 JANUARY 31, 1997
------------- ----------------
<S> <C> <C>
Finished goods $25,007,066 $27,445,635
Raw materials and in process 2,850,053 3,629,940
Merchandise in transit 2,125,921 1,124,947
------------ -----------
TOTAL $29,983,040 $32,200,522
============ ===========
</TABLE>
3. LETTER OF CREDIT FACILITIES
<TABLE>
<CAPTION>
JULY 31, 1997 JANUARY 31, 1997
------------- ----------------
<S> <C> <C>
Total letter of credit facilities $37,000,000 $33,000,000
Borrowings - (6,812,629)
Outstanding letters of credit (29,748,024) (16,978,256)
------------ ------------
Total Available $ 7,251,976 $ 9,209,115
============ ============
</TABLE>
4. EARNINGS PER SHARE
Earnings per common share and common equivalent share were computed by
dividing net income by the weighted average number of shares of common
stock and common stock equivalents outstanding during the year after
giving effect to the stock dividend discussed in Note 5. The number of
common shares was increased by the number of shares issuable on the
exercise of warrants and stock options when the market price of the
common stock exceeds the exercise price of the warrants or options.
This increase in the number of common shares was reduced by the number
of common shares that are assumed to have been purchased with the
proceeds from the exercise of the warrants or options; those purchases
were assumed to have been made at the average price of common stock
during the year. Earnings per share assuming full dilution was
determined in the same manner as earnings per common share and common
equivalent share except that the period-end stock price was used.
5. STOCK DIVIDEND
On July 21, 1997, the Company's Board of Directors declared a 3 for 2
stock split in the form of a stock dividend to be distributed on or
about August 15, 1997, to shareholders of record at the close of
business on July 31, 1997. Retained earnings was charged for the
2,178,144 additional shares to be issued based on the par value of the
Company's stock. All income per share and common shares outstanding
information have been retroactively restated to reflect said stock
dividend.
5
<PAGE>
6. STOCKHOLDERS' EQUITY
The following is a schedule of the transactions in the stockholders'
equity:
<TABLE>
<CAPTION>
STOCK DIVIDEND
COMMON STOCK DISTRIBUTABLE ADDITIONAL RETAINED
------------ ------------- ---------- --------
SHARES AMOUNT SHARES AMOUNT PAID-IN CAPITAL EARNINGS
------ ------ ------ ------ --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1997 4,351,287 $43,513 - $ - $27,419,452 $20,312,509
Exercise of stock options 5,000 50 - - 57,450 -
Net Income - - - - - 2,976,225
Stock Dividend - - 2,178,144 21,781 - (21,781)
--------- ------- --------- ------- ----------- -----------
Balance, July 31, 1997 4,356,287 $43,563 2,178,144 $21,781 $27,476,902 $23,266,953
========= ======= ========= ======= =========== ===========
</TABLE>
7. ACQUISITIONS
On September 6, 1996, the Company acquired certain assets of
Munsingwear, Inc. ("Munsingwear") a manufacturer of men's casual
apparel for approximately $18,400,000. The assets acquired consisted of
brand names including Grand Slam, Grand Slam Tour, Penguin Sport, and
other intangible assets. The purchase price amounted to approximately
$19,800,000, which included $1,400,000 of transaction costs, and was
primarily allocated to working capital and intangible assets as
follows: inventories $300,000; accounts receivable $300,000; and brand
names $19,200,000. The acquisition was accounted for under the purchase
method of accounting and was financed with borrowings from the
revolving credit agreement.
The following unaudited information presents the Company's pro forma
operating data for the period ended July 31, 1996 as if the
acquisitions had been consummated at the beginning of the period
presented. It includes certain adjustments to the historical
consolidated statements of operations of the Company to give effect to
the acquisition of brand names and associated rights, license
agreements and other acquired net assets, the related issuance of
additional indebtedness by the Company and the increased amortization
of the intangible assets. The unaudited pro forma financial data are
not necessarily indicative of the results of operations that would have
been achieved had the transactions reflected therein been consummated
prior to the period in which they were completed, or that might be
attained in the future. Net income per share has been retroactively
restated to reflect the stock dividend described in Note 5.
PRO FORMA SIX MONTHS ENDED
--------------------------
JULY 31, 1996
-------------
Net sales $91,233,075
Net income $ 3,854,853
Net income per share $ .59
6
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Supreme International Corporation (the "Company") cautions
readers that certain important factors may affect the Company's actual
results and could cause such results to differ materially from any
forward-looking statements which may be deemed to have been made in
this Report or which are otherwise made by or on behalf of the Company.
For this purpose, any statements contained in this Report that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words
such as "may", "will", "expect", "believe", "anticipate", "intend",
"could", "would", "estimate", or "continue" or the negative other
variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors which may affect the Company's
results include, but are not limited to, risks related to fashion
trends; the retail industry; reliance on key customers; contract
manufacturing; foreign sourcing; imports and import restrictions;
competition; seasonality; rapid expansion of business; dependence on
key personnel and other factors discussed in the Company's filings with
the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JULY 31, 1997 AS COMPARED TO THREE AND SIX
MONTHS ENDED JULY 31, 1996.
Net sales for the three and six months ended July 31, 1997
increased $10,877,850 (34.9%) and $21,910,743 (31.8%), respectively, to
$42,037,105 and $90,877,818 from $31,159,255 and $68,967,075 for the
three and six months ended July 31, 1996 respectively. Such increases
are mainly attributable to the Munsingwear (see Note 7) and Jolem
acquisitions (on May 6, 1996, the Company acquired all of the assets of
Jolem Imports, Inc. ("Jolem") a Miami based manufacturer of men's and
boys' casual apparel). Net sales were $6,697,787 and $3,381,999 for
Munsingwear and Jolem, respectively, for the quarter ended July 31,
1997, with the rest of the increase representing existing business. For
the six months ended July 31, 1997, net sales were $13,538,429 and
$5,809,323 for Munsingwear and Jolem, respectively, with the rest of
the increase representing existing business. Net sales for Jolem were
$331,424 for the three and six months ended July 31, 1997. Since the
acquisition of Munsingweat occurred subsequent to the quarter ended
July 31, 1996, there are not coparable sales for that period. For
comparative purposes, net sales for the prior period (Fiscal 1997)
presented has been adjusted to reflect management's decision to account
for co-op advertising as a selling, general and administrative expense
rather than as a reduction of sales for Fiscal 1998, thereby resulting
in an increase in the absolute dollar value of net sales for both
periods presented.
Cost of goods sold increased to $32,550,086 and $69,551,025,
respectively, for the three and six months ended July 31, 1997 from
$24,405,469 and $53,568,705, for the three and six months ended July
31, 1996, reflecting the increased level of sales. As a percentage of
sales, cost of sales decreased to 77.4% in the three months ended July
31, 1997 from 78.3% in the three months ended July 31, 1996 and to
76.5% for the six months ended July 31, 1997 from 77.7% in the six
months ended July 31, 1996. Gross profits were $9,487,019 (22.6% of
sales) and $21,326,793 (23.5% of sales) in the three and six month
period ended July 31, 1997, as compared to $6,753,786 (21.7% of sales)
and $15,398,370 (22.3% of sales) in the three and six month period
ended July 31, 1996. The increase in gross profit and decrease in cost
of goods sold as a percentage of sales is principally attributable to
an increase in sales of higher margin merchandise, resulting from the
introduction of new brand names coupled with better margins on sales of
discounted merchandise.
Selling, general and administrative expenses increased by
$2,168,955 or 40.2% from $5,392,843 in the three months ended July
31,1996 to $7,561,798 in the three months period ended July 31, 1997
and by $3,980,875 or 35.5% from $11,221,434 for the six months ended
July 31, 1996 to $15,202,309 for the six months ended July 31, 1997. As
a percentage of sales, selling, general and administrative expenses
were 18.0% and 16.7% for the three and six months period ended July 31,
1997 and 17.3% and 16.3% for the three and six months ended July 31,
1996. The increases in the selling, general and administrative expenses
are mainly attributable to an increase in advertising costs, as well as
an increase in amortization expense offset by an increase in royalty
income, both resulting from the Munsingwear acquisition. Additionally,
for Fiscal 1998, management has decided to account for co-op
advertising as a selling, general and administrative expense rather
than as a reduction of sales as done in prior years. Although the
reclassification has been reflected in the prior period presented
(Fiscal 1997) said change results in an increase in absolute dollars
value in th selling, general and administrative expenses.
Interest expense increased to $602,111 and to $1,306,015 for
the three and six months ended July 31, 1997 from $239,931 and $452,994
in the three and six months ended July 31, 1996. This increase is as a
result of the additional indebtedness by the Company related to the
acquisition discussed in Note 7.
Income before taxes for the three and six months ended July
31, 1997 was $1,323,110 and $4,818,469, respectively, as compared to
income before taxes for the three and six months ended July 31, 1996 of
$1,121,012 and $3,723,942, respectively. Net income was $826,533 and
$2,976,225 for the three and six months ended July 31, 1997
representing net income per share of $0.12 and $0.45 respectively,
as compared to $689,012 and $2,303,942 for three and six months ended
7
<PAGE>
July 31, 1996, representing net income per share of $0.10 and $0.35,
respectively. Net income per share was computed using the weighted
average number of common shares outstanding of 6,631,283 and 6,612,527
for the three and six months ended July 31, 1997, and 6,611,700 and
6,587,913 for the three and six months ended July 31, 1996 after giving
effect to the stock dividend discussed in Note 5.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth in sales and other working
capital requirements principally from operating cash flows and
borrowings under a $35.0 million revolving credit agreement with a bank
(the "Revolving Credit Agreement"). The amount available for borrowings
under the Revolving Credit Agreement is determined pursuant to a
formula based upon the levels of eligible accounts receivable and
finished goods inventory, subject to a maximum of $35.0 million. The
Revolving Credit Agreement bears interest at the bank's prime rate or
LIBOR plus 1.5%. Substantially all the assets of the Company are
pledged as collateral under the Revolving Credit Agreement. As of July
31, 1997, $30,872,903 was outstanding under the Revolving Credit
Agreement, and the Company had $4,127,097 available for additional
borrowings based on eligible receivables and inventory.
Cash flows provided by operating activities were $2,393,616
for the six months ended July 31, 1997, principally representing cash
provided by net income of $2,976,225, a decrease in inventories of
$2,217,482 offset by a decrease in current liabilities of $3,173,360.
For the six months ended July 31, 1996, cash flows provided by
operating activities were $4,245,865, principally representing cash
provided by net income of $2,303,942, a decrease in inventories of
$4,998,707 and a net increase in current liabilities of $368,945,
offset by cash used to finance increases in accounts receivable and
other current assets of $2,278,796 and $854,731, respectively.
Cash flows used in investing activities were $1,218,045 for
the six months ended July 31, 1997 representing normal requirements for
capital expenditures. Cash flows used in investing activities for the
six months ended July 31, 1996 were $3,743,075 principally as a result
of the Jolem acquisition (see "Results of Operations") in the amount of
$3,657,435.
Cash flows used in financing activities were $1,019,027 for
the six months ended July 31, 1997 primarily as a result of a decrease
in borrowings under credit facilities of $6,812,629 and payments on
long-term debt of $19,088,572 proceeds offset by from long-term debt of
$24,824,674. For the six months ended July 31, 1996, cash flows used in
financing activities were $385,978, primarily as a result of proceeds
from long-term debt of $1,515,652 offset by the purchase of treasury
stock of $1,901,630. At July 31, 1997, the Company had cash of
$912,342, as compared to $755,798 at January 31, 1997, as a result of
the activities described above.
The Revolving Credit Agreement contains significant financial
and operating covenants, including requirements that the Company
maintain minimum net worth levels and certain financial ratios,
prohibitions on the ability of the Company to incur certain additional
indebtedness and restrictions on its ability to make capital
expenditures, to incur or suffer to exist certain liens, to pay
dividends or to take certain other corporate actions. Amounts will only
be available under the Revolving Credit Agreement if such financial
maintenance and other covenants are satisfied and the borrowing base
calculation (which is based upon the amount of eligible accounts
receivable and eligible inventory) are satisfied. The Company is
currently in compliance with all covenants under the Revolving Credit
Agreement.
The Company had working capital of $25,878,736 and $23,575,093
at July 31, 1997 and January 31, 1997, respectively. The outstanding
balance under the Revolving Credit Agreement was $30,872,903 and
$25,136,801 at July 31, 1997 and January 31, 1997, respectively and was
classified as a current liability as it will mature in October 1997.
The Company intends to refinance the Revolving Credit Agreement prior
to its maturity. The Company's current ratio was 1.72 at July 31, 1997
compared to 1.58 at January 31, 1997.
8
<PAGE>
The Company maintains three facilities with a combined limit
of $37.0 million for letters of credit. The facilities further provide
the Company with an aggregate sublimit of $7.2 million for advances to
refinance letters of credit up to 120 days. These facilities are
secured by the consignment of merchandise in transit under each letter
of credit. Indebtedness under these facilities bears interest at
variable rates substantially equal to the lenders' specified base
lending rates plus a 1.5% per annum acceptance commission fee. Letters
of credit under these facilities totaled $29,748,024 and $16,978,256 as
of July 31, 1997 and January 31,1997, respectively.
Management believes that the combination of the borrowing
availability under the Revolving Credit Agreement, existing working
capital and funds anticipated to be generated from operating activities
will be sufficient to meet the Company's anticipated operating and
capital needs for the foreseeable future.
During Fiscal 1998, the Company intends to consolidate its
administrative offices, warehouse and distribution facilities into a
new 238,000 square foot facility in Miami which is being built to the
Company's specifications. The Company was party to an agreement to
purchase this facility. The Company financed the facility with a
financial institution in a transaction where the financial institution
assumed the Company's obligation to purchase the facility and entered
into a long term lease with the Company for the facility. The lease has
an initial term of five years and a minimum annual rental of
approximately $1,300,000. This transaction was consummated in September
1997.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
The Company does not believe that inflation significantly
affected its results of operations for the six months ended July 31,
1997 and 1996.
The Company's purchases from foreign suppliers are made in
U.S. dollars. Accordingly, the Company, to date, has not been
materially adversely affected by foreign currency fluctuations.
9
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings
Not applicable.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) On July 25, 1997, the Company held its Annual
Meeting of Shareholders (the "Meeting")
(b) Not applicable
(c) At the Meeting, the following matters were voted upon;
(i) Election of Directors
The following table sets forth the name of each nominee
and the voting with respect to each nominee for director.
WITHHOLD BROKER
NAME FOR AUTHORITY NON-VOTES
---- --- --------- ---------
George Feldenkreis 3,645,680 1,200 0
Oscar Feldenkreis 3,645,680 1,200 0
Ronald L. Buch 3,645,680 1,200 0
Gary Dix 3,645,680 1,200 0
Salomon Hanono 3,644,680 2,200 0
Leonard Miller 3,645,680 1,200 0
Richard W. McEwen 3,645,680 1,200 0
(ii) Ratification of the appointment of Deloitte & Touche LLP
as the Company's independent public accountants for the year
ending January 31, 1998.
With respect to the foregoing matter, 3,646,280
shares voted in favor, 300 shares against and 300 shares
abstained. There were no broker-non votes.
10
<PAGE>
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
On July 17, 1997, the Company filed a second
amendment to Form 8-K originally filed with the SEC
on November 20, 1996 in response to certain
comments of the staff.
11
<PAGE>
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.
Date: September 11, 1997 By: /s/ RICHARD L. DUNN
-------------------
Richard L. Dunn
Chief Financial Officer
12
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 912,342
<SECURITIES> 0
<RECEIVABLES> 28,185,035
<ALLOWANCES> 0
<INVENTORY> 29,983,040
<CURRENT-ASSETS> 62,011,665
<PP&E> 2,482,175
<DEPRECIATION> 0
<TOTAL-ASSETS> 86,942,128
<CURRENT-LIABILITIES> 36,132,929
<BONDS> 0
0
0
<COMMON> 43,563
<OTHER-SE> 50,765,636
<TOTAL-LIABILITY-AND-EQUITY> 86,942,128
<SALES> 90,877,818
<TOTAL-REVENUES> 90,877,818
<CGS> 69,551,025
<TOTAL-COSTS> 69,551,025
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,306,015
<INCOME-PRETAX> 4,818,469
<INCOME-TAX> 1,842,244
<INCOME-CONTINUING> 2,976,225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,976,225
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
