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 OCTOBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-21764
PERRY ELLIS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-1162998
(State or other jurisdiction of (IRS Employer Identification
Incorporation or organization) Number)
3000 N.W. 107 AVENUE
MIAMI, FLORIDA 33172
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 592-2830
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 6,738,367
(as of December 9, 1999).
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1:
Consolidated Balance Sheets
as of October 31, 1999 (Unaudited) and January 31, 1999 1
Consolidated Statements of Operations (Unaudited)
for the three and nine months ended October 31, 1999
and October 31, 1998 2
Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended October 31, 1999
and October 31, 1998 3
Notes to Consolidated Financial Statements 4
ITEM 2:
Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
Year 2000 Readiness Disclosure 10
PART II: OTHER INFORMATION 11
Signature 11
<PAGE>
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 401,781 $ 173,493
Accounts receivable, net 61,070,265 38,969,845
Inventories 30,630,917 32,965,655
Deferred income taxes 1,091,482 1,091,482
Deposits for acquisitions -- 6,000,000
Other current assets 2,311,812 2,040,200
------------ ------------
Total current assets 95,506,257 81,240,675
Property and equipment, net 7,882,529 7,851,592
Intangible assets, net 123,302,601 18,842,797
Other 5,231,506 1,022,467
------------ ------------
$231,922,893 $108,957,531
TOTAL ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
$ 5,231,715 $ 4,595,688
Accounts payable
Accrued expenses 4,606,813 4,754,077
Accrued interest payable 1,392,245 177,448
Other current liabilities 2,872,145 413,505
------------ ------------
Total current liabilities 14,102,918 9,940,718
Bonds payable, net 98,947,667 --
Deferred income taxes 559,728 559,728
Long term debt-senior credit 32,273,842 33,511,157
agreement
Long term debt-term loan 12,500,000 --
------------ ------------
Total liabilities 158,384,155 44,011,603
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value; 1,000,000
shares authorized; no shares issued or
outstanding
Common stock - $.01 par value; 30,000,000
shares authorized; 6,728,019 and 6,712,374
shares issued and outstanding as of
October 31, 1999 and January 31, 1999, respectively 67,280 67,123
Additional paid-in-capital 28,936,145 28,806,455
Retained earnings 44,535,313 36,072,350
------------ ------------
Total stockholders' equity 73,538,738 64,945,928
------------ ------------
$231,922,893 $108,957,531
TOTAL ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE>
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 66,618,418 $ 65,011,630 $171,370,287 $174,806,318
Royalty income 6,453,288 492,531 15,513,345 2,496,075
------------ ------------ ------------ ------------
TOTAL REVENUES 73,071,706 65,504,161 186,883,632 177,302,393
COST OF SALES 49,861,291 49,419,127 127,343,117 132,403,538
------------ ------------ ------------ ------------
GROSS PROFIT 23,210,415 16,085,034 59,540,515 44,898,855
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 11,457,604 10,296,463 32,427,428 30,466,839
DEPRECIATION 295,249 215,972 886,586 713,994
AMORTIZATION 1,067,800 269,364 2,858,681 804,581
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 12,820,653 10,781,799 36,172,695 31,985,414
------------ ------------ ------------ ------------
OPERATING INCOME 10,389,762 5,303,235 23,367,820 12,913,441
INTEREST EXPENSE 4,067,654 955,067 9,973,565 2,789,461
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 6,322,108 4,348,168 13,394,255 10,123,980
INCOME TAXES 2,358,028 1,536,256 4,931,292 3,619,496
------------ ------------ ------------ ------------
NET INCOME $ 3,964,080 $ 2,811,912 $ 8,462,963 $ 6,504,484
============ ============ ============ ============
NET INCOME PER SHARE:
BASIC $ 0.59 $ 0.42 $ 1.26 $ 0.97
============ ============ ============ ============
DILUTED $ 0.58 $ 0.42 $ 1.24 $ 0.96
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
BASIC 6,725,490 6,711,667 6,724,986 6,674,103
============ ============ ============ ============
DILUTED 6,879,748 6,768,667 6,851,480 6,781,737
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------
OCTOBER 31, OCTOBER 31,
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,462,963 $ 6,504,484
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,745,267 1,518,575
Amortization of bond discount 95,668 --
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net (21,122,866) (22,257,602)
Inventories 2,334,738 927,583
Other current assets 1,397,526 700,662
Other assets (4,459,039) 309,572
Accounts payable and accrued expenses 765,293 (607,548)
Accrued interest payable 1,214,797 181,316
Other current liabilities 667,603 1,932,894
------------- -------------
Net cash used in operating activities: (6,898,050) (10,790,064)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (855,649) (3,532,354)
Payment on purchase of other intangible assets (827,069) (238,861)
Payment for acquired businesses (101,435,477) --
------------- -------------
Net cash used in investing activities: (103,118,195) (3,771,215)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in borrowings under credit facilities 12,500,000 (3,000,000)
Net (payments) proceeds from long term debt (1,237,314) 16,750,162
Net proceeds from bonds payable 98,852,000 --
Proceeds from exercise of stock options 129,847 458,152
------------- -------------
Net cash provided by financing activities: 110,244,533 14,208,314
------------- -------------
NET INCREASE (DECREASE) IN CASH 228,288 (352,965)
CASH AT BEGINNING OF YEAR 173,493 1,010,256
------------- -------------
CASH AT END OF PERIOD $ 401,781 $ 657,291
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
$ 8,195,554 $ 2,644,741
Interest ============= =============
Income taxes $ 5,803,580 $ 1,502,051
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1. NOTES TO THE 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 Company's Annual Report on Form 10-K for the
year ended January 31, 1999. In the opinion of management, the unaudited
consolidated financial statements contain all adjustments necessary for a fair
presentation of the interim periods presented and all adjustments are of a
normal and recurring nature. The results of operations for the three and nine
months ended October 31, 1999 are not necessarily indicative of the results
which may be expected for the entire fiscal year. In June 1999 Supreme
International Corporation changed its name to Perry Ellis International, Inc.
(the "Company").
Certain amounts in the prior periods have been reclassified to conform to the
current periods' presentation.
2. INVENTORIES
Inventories consist principally of finished goods and are stated at the lower of
cost or market on a first-in first-out basis.
3. LETTER OF CREDIT FACILITIES
OCTOBER 31, JANUARY 31,
1999 1999
------------ ------------
Total letter of credit facilities $ 60,000,000 $ 60,000,000
Outstanding letters of credit (23,180,196) (23,831,172)
------------ ------------
Total Available $ 36,819,804 $ 36,168,828
============ ============
4. SENIOR CREDIT AGREEMENT
The Company amended its revolving senior credit agreement (the "Agreement")
effective August 12, 1999 upon substantially similar terms. The agreement now
provides for borrowings at the Company's option of LIBOR plus 2.0%, or the
bank's prime rate. The interest rate spread may
4
<PAGE>
vary based upon the ratio of Consolidated Funded Indebtedness, as defined in the
Agreement, to earnings before interest, taxes, depreciation and amortization
(EBITDA).
5. BONDS PAYABLE (SENIOR SUBORDINATED NOTES)
The Company issued $100 million in bonds on April 6, 1999 as Senior Subordinated
Notes bearing interest at 12 1/4%. The actual proceeds to the Company were $98.9
million after the deduction of discounts. The Company pays interest on the notes
on April 1 and October 1 of each year. The notes mature on April 1, 2006. The
notes may be redeemed in whole, or in part, at any time on or after April 1,
2003. In addition, on or before April 1, 2002, the Company may redeem up to 35%
of the aggregate principal amount of the notes with the net proceeds of a public
equity offering if at least 65% of the aggregate principal amount of the notes
originally issued remains outstanding after such redemption.
6. ACQUISITIONS
On March 29, 1999 the Company acquired the John Henry, Manhattan and Lady
Manhattan trademarks for approximately $27.0 million. On April 6, 1999 the
Company acquired all the outstanding capital stock of Perry Ellis International,
Inc. for approximately $75.0 million in cash. Perry Ellis International, Inc.
was a privately held company which owned and licensed the Perry Ellis brand
name, currently one of the top selling brands in specialty chains and department
stores in the United States.
The acquisitions were accounted for using the purchase method of accounting, and
accordingly, the financial statements include the results of operations of the
acquisitions commencing on April 1, 1999 for the John Henry/Manhattan
acquisition; and April 6, 1999 for the Perry Ellis acquisition. Costs in excess
of the carrying value of the net tangible assets acquired were allocated to the
trademarks acquired, are being amortized over a 40 year life, and were
determined as follows:
Purchase price $102,000,000
Plus purchase price adjustments 1,684,624
Plus expenses incurred in connection with the
acquisition 5,901,230
------------
Adjusted purchase price 109,585,854
Tangible asset acquired:
Cash 2,150,377
Accounts receivable 977,553
Other current assets 1,669,068
PP&E 19,599
------------
104,769,257
Liabilities assumed:
Accounts payables and accrued expenses: 1,514,507
------------
Trademarks $106,283,764
============
5
<PAGE>
7. SUPPLEMENTAL CASH FLOW INFORMATION
The following information presents the non-cash impact on the balance sheets of
assets acquired and liabilities assumed in connection with the John
Henry/Manhattan and Perry Ellis International, Inc. acquisitions. The non-cash
effects of these investing activities during the nine months ended October 31,
1999 were as follows:
NINE MONTHS
ENDED
OCTOBER 31, 1999
----------------
Adjusted purchase price $ 109,585,854
Less cash acquired (2,150,377)
Less deposits in prior period (6,000,000)
-------------
Net cash paid for acquisitions $ 101,435,477
=============
8. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information presented below, based under the assumption
that operations were in effect for each of the periods ending October 31, 1998
and 1999, gives effect to (i) the John Henry/Manhattan acquisition; (ii) the
Perry Ellis International, Inc. acquisition, and (iii) the offering of the
Senior Subordinated Notes. The information presented below is for illustrative
information purposes only and is not indicative of results which would have been
achieved or results which may be achieved in the future.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- -------------- -------------- ------------
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1999 1998 1999 1998
-------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Total revenues $ 73,072,000 $ 71,358,681 $ 190,808,367 $193,149,071
============== ============== ============== ============
Net income $ 3,964,000 $ 1,479,726 $ 7,877,661 $ 2,811,197
============== ============== ============== ============
Net income per share (diluted) $ 0.58 $ 0.22 $ 1.15 $ 0.42
============== ============== ============== ============
</TABLE>
9. BUSINESS SEGMENTS
The Company's principal segments are grouped between the generation of revenues
from products and royalties. The Licensing segment derives its revenues from
royalties associated from the use of its brand names, principally Perry Ellis,
John Henry, Manhattan and Munsingwear. The Product segment derives its revenues
from the design, import and distribution of apparel to department stores and
other retail outlets, principally throughout the United States.
6
<PAGE>
This is the first year that management has segregated the operations for the two
segments. Trademark costs have been allocated among the divisions where brands
are shared. Shared selling, general and administrative expenses are allocated
amongst the segments.
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, 1999 OCTOBER 31, 1999
------------------ -----------------
Revenues:
Product $ 66,618,418 $171,370,287
Licensing 6,453,288 15,513,345
------------ ------------
Total Revenues $ 73,071,706 $186,883,632
============ ============
Operating Income
Product $ 6,454,247 $ 13,905,820
Licensing 3,935,515 9,462,000
------------ ------------
Total Operating Income $ 10,389,762 $ 23,367,820
============ ============
Income Before Taxes
Product $ 5,531,343 $ 11,270,004
Licensing 790,765 2,124,251
------------ ------------
Total Income Before Taxes $ 6,322,108 $ 13,394,255
============ ============
Depreciation and Amortization
Product $ 559,961 $ 1,642,784
Licensing 803,088 2,102,483
------------ ------------
Total Depreciation and Amortization $ 1,363,049 $ 3,745,267
============ ============
Identifiable Assets
Product $116,984,668
Licensing 113,150,160
Corporate 1,788,065
------------
Total Identifiable Assets $231,922,893
============
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITON AND RESULTS
OF OPERATIONS
Perry Ellis International, Inc., formerly 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
7
<PAGE>
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, risk related to fashion trends; the
retail industry; reliance on key customers; contract manufacturing; foreign
sourcing; imports and export restrictions; competition; seasonality; rapid
expansion of business; dependence on key personnel and other factors discussed
herein and in the Company's filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED OCTOBER 31, 1999 AS COMPARED TO THREE AND NINE
MONTHS ENDED OCTOBER 31, 1998.
TOTAL REVENUES. Total revenues consist of net sales and royalty income. Total
revenues for the three and nine months ended October 31, 1999 increased $7.6
million or 11.6% to $73.1 million and $9.6 million or 5.4% to $186.9 million,
respectively, from $65.5 million and $177.3 million in the year ago periods,
primarily as a result of the growth in royalty income following the recent John
Henry/Manhattan and Perry Ellis acquisitions in March 1999 and April 1999,
respectively.
NET SALES. Net sales for the three months ended October 31, 1999, increased $1.6
million or 2.5% to $66.6 million from the year ago period as a result of
increases in certain branded products and in private label sales. Net sales for
the nine months ended October 31, 1999, decreased $3.4 million or 2.0% to $171.4
million from the prior period. The decrease in sales for the nine month period
was largely the result of the Company's exit from the boy's business, softness
in the market for golf apparel and the closure of some retail customers.
ROYALTY INCOME. Royalty income for the three months ended October 31, 1999
increased $6.0 million to $6.5 million from $0.5 million in the same period a
year ago. For the nine months ended October 31, 1999, royalty income was $15.5
million compared to $2.5 million for the same period a year ago. The increase in
royalty income for these two periods is principally attributable to income
generated by licensees following the acquisitions of the John Henry, Manhattan,
and Perry Ellis brand names.
COST OF SALES. Cost of sales as a percentage of net sales decreased to 74.8% for
the three months ended October 31, 1999 from 76.0% for the same period a year
ago. For the nine month period ended October 31, 1999, cost of sales as a
percentage of net sales decreased to 74.3% from 75.7% during the nine months
ended October 31, 1998. The decline in the cost of sales as a percentage of net
sales is a reflection of introduction of new brands at higher gross margins and
the discontinuance of the boy's business which generated lower gross margins.
GROSS PROFIT. Gross profit was $23.2 million and $59.5 million, respectively,
for the three and nine month periods ended October 31, 1999 compared to $16.1
million and $44.9 million for the same periods a year ago. The increases in
gross profit reflect the improvement in cost of sales and the increase in
licensing revenue which has no associated cost of sales.
8
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, excluding depreciation and amortization, increased $1.2
million or 11.3% and $2.0 million or 6.4%, respectively, for the three and nine
month periods ended October 31, 1999 to $11.5 million and $32.4 million,
respectively. The increase in selling, general and administrative costs in both
periods is primarily attributable to personnel costs associated with the
Company's recent acquisitions. As a percentage of total revenues, selling
general and administrative expenses were 15.7% for the three months ended
October 31, 1999 and October 31, 1998 and 17.4% for the nine months ended
October 31, 1999 as compared to 17.2% for the comparable period a year ago.
Depreciation and amortization expenses for the three and nine months ended
October 31, 1999 increased to $1.4 million and $3.7 million, respectively, from
$0.5 million and $1.5 million in the comparable periods a year ago, reflecting
the increased amortization from the recent acquisitions.
INTEREST EXPENSE. Interest expense increased $3.1 million and $7.2 million for
the three and nine months ended October 31, 1999, to $4.1 million and $10.0
million, respectively. The increase is attributable to the additional interest
resulting from the $100 million Senior Subordinated Notes.
INCOME TAXES. For the three and nine month periods ended October 31, 1999, the
Company's effective tax rate was 37.3% and 36.8% compared to 35.3% and 35.8%,
respectively, for the comparable periods in 1998. The increased tax rate is
primarily attributable to the reversal of accruals in the prior year.
NET INCOME. Net income for the three and nine months ended October 31, 1999
increased $1.2 million or 41.0% to $4.0 million or 5.3% of total revenue and
$2.0 million or 30.1% to $8.5 million or 4.5% of total revenue, respectively.
Net income was 4.3% and 3.6%, respectively, of total revenue in the comparable
prior periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies primarily upon cash flow from operations and borrowings under
the Senior Credit Facility to finance operations and expansion. Cash used in
operating activities was $6.9 million for the nine months ended October 31, 1999
compared to $10.8 million for the same period last year.
The change from prior year is principally attributable to the increased cash
income from operations. Net cash used in investing activities of $103.1 million
for the nine months ended October 31, 1999 principally reflects the purchase
price of the John Henry/Manhattan acquisitions and the Perry Ellis
International, Inc. acquisition.
Net cash provided by financing activities for the nine months ended October 31,
1999 totaled $110.2 million which was primarily the result of the net proceeds
of a $98.9 million subordinated debt offering and a net increase of $12.5
million in borrowings under the revolving credit agreement. These funds were
used for the John Henry/Manhattan and Perry Ellis acquisitions
The Company has a Senior Credit Facility which consists of a $75.0 million
revolving credit facility and a $15.0 million amortizing term loan facility.
Borrowings under the revolving credit facility are limited under term to a
borrowing base calculation, which generally restricts the
9
<PAGE>
outstanding balances to 85.0% of eligible receivables plus 60.0% of eligible
inventories, as defined. Interest on borrowings is variable based, at the
Company's option and as a function of total debt to EBITDA, upon either LIBOR
plus 2.00%, or the agent's bank's prime rate. The Senior Credit Facility
contains certain covenants, the most restrictive of which requires the Company
to maintain certain financial ratios and minimum net worth. In addition, the
Senior Credit Facility restricts the payment of dividends and is secured by all
of the Company's assets.
The term loan agreement requires quarterly principal payments of $1,250,000.
This reduction began July 1999 and contains covenants similar to the revolving
credit facility.
The Company also maintains three letter of credit facilities which total $60.0
million. Each letter of credit is collaterized by the consignment of merchandise
in transit under that letter of credit. As of October 31, 1999, there was $36.8
million available under these facilities. One of the facilities expires in June
2000, one in July 2000 and the other facility for $7.0 million has no set
expiration date.
Management believes that the combination of 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 in the foreseeable future.
YEAR 2000 ISSUES
BACKGROUND. The year 2000 issue refers to the inability of certain data
sensitive computer chips, software and systems to recognize a two-digit date
field as belonging to the 21st century. Many computer software programs, as well
as certain hardware equipment containing date-sensitive data, were structured to
utilize a two-digit date field. Accordingly, these programs may not be able to
properly recognize dates in the year 2000 and later, which could result in
significant system and equipment failures. This is a significant issue for most,
if not all, companies, with far reaching implications, some of which cannot be
anticipated or predicted with any degree of certainty. Perry Ellis recognized
that it needed to take action to ensure that its operations would not be
adversely impacted by Year 2000 software failures.
We have undertaken a study of our functional application systems to determine
their compliance with year 2000 issues and, to the extent of noncompliance, the
required remediation. As a result of such study, we believe that the majority of
our systems are year 2000 compliant. To date, the expenses incurred by the
Company in order to become year 2000 compliant, including computer software
costs, have been approximately $0.3 million. Such costs, other than software,
have been expensed as incurred.
An assessment of the readiness of year 2000 compliance of third party entities
with which the Company has relationships, such as its banking institutions,
customers, payroll processors and others has been completed. We have inquired,
of the significant aforementioned third party entities as to their readiness
with respect to year 2000 compliance and to date have received indications that
most of them are either compliant or in the process of remediation. We will
continue to monitor these third party entities to determine the impact on the
business of the Company and the actions the Company must take, if any, in the
event of non-compliance by any
10
<PAGE>
of these third parties. Our initial assessment of compliance by third parties is
that there is not a material business risk to the Company posed by any such
noncompliance and, as such, we have not yet developed any related contingency
plans.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
The Company does not believe that inflation or foreign currency fluctuations
significantly affected its results of operations for the three or nine months
ended October 31, 1999 and 1998.
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. Other Information
Not applicable
ITEM 5. Exhibits and Reports on Form 8-K
a) Exhibits
27.1 Financial Data Schedule (for SEC only)
b) Reports on Form 8-K
None
SIGNATURE
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: December 13, 1999 By: /s/ NEAL S. NACKMAN
-----------------------------------
Chief Financial Officer
11
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule (for SEC only)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-1-1999
<PERIOD-END> OCT-31-1999
<CASH> 401,781
<SECURITIES> 0
<RECEIVABLES> 61,070,265
<ALLOWANCES> 0
<INVENTORY> 30,630,917
<CURRENT-ASSETS> 95,506,257
<PP&E> 7,882,529
<DEPRECIATION> 0
<TOTAL-ASSETS> 231,922,893
<CURRENT-LIABILITIES> 14,102,918
<BONDS> 0
0
0
<COMMON> 67,280
<OTHER-SE> 73,471,458
<TOTAL-LIABILITY-AND-EQUITY> 231,922,893
<SALES> 171,370,287
<TOTAL-REVENUES> 186,883,632
<CGS> 127,343,117
<TOTAL-COSTS> 127,343,117
<OTHER-EXPENSES> 36,172,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,931,292
<INCOME-PRETAX> 13,934,255
<INCOME-TAX> 4,931,292
<INCOME-CONTINUING> 8,462,963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,462,963
<EPS-BASIC> 1.26
<EPS-DILUTED> 1.24
</TABLE>
