SUPREME INTERNATIONAL CORP, 10-K, 1999-03-16

SUPREME INTERNATIONAL CORP
10-K, 1999-03-16
MEN'S & BOYS' FURNISHGS, WORK CLOTHG, & ALLIED GARMENTS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JANUARY 31, 1999

[ ] 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 0-21764

SUPREME INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

FLORIDA 59-1162998
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

3000 N.W. 107TH AVENUE, MIAMI, FLORIDA 33172
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(305) 592-2830
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

TITLE OF EACH CLASS:
COMMON STOCK, PAR VALUE $.01 PER SHARE

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS.

Indicate by check mark whether the Registrant has filed all documents and
reports to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by
a court. Yes [ ] No [ ]

The number of shares outstanding of the Registrant's Common Stock is
6,723,874 (as of March 12, 1999).

The aggregate market value of the voting stock held by non-affiliate of
the Registrant's approximately $44,693,206 (as of March 12, 1999).

DOCUMENTS INCORPORATED BY REFERENCE
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UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO "SUPREME," THE
"COMPANY," "WE," "US" OR "OUR" INCLUDE SUPREME INTERNATIONAL CORPORATION AND
ITS SUBSIDIARIES. REFERENCES IN THIS REPORT TO ANNUAL FINANCIAL DATA FOR
SUPREME REFER TO FISCAL YEARS ENDING JANUARY 31.

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FORWARD-LOOKING STATEMENTS

We caution readers that this report includes forward-looking statements.
We have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject
to risks, uncertainties, and assumptions about us, including, among other
things:

/bullet/ our anticipated growth strategies;

/bullet/ our expected internal growth;

/bullet/ consummation of our pending acquisitions and ability to obtain
additional financing;

/bullet/ our ability to integrate acquired businesses, trademarks,
tradenames and licenses;

/bullet/ the expected efficiencies from our new office and warehouse
facility;

/bullet/ anticipated trends and conditions in our industry, including
future consolidation;

/bullet/ our future capital needs;

/bullet/ our ability to compete;

/bullet/ the continued economic health of our markets; and

/bullet/ other factors set forth in this report and in our other filings
with the Securities and Exchange Commission (the "Commission").

We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this report might not occur.

PART I

ITEM 1. BUSINESS

OVERVIEW

We are a leading designer and marketer of a broad line of high quality
men's sportswear, including sport and dress shirts, golf sportswear, sweaters,
urban wear, casual and dress pants and shorts which we sell to all levels of
retail distribution. We have built a broad portfolio of brands through
selective acquisitions and the establishment of our own brands over our 32-year
operating history. Our distribution channels include regional, national and
international department stores, chain stores, mass merchandisers and specialty
stores throughout the United States, Puerto Rico and Canada. We are one of the
top 5 branded suppliers to department stores in the knit and woven shirt
product categories. Our largest customers include Dayton Hudson Corp.,
Federated Department Stores, Inc., Sears Roebuck & Co., Kohl's Corporation,
Wal-Mart Stores, Inc. and J.C. Penney Company, Inc. We currently use over 70
independent suppliers to source our products, located mostly in the Far East,
other parts of Asia, Mexico, and Central America.

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Through consolidation of brands and internal growth, we have experienced
significant overall growth in recent years. Our total revenues have increased
to $224.4 million for fiscal 1999 from $90.6 million for fiscal 1995,
representing a compound annual growth rate of 25.5%. During that same period,
our EBITDA (as defined herein; see "Item 6. Selected Financial Data--Summary
Historical Financial Information") grew to $18.7 million from $7.9 million,
representing a compound annual growth rate of 24.0%. On a pro forma basis
assuming that our pending acquisition of Perry Ellis International, Inc. was
completed on February 1, 1998, our EBITDA for fiscal 1999, would have been
$29.0 million. For the estimated effect of the John Henry/Manhattan
acquisition, see "Item 6. Selected Financial Data--Summary Pro Forma and
Supplemental Financial Information."

We own or license from third parties the brands under which most of our
products are sold. These brands include Crossings/registered trademark/ and
Natural Issue/registered trademark/ for casual sportswear, John
Henry/registered trademark/ for dress casual wear, Andrew Fezza/registered
trademark/ for dress sportswear, Ping and Munsingwear for golf sportswear and
PNB Nation for urban wear. Through our "family of brands" marketing strategy,
we seek to develop and enhance a distinct brand name for each product category
within each distribution channel. We market our brands to a wide range of
demographic segments, targeting consumers in specific age, income and ethnic
groups. Currently, our products are predominantly produced for the men's
segment of the apparel industry, in which fashion trends tend to be less
volatile than in other segments. The percentage of our revenues from branded
products increased to 81.4% in fiscal 1999 from 71.5% in fiscal 1997.

We also license our proprietary brands to third parties for the
manufacture and marketing of various products which we do not sell, including
underwear, activewear and loungewear. In addition to generating additional
sources of revenue for us, these licensing arrangements raise the overall
awareness of our brands. In order to expand our licensing operations, we
recently signed a definitive agreement to acquire Perry Ellis International,
Inc. which owns and licenses the prestigious and well-known Perry Ellis brand
name. Perry Ellis International, Inc. had licensing revenues of $16.2 million
for the year ended December 31, 1998. We have also signed a definitive
agreement to purchase the trademarks for John Henry, a leading brand of men's
dress casualwear sold at Sears Roebuck, for Manhattan, a popular dress shirt
brand sold at Wal-Mart and Kmart Corporation and Lady Manhattan. See "The
Pending Acquisitions."

We believe that our competitive strengths position us to capitalize on
several trends that have affected the apparel industry in recent years. These
include the consolidation of the department and chain store sectors into a
smaller number of stronger retailers, which represent some of our most
important customers; the increased reliance of retailers on reliable suppliers
with design expertise and advanced systems and technology; the continued
importance of a brand as a source of product differentiation.

COMPETITIVE STRENGTHS

We believe that we have the following competitive advantages in our industry:

PORTFOLIO OF STRONG BRANDS. We currently own four major brands
(Munsingwear, Crossings, Natural Issue and Grand Slam) with a total of over 40
sub-brands (such as Penguin and Career Club). We also design, source and market
three other major brands (PNB Nation, Andrew Fezza, and Ping) which we license
under existing agreements with various expiration dates and renewal options.
These brands enjoy national recognition in their respective sectors of the
apparel industry and have a loyal consumer and retailer following. Brand
recognition is critical in the apparel industry, where strong brand names help
define consumer preferences and drive department store floor space allocation.
We believe that each of the Perry Ellis International and John Henry/Manhattan
acquisitions will further enhance our established portfolio of recognizable
brands.

STRONG RETAILER RELATIONSHIPS. We believe our established relationships
with retailers at all distribution levels give us the opportunity to maximize
the selling space dedicated to our products,

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monitor our brand presentation and merchandising selection, and introduce new
brands and products. We have long-standing relationships with our largest
customers, including J.C. Penney and Sears Roebuck (more than 20 years),
Federated Department Stores (12 years), Wal-Mart (10 years), Kohl's (6 years)
and Dayton Hudson (5 years). We believe that we have maintained these long
relationships as a result of our quality brand name products and our dedication
to customer service. Management, in conjunction with our 30 salespeople, meets
with our major customers frequently to review product offerings, establish and
monitor sales plans, and design joint advertising and promotional campaigns. We
believe our reliable delivery times, consistent product quality and quick
response to design trends and inventory demands allow us to meet our retailers'
current requirements. In addition, our global sourcing network, design
expertise, advanced systems and technology, and new warehousing facility
enhance our ability to meet the changing and increasing needs of our retailers.

STRONG LICENSING CAPABILITIES AND RELATIONSHIPS. By actively licensing the
brands we own, we have gained significant experience in identifying potential
licensing opportunities and have established relationships with many active
licensees. We believe that our broad portfolio of brands appeals to licensees
because it gives them the opportunity to sell their products in many different
retail distribution channels. For example, a manufacturer of men's accessories
might license the Crossings brand to sell to national department stores and the
Munsingwear brand to target mass merchandisers. We believe that our licensing
expertise, which is supported by a dedicated staff, will allow us to continue
marketing our brands to apparel producers effectively.

WORLD-WIDE LOW-COST SOURCING CAPABILITIES. Our global network of suppliers
enables us to purchase apparel products at competitive cost without sacrificing
quality, while at the same time reacting quickly to our retailers' needs and
maximizing production flexibility. We developed this expertise through more
than 32 years of experience in purchasing our products from suppliers around
the world. No individual supplier in fiscal 1999 accounted for more than 6.9%
of our total sourcing needs. We currently maintain a staff of experienced
professionals principally located in the United States, Korea, China and
Mexico, and a global network of ten sourcing and quality assurance offices,
which closely monitor our suppliers to maintain strict quality standards and
identify new sourcing opportunities. By sourcing our products, we manage our
inventories more effectively and do not incur the costs of maintaining and
operating production facilities.

DESIGN EXPERTISE AND ADVANCED TECHNOLOGY. Our in-house staff consists of
five designers, who have an average of 18 years of experience, and are
supported by a staff of 14 other design professionals. Together, they design
substantially all of our products utilizing computer-aided design technology.
The use of this technology minimizes the time-consuming and costly production
of actual sewn samples prior to customer approval. It also allows us to create
custom-designed products meeting the specific needs of our customers and
facilitates a quick response to changing fashion trends. Our computer-aided
design technology produces approximately 800 designs per month and our library
currently contains approximately 52,000 designs.

CAPACITY FOR GROWTH. We will be able to leverage our recent investments in
infrastructure and our skilled personnel to accommodate future internal growth
and selected acquisitions. Our recent move to a new approximately 238,000 sq.
ft. office and warehouse facility in Miami with 170,000 sq. ft. of warehouse
space has positioned us to increase capacity with no significant additional
capital expenditure. This facility and our 15,000 sq. ft. of office space in
New York are sufficient to accommodate additional personnel. However, we expect
that our staffing levels will rise at a lower rate than our revenue growth.

PROVEN ABILITY TO INTEGRATE ACQUISITIONS. Since 1993, we have acquired and
integrated four major brands, which currently have over 40 sub-brands. We
selectively target brands that we believe are underperforming and can be
revitalized using our competitive strengths. To date our most significant brand
purchase was the Munsingwear brand in 1996. As part of an extensive integration
process, we:

/bullet/ repositioned the brand based on our "family of brands"
strategy;

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/bullet/ improved the responsiveness to market trends by applying our
design and sourcing expertise; and

/bullet/ communicated the new positioning of the brand through a wide
ranging marketing program.

As a result, Munsingwear annual revenues increased by 55.7% to approximately
$66.0 million in fiscal 1999 from approximately $42.4 million in fiscal 1998,
the first full year of our ownership. We believe that we can successfully
integrate additional brands into the Supreme family of brands and revitalize
them. For example, we intend to license the Perry Ellis brand for additional
product categories such as women's wear and expand into geographic areas where
the Perry Ellis brand has been historically underrepresented such as Europe and
Asia.

EXPERIENCED MANAGEMENT TEAM. Our senior management team averages nearly 20
years of experience in the apparel industry. Our management team also has
significant experience in developing and revitalizing brand names, has an
established reputation with retailers, the trade and the financial community,
and possesses a diverse skill base, which incorporates brand marketing,
sourcing and management information systems.

BUSINESS STRATEGY

Our "family of brands" marketing approach is designed to develop a
distinct brand for each product category within each distribution channel. For
example, we sell our golf sportswear under the Munsingwear brand to mass
merchants, under the Grand Slam brand to department stores and under the Ping
brand to higher-end retailers, golf shops and resorts. By differentiating our
brands in this manner, we can better satisfy the needs of each type of retailer
by offering brands tailored to its specific distribution channel. In addition,
we believe that this strategy helps insulate us from changing retail patterns,
allows us to maintain the integrity of each distribution channel and helps
prevent brand erosion.

Our objective is to develop and enhance our brands by:

/bullet/ carefully maintaining distinct distribution channels for each
of our brands;

/bullet/ consistently designing, sourcing and marketing quality
products;

/bullet/ reinforcing the image of our brands and continuously promoting
them; and

/bullet/ updating our styles to keep them current.

Controlling strong brands allows us to increase our retail base, license
these brands to third parties, develop sub-brands and grow internationally.

To achieve our objective, we have adopted a strategy based on the
following elements:

INCREASE BRAND NAME RECOGNITION. We intend to enhance recognition of our
brand names by promoting our brands at both the retailer and consumer levels.
We conduct cooperative advertising in print and broadcast media in which
various retailers feature our products in their advertisements. We have also
begun direct consumer advertising in select markets by placing highly visible
billboards, sponsorships, special event advertisements and magazine
advertisements in periodicals such as Men's Health and Gentleman's Quarterly.
Licensing our brands to third parties also serves to enhance brand recognition
by providing increased consumer exposure. We also recently established Web
sites for each of our major brands to position us to take advantage of
opportunities created by the Internet.

INCREASE DISTRIBUTION. We intend to increase the distribution of our
existing products by expanding the number of regional, national and
international retailers that carry our brands and

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increasing the number of stores in which each of these retailers sells our
products. This increased exposure should broaden our established reputation at
the retail and consumer levels. We selectively pursue new channels of
distribution for our products, focusing on maintaining the integrity of our
products and reinforcing our image at existing retail stores, as well as
introducing our products to geographic areas and consumer sectors that are
presently less familiar with our products.

CONTINUE TO DIVERSIFY PRODUCT LINE. We intend to broaden the range of our
product lines, capitalizing on the name recognition, popularity and discrete
target customer segmentation of each major brand. For example, we introduced a
sweater line under the Crossings brand and expanded it to include several of
our other brands. We have also expanded into urban wear with the licensing of
the PNB Nation brand, dress sportswear with the licensing of the Andrew Fezza
brand and high-end golf sportswear with the licensing of the Ping brand.

EXPAND LICENSING ACTIVITIES. Since acquiring Munsingwear in 1996, we have
significantly expanded the licensing of our brands to third parties for various
product categories. Similar to the Munsingwear acquisition, we believe the
pending acquisitions of the Perry Ellis and John Henry/
Manhattan brands will provide significant licensing opportunities. We intend to
use these nationally-recognized brands to expand our licensing activities,
particularly with respect to additional product categories, such as women's
wear, and into geographic areas which we believe have been historically
underrepresented by these brands, such as Europe and Asia. We plan to work with
our licensees to strengthen their marketing efforts and thereby increase our
revenues.

THE PENDING ACQUISITIONS

PERRY ELLIS INTERNATIONAL, INC. In January 1999, we agreed to buy Perry
Ellis International, Inc. for approximately $74.6 million in cash, net of
purchase price adjustments. Perry Ellis International, Inc. is a privately held
company, which owns and licenses the Perry Ellis brand, currently one of the
top selling brands in department stores in the United States. Perry Ellis
International, Inc. is currently the licensor under 34 license agreements,
primarily for various categories of men's wear, boy's wear and fragrances. The
purchase of the Perry Ellis brand gives us a widely recognized brand in the
market and will be our premier brand.

Perry Ellis, who was an internationally-known designer, positioned his
brand to be associated with quality, value and innovative designs and to appeal
to high-income, status conscious, 25-50 year-old men. His successors have
maintained the brand's premier image into the 1990's as annual retail sales by
the brand's 34 licensees in various product categories exceeded $900 million in
1998. Perry Ellis International, Inc. is currently one of the largest selling
brands in department stores such as Dillards, Federated Department Stores, Saks
Fifth Avenue and May's Department Stores at retail price points ranging from
$39.99 to $99.99 for dress shirts.

We intend to capitalize on Perry Ellis' image as a premier brand by
seeking licensing opportunities in the product categories in which we currently
do not have a large presence, such as women's wear and men's accessories, and
into geographic areas historically underrepresented by this brand, such as
Europe and Asia. Currently, Perry Ellis branded products are principally sold
in the men's wear, boy's wear and fragrance product categories, and are sold
mostly in the United States. We plan to apply the elements of our brand
strategy to the Perry Ellis brand in order to strengthen it. We believe that
our significant experience in identifying strong licensees and our current
relationship with experienced licensees will enable us to capitalize on the
various licensing opportunities for the Perry Ellis brand. We will also work
with Perry Ellis International, Inc.'s current licensees to further enhance the
brand's image and generate greater licensing revenue.

Although the Perry Ellis brand has international recognition, we perceive
the brand to be underperforming in international markets such as Europe and
Asia. We believe that our brand and licensing experience will enable us to
capitalize on these international opportunities. This acquisition is expected
to close in early April 1999 and is intended to be financed from the net
proceeds of a Rule 144A offering of $100.0 million in aggregate principal
amount of senior subordinated notes due 2009.

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JOHN HENRY/MANHATTAN. In December 1998, we entered into an agreement to
buy certain assets of the John Henry and Manhattan dress shirt business from
Salant Corporation, which is currently in a Chapter 11 bankruptcy proceeding.
On February 24, 1999, the bankruptcy court approved the purchase for $27.0
million plus the value of the existing dress shirt inventory (which is
currently estimated to be approximately $17.2 million). The assets to be
purchased consist of the John Henry, Manhattan and Lady Manhattan trademarks
and trade names, license agreements, certain manufacturing equipment and the
existing dress shirt inventory. Phillips-Van Heusen Corporation has agreed,
subject to certain conditions including regulatory approval, to buy the
existing dress shirt inventory at our acquisition cost concurrently with the
John Henry/Manhattan acquisition and to license from us the John Henry and
Manhattan brands for men's dress shirts. In connection with the acquisition, we
will assume a lease for a shirt manufacturing facility located in Mexico which
expires in July 1999. Although no agreement has been reached, we intend to
sublease the Mexican facility to one of our suppliers for use in the production
of our products or not renew the lease.

The John Henry/Manhattan acquisition is subject to a number of conditions,
including regulatory approval, amendment of our revolving credit facility with
a group of banks (the "Senior Credit Facility"), amendment of a synthetic lease
(the "Lease") entered into to finance our new office and warehouse facility
and, if consummated, is expected to close in late March or early April 1999.
The acquisition price, net of the $1.0 million deposit we have paid and the
proceeds from sale of the existing dress shirt inventory, will be approximately
$26.0 million and is intended to be financed with borrowings under our Senior
Credit Facility, which we expect to amend prior to consummation of the
acquisition.

The licenses to Phillips-Van Heusen have an initial term of three years
and Phillips-Van Heusen has options to renew the licenses for four additional
terms of three years each. The minimum royalty for the first three years would
be approximately $1.5 million and approximately $1.5 million for the John Henry
and Manhattan licenses, respectively, and would increase by varying percentages
in the 12 subsequent years. Phillips-Van Heusen is required to contribute $1.0
million to an overall $3.0 million advertising/marketing campaign for the first
18 months of the license term.

Upon consummation of the John Henry/Manhattan acquisition, we will pay
Icahn Associates Corp., an affiliate of Carl Icahn, or its affiliates ("IAC") a
financial advisory fee consisting of $1.0 million in cash and a right to
purchase 1,320,000 shares of our common stock at $12.00 per share.
Simultaneously with the exercise of the right, IAC will be required to enter
into a two-year standstill agreement and will receive certain registration
rights with respect to the shares.

We are currently a licensee for the John Henry brand name and are thus
very familiar with the brand and its potential. The John Henry brand is highly
recognizable, appealing to 25 to 55 year-old middle-income men and is a leading
brand of men's dress casualwear at Sears Roebuck, one of our existing
customers. The John Henry brand is one which consumers associate with quality
and value.

The Manhattan brand has a history in excess of 50 years. The brand appeals
to 25 to 65 year-old low-income men and is a popular dress shirt at Wal-Mart
and Kmart Corporation. It also has a strong presence in Asia and in other mass
merchandisers such as Meijer's. The brand has been positioned to be associated
with value at a moderate price.

BRANDS

The key components of our brand strategy are (a) to provide consistent
quality products, (b) to distribute the brands in distinct channels of
distribution and (c) to reinforce and capitalize on the brand's image through
new product development and image advertising. This strategy has enabled us to
increase our customer base, license our brands to third parties and develop
sub-brands.

In fiscal 1999, over 81.4% of our total revenues resulted from sales of
brands we own or license. We currently own four nationally recognized brands,
which are the Natural Issue, Munsingwear,

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Grand Slam and Crossings brands. There have been over 40 sub-brands developed
from these four major brands. We also have licenses to distribute other
nationally recognized brands including the Ping, Andrew Fezza and PNB Nation
brands. Our depth of brand selection enables us to target consumers across a
wide range of ages, incomes and ethnic groups.

NATURAL ISSUE. We developed the Natural Issue brand in 1988 to appeal to
middle-income men who are 25-55 years old. The brand is now a well-established
brand which we have positioned to be associated with value and quality. Natural
Issue products include shirts, pants and shorts and are primarily sold in chain
stores, such as Sears Roebuck, Kohl's, J.C. Penney and Mervyn's at retail price
points ranging from $22.99 to $30.99.

MUNSINGWEAR AND GRAND SLAM. We purchased the Munsingwear and Grand Slam
brands along with their associated sub-brands in 1996 to appeal to middle
income 30-70 year-old men who are sports enthusiasts. These well-known brands
are identified by their signature penguin logo and have over 100 years of
history. We have positioned these brands to be associated with fashion at a
moderate price. Munsingwear and Grand Slam products include golf shirts, pants
and shorts. The Munsingwear brand is primarily sold in sporting goods stores
such as The Sports Authority and FootLocker at retail price points ranging from
$12.99 to $26.99. The Grand Slam brand is primarily sold in department stores
such as Dayton Hudson, Federated Department Stores and May's Department Stores
at retail price points ranging from $24.99 to $39.99.

Some of the successful sub-brands of the Munsingwear brand include the
Munsingwear Lifestyle/registered trademark/ sub-brand for casual sportswear and
the Munsingwear Golf/registered trademark/ and Slammer/registered trademark/
sub-brands for golf sportswear. These sub-brands are sold primarily to regional
mass merchandisers such as Meijer and Uptons at retail price points ranging
from $18.99 to $24.99.

We also offer golf sportswear under the Grand Slam Tour sub-brand, which
is sold primarily in golf shops and top-tier stores, and the Penguin
Sport/registered trademark/ sub-brand, which is sold primarily to the chain
stores. The retail price points of the Grand Slam Tour and Penguin Sport
sub-brands are $24.99 to $39.99 and $23.99 to $24.95, respectively.

CROSSINGS. We purchased the well-known Crossings sweater brand in 1997 in
order to increase our product offerings to include sweaters appealing to
middle-income 25-55 year-old men. We positioned the brand to be associated with
value and quality and have expanded it to include shirts. The Crossings brand
is primarily sold to department stores such as Federated Department Stores,
May's Department Stores and Saks Fifth Avenue at retail price points ranging
from $22.99 to $30.99 for sweaters.

PING. We obtained a license for the prestigious Ping golf brand in 1998 to
appeal to high-income 25-50 year-old men who are status-conscious. The license,
which covers the world other than Japan, has an initial term expiring in
December 2001 with the possibility of renewal depending on satisfactory
performance of our obligations under the licensing agreement. The brand is a
well-known and prestigious golf brand which we positioned to be associated with
the highest standard of quality in the golf business. Currently, we sell golf
shirts, sweaters, pants, outerwear and hats under this brand. The brand is sold
primarily in golf shops and top-tier stores at retail price points ranging from
$50.00 to $105.00.

ANDREW FEZZA. We obtained a license for the Andrew Fezza brand in 1998 to
appeal to high-income 25-50 year-old men who enjoy shopping for designer
clothes. The license covers the United States, its territories and possessions
and has an initial term expiring in June 2003. We have an option to renew for
an additional 5 years depending on satisfactory performance of our obligations
under the licensing agreement. Andrew Fezza is a recognized living American
designer who is actively involved with the design and marketing of the brand.
We have positioned the brand to be associated with a classic European style at
a moderate price. Andrew Fezza's products include shirts and pants. The Andrew
Fezza brand is primarily sold to department stores such as May's Department
Stores,

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Federated Department Stores and Saks Fifth Avenue at retail price points
ranging from $25.99 to $34.99 for shirts and $29.99 to $49.99 for pants.

PNB NATION. We obtained a license for the urban-oriented PNB Nation brand
in 1998 to appeal to 15-30 year-old men whose clothes are very important to
their identities and who enjoy the urban culture, music and night life. The
license covers the United States and has an initial term of at least two years,
and we have an option to purchase the brand. PNB Nation's products include
shirts, pants and outerwear. The brand is primarily sold in urban stores and
sporting goods stores such as The Buckle, Pacific Sunwear and Dr. Jays at
retail price points ranging from $14.99 to $34.99 for shirts and $39.99 to
$79.00 for pants.

PRIVATE LABEL. In addition to our sales of branded products, we sell
products to retailers for marketing as private label, own-store lines. In
fiscal 1999, we sold private label products to Wal-Mart, Kmart and Meijer.
Private label sales generally yield lower profit margins than comparable
branded products. Consequently, our strategy is to increase sales of branded
products. Private label sales accounted for approximately 18.6%, 24.6% and
28.5% of net sales during fiscal 1999, 1998 and 1997.

PRODUCTS AND PRODUCT DESIGN

We offer a broad line of high quality men's sportswear, including sport
and dress shirts, golf sportswear, sweaters, urban wear and casual and dress
pants and shorts. Substantially all of our products are designed by our
in-house staff utilizing our advanced computer-aided design technology. This
technology enables us to produce computer-generated simulated samples that
display how a particular style will look in a given color and fabric. These
samples can be printed on paper or directly onto fabric to more accurately
present the colors and patterns to a potential retailer. In addition, we can
quickly alter the simulated sample in response to retailer comments, such as a
request to change the colors, print layout, collar style and trimming, pocket
details and/or placket treatments. The use of computer-aided design technology
minimizes the time-consuming and costly need to produce actual sewn samples
prior to retailer approval and allows us to create custom-designed products
meeting the specific needs of a retailer.

In designing our apparel, we seek to foster consumer appeal by combining
functional, colorful and high quality fabrics with creative designs and
graphics. Styles, color schemes and fabrics are also selected to encourage
consumers to coordinate outfits, thereby encouraging multiple purchases. Our
design staff seeks to stay abreast of the latest design trends by attending
trade shows and periodically conducting market research in Europe and the
United States.

Our products include:

SHIRTS. We offer a broad line of sport shirts, which include cotton and
cotton-blend printed and plain knit shirts, cotton woven shirts, silk, cotton
and rayon printed button front sport shirts, linen sport shirts, golf shirts,
and embroidered cotton shirts. Our shirt line also includes dress shirts,
brushed twill shirts, jacquard knits and yarn-dyed flannels. In addition, we
are a leading distributor in the United States of guayabera shirts. We market
shirts under a number of our own brands as well as the private labels of our
retailers. Sales under our brands and those licensed by us account for a
significant majority of shirt sales. Our shirts are produced in a wide range of
men's sizes, including sizes for the big and tall men's market. Sales of shirts
accounted for approximately 82%, 83% and 87% of net sales during fiscal 1999,
1998 and 1997, respectively.

PANTS. Our lines of pants include a variety of styles of wool, wool-blend,
linen and poly/rayon dress pants, casual pants in cotton and poly/cotton and
linen/cotton walking shorts. We offer our pants in a wide range of men's sizes
and generally market them as complements to our shirt lines. Sales of pants
accounted for approximately 11%, 11% and 7% of net sales during fiscal 1999,
1998 and 1997, respectively.

OTHER PRODUCTS. We began to offer sweaters when we purchased the Crossings
brand in 1997 and recently introduced sweaters under our other brands. The
majority of the other products we sell is

9
<PAGE>

sweaters, which accounted for approximately 4% of net sales during fiscal 1999.
We also began to offer a line of urban sportswear, tee-shirts and outerwear
when we licensed the PNB Nation brand. Sales of other products (including
sweaters) accounted for approximately 7%, 6% and 6% of net sales during fiscal
1999, 1998 and 1997, respectively.

MARKETING AND DISTRIBUTION

We market our apparel products to retailers principally through the direct
efforts of an in-house sales staff and independent commissioned sales
representatives who work exclusively for us. These in-house employees and
commissioned sales representatives accounted for approximately 84% of net sales
for fiscal 1999. To supplement our sales efforts, we also use other
non-exclusive independent commissioned sales representatives, who generally
market other product lines as well as ours, and we attend major industry trade
shows and tele-market our products to specialty retailers. We also advertise to
retailers through print advertisements in a variety of trade magazines and
newspapers. In order to promote our men's sportswear at the consumer level, we
share the cost of conducting cooperative advertising in print and broadcast
media in which various retailers feature our products in their advertisements.
We also conduct various in-store marketing activities with our retailers, such
as placing displays of our product line with an emphasis on related and
coordinated clothing in highly visible locations and offering promotions geared
to holidays such as Christmas and Father's Day. In fiscal 1997, we started
direct consumer advertising in select markets featuring the Natural Issue,
Grand Slam and Munsingwear brands through the placement of highly visible
billboards, sponsorships, and special event advertising. We also established
Web sites featuring our brands.

The following table sets forth the principal brand names for our product
categories at different levels of retail distribution.

<TABLE>
<CAPTION>
PRODUCT CATEGORY
-----------------------------------------
RETAIL CASUAL
DISTRIBUTION LEVEL SPORTSWEAR
- ----------------------- -----------------------------------------
<S> <C>
High End Specialty --
Retailer, Golf Shops,
Resorts

National Department Crossings
Stores Perry Ellis America(1)

Chain Stores Natural Issue
Alexander Martin/registered trademark/

Regional Stores Munsingwear
Lifestyle/registered trademark/

Mass Merchandisers Munsingwear
Classics/registered trademark/

Urban Stores --

Sporting Goods --
Stores

<CAPTION>
PRODUCT CATEGORY
----------------------------------------------------------------------------------------------------
RETAIL GOLF DRESS URBAN
DISTRIBUTION LEVEL SPORTSWEAR SPORTSWEAR SPORTSWEAR
- ---------------------- ----------------------------- ------------------------------------- ----------------------------
<S> <C> <C> <C>
High End Specialty Perry Ellis(1) Perry Ellis(1) --
Retailer, Golf Shops, Ping
Resorts Grand Slam Tour
National Department Grand Slam Andrew Fezza PNB Nation
Stores Perry Ellis(1)
Chain Stores Penguin Sport John Henry(2) Tipo's/registered trademark/
Regional Stores Munsingwear Corporate Gear/registered trademark/ --
Golf/registered trademark/ Career Club/registered trademark/
Slammer/registered trademark/
Mass Merchandisers Munsingwear Golf etcetera/registered trademark/ New Step/registered trademark/
Classics/registered trademark/ Manhattan(2) Monte Fino/registered trademark/
Urban Stores -- -- PNB Nation
Sporting Goods Munsingwear -- PNB Nation
Stores
</TABLE>

- ----------------
(1) We will primarily be a licensor for the Perry Ellis brand in the dress
sportswear category upon consummation of the Perry Ellis International
acquisition.

(2) We are currently a licensee of the John Henry brand but, subject to
consummation of the John Henry/Manhattan acquisition, will become a
licensor of the John Henry and Manhattan brands in the dress shirt product
category.

10
<PAGE>

We believe that the pending Perry Ellis International and John
Henry/Manhattan acquisitions will provide us with additional nationally
recognized brands which we can similarly leverage into additional sub-brands,
geographic areas and distribution channels.

We believe that customer service is a key factor in successfully marketing
our apparel products and seek to provide retailers with a high level of
customer service. We coordinate efforts with retailers to develop products
meeting their specific needs using our design expertise and computer-aided
design technology to offer custom-designed products. We also use our sourcing
capabilities to produce and deliver products on a timely basis.

Our in-house sales staff is responsible for retailer follow-up and support
including monitoring prompt order fulfillment and timely delivery. We utilize
an Electronic Data Interchange ("EDI") system for certain retailers in order to
provide advance shipping notices, process orders and conduct billing
operations. In addition, certain retailers use the EDI system to communicate
their weekly inventory requirements per store to us electronically. We then
fill those orders either by shipping directly to the individual stores or by
sending shipments, individually packaged and bar-coded by store, to a
retailer's centralized distribution center.

SOURCES OF SUPPLY

We currently use independent contract foreign manufacturers to produce all
of our products. We have 48 suppliers from countries in the Far East and other
parts of Asia and 24 suppliers in Mexico and from countries in Central America.
We believe that the use of numerous independent suppliers allows us to maximize
production flexibility while avoiding significant capital expenditures and the
costs of maintaining and operating production facilities. Upon completion of
the John Henry/Manhattan acquisition, we will assume the lease for a shirt
manufacturing facility in Mexico that expires in July 1999. We intend to sell or
sublease the Mexican facility to one of our suppliers for use in the production
of our products.

We maintain offices in Beijing, Guangzhou, Seoul, Taipei and Mexico City.
We also operate through independent agents based in Thailand, Hong Kong,
Pakistan, Korea, Turkey, Indonesia, India, and Sri Lanka to source our products
in Asia and monitor production at contract manufacturing facilities in order to
ensure quality control and timely delivery. Similar functions with respect to
our Central American suppliers are performed by our personnel based in our
Miami, Florida executive offices. We conduct periodic inspections of samples of
each product prior to cutting by contractors, during the manufacturing process
and prior to shipment. We also have full-time quality assurance inspectors in
the Dominican Republic, Honduras, El Salvador, Guatemala and each of our
overseas offices. Finished goods are generally shipped to our Miami, Florida
facilities for repackaging and distribution to customers. Our return policy
permits customers to return any defective products for credit. These returns
were not material in any of the last three fiscal years.

In order to assist with timely delivery of finished goods, we function as
our own customs broker enabling us to prepare our own customs documentation and
arrange for any inspections or other clearance procedures with the United
States Customs Service. We are also a member of the United States Customs
Automated Interface program, which permits us to clear our goods through United
States Customs electronically, generally reducing the necessary clearance time
to a matter of hours rather than days.

LICENSING OPERATIONS

For the past four years, we have been actively licensing the brands we own
to third parties for various product categories. Licensing our brands enhances
their image by increasing their distribution and visibility without requiring
us to make a significant capital investment or incur significant operating
expenses. As a result of this strategy, we have gained significant experience
in identifying potential licensing opportunities and have established
relationships with many active licensees.

11
<PAGE>

We are currently the licensor under approximately 24 license agreements
for various products including outerwear, underwear, activewear and loungewear.
Sales of licensed products by our licensees were approximately $78.7 million,
$73.9 million and $67.7 million in fiscal 1999, 1998 and 1997, respectively. We
received royalties from these sales and sign-up fees from new licenses of
approximately $3.1 million, $4.0 million and $1.7 million in fiscal 1999, 1998
and 1997, respectively.

Upon completion of each of the Perry Ellis International and John
Henry/Manhattan acquisitions, we will acquire significant additional licensing
operations of nationally recognized brand names. As a result of these
acquisitions and the overall growth of our licensing operations, we plan to
hire an experienced senior executive to oversee and manage these operations.

To maintain a brand's image, we closely monitor our licensees and
pre-approve all products licensed. In evaluating a potential licensee, we
consider the experience, financial stability, manufacturing performance and
marketing ability of the proposed licensee. We also evaluate the marketability
of the proposed products and their compatibility with products currently being
marketed under that brand. We regularly monitor product design, development,
merchandising and marketing and schedule meetings throughout the year with
licensees to ensure quality, uniformity and consistency with our overall
marketing, merchandising and design strategies. All of our licensees' products,
advertising, promotional and packaging materials must be approved in advance by
us.

As part of our licensing strategy, we work with our licensees to further
enhance the products, brand images and sales. We offer licensees marketing
support and use our relationship with retailers to help them become more
profitable.

Our license agreements generally extend for a period of 3 to 5 years with
options to renew prior to expiration for an additional multi-year period. A
typical agreement requires that the licensee pay us the greater of a royalty
based on a percentage of the licensee's net sales of the licensed products or a
guaranteed minimum royalty that typically increases over the term of the
agreement. Generally, licensees are required to spend a percentage of the net
sales of licensed products on advertising and promotion of the licensed
products.

CUSTOMERS

We sell merchandise to a broad spectrum of retailers, including chain
stores, department stores, mass merchandisers and specialty stores. Our largest
customers include Dayton Hudson, Sears Roebuck, Federated Department Stores,
Kohl's, Wal-Mart and J.C. Penney. Net sales to our five largest customers
aggregated approximately 48%, 47% and 54% of net sales in fiscal 1999, 1998 and
1997, respectively. For fiscal 1999, sales to Dayton Hudson, Sears Roebuck, and
Federated Department Stores each accounted for approximately 15%, 10% and 10%,
respectively, of net sales. For fiscal 1998, sales to Dayton Hudson and Sears
Roebuck each accounted for approximately 12% and 13% of net sales,
respectively. For fiscal 1997, sales to Kmart Corporation, J.C. Penney and
Sears Roebuck each accounted for approximately 15%, 12% and 12%, respectively,
of net sales. No other single customer accounted for more than 10% of net sales
during such fiscal years.

SEASONALITY AND BACKLOG

Our products were historically geared towards lighter weight products
generally worn during the spring and summer months. We believe that this
seasonality has been reduced with the introduction of fall, winter, and holiday
merchandise. Our higher priced products generally tend to be less sensitive to
economic conditions and the weather, as compared to our lower priced products.
While the variation in our sales on a quarterly basis has narrowed, seasonality
can be affected by a variety of factors, including the mix of advance and
fill-in orders, the amounts of sales to different distribution levels and
overall product mix between traditional and fashion merchandise.

12
<PAGE>

We generally receive orders from our retailers approximately five to seven
months prior to shipment. For approximately 80.0% of our sales, we have orders
from our retailers before we place orders with our suppliers. A summary of the
order and delivery cycle for our four primary selling seasons is illustrated
below:

MERCHANDISE SEASON ADVANCE ORDER PERIOD DELIVERY PERIOD TO RETAILERS
- -------------------- ---------------------- -----------------------------
Spring June to August January to March
Summer August to October April and May
Fall November to January July to September
Holiday February and March October and November

Sales and receivables are recorded when inventory is shipped, with payment
terms generally 30 to 60 days from the date of shipment. At January 31, 1999,
our backlog of orders for our products, all of which are expected to be shipped
prior to September 1999, was approximately $99.6 million, compared to
approximately $104.4 million at January 31, 1998.

COMPETITION

The retail apparel industry is highly competitive and fragmented. Our
competitors include numerous apparel designers, manufacturers, importers and
licensors, many of which have greater financial and marketing resources than we
do. We believe that the principal competitive factors in the industry are (1)
timeliness, reliability and quality of services provided, (2) market share and
visibility, (3) price, and (4) the ability to anticipate consumer demands and
maintain appeal of products to customers.

The level of competition and the nature of our competitors varies by
product segment. We believe mass-market manufacturers are our main competitors
in the less expensive segment of the market, and American and foreign designers
and licensors are our main competitors in the more upscale segment of the
market. We believe that our continued dedication to customer service, product
assortment and quality control, as well as our selective pursuit of licensing
and acquisition opportunities, directly addresses the competitive factors
listed above in all market segments. To date, we have competed successfully,
but there can be no guarantee that we will continue to do so in the future.

TRADEMARKS

We hold or have applied for U.S. trademarks for our most significant brand
names. We may be subject to claims and suits against us, as well as the
initiator of claims and suits against others, in the ordinary course of our
business, including claims arising from the use of our trademarks. We do not
believe that the resolution of any pending claims will have a material adverse
affect on our business, financial condition, results of operations or cash
flows.

EMPLOYEES

We employed approximately 385 persons as of January 31, 1999. None of our
employees are subject to a collective bargaining agreement, and we believe that
our employee relations are good.

ITEM 2. PROPERTIES

Our administrative offices, warehouse and distribution facility are
located in a 238,000 square foot leased facility in Miami which was built to
our specifications and was completed in 1997. The facility is occupied pursuant
to the Lease, which has an initial term expiring in 2003 and a minimum annual
rental payment of approximately $1.1 million and a minimum contingent rental
payment of $12.3 million if we do not renew the lease after the initial 5-year
term. In March 1998, for purposes of potential future expansion, we purchased
certain land adjacent to our facility from a non-affiliated third party for
$1.1 million.

13
<PAGE>

We also lease 15,000 square feet of show rooms and offices in New York
City pursuant to a 9-year lease with a non-affiliated third party expiring in
December 2007.

Upon consummation of the Perry Ellis International acquisition, we will
assume a lease expiring in April 2004 on Perry Ellis International, Inc.'s New
York City facilities. We intend to integrate the New York operations of Perry
Ellis International, Inc. into our existing New York City facility. Upon
consummation of the John Henry/Manhattan acquisition, we will assume the lease
for a Mexican shirt manufacturing facility expiring on July 31, 1999. We intend
to sell or sublease the Mexican facility to one of our suppliers for use in the
production of our products. This facility employs a work force of approximately
163 workers which are subject to a collective bargaining agreement.

In order to monitor Far East production of our respective products, we
maintain an office in Guangzhou and also lease offices jointly with Carfel,
Inc. ("Carfel"), a privately-held corporation controlled by George Feldenkreis,
our Chairman of the Board, in Beijing and Taipei.

ITEM 3. LEGAL PROCEEDINGS

We are subject to claims and suits against us, as well as the initiator of
claims and suits against others, in the ordinary course of our business,
including claims arising from the use of our trademarks. We do not believe that
the resolution of any pending claims will have a material adverse affect on our
business, financial condition, results of operations or prospects.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

14
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) Market Information

Our common stock has been listed for trading on The Nasdaq National Market
under the symbol SUPI since May 21, 1993. The following table sets forth, for
the fiscal quarters indicated, the range of high and low closing bid prices per
share of common stock as reported by The Nasdaq National Market. Such
quotations represents inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.

HIGH($) LOW($)
--------- ---------
Fiscal 1998
First Quarter .......... 11.00 8.83
Second Quarter ......... 12.00 10.17
Third Quarter .......... 15.38 11.25
Fourth Quarter ......... 13.13 10.38
Fiscal 1999
First Quarter .......... 16.38 10.38
Second Quarter ......... 17.63 15.13
Third Quarter .......... 17.63 7.50
Fourth Quarter ......... 16.00 9.63

(b) Holders

As of March 12, 1999, there were approximately 49 holders of record of our
common stock. We believe the number of beneficial owners of our common stock is
in excess of 1,100.

We have not paid any cash dividends since its inception and the Board of
Directors does not contemplate doing so in the near future. Payment of cash
dividends is prohibited under the Senior Credit Facility. See Note 10 of Notes
to Supreme's consolidated financial statements included in Item 8 of this
Report. Any future decision as to payment of cash dividends will depend on the
earnings and financial position of Supreme and such other factors as the Board
of Directors deems relevant.

15
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

SUMMARY PRO FORMA AND SUPPLEMENTAL FINANCIAL INFORMATION

The "Pro Forma Financial Information" set forth below gives effect to (i)
the Perry Ellis International acquisition and (ii) a Rule 144A offering of
$100.0 million in aggregate principal amount of senior subordinated notes due
2009. The "Supplemental Financial Information" set forth below, in addition to
giving effect to the transactions included in the Pro Forma Financial
Information, gives effect to (i) the John Henry/Manhattan acquisition and the
related concurrent sale of the existing dress shirt inventory to Phillips-Van
Heusen and (ii) additional indebtedness incurred under the Senior Credit
Facility to finance the John Henry/Manhattan acquisition. The income statement
and operating information give effect to such transactions as if they had
occurred on February 1, 1998 and the balance sheet information gives effect to
such transactions as if they had occurred on January 31, 1999.

The information presented below has been derived from our audited
consolidated financial statements, the audited financial statements of Perry
Ellis International, Inc. and certain financial information received from
Salant Corporation with respect to the John Henry/Manhattan acquisition. This
information does not purport to represent what our operating results or
financial condition would actually have been had the Perry Ellis International
acquisition and/or the John Henry/Manhattan acquisition and related
transactions with Phillips-Van Heusen actually occurred as of the dates
indicated above or to project our financial condition for any future period.
The information presented below should be read in conjunction with our
consolidated financial statements and notes thereto, the financial statements
and notes thereto of Perry Ellis International, Inc., the Unaudited Pro Forma
Combined Financial Information and notes thereto included in Item 8 of this
report and "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations."

PRO FORMA
FISCAL YEAR ENDED
JANUARY 31, 1999
PRO FORMA FINANCIAL INFORMATION ----------------------
(DOLLARS IN MILLIONS)
STATEMENT OF INCOME DATA:
Total revenues ........................................ $ 240.6
Depreciation and amortization ......................... 5.9
Operating income ...................................... 23.1
Interest expense ...................................... 12.8

BALANCE SHEET DATA (AT YEAR END):
Working capital ....................................... $ 66.5
Total assets .......................................... 183.4
Total debt ............................................ 106.5
Total stockholders' equity ............................ 64.9

OTHER FINANCIAL DATA AND RATIOS:
Pro Forma EBITDA (a) .................................. $ 29.0
Capital expenditures .................................. 4.0
Ratio of Pro Forma EBITDA to interest expense ......... 2.3x
Ratio of total debt to Pro Forma EBITDA ............... 3.7x

SUPPLEMENTAL FINANCIAL INFORMATION

The Pro Forma Financial Information set forth above does not give effect to
the John Henry/Manhattan acquisition because audited financial information for
the assets being acquired were not available from Salant Corporation prior to
the filing of this report. However, we have been provided with certain unaudited
financial information for the 11 months ended November 30, 1998 that has been
derived from Salant's internal financial records. Based on this information,
EBITDA related to

16
<PAGE>

the John Henry and Manhattan brands being acquired for the 11 months ended
November 30, 1998 was $3.8 million ("Estimated EBITDA") (see note (b) below).
The sum of the $29.0 million Pro Forma EBITDA (with respect to the Perry Ellis
International acquisition) set forth above plus Estimated EBITDA is $32.8
million ("Adjusted EBITDA"). The information used to calculate the Estimated
EBITDA and, correspondingly, the Adjusted EBITDA may not be reliable because
Estimated EBITDA (i) has been obtained from the unaudited financial records of
Salant Corporation, (ii) reflects only 11 months of operations and (iii) does
not include the impact of any additional costs or expenses that may be recorded
by Salant Corporation in December, as a result of normal year end adjustments
or otherwise, that relate to the 11 months ended November 30, 1998.
Additionally, the Estimated EBITDA and, correspondingly, the Adjusted EBITDA do
not take into consideration any expenses of assuming the lease for the dress
shirt manufacturing facility located in Mexico, operating that facility or
disposing of that facility. Although no agreement has been reached, we intend
to either sublease the facility or not renew the lease.

The following financial information supplements the Pro Forma Financial
Information set forth above to give effect to the John Henry/Manhattan
acquisition and related Phillips-Van Heusen transactions by adjusting (i) Pro
Forma EBITDA by Estimated EBITDA and (ii) Total Debt and interest expense by
the additional debt of $27.0 million and related interest expense of $2.1
million to be incurred to finance the John Henry/Manhattan acquisition
(assuming that Phillips-Van Heusen acquires the existing dress shirt inventory
concurrently with the closing of the John Henry/Manhattan acquisition) (dollars
in millions):

Pro Forma EBITDA ..................................... $ 29.0
Estimated EBITDA(b) .................................. 3.8
--------
Adjusted EBITDA(a) ................................. $ 32.8
========
Interest expense ..................................... $ 14.9
--------
Total Debt ........................................... $ 133.5
--------
Ratio of Adjusted EBITDA to interest expense ......... 2.2x
Ratio of Total Debt to Adjusted EBITDA ............... 4.1x

- ----------------

(a) EBITDA represents net income before taking into consideration interest
expense, income tax expense, depreciation expense, and amortization
expense. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and does not represent cash flow
from operations. Accordingly, do not regard this figure as an alternative
to net income (loss) or as an indicator of our operating performance or as
an alternative to cash flows as a measure of liquidity. We believe that
EBITDA is widely used by analysts, investors and other interested parties
in our industry but it is not necessarily comparable with similarly titled
measures for other companies. See "Statements of Cash Flows" in our
consolidated financial statements and in the financial statements of Perry
Ellis International, Inc. contained in Item 8 of this report.
(b) Estimated EBITDA represents the sum of (i) royalty income related to the
John Henry and Manhattan brands being acquired less the related direct
expenses (which exclude any allocation of corporate expense), in each case
for the 11 months ended November 30, 1998 as determined from the financial
information provided by Salant Corporation referred to above and (ii) the
minimum yearly royalty required to be paid to us by Phillips-Van Heusen
pursuant to its license of the John Henry and Manhattan brands.

17
<PAGE>

SUMMARY HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

The following table presents selected historical financial and operating
data derived from the audited consolidated financial statements of Supreme and
the audited financial statements of Perry Ellis International, Inc. The
historical financial data should be read in conjunction with our consolidated
financial statements and the notes and the financial statements of Perry Ellis
International, Inc. and the notes thereto appearing elsewhere herein and "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
---------------------------------------------------------------------
1995 1996 1997 1998 1999
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
SUPREME HISTORICAL

STATEMENT OF INCOME DATA:
Net sales .................................. $ 90,564 $ 121,839 $ 157,373 $ 190,689 $ 221,347
Net royalty income ......................... -- 759 1,654 4,032 3,057
---------- ---------- ---------- ---------- ----------
Total revenue .............................. 90,564 122,598 159,027 194,721 224,404
Cost of sales .............................. 69,187 92,145 122,046 145,991 166,198
---------- ---------- ---------- ---------- ----------
Gross profit ............................... 21,377 30,453 36,981 48,730 58,206
Selling, general and administrative
expenses .................................. 13,493 20,395 24,729 34,137 39,478
Depreciation and amortization .............. 474 725 1,147 1,748 2,161
---------- ---------- ---------- ---------- ----------
Operating income ........................... 7,410 9,333 11,105 12,845 16,567
Interest expense ........................... 1,219 2,224 1,664 2,782 3,494
---------- ---------- ---------- ---------- ----------
Income before income taxes ................. 6,191 7,109 9,441 10,063 13,073
Income taxes ............................... 2,319 2,685 3,597 2,885 4,491
---------- ---------- ---------- ---------- ----------
Net income ................................. $ 3,872 $ 4,424 $ 5,844 $ 7,178 $ 8,582
========== ========== ========== ========== ==========
Net income per share
Basic ..................................... $ 0.73 $ 0.76 $ 0.89 $ 1.10 $ 1.29
Diluted ................................... $ 0.73 $ 0.75 $ 0.89 $ 1.08 $ 1.27
Weighted average number of shares
outstanding
Basic ..................................... 5,300,000 5,800,000 6,534,446 6,540,604 6,674,103
Diluted ................................... 5,300,000 5,874,470 6,595,147 6,665,635 6,769,810

OTHER FINANCIAL DATA AND RATIOS:
EBITDA (a) ................................. $ 7,884 $ 10,058 $ 12,252 $ 14,593 $ 18,728
Capital expenditures ....................... 747 1,309 1,058 3,828 4,005
Ratio of earnings to fixed charges (b) ..... 5.3x 3.8x 5.7x 4.1x 4.2x

BALANCE SHEET DATA (AT YEAR END):
Working capital ............................ $ 43,067 $ 47,760 $ 23,575 $ 66,166 $ 71,300
Total assets ............................... 55,512 53,735 88,158 101,650 108,958
Total debt (c) ............................. 28,256 6,968 31,949 39,658 33,511
Total stockholders' equity ................. 22,016 43,833 47,775 55,155 64,946
</TABLE>

(CONTINUED ON FOLLOWING PAGE)

18
<PAGE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
PERRY ELLIS INTERNATIONAL, INC. HISTORICAL

STATEMENT OF INCOME DATA:
Net royalty income ................................... $10,917 $15,660 $16,177
Selling, general and administrative expenses ......... 8,606 7,109 8,398
Depreciation and amortization ........................ 212 226 228
------- ------- -------
Operating income ..................................... 2,099 8,325 7,551
Interest income ...................................... 144 136 32
------- ------- -------
Income before income taxes ........................... 2,243 8,461 7,583
Income taxes ......................................... 218 852 760
------- ------- -------
Net income ........................................... $ 2,025 $ 7,609 $ 6,823
======= ======= =======
OTHER FINANCIAL DATA AND RATIOS:
EBITDA (a) ........................................... $ 2,455 $ 8,688 $ 7,811
Capital expenditures ................................. 47 87 21
BALANCE SHEET DATA (AT YEAR END):
Working capital ...................................... $ 1,995 $ (27) $ 2,665
Total assets ......................................... 4,803 3,112 4,563
Total debt ........................................... -- -- --
Total stockholders' equity ........................... 3,439 1,369 3,839
</TABLE>

- ----------------

(b) For purpose of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist of interest expense,
amortization of deferred debt issuance costs and the portion of rental
expense of the Lease deemed representative of the interest factor.

(c) Total debt includes balances outstanding under credit facilities, long-term
debt and current portion of long-term debt.

19
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

We are a leading designer and marketer of a broad line of high quality
men's sportswear, including sport and dress shirts, golf sportswear, sweaters,
urban wear and casual and dress pants which we sell to all levels of retail
distribution. We have built a broad portfolio of brands through selective
acquisitions and the establishment of our own brands over our 32-year operating
history. We are currently one of the top five branded suppliers to department
stores in the knit and woven shirt product categories. We currently use over 70
independent suppliers, mostly located in the Far East, other parts of Asia,
Mexico, and Central America.

We own or license from third parties the brand names under which most of
our products are sold. These brand names include Crossings and Natural Issue
for casual sportswear, John Henry for dress casual wear, Andrew Fezza for dress
sportswear, Ping and Munsingwear for golf sportswear and PNB Nation for urban
wear. We market our brands to a wide range of demographic segments, targeted at
consumers in specific age, income and ethnic groups. Currently, our products
are predominantly produced for the men's segment of the apparel industry, in
which fashion trends tend to be less volatile than in other segments. The
percentage of our revenues from branded products increased to 81.4% in fiscal
1999 from 71.5% in fiscal 1997.

RECENT DEVELOPMENTS

In order to expand our licensing operations, we recently signed a
definitive agreement to acquire Perry Ellis International, Inc. which owns and
licenses the prestigious and well-known Perry Ellis brand name. We have also
signed a definitive agreement to purchase the trademarks for John Henry, the
leading brand for men's dress casualwear at Sears Roebuck, for Manhattan, the
best selling dress shirt brand at Wal-Mart and Kmart Corporation and for Lady
Manhattan.

PERRY ELLIS INTERNATIONAL ACQUISITION. In January 1999, we agreed to buy
Perry Ellis International, Inc. for approximately $74.6 million in cash, net of
purchase price adjustments. Perry Ellis International, Inc. is a privately held
company which owns and licenses the Perry Ellis brand name, currently one of
the top selling brands in department stores in the United States. Perry Ellis
International, Inc. is currently the licensor under 34 license agreements,
primarily for various men's wear, boys' wear and fragrances. During the years
ended December 31, 1998, Perry Ellis International, Inc. had revenues of $16.2
million and EBITDA of $7.8 million. Under our management of the brand, we
expect to benefit from certain operating efficiencies and to enhance the
licensing royalties the Perry Ellis brand generates. Net income from royalties
at Perry Ellis International, Inc. grew 48.2% from fiscal year end December 31,
1996 to December 31, 1998 while operating expenses grew at a rate of 55.6%
primarily as a result of increased advertising.

JOHN HENRY/MANHATTAN ACQUISITION. In December 1998, we entered into an
agreement to buy certain assets of the John Henry and Manhattan dress shirt
business from Salant Corporation which is currently in Chapter 11 bankruptcy
proceedings. On February 24, 1999, the bankruptcy court approved the purchase
for $27.0 million, plus the value of the existing dress shirt inventory (which
is currently estimated to be approximately $17.2 million). The assets to be
purchased consist of the John Henry, Manhattan and Lady Manhattan trademarks,
tradenames, license agreements, certain manufacturing equipment and the
existing dress shirt inventory. Phillips-Van Heusen Corporation has agreed,
subject to certain conditions including regulatory approval, to buy the
existing dress shirt inventory at our acquisition cost concurrently with the
acquisition and to license from us the John

20
<PAGE>

Henry and Manhattan brands for men's dress shirts. In connection with the John
Henry/Manhattan acquisition, we will also assume a lease for a shirt
manufacturing facility in Mexico which expires in July 1999. Although no
agreement has been reached, we intend to sublease the Mexican facility to one
of our suppliers for use in the production of our products or not renew the
lease. The John Henry/Manhattan acquisition is subject to a number of
conditions, including regulatory approval, amendment of the Senior Credit
Facility, amendment of the Lease and, if consummated, is expected to close in
late March or early April 1999. The acquisition price, net of the $1.0 million
deposit we have paid and the proceeds from sale of the existing dress shirt
inventory, will be approximately $26.0 million and is intended to be financed
with borrowings under our Senior Credit Facility which we expect to amend prior
to consummation of the acquisition.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected items
in our consolidated statements of income expressed as a percentage of total
revenues:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Net sales ............................................ 99.0% 97.9% 98.6%
Royalty income ....................................... 1.0 2.1 1.4
----- ----- -----
Total revenues ....................................... 100.0 100.0 100.0
Cost of sales ........................................ 76.7 75.0 74.1
----- ----- -----
Gross profit ......................................... 23.3 25.0 25.9
Selling, general and administrative expenses ......... 16.3 18.4 18.5
----- ----- -----
Operating income ..................................... 7.0 6.6 7.4
Interest expense ..................................... 1.0 1.4 1.6
----- ----- -----
Income before income taxes ........................... 6.0 5.2 5.8
Income tax provision ................................. 2.3 1.5 2.0
----- ----- -----
Net income ........................................... 3.7% 3.7% 3.8%
===== ===== =====
</TABLE>

FISCAL 1999 AS COMPARED TO FISCAL 1998

TOTAL REVENUES. Total revenues consist of net sales and royalty income.
Total revenue grew $29.7 million or 15.3% to $224.4 million in fiscal 1999 from
$194.7 million in fiscal 1998 as a result of internal growth.

NET SALES. Net sales increased $30.6 million or 16.1% to $221.3 million in
fiscal 1999 from $190.7 million in fiscal 1998 as branded products grew to
represent nearly 81.4% of net sales in fiscal 1999 compared to 75.4% of net
sales in fiscal 1998. Within branded products, the increase in net sales was
primarily the result of the sales growth in the Munsingwear brand where net
sales increased by $23.6 million to approximately $66.0 million in fiscal 1999.
In addition, net sales of the Natural Issue brand increased by approximately,
$10.2 million to $76.2 million for fiscal 1999. In the portfolio of other
branded products, the John Henry brand also experienced an increase in net
sales. We first introduced the Andrew Fezza, PNB Nation and Ping brands during
fiscal 1999. They also contributed to the increase in net sales. The increases
in net sales in fiscal 1999 were slightly offset by declines in net sales of
our other branded and private label products.

ROYALTY INCOME. We had royalty income of $3.1 million for fiscal 1999
compared to $4.0 million for fiscal 1998. The decline of $0.9 million was
primarily due to our relationship with one customer, which shifted from
primarily a licensee basis to primarily a sales basis. Net sales to this
customer increased by $7.0 million to $11.5 million in fiscal 1999.

21
<PAGE>

COST OF SALES. Cost of sales for fiscal 1999 was $166.2 million or 74.1%
of total revenue as compared to $146.0 million or 75.0% of total revenue for
fiscal 1998. The decrease in the cost of sales as a percentage of total
revenues is a result of our increased sales in branded products, which
typically generate higher gross profit margin than private label products.
Gross profit was $58.2 million or 25.9% of total revenue for fiscal 1999 as
compared to $48.7 million or 25.0% of total revenue in fiscal 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, including depreciation and amortization, for fiscal
1999 were $41.6 million or 18.5% of total revenue as compared to $35.9 million
or 18.4% of total revenue for fiscal 1998. The increase is primarily
attributable to costs associated with recent license acquisitions and the $0.7
million in costs associated with the increase in temporary personnel hired in
connection with our new inventory management system. The costs associated with
the recent license acquisitions are primarily related to payroll, advertising,
and samples. We will continue to incur expenses related to start up costs of
acquired licenses, including the completion and integration of the Perry Ellis
International acquisition and the John Henry/Manhattan acquisition. We believe
that we will achieve greater efficiencies in our new corporate and warehouse
facility during the coming fiscal year, somewhat offsetting these increases.

INTEREST EXPENSE. Interest expense for fiscal 1999 was $3.5 million as
compared to $2.8 million for fiscal 1998. The increase was the result of
additional indebtedness incurred to support the increase in working capital
requirements during the fiscal year particularly in the third quarter.

INCOME TAXES. During fiscal 1999, our effective tax rate was 34.4%
compared to 28.7% in fiscal 1998, which resulted in an increase in the income
tax provision by $1.6 million to $4.5 million. The prior year tax rate was
lower than normal as we adjusted our provision for overpayments in fiscal 1997.

NET INCOME. Net income for fiscal 1999 increased $1.4 million or 19.4% to
$8.6 million or 3.8% of total revenue from $7.2 million or 3.7% of total
revenue for fiscal 1998.

FISCAL 1998 AS COMPARED TO FISCAL 1997

TOTAL REVENUES. Total revenues grew 22.5% or $35.7 million to $194.7
million in fiscal 1998 from $159.0 million in fiscal 1997 primarily as a result
of the growth from our acquisition of the Munsingwear brand and the related
license income.

NET SALES. Net sales for fiscal 1998 increased 21.2% or $33.3 million to
$190.7 million from $157.4 million for fiscal 1997. The increase in net sales
was primarily attributable to the Munsingwear and Grand Slam brands which
increased approximately $33.0 million as well as an increase in the Crossings
brand. We acquired the Munsingwear brand during the final quarter of fiscal
1997. This increase was partially offset by a decrease in revenue from sales of
the Natural Issue brand and private label products.

ROYALTY INCOME. We had royalty income of $4.0 million for fiscal 1998
compared to $1.7 million for fiscal 1997. The increase of $2.3 million was
primarily due to the increase in royalties from the licensing of the
Munsingwear brand.

COST OF SALES. Cost of sales for fiscal 1998 was $146.0 million or 75.0%
of total revenue as compared to $122.0 million or 76.7% of total revenue for
fiscal 1997. The decrease in the cost of sales as a percentage of total revenue
reflects a continued shift to more sales of branded products which typically
generate higher gross profit margin than private label products. Gross profit
was $48.7 million or 25.0% of total revenue for fiscal 1998 as compared to
$37.0 million or 23.3% of total revenue in fiscal 1997.

SALES, GENERAL AND ADMINISTRATIVE EXPENSES. Sales, general and
administrative expenses, including depreciation and amortization, for fiscal
1998 were $35.9 million or 18.4% of total revenue as

22
<PAGE>

compared to $25.9 million or 16.3% of sales for fiscal 1997. This increase was
due to increased levels of staffing required to service the Munsingwear brand
and increased advertising costs relating to the start of consumer advertising
as a result of brand imaging.

INTEREST EXPENSE. Interest expense for fiscal 1998 was $2.8 million
compared to $1.7 million for fiscal 1997. This increase in interest expense was
the result of the additional indebtedness incurred by us in connection with the
acquisition of the Munsingwear and Jolem labels, as well as to support
increased levels of working capital requirements proportionate with the
increased levels of revenue.

INCOME TAXES. During fiscal 1998, our effective tax rate was 28.7%
compared to 38.1% in fiscal 1997. This decrease was the result of our
adjustment of our income tax provision because of tax overpayments for the
prior two fiscal years.

NET INCOME. Net income for fiscal 1998 was $7.2 million or 3.7% of total
revenue as compared to $5.8 million or 3.7% of total revenue for fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

We rely primarily upon cash flow from operations and borrowings under our
Senior Credit Facility to finance operations and expansion. Cash provided by
operating activities was $14.3 million in fiscal 1999, compared to a usage of
cash of $3.1 million in fiscal 1998 and cash provided by operating activities
of $1.9 million in 1997. The $17.4 million increase in fiscal 1999 cash flow
from operations as compared to fiscal 1998 is due primarily to decreases in
inventory and accounts receivable levels from year-to-year in the amount of
$6.4 million and $3.2 million, respectively, as well as increases in accounts
payable and accrued expenses of $5.3 million.

Net cash used in investing activities was $10.2 million in fiscal 1999, of
which $5.0 million was for the deposit on the pending Perry Ellis International
acquisition and $1.0 million was related to the pending John Henry/Manhattan
acquisition. Net cash used in investing activities for fiscal 1998 totaled $4.6
million, of which $3.8 million related principally to the new distribution and
office facility.

Net cash used in financing activities for fiscal 1999 totaled $4.9 million
which was primarily due to a reduction of $6.1 million from borrowings on the
Letter of Credit Facilities and the Senior Credit Facility. Net cash provided
by financing activities for fiscal 1998 totaled $7.9 million, which was
primarily due to an increase in borrowings under the Senior Credit Facilities.

Working capital (current assets minus current liabilities) was $71.3
million at the end of fiscal 1999 as compared to $66.2 million at the end of
fiscal 1998. The $5.1 million increase in working capital primarily resulted
from an increase in accounts receivable and other current assets due to the
sales growth and deposits made for pending acquisitions. The current ratio
(current assets divided by current liabilities) was 8.2:1 and 7.9:1 at the end
of fiscal 1999 and fiscal 1998, respectively.

We have the $60.0 million Senior Credit Facility with a group of banks.
Borrowings are limited under its terms to a borrowing base calculation, which
generally restricts the outstanding balances to 85.0% of eligible receivables
plus 50.0% of eligible inventories, as defined. Interest on borrowings is
variable based, at our option, upon either LIBOR plus 1.25% or the agent bank's
prime rate. The Senior Credit Facility contains certain covenants, the most
restrictive of which requires us to maintain certain financial ratios and
minimum net worth. In addition, the Senior Credit Facility restricts the payment
of dividends. The Senior Credit Facility is secured by all of our assets and is
guaranteed by our subsidiaries. The outstanding balance under the Senior Credit
Facility on January 31, 1999 was $33.5 million. The Senior Credit Facility
expires in April 2001.

We are currently in the process of amending the Senior Credit Facility to
increase the maximum amount available under the revolving portion of the Senior
Credit Facility and to add a $20.0 million term loan to the facility.
Borrowings under the increased facility will be used to finance the John

23
<PAGE>

Henry/Manhattan acquisition for which the acquisition price, net of the $1.0
million deposit we have paid and assuming Phillips-Van Heusen acquires the
existing dress shirt inventory, will be approximately $26.0 million. We have
entered into an agreement to sell the dress shirt inventory being acquired in
the acquisition (with a value currently estimated to be $17.2 million) to
Phillips-Van Heusen Corporation concurrently with this acquisition. We intend
to finance the $75.0 million acquisition of Perry Ellis International, Inc.,
with the net proceeds from a Rule 144A offering of $100.0 million in aggregate
principal amount of senior subordinated notes due 2009. The remaining net
proceeds from the Rule 144A offering will be used to reduce borrowings under
the amended Senior Credit Facility.

We also maintain three letter of credit facilities which total $60.0
million. Each letter of credit is collateralized by the consignment of
merchandise in transit under that letter of credit. Indebtedness under these
letters of credit bears interest at variable rates approximately equal to the
lenders' specified base lending rates minus 1.0% per annum. As of January 31,
1999, there was $36.2 million available under these facilities. One of the
facilities expires in July 1999 and the other two facilities, aggregating $15.0
million, have perpetual terms.

Capital expenditures, principally associated with the new office and
warehouse facility, were $4.0 million, $3.8 million and $1.1 million for fiscal
1999, 1998 and 1997 respectively. Capital expenditures, including the
integration costs for the pending Perry Ellis International and John
Henry/Manhattan acquisitions, for fiscal 2000 and 2001 are expected to be
approximately $4.0 million and $4.5 million, respectively.

Our products have historically been geared toward lighter-weight products
generally worn during the spring and summer months, which typically caused a
disproportionately higher amount of revenues to be realized during the first
quarter of each fiscal year. The introduction of fall, winter and holiday
merchandise has also positively affected the third quarter. Our business is
currently more affected by the variations in retail buying patterns than the
seasons of the year.

Management believes that the combination of the borrowing availability
under the amended Senior Credit Facility, the completion of this offering,
funds anticipated from changes in working capital and funds anticipated to be
generated from operating activities will be sufficient to meet our operating
and capital needs in the foreseeable future.

EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS

We do not believe that inflation has significantly affected our results of
operations.

We purchase from foreign suppliers in U.S. dollars. Accordingly, the
Company, to date, has not been materially adversely affected by foreign
currency fluctuations.

NEW ACCOUNTING PRONOUNCEMENTS

In March 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP 98-1"). SOP 98-1 provides
guidance for capitalizing and expensing the costs of computer software developed
or obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Management has not determined
the effect, if any, of adopting SOP 98-1.

In April 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-5, REPORTING ON THE COSTS OF START-UP
ACTIVITIES ("SOP 985"). SOP 98-5 establishes accounting standards for the
reporting of certain costs associated with the start-up of operations, lines of
business, etc. SOP 98-5 requires that costs of start-up activities, including
organizational costs, be expenses as incurred and that in the year of adoption,
start-up costs recorded should be expensed.

24
<PAGE>

SOP 98-5 is effective for fiscal years beginning subsequent to December 15,
1998. Management has not determined the effect, if any, of adopting SOP 98-5.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING Activities. Among other provisions, SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It also requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 is effective for financial statements
for fiscal year beginning after June 15, 1999. Management has not determined
the effect, if any, of adopting SFAS No. 133.

YEAR 2000 READINESS DISCLOSURE

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 and 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 a 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. We
recognize that we must take action to ensure that our operations will 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
the majority of our systems are year 2000 compliant. Our current distribution
software was modified by expanding the date to be century compliant, and all
entry forms were modified using a windowing algorithm. The financial systems
Account Receivables, Accounts Payables and General Ledger were replaced with
Oracle Financial release 11.01, under Oracle 8.0.5 database. This is year 2000
compliant, and enhances our business analysis capabilities.

Our EDI application is software purchased from NGC, a company in Miami
Lakes, Florida. While we do not own the source code to this software, NGC
provided written certification of year 2000 compliance. Furthermore, we passed
the EDI year 2000 compliance test from NRF (National Retail Federation).
Results of the test can be found at http://www.nrf.com. We are ready to change
to the new EDI 4010 documents whenever our customers are ready. Some of our
larger customers are already doing 4010 transactions with us. Our EDI software
is also ready to convert any non-compliant year 2000 EDI documents to an
internal year 2000 compliant transaction.

All of our PBXs or telephone systems are year 2000 compliant and were
certified and tested by Lucent Technologies. The security system equipment Year
2000 compliant certification could be found under
http://www.napcosecurity.com/nsg nsg2000.html. The monitoring company Security
One has provided us a Year 2000 certification of any Date Based System. We
completed the required remediation noted above, including testing, by December
31, 1998. However, there are also less significant hardware options which will
be remediated during 1999. To date, the expense to outsiders incurred by us in
order to become year 2000 compliant, including computer software costs, have
been $0.2 million and the current additional estimated cost to outsiders to
complete such remediation is expected to be $0.2 million. Such costs, other
than software, have been and will continue to be expensed as incurred.

An assessment of the readiness of year 2000 compliance of third party
entities with which we have relationships, such as our banking institutions,
customers, payroll processors and others is ongoing. We have inquired, or are
in the process of inquiring, of the significant aforementioned third party
entities as to their readiness with respect to year 2000 compliance and to date
has received indications that many of them are either compliant or in the
process of remediation. We will continue

25
<PAGE>

to monitor these third party entities to determine the impact on our business
and the actions we must take, if any, in the event of non-compliance by any of
these third parties. Our initial assessment of compliance by third party is
that there is not a material business risk to us posed by any such
noncompliance and, as such, we have not yet developed any related contingency
plan.

FORWARD-LOOKING STATEMENTS

Except for the historical information contained herein, this "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains forward-looking statements that involve a number of risks
and uncertainties, including the risks described elsewhere in this report and
detailed from time to time in the Company's filings with the Commission.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See pages F-1 through F-33 appearing at the end of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

26
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICES OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- ----- --------------------------------------------------
<S> <C> <C>
George Feldenkreis(1) 63 Chairman of the Board and Chief Executive Officer
Oscar Feldenkreis 39 President, Chief Operating Officer and Director
Joseph Roisman 53 Executive Vice President
Fanny Hanono 38 Secretary-Treasurer
Ronald L. Buch 63 Director
Gary Dix(1) 51 Director
Salomon Hanono 49 Director
Richard W. McEwen(2) 78 Director
Leonard Miller(1)(2) 69 Director
</TABLE>

- ----------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.

GEORGE FELDENKREIS founded Supreme in 1967. He has been involved in all
aspects of its operations since that time and served as our President and a
Director until February 1993, at which time he was elected Chairman of the
Board and Chief Executive Officer. Mr. Feldenkreis is also a director,
executive officer and principal shareholder of Carfel, an importer and
distributor of automotive parts which he founded in 1961. He is Vice President
of the Greater Miami Jewish Federation and is a trustee of the University of
Miami.

OSCAR FELDENKREIS was elected Vice President and a Director in 1979 and
joined Supreme on a full-time basis in 1980. Mr. Feldenkreis has been involved
in all aspects of its operations since that time and was elected President and
Chief Operating Officer in February 1993. Oscar Feldenkreis also serves as a
director of Carfel but does not devote any of his working time to its affairs.
He is also a board member of the Greater Miami Jewish Federation.

JOSEPH ROISMAN was appointed Executive Vice President in September 1995.
Previously, Mr. Roisman, who has been employed by Supreme since 1988, was Vice
President, Sales.

FANNY HANONO was elected Secretary-Treasurer in September 1990. Mrs.
Hanono has been employed by Carfel since 1988 in various administrative
positions, most recently as Vice President of Carfel. Since 1996, Mrs. Hanono
has served as a board member of the Michael-Ann Russell Jewish Community
Center.

RONALD L. BUCH was elected to Supreme's Board of Directors in January
1996. Prior to his retirement in 1995, Mr. Buch was employed by Kmart
Corporation for over 39 years, most recently as Vice President and General
Merchandise Manager.

GARY DIX was elected to Supreme's Board of Directors in May 1993. Since
February 1994, Mr. Dix, a certified public accountant, has been a partner at
Mallah Furman & Company, P.A., an accounting firm in Miami, Florida. From 1979
to January 1994, Mr. Dix was a partner of Silver Dix & Hammer, P.A., another
Miami accounting firm.

SALOMON HANONO was elected to Supreme's Board of Directors in February
1993. Mr. Hanono has been employed by Carfel in various sales capacities since
1987 and currently is its Export Director, with overall responsibilities for
Carfel's export sales. Mr. Hanono devotes substantially all of his working time
to the affairs of Carfel.

27
<PAGE>

RICHARD W. MCEWEN was elected to Supreme's Board of Directors in September
1994. Mr. McEwen serves as a director of Wometco Enterprises, Inc. Prior to his
retirement in 1985, Mr. McEwen was Chairman of the Board and Chief Executive
Officer of Burdines, a division of Federated Department Stores, Inc.

LEONARD MILLER was elected to Supreme's Board of Directors in May 1993.
Mr. Miller has been Vice President and Secretary of Pasadena Homes, Inc., a
home construction firm in Miami, Florida, since 1959.

George Feldenkreis is the father of Oscar Feldenkreis and Fanny Hanono and
the father-in-law of Salomon Hanono, Fanny Hanono's spouse. There are no other
family relationships among Supreme's directors and executive officers.

Supreme's executive officers are elected annually by the Board of
Directors and serve at the discretion of the Board of Directors.

Supreme's Articles of Incorporation were amended in 1998 to divide the
Board of Directors into three approximately equal classes with staggered terms.
Directors are elected for three-year terms and, in each case, until their
successors are duly elected and qualified or until their earlier death,
resignation or removal. Messrs. Buch and Hanono hold office until the 1999
Annual Meeting of Shareholders, Messrs. McEwen and Oscar Feldenkreis hold
office until the 2000 Annual Meeting of Shareholders, and Messrs. Dix, Miller
and George Feldenkreis hold office until the 2001 Annual Meeting of
Shareholders.

COMPENSATION OF DIRECTORS

During fiscal 1999, non-employee directors, with the exception of Salomon
Hanono, were compensated at the rate of $1,500 per quarter and $500 for
meetings of the Board of Directors or any committee thereof attended during a
quarter, up to a maximum of $8,000 per annum. Mr. Hanono receives no cash
compensation for his services as a director. Directors are reimbursed for
travel and lodging expenses in connection with their attendance at meetings.
Directors are also entitled to receive options under the Company's 1993 Stock
Option Plan, as amended (the "1993 Plan") and the Directors' Stock Option Plan
(the "Directors' Plan"). During fiscal 1999, each non-employee director was
granted options to purchase 5,000 shares of Common Stock at an exercise price
of $15.75 per share. As of January 31, 1999, the following options were
outstanding under the Directors' Plan:

<TABLE>
<CAPTION>
NAME OF OPTIONEE NUMBER OF SHARES EXERCISE PRICE($) EXPIRATION DATE
- ---------------------------- ------------------ ------------------- ----------------
<S> <C> <C> <C>
Ronald L. Buch ............. 5,000 15.75 May 7, 2008

Gary Dix ................... 5,000 15.75 May 7, 2008
11,250 8.00 June 2, 2000

Richard W. McEwen .......... 5,000 15.75 May 7, 2008
7,500 8.00 June 2, 2000

Leonard Miller ............. 5,000 15.75 May 7, 2008
11,250 8.00 June 2, 2000

Salomon Hanono ............. 5,000 15.75 May 7, 2008
11,250 8.00 June 2, 2000
</TABLE>

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and holders of more than ten
percent of the Company's Common Stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the Nasdaq
National Market. Such persons are required to furnish the Company with copies
of all Section 16(a) forms they file.

28
<PAGE>

Based solely on it review of the copies of such forms received by it, or
oral or written representations from certain reporting persons from whom no
Form 5 were required, Supreme believes that, with respect to fiscal 1999, its
executive officers, directors and greater than ten percent beneficial owners
complied with all such filing requirement, except that due to an administrative
oversight, Joseph Reisman, Supreme's Executive Vice President, failed to timely
file a Form 5 reporting a May 1998 grant of 3,000 options under the 1993 Plan.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following compensation table sets forth for fiscal 1999, fiscal 1998
and fiscal 1997, the cash and certain other compensation paid to the Chief
Executive Officer ("CEO") and such other executive officers whose annual salary
and bonus exceeded $100,000 during fiscal 1999 (together with the CEO,
collectively, the "Named Executive Officers"):

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------- ----------------------------------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) OPTION/SAR'S (#) COMPENSATION ($)(1)
- ----------------------------- ------------- ------------ ----------- ----------------------- --------------------
<S> <C> <C> <C> <C> <C>
George Feldenkreis 1999 141,000 0 150,000 1,731
Chairman and CEO 1998 125,000 100,000 -- 4,750
1997 120,000 50,000 -- 500

Oscar Feldenkreis 1999 373,000 200,000 55,000 1,753
President and Chief 1998 350,000 460,000 -- 4,750
Operating Officer 1997 350,000 450,000 -- 500

Joseph Roisman 1999 152,000 15,000 3,000 1,109
Executive Vice President 1998 147,000 21,000 -- 4,750
1997 140,000 10,000 -- 500
</TABLE>

- ----------------
(1) The dollar amount represents Company contributions for the Named Executive
Officer under the Company's 401(K) plan.

EMPLOYMENT AGREEMENTS

Supreme has an employment agreement with Oscar Feldenkreis, the President
and Chief Operating Officer, which was renewed in May 1998 for a two-year
period. In connection with the renewal of the employment agreement, Mr.
Feldenkreis was granted ten-year options under the 1993 Plan to purchase a
total of 55,000 shares of Common Stock at an exercise price of $15.75 per
share. The employment agreement provides for an annual salary of $350,000,
subject to annual cost-of-living increases, and an annual bonus as may be
determined by the Compensation Committee in its discretion, up to a maximum of
$500,000. The employment agreement also prohibits Mr. Feldenkreis from directly
or indirectly competing with us for one year after termination of his
employment for any reason except our termination of Mr. Feldenkreis without
cause. Upon termination of the employment agreement by reason of his death or
disability, Mr. Feldenkreis or his estate will receive a lump sum payment equal
to one year's salary plus a bonus as may be determined by the Compensation
Committee in its discretion.

Supreme also has an employment agreement with George Feldenkreis, the
Chairman of the Board and CEO, which was renewed in May 1998 for a two-year
period. In connection with the renewal of the employment agreement, Mr.
Feldenkreis was granted options under the 1993 Plan to purchase a total of
150,000 shares of Common Stock at an exercise price of $15.75 per share. The
employment agreement provides for an annual salary of $375,000, subject to
annual cost-of-living increases, and an annual bonus as may be determined by
the Compensation Committee in its discretion, up to a maximum of $250,000.
George Feldenkreis' employment agreement contains termination and
non-competition provisions similar to those set forth in Oscar Feldenkreis'
agreement.

29
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning individual grants of
options made during fiscal 1999 to any of the Named Executive Officers.

<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
--------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
% OF TOTAL APPRECIATION FOR
NUMBER OF SHARES OPTIONS GRANTED EXERCISE OR OPTION TERM ($)(1)
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
- ------------------------- -------------------- ----------------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
George Feldenkreis ...... 150,000 38.8 15.75 5/07/08 1,485,764 3,765,217
Oscar Feldenkreis ....... 55,000 14.2 15.75 5/07/08 544,780 1,380,579
Joseph Roisman .......... 3,000 0.8 10.00 5/04/03 8,288 18,315
</TABLE>

- ----------------
(1) Based upon the exercise price, which was equal to the fair market on the
date of grant, and annual appreciation at the rate stated on such price
through the expiration date of the options. Amounts represented
hypothetical gains that could be achieved for the options if exercised at
the end of the term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the Securities
and Exchange Commission (the "Commission") and do not represent the
Company's estimate or projection of the future stock price. Actual gains,
if any, are contingent upon the continued employment of the Named
Executive Officer through the expiration date, as well as being dependent
upon the general performance of the Common Stock. The potential realizable
values have not taken into account amounts required to be paid for federal
income taxes.

STOCK OPTIONS HELD AT END OF FISCAL 1999

The following table indicates the total number and value of exercisable
and unexercisable stock options held by each of the Named Executive Officers as
of January 31, 1999. No options to purchase stock were exercised by any of the
Named Executive Officers in fiscal 1999.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END ($)
------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
- ---------------------------- ------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C>
George Feldenkreis ......... 150,000 0 37,500 0
Oscar Feldenkreis .......... 100,000 0 354,400 0
Joseph Roisman ............. 12,000 2,250 98,213 13,500
</TABLE>

- ----------------
(1) Based on the Nasdaq National Market last sales price for the Company's
Common Stock on January 29, 1999 in the amount of $16.00 per share.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None.

30
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of January 31, 1999, by
(i) each of the shareholders of the Company who is known by the Company to own
more than 5% of the outstanding shares of Common Stock, (ii) each director of
the Company, (iii) each Named Executive Officer and (iv) all directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) NUMBER OF SHARES % OF CLASS OUTSTANDING
- -------------------------------------------- ------------------ -----------------------
<S> <C> <C>
George Feldenkreis(3) ...................... 1,738,153 25.3
Oscar Feldenkreis(4) ....................... 1,308,188 19.2
Fanny Hanono(5) ............................ 399,858 6.0
Salomon Hanono(5)(6) ....................... 416,108 6.2
Carfel, Inc.(7) ............................ 361,525 5.4
Joseph Roisman(8) .......................... 13,500 *
Ronald Buch(9) ............................. 5,750 *
Gary Dix(10) ............................... 21,800 *
Richard W. McEwen(11) ...................... 14,750 *
Leonard Miller(12) ......................... 55,250 *
FMR Corporation
82 Devonshire Street
Boston, Massachusetts 02109(13) ........... 872,500 13.0
The Kaufmann Funds, Inc.
140 East 45th Street, 43rd Floor
New York, New York 10017(14) .............. 450,000 6.7
All directors and executive offers
as a group (9 persons)(15) ................ 3,405,199 48.4
</TABLE>

- ----------------
* Less than 1%.
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
Supreme International Corporation, 3000 N.W. 107th Avenue, Miami, Florida
33172.
(2) Except as otherwise indicated, we believe that all beneficial owners named
in the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.
(3) Represents (a) 1,141,728 shares of Common Stock held by George
Feldenkreis, (b) 150,000 shares of Common Stock issuable upon the exercise
of stock options held by George Feldenkreis, (c) 361,525 shares of Common
Stock held by Carfel, of which company Mr. Feldenkreis is a director,
executive officer and principal shareholder and (d) 84,900 shares of
Common Stock held by a charitable foundation of which George Feldenkreis,
Oscar Feldenkreis and Fanny Hanono are each directors and officers (the
"Foundation").
(4) Represents (a) 1,122,288 shares of Common Stock held by a limited
partnership of which Oscar Feldenkreis is the sole shareholder of the
general partner and the sole limited partner, (b) 1,000 shares of Common
Stock held by Mr. Feldenkreis directly, (c) 100,000 shares of Common Stock
issuable upon the exercise of stock options held by Oscar Feldenkreis and
(d) 84,900 shares held by the Foundation.
(5) Represents (a) 314,958 shares of Common Stock held by a limited
partnership of which Fanny Hanono is the sole shareholder of the general
partner and the sole limited partner and (b) 84,900 shares held by the
Foundation. Fanny Hanono and Salomon Hanono are husband and wife.
(6) Also includes 16,250 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Hanono.
(7) The shares of Common Stock held by Carfel are pledged to a bank to secure
Carfel's credit facility.
(8) Represents (a) 1,500 shares of Common Stock held by Mr. Roisman and (b)
11,250 shares of Common Stock issuable upon the exercise of stock options
held by Mr. Roisman.
(9) Represents (a) 750 shares of Common Stock held by Mr. Buch and (b) 5,000
shares of Common Stock issuable upon the exercise of stock options held by
Mr. Buch.
(10) Represents (a) 3,000 shares of Common Stock held by Mr. Dix, (b) 1,800
shares of Common Stock held in trust for his children, (c) 750 shares held
in an individual retirement account and (d) 16,250 shares of Common Stock
issuable upon the exercise of stock options held by Mr. Dix.
(11) Represents (a) 2,250 shares of Common Stock held by Mr. McEwen and (b)
12,500 shares of Common Stock issuable upon the exercise of stock options
held by Mr. McEwen.
(12) Represents (a) 39,000 shares of Common Stock held by Mr. Miller and (b)
16,250 shares of Common Stock issuable upon the exercise of stock options
held by Mr. Miller.
(13) Based solely on information contained in an amendment to Schedule 13G
dated December 30, 1998 filed with the Commission. 380,000 of these shares
of Common Stock are owned by Fidelity Capital Appreciation Fund, a
wholly-owned subsidiary of FMR Corporation.
(14) Based solely on information contained in Schedule 13G dated December 31,
1996 filed with the Commission.
(15) Includes the shares of Common Stock and options to purchase shares of
Common Stock described in Notes (3) through (6) and (8) through (12).

31
<PAGE>

In connection with the pending John Henry/Manhattan acquisition, we
granted IAC in April 1998 the right to purchase 1,320,000 shares of Supreme
common stock at a price of $12 per share, representing approximately 16.4% of
our outstanding common stock as of January 31, 1999. This right is exercisable
upon the consummation of the John Henry/Manhattan acquisition.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

LEASE AGREEMENTS

See "Business--Facilities" with respect to certain facilities leased
jointly by Supreme and Carfel.

Prior to the consolidation of our administrative offices and warehouse and
distribution facilities, we occupied the following properties from affiliated
parties.

We lease an approximately 16,900 square foot building in Miami, Florida
which housed our executive offices. The space is leased from George
Feldenkreis, the Company's Chairman of the Board, pursuant to a lease which
expires in December 2000. The annual rental for the office facility is
approximately $128,000. Supreme will continue to pay rent on this facility
until the expiration of the lease or until the lease of the facility to another
party.

We also leased an approximately 49,000 square foot warehouse/office
building adjacent to our former executive offices from George Feldenkreis
pursuant to a lease which expired in April 1998. Fiscal 1999 rental for this
facility was approximately $282,000. In January 1999, we vacated this building.

We also lease an approximately 32,000 square foot warehouse building from
a partnership of which Mr. Feldenkreis is a general partner. This warehouse was
leased pursuant to a lease which expired in June 1998. Fiscal 1999 rental for
this facility was approximately $136,000. This facility is currently being
leased on a month-to-month basis for a monthly rental of $11,333.

LICENSING AGREEMENTS

In January 1995, we entered into a license agreement ("Isaco License
Agreement") with Isaco International, Inc. ("Isaco"), pursuant to which Isaco
was granted an exclusive license to use the Natural Issue brand in the United
States and its territories and possessions to market a line of men's underwear
and loungewear. In June 1998, Supreme and Isaco extended the Isaco License
Agreement for an additional year at a guaranteed minimum royalty of $137,500.
Royalty income earned from Isaco License Agreement amounted to approximately
$298,000, $296,000 and $243,000 for fiscal 1999, 1998 and 1997, respectively.
The principal shareholder of Isaco is Isaac Zelcer, who is Oscar Feldenkreis'
father-in-law.

In January 1998, we entered into two additional three-year license
agreements with Isaco for use of the Natural Issue brand in the United States
and its territories and possessions to market lines of hosiery and neckwear.
The license agreement for neckwear provides for a guaranteed minimum annual
royalty of $15,000 and the license agreement for hosiery provides for a
guaranteed minimum annual royalty of $25,000 during the first year, increasing
by $5,000 in each subsequent year.

The Company believes that its arrangements with George Feldenkreis, Carfel
and Isaco are on terms at least as favorable as the Company could secure from a
non-affiliated third party.

32
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report

(1) Financial Statements.

(1) Financial Statements. The following consolidated financial
statements of Supreme International Corporation and subsidiaries are
included in Part II, Item 8:

PAGE
-----
Independent Auditors' Report ........................................ F-1
Consolidated Balance Sheets as of January 31, 1998 and 1999 ......... F-2
Consolidated Statements of Income
For Each of the Three Years in the Period Ended January 31, 1999 .... F-3
Consolidated Statements of Changes in Stockholders' Equity
For Each of the Three Years in the Period Ended January 31, 1999 .... F-4
Consolidated Statements of Cash Flow
For Each of the Three Years in the Period Ended January 31, 1999 .... F-5
Notes to Consolidated Financial Statements .......................... F-6

The following financial statements of Perry Ellis International, Inc.
are included in Part II, Item 8:

PAGE
-----
Independent Auditors' Report ........................................ F-21
Balance Sheet as of December 31, 1997 and 1998 ...................... F-22
Statement of Operations for the years ended
December 31, 1996, 1997 and 1998 ................................... F-23
Undistributed Income for the years ended
December 31, 1996, 1997 and 1998 ................................... F-24
Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998 ................................... F-25
Notes to Financial Statements ....................................... F-26

The following Unaudited Pro Forma Combined Financial Information of
Supreme and Perry Ellis International, Inc. are included in Part II,
Item 8:

PAGE
-----
Introduction ........................................................ F-29
Balance Sheet as of January 31, 1999 ................................ F-30
Income Statement for the year ended January 31, 1999 ................ F-31
Notes to Unaudited Pro Forma Combined Financial Information ......... F-32

(2) Consolidated Financial Statement Schedule

All schedules for which provision is made in applicable regulations
of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or the required information
have been included in the Consolidated Financial Statements and
therefore such schedules have been omitted.

33
<PAGE>

(3) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- -------- ---------------------------------------------------------------------------------------------
<S> <C>
3.1 Registrant's Second Amended and Restated Articles of Incorporation(6)
3.2 Registrant's Amended and Restated Bylaws(1)
4.1 Form of Common Stock Certificate(1)
10.3 Form of Indemnification Agreement between the Registrant and each of the Registrant's
Directors and Officers(1)
10.6 Business Lease dated October 4, 1990, between George Feldenkreis and the Registrant
relating to warehouse facilities(1)
10.7 Business Lease dated May 1, 1990, between George Feldenkreis and the Registrant relating
to warehouse facilities(1)
10.9 1993 Stock Option Plan (1)(2)
10.10 Directors Stock Option(1)(2)
10.15 Loan and Security Agreement dated as of October 5, 1994, between the Registrant and
NationsBank
10.16 First Amendment to Loan and Security Agreement dated as of August 19, 1995, between
the Registrant and NationsBank of George N.A.(4)
10.17 Amendment to Business Lease between George Feldenkreis and the Registrant relating to
office facilities(4)
10.18 Revocable Credit Facility Agreement dated May 26, 1995 between the Registrant and
Hamilton Bank, N.A.(4)
10.19 Revolving Line of Credit Agreement dated June 23, 1995 between the Registrant and Ocean
Bank(4)
10.20 Profit Sharing Plan(2)(4)
10.21 Amended and Restated Employment Agreement between the Registrant and George
Feldenkreis(2)(4)
10.22 Amended and Restated Employment Agreement between the Registrant and Oscar
Feldenkreis(2)(4)
10.23 Business Lease dated December 26, 1995 between George Feldenkreis and the Registrant
relating to office facilities(5)
10.24 Lease Agreement [Land] dated as of August 28, 1997 between SUP Joint Venture, as Lessor
and Registrant, as Lessee(7)
10.25 Lease Agreement [Building] dated as of August 28, 1997 between SUP Joint Venture, as
Lessor and Registrant, as Lessee(7)
10.26 Amended and Restated Loan and Security Agreement dated as of March 31, 1998(7)
10.27 Amendment to Amended and Restated Loan and Security Agreement dated as of August 1,
1998(6)
22.1 Subsidiaries of Registrant(3)
23.2 Consent of Deloitte & Touche LLP(6)
27.1 Financial Data Schedule (SEC use only)(6)
</TABLE>

- ----------------
(1) Previously filed as an Exhibit of the same number to Registrant's
Registration Statement on Form S -1 (File No. 33-60750) and incorporated
herein by reference.

(2) Management Contract or Compensation Plan.

(3) Previously filed as an Exhibit of the same number to Registrant's Annual
Report on Form 10-K for the year ended January 31, 1995 and incorporated
herein by reference.

(4) Previously files as an Exhibit of the same number to Registrant's
Registration Statement on Form S-1 (File No. 33-96304) and incorporated
herein by reference.

(5) Previously filed as an Exhibit of the same number to Registrant's Annual
Report on Form 10-K for the year ended January 31, 1996 and incorporated
herein by reference.

(6) Filed herewith.

(7) Previously filed as an exhibit of the same number to Registrant's Annual
Report on Form 10-K for the year ended January 31, 1997 and incorporated
herein by reference.

34
<PAGE>

(b) Reports on Form 8-K

On January 15, 1999 Supreme filed a current report on Form 8-K to
disclose that it had entered into a definitive agreement with respect to
the John Henry/Manhattan acquisition.

The exhibits required by Item 601 of Regulation S-K are set forth in
(a)(3) above.

(d) Financial Statement Schedules

The financial statement schedules required by Regulation S-K are set forth
in (a)(2) above.

35
<PAGE>

SIGNATURES

Pursuant to the requirement of Section 12 of the Securities Exchange Act
of 1934, the Registrant has caused this report or amendment to thereto to be
signed on its behalf by the undersigned, thereunto duly authorized.

SUPREME INTERNATIONAL CORPORATION

By: /s/ GEORGE FELDENKREIS

By: /s/ GEORGE FELDENKREIS
-------------------------------------
George Feldenkreis
Chairman of the Board and Chief
Executive Officer

Dated: March 15, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the date indicated:

<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- -------------------------------- ------------------------------------- ---------------
<S> <C> <C>
/s/ GEORGE FELDENKREIS Chairman of the Board and March 15, 1999
- -------------------------------- Chief Executive Officer
George Feldenkreis (Principal Executive Financial)
and Accounting Officer)

/s/ OSCAR FELDENKREIS President, Chief Operations Officer March 15, 1999
- -------------------------------- and Director
Oscar Feldenkreis

/s/ RONALD BUCH Director March 15, 1999
- --------------------------------
Ronald Buch

/s/ GARY DIX Director March 15, 1999
- --------------------------------
Gary Dix

/s/ SALOMON HANONO Director March 15, 1999
- --------------------------------
Salomon Hanono

/s/ RICHARD McEWEN Director March 15, 1999
- --------------------------------
Richard McEwen

/s/ LEONARD MILLER Director March 15, 1999
- --------------------------------
Leonard Miller
</TABLE>

36
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Supreme International Corporation and subsidiaries:

We have audited the consolidated balance sheets of Supreme International
Corporation and subsidiaries (the "Company") as of January 31, 1998 and 1999,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the three years in the period ended January
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of January 31,
1998 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended January 31, 1999 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Miami, Florida
March 12, 1999

F-1
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JANUARY 31, 1998 AND 1999

<TABLE>
<CAPTION>
1998 1999
--------------- ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash ............................................................. $ 1,010,256 $ 173,493
Accounts receivable, net ......................................... 35,502,607 38,969,845
Inventories ...................................................... 35,799,388 32,965,655
Deferred income taxes ............................................ 1,154,905 1,091,482
Deposits for acquisitions ........................................ -- 6,000,000
Other current assets ............................................. 2,253,328 2,040,200
------------ ------------
Total current assets ........................................... 75,720,484 81,240,675
Property and equipment, net ....................................... 4,899,656 7,851,592
Intangible assets, net ............................................ 19,716,064 18,842,797
Other ............................................................. 1,313,747 1,022,467
------------ ------------
TOTAL .......................................................... $101,649,951 $108,957,531
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ................................................. $ 4,048,325 $ 4,595,688
Accrued expenses ................................................. 2,062,912 4,931,525
Borrowings under letter of credit facilities ..................... 3,000,000 --
Other current liabilities ........................................ 442,790 413,505
------------ ------------
Total current liabilities ...................................... 9,554,027 9,940,718
Deferred income tax ............................................... 282,905 559,728
Long term debt--senior credit agreement ........................... 36,658,174 33,511,157
------------ ------------
Total liabilities .............................................. 46,495,106 44,011,603
------------ ------------
Commitments and Contingencies: (Note 16)
Stockholders' Equity:
Preferred stock--$.01 par value; 1,000,000 shares authorized;
no shares issued or outstanding ................................. -- --
Class A Common Stock--$.01 par value; 30,000,000 shares authorized;
no shares issued or outstanding ................................. -- --
Common stock--$.01 par value; 30,000,000 shares authorized;
6,555,681 and 6,712,374 shares issued and outstanding
as of January 31, 1998 and 1999, respectively ................... 65,556 67,123
Additional paid-in-capital ........................................ 27,598,618 28,806,455
Retained earnings ................................................. 27,490,671 36,072,350
------------ ------------
Total stockholders' equity ..................................... 55,154,845 64,945,928
------------ ------------
TOTAL .......................................................... $101,649,951 $108,957,531
============ ============
</TABLE>

See Notes to consolidated financial statements.

F-2
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

<TABLE>
<CAPTION>
1997 1998 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues
Net Sales ........................................... $ 157,372,796 $ 190,689,212 $ 221,347,295
Royalty Income ...................................... 1,654,262 4,031,878 3,057,357
------------- ------------- -------------
Total Revenues ..................................... 159,027,058 194,721,090 224,404,652
Cost of Sales ........................................ 122,045,614 145,991,132 166,198,450
------------- ------------- -------------
Gross Profit ......................................... 36,981,444 48,729,958 58,206,202
Selling, General and Administrative Expenses ......... 25,876,115 35,885,443 41,639,672
------------- ------------- -------------
Operating Income ..................................... 11,105,329 12,844,515 16,566,530
Interest Expense ..................................... 1,664,392 2,781,509 3,493,985
------------- ------------- -------------
Income Before Income Tax Provision ................... 9,440,937 10,063,006 13,072,545
Income Tax Provision ................................. 3,596,918 2,884,844 4,490,866
------------- ------------- -------------
Net Income ........................................... $ 5,844,019 $ 7,178,162 $ 8,581,679
============= ============= =============
Net Income Per Share
Basic ............................................... $ 0.89 $ 1.10 $ 1.29
============= ============= =============
Diluted ............................................. $ 0.89 $ 1.08 $ 1.27
============= ============= =============
Weighted Average Number of Shares Outstanding
Basic ............................................... 6,534,446 6,540,604 6,674,103
============= ============= =============
Diluted ............................................. 6,595,147 6,665,635 6,769,810
============= ============= =============
</TABLE>

See Notes to consolidated financial statements.

F-3
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------------- ---------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1996 ................... 6,800,000 $ 68,000 $ 29,296,594 $14,468,490 $ 43,833,084
Purchase of treasury stock, at cost ......... (278,069) (2,780) (1,947,599) -- (1,950,379)
Exercise of stock options ................... 7,500 75 48,675 -- 48,750
Net Income .................................. -- -- -- 5,844,019 5,844,019
--------- -------- ------------ ----------- ------------
BALANCE, JANUARY 31, 1997 ................... 6,529,431 65,295 27,397,670 20,312,509 47,775,474
Exercise of stock options ................... 26,250 261 200,948 -- 201,209
Net Income .................................. -- -- -- 7,178,162 7,178,162
--------- -------- ------------ ----------- ------------
BALANCE, JANUARY 31, 1998 ................... 6,555,681 65,556 27,598,618 27,490,671 55,154,845
Exercise of stock options ................... 78,525 785 457,367 -- 458,152
Exercise of warrants ........................ 78,168 782 (782) -- --
Net Income .................................. -- -- -- 8,581,679 8,581,679
Tax benefit for exercise of
non-qualified stock options ............... -- -- 751,252 -- 751,252
--------- -------- ------------ ----------- ------------
BALANCE, JANUARY 31, 1999 ................... 6,712,374 $ 67,123 $ 28,806,455 $36,072,350 $ 64,945,928
========= ======== ============ =========== ============
</TABLE>

See Notes to consolidated financial statements.

F-4
<PAGE>

SUPREME INTERNATIONAL CORPORATIONS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

<TABLE>
<CAPTION>
1997 1998 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................... $ 5,844,019 $ 7,178,162 $ 8,581,679
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization .................................. 1,147,091 1,748,006 2,161,398
Loss on sale and abandonment of property ....................... 257,221 187,692 --
Decrease (increase) in deferred taxes .......................... 159,655 (203,342) 340,246
Changes in operating assets and liabilities:
(net of effects of acquisition)
Accounts receivable, net ...................................... (8,951,318) (6,695,371) (3,467,238)
Inventories ................................................... 293,527 (3,598,866) 2,833,733
Other current assets .......................................... (359,942) (727,633) 213,128
Other assets .................................................. (1,915,477) 889,854 291,280
Accounts payable and accrued expenses ......................... 4,835,234 (1,907,414) 3,415,976
Other current liabilities ..................................... 563,756 28,055 (29,285)
------------- ------------ -------------
Net cash provided by (used in)
operating activities ..................................... 1,873,766 (3,100,857) 14,340,917
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .............................. (1,058,061) (3,828,142) (4,004,588)
Proceeds from sale of property and equipment .................... 164,545 32,102 --
Payment on purchase of intangible assets ........................ (137,027) (758,598) (235,479)
Deposit for John Henry/Manhattan acquisition .................... -- -- (1,000,000)
Deposit for Perry Ellis International acquisition ............... -- -- (5,000,000)
Payment for Jolem acquisition ................................... (3,657,435) -- --
Payment for Munsingwear acquisition ............................. (19,768,380) -- --
------------- ------------ -------------
Net cash used in investing activities ........................ (24,456,358) (4,554,638) (10,240,067)
------------- ------------ -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in borrowings under letter of
credit facilities ............................................. 6,812,629 (3,812,629) (3,000,000)
Net proceeds from (repayments of) long-term debt ................ 18,168,857 11,521,373 (3,147,017)
Purchase of treasury stock ...................................... (1,950,379) -- --
Tax benefit for exercise of non-qualified stock options ......... -- -- 751,252
Proceeds from exercise of stock options ......................... 48,750 201,209 458,152
------------- ------------ -------------
Net cash provided by (used in) financing activities .......... 23,079,857 7,909,953 (4,937,613)
------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH ................................. 497,265 254,458 (836,763)
CASH AT BEGINNING OF YEAR ....................................... 258,533 755,798 1,010,256
------------- ------------ -------------
CASH AT END OF YEAR ............................................. $ 755,798 $ 1,010,256 $ 173,493
============= ============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest ....................................................... $ 1,433,403 $ 2,820,016 $ 3,293,877
============= ============ =============
Income taxes ................................................... $ 3,394,466 $ 3,174,807 $ 1,762,479
============= ============ =============
</TABLE>

See Notes to consolidated financial statements.

F-5
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

1. GENERAL

Supreme International Corporation and subsidiaries (the "Company") was
incorporated in the State of Florida and has been in business since 1967. The
Company is a leading designer and marketer of a broad line of high quality
men's sportswear, including sport and dress shirts, golf sportswear, sweaters,
urban wear, casual and dress pants and shorts to all levels of retail
distribution.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the Company's significant accounting
policies:

PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Supreme International Corporation and its wholly-owned
subsidiaries. All intercompany transactions and balances have been eliminated
in consolidation.

USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts in the consolidated financial
statements and the accompanying notes. Actual results could differ from those
estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts of accounts
receivable and accounts payable approximates fair value due to their short-term
nature. The carrying amount of debt and credit facilities approximate fair
value due to their stated interest rate approximating a market rate. These
estimated fair value amounts have been determined using available market
information or other appropriate valuation methodologies.

INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out basis) or market. Costs consist of the purchase price, customs,
duties, freight, insurance, and commissions to buying agents.

PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.
Depreciation is computed using the straight-line and accelerated methods over
the estimated useful lives of the assets. Amortization of leasehold
improvements is computed using the straight-line method over the shorter of the
lease term or estimated useful lives of the improvements. The useful lives
range from five to ten years.

INTANGIBLE ASSETS--Intangible assets primarily represent costs capitalized
in connection with the acquisition, registration and maintenance of brand names
and license rights. The amortization periods for the intangible assets range
from fifteen to twenty years, with a weighted average of nineteen and a half
years.

LONG LIVED-ASSETS--Management reviews long-lived assets, including
identifiable intangible assets, for possible impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. If there is an indication of impairment, management prepares an
estimate of future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset and its eventual disposition. If
these cash flows are less than the carrying amount of the asset, an impairment
loss is recognized to reduce the asset to its estimated fair value. Preparation
of estimated expected future cash flows is inherently subjective and is based
on management's best

F-6
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

estimate of assumptions concerning future conditions. At January 31, 1999,
management believes there was no impairement to long-lived assets.

REVENUE RECOGNITION--Sales are recognized upon shipment, returns for
defective goods are netted against sales, and an allowance is provided for
estimated returns and other chargebacks. Royalty income is recognized when
earned on the basis of the terms specified in the underlying contractual
agreements.

INCOME TAXES--Deferred income taxes result primarily from timing
differences in the recognition of expenses for tax and financial reporting
purposes and are accounted for in accordance with Financial Accounting
Standards Board Statement No. 109 ("SFAS No. 109"), Accounting for Income
Taxes, which requires the asset and liability method of computing deferred
income taxes. Under the asset and liability method, deferred taxes are adjusted
for tax rate changes as they occur.

NET INCOME PER SHARE--Basic net income per share is computed by dividing
net income by the weighted average shares of outstanding common stock. The
calculation of diluted net income per share is similar to basic earnings per
share except that the denominator includes dilutive potential common stock. The
dilutive potential common stock included in the Company's computation of
diluted net income per share includes the effects of the stock options and
warrants described in Note 14, as determined using the treasury stock method.
The weighted average number of shares for stock options included in the
dilutive weighted average shares outstanding were 60,701, 125,031 and 95,707 in
1997, 1998 and 1999, respectively.

STOCK SPLIT--On July 21, 1997, the Company's Board of Directors declared a
3 for 2 stock split in the form of a stock dividend. The accompanying financial
statements reflect the stock split as if it had occurred as of the earliest
period being presented.

ACCOUNTING FOR STOCK-BASED COMPENSATION--The Company has chosen to account
for stock-based compensation to employees and non-employee members of the Board
using the intrinsic value method prescribed by Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As required by Statement of Financial Accounting Standards No.
123 ("SFAS No. 123"), Accounting for Stock-Based Compensation, the Company has
presented certain pro forma and other disclosures related to stock-based
compensation plans.

RECLASSIFICATIONS--Certain amounts in the 1998 and 1997 financial
statements have been reclassified to conform to the 1999 presentation.

NEW ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130
("SFAS No. 130"), REPORTING COMPREHENSIVE INCOME. SFAS No. 130 requires that
all components of comprehensive income be reported on one of the following: (1)
the statement of income; (2) the statement of changes in stockholders' equity,
or (3) a separate statement of comprehensive income. Comprehensive income is
comprised of net income and all changes to stockholders' equity, except those
due to investments by stockholders (changes in paid-in capital) and
distributions to stockholders (dividends). SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. The Company adopted SFAS No. 130

F-7
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

for the fiscal year ended January 31, 1999. The components of comprehensive
income which are excluded from net income are not significant, individually or
in the aggregate, and therefore no separate statement of comprehensive income
has been presented.

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. SFAS No. 131 changes the way
public companies report information about segments of their business in their
annual financial statements and requires them to report selected segment
information in their quarterly reports issued to shareholders. SFAS No. 131
also requires entity-wide disclosure about products and services an entity
provides, the foreign countries in which it holds assets and reports revenues
and its major customers. SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997. The Company adopted SFAS No. 131 for the fiscal year
ended January 31, 1999 (see Note 15).

In March 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED OR Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides
guidance for capitalizing and expensing the costs of computer software
developed or obtained for internal use. SOP 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. Management has
not determined the effect, if any, of adopting SOP 98-1.

In April 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-5, REPORTING ON THE COSTS OF START-UP
ACTIVITIES ("SOP 98-5"). SOP 98-5 establishes accounting standards for the
reporting of certain costs associated with the start-up of operations, lines of
business, etc. SOP 98-5 requires that costs of start-up activities, including
organizational costs, be expenses as incurred and that in the year of adoption,
start-up costs recorded should be expensed. SOP 98-5 is effective for fiscal
years beginning subsequent to December 15, 1998. Management has not determined
the effect, if any, of adopting SOP 98-5.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING Activities ("SFAS No. 133"). Among other provisions, SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It also requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 is effective
for financial statements for fiscal year beginning after June 15, 1999.
Management has not determined the effect, if any, of adopting SFAS No. 133.

3. ACQUISITIONS

MUNSINGWEAR ACQUISITION--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/registered trademark/, GRAND SLAM
TOUR/registered trademark/, PENGUIN SPORT/registered trademark/, 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

F-8
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

3. ACQUISITIONS--(CONTINUED)

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 (see Note 10).

JOLEM ACQUISITION--On May 6, 1996, the Company acquired all the assets of
Jolem Imports, Inc. ("Jolem"), a Miami based manufacturer of men's and boy's
casual apparel. The purchase price amounted to approximately $3,700,000 and was
primarily allocated to working capital and intangible assets as follows:
inventories $1,800,000; accounts receivable $1,500,000; and brand names
$400,000. The acquisition was accounted for under the purchase method of
accounting.

4. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following as of January 31:

<TABLE>
<CAPTION>
1998 1999
--------------- ---------------
<S> <C> <C>
Trade accounts ................................................ $ 37,499,297 $ 43,219,125
Royalties and other receivables ............................... 2,217,338 1,479,149
------------ ------------
Total ......................................................... 39,716,635 44,698,274
Less: Allowance for doubtful accounts ......................... (609,874) (609,874)
Allowance for sales returns and other chargebacks .......... (3,604,154) (5,118,555)
------------ ------------
Total ......................................................... $ 35,502,607 $ 38,969,845
============ ============
</TABLE>

The activity for the allowance accounts are as follows:

<TABLE>
<CAPTION>
1997 1998 1999
--------------- ---------------- ----------------
<S> <C> <C> <C>
Allowance for doubtful accounts:
Beginning balance ............................ $ 242,792 $ 250,000 $ 609,874
Provision .................................... 135,854 799,129 167,659
Write-offs, net of recoveries ................ (128,646) (439,255) (167,659)
------------ ------------- -------------
Ending balance ............................... $ 250,000 $ 609,874 $ 609,874
============ ============= =============
Allowance for sales returns and other
chargebacks:
Beginning balance ............................ $ 567,014 $ 1,670,565 $ 3,604,154
Provision .................................... 9,057,342 13,047,822 11,984,955
Actual returns and other chargebacks ......... (7,953,791) (11,114,233) (10,470,554)
------------ ------------- -------------
Ending balance ............................... $ 1,670,565 $ 3,604,154 $ 5,118,555
============ ============= =============
</TABLE>

The Company carries accounts receivable at the amount it deems to be
collectible. Accordingly, the Company provides allowances for accounts
receivable it deems to be uncollectible based on management's best estimates.
Recoveries are recognized in the period they are received. The ultimate amount
of accounts receivable that become uncollectible could differ from those
estimated.

F-9
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

5. INVENTORIES

Inventories consisted of the following as of January 31:

1998 1999
--------------- --------------
Finished goods ........................ $ 31,972,723 $ 30,730,131
Raw materials and in process .......... 1,204,841 255,085
Merchandise in transit ................ 2,621,824 1,980,439
------------ ------------
Total ................................. $ 35,799,388 $ 32,965,655
============ ============

6. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of January 31:

1998 1999
--------------- ---------------
Land .................................. $ -- $ 1,125,000
Furniture, fixture and equipment ...... 5,723,557 7,205,651
Vehicles .............................. 309,955 371,364
Leasehold improvements ................ 1,617,288 2,299,704
------------ ------------
7,650,800 11,001,719
Less: accumulated depreciation ........ (2,751,144) (3,150,127)
------------ ------------
Total ................................. $ 4,899,656 $ 7,851,592
============ ============

Depreciation expense relating to property and equipment amounted to
approximately $800,000, $847,000, and $1,052,000 for the fiscal years ended
January 31, 1997, 1998 and 1999, respectively.

7. INTANGIBLE ASSETS

Intangible assets consisted of the following as of January 31:

1998 1999
-------------- --------------
Trademarks & Licenses ............. $ 21,306,788 $ 21,544,562
Goodwill .......................... 17,864 16,165
------------ ------------
21,324,652 21,560,727
Accumulated Amortization .......... (1,608,588) (2,717,930)
------------ ------------
Balance, net ...................... $ 19,716,064 $ 18,842,797
============ ============

Amortization expense relating to the intangible assets amounted to
approximately $347,000, $901,000 and $1,109,000, for the fiscal years ended
January 31, 1997, 1998 and 1999, respectively.

F-10
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

8. ACCRUED EXPENSES

Accrued expenses consisted of the following as of January 31:

1998 1999
------------- -------------
Income taxes ...................... $ 370,687 $2,107,457
Salaries and commissions .......... 662,865 1,549,758
Buying commissions ................ 597,280 818,188
Other ............................. 432,080 456,122
---------- ----------
Total ............................. $2,062,912 $4,931,525
========== ==========

9. BORROWINGS UNDER LETTER OF CREDIT FACILITIES

The Company has a $45 million facility which provides up to $35 million to
issue sight letters of credit including a sub-limit of $2 million to issue time
letters of credit up to 120 days. In addition, the facility has a $10 million
sub-limit for refinancing of sight letters of credit for a period of up to 120
days. The facility is collateralized by the consignment of merchandise in
transit under each letter of credit. Indebtedness under this facility bears
interest at variable rates substantially equal to the lenders' prime rate minus
1.0% per annum (6.75% as of January 31, 1999). Amounts outstanding under the
$10 million sub-limit are collateralized by a secondary interest in the
Company's accounts receivable and inventories.

The Company has two additional letters of credit facilities which provide
for borrowings of up to $15 million to issue sight letters of credit. The
facilities are collateralized by the consignment of the merchandise in transit
under each letter of credit.

Borrowings available under letter of credit facilities consisted of the
following as of January 31:

1998 1999
--------------- ---------------
Total letter of credit facilities ...... $ 60,000,000 $ 60,000,000
Borrowings ............................. (3,000,000) --
Outstanding letters of credit .......... (26,673,016) (23,831,172)
------------- -------------
Available .............................. $ 30,326,984 $ 36,168,828
============= =============

10. LONG-TERM DEBT--SENIOR CREDIT FACILITY

The Company amended its revolving credit facility (the "Senior Credit
Facility") on August 1, 1998 with a group of banks giving it the right to
borrow $60 million or a portion thereof for its general corporate purposes. The
Senior Credit Facility expires in April 2001 . Borrowings are limited under the
terms of a borrowing base calculation which generally restricts the outstanding
balance to 85% of eligible receivables plus 50% of eligible inventories, as
defined. Interest on borrowings is variable, based upon the Company's option of
selecting a LIBOR plus 1.25% or the bank's prime rate. The weighted average
interest rate was 6.69% as of January 31, 1999. The Senior Credit Facility
contains certain covenants, the most restrictive of which require the Company
to maintain certain financial and net worth ratios. In addition, the Senior
Credit Facility restricts the payment of dividends. The Senior Credit Facility
is secured by the Company's assets. The outstanding balance under the Senior
Credit Facility as of January 31, 1998 and 1999 amounted to $36,658,174 and
$33,511,157, respectively.

F-11
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

10. LONG-TERM DEBT--SENIOR CREDIT FACILITY--(CONTINUED)

The Company has received a proposal letter to amend the Senior Credit
Facility. As amended, the Senior Credit Facility will provide (a) a revolving
credit facility of up to an aggregate amount of $80 million (the "Revolver")
and (b) a term loan in the aggregate amount of $20 million (the "Term Loan").
The amended agreement will have a term of five years.

11. INCOME TAXES

The income tax provision consisted of the following for each of the years
ended January 31:

1997 1998 1999
------------- ------------- -------------
Current income taxes:
Federal ................... $2,910,509 $2,780,815 $3,057,838
State ..................... 526,754 307,371 1,002,692
Foreign ................... -- -- 90,090
---------- ---------- ----------
Total ...................... $3,437,263 $3,088,186 $4,150,620
Deferred income taxes:
Federal and state ......... 159,655 (203,342) 340,246
---------- ---------- ----------
Total ...................... $3,596,918 $2,884,844 $4,490,866
========== ========== ==========

The following table reconciles the statutory federal income tax rate to
the Company's effective income tax rate for each of the years ended January 31:

<TABLE>
<CAPTION>
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Statutory federal income tax rate ............................... 35.0 % 35.0 % 35.0 %
Increase (decrease) resulting from
State income taxes, net of federal income tax benefit .......... 3.9 2.1 2.9
Benefit of graduated rate ...................................... (1.0) (1.0) (1.0)
Reversal of certain income tax reserves ........................ -- (5.0) --
Other ........................................................... 0.2 (2.4) (2.5)
----- ----- -----
Total ........................................................... 38.1 % 28.7 % 34.4 %
===== ===== =====
</TABLE>

F-12
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

11. INCOME TAXES--(CONTINUED)

The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows as of January 31:

1998 1999
------------ ------------
Deferred income tax assets:
Inventories ............................. $ 642,944 $ 795,442
Accounts receivable ..................... 227,468 220,165
Accrued expenses ........................ 183,750 --
Other ................................... 100,743 75,875
--------- ---------
Deferred income tax assets .............. 1,154,905 1,091,482
--------- ---------
Deferred income tax liabilities:
Fixed assets ............................ (61,742) (318,580)
Intangible .............................. (99,694) (241,148)
Other ................................... (121,469) --
--------- ---------
Deferred income tax liabilities ......... (282,905) (559,728)
--------- ---------
Net deferred income tax asset ........... $872,000 $531,754
========= =========

A valuation allowance for deferred income tax assets is not deemed
necessary as the assets are expected to be recovered.

12. RETIREMENT PLAN

The Company adopted a 401(K) Profit Sharing Plan (the "Plan") in which
eligible employees may participate. Employees are eligible to participate in
the Plan upon the attainment of age 21, and completion of one year of service.
Participants may elect to contribute up to 15% of their annual compensation,
not to exceed amounts prescribed by statutory guidelines. The Company is
required to contribute an amount equal to 50% of each participant's eligible
contribution up to 4% of the participant's annual compensation. The Company may
elect to contribute additional amounts at its discretion. The Company's
contributions to the plan were approximately $34,000, $74,000, and $115,000 for
the fiscal years ended January 31, 1997, 1998 and 1999 respectively.

13. RELATED PARTY TRANSACTIONS

The Company leases certain office and warehouse space owned by the
Company's Chairman of the Board of Directors and Chief Executive Officer under
non-cancelable operating lease arrangements. Rent expense, including taxes, for
these leases amounted to approximately $600,000, $625,000 and $546,000 for the
fiscal years ended January 31, 1997, 1998 and 1999, respectively.

The Company entered into a license agreement (the "License Agreement")
with Isaco International, Inc. ("Isaco"), pursuant to which Isaco was granted
an exclusive license to use the Natural Issues brand name in the United States
and Puerto Rico to market a line of men's underwear and loungewear. The License
Agreement provides for a guaranteed minimum royalty payment to the Company of
$137,500 and expires on May 31, 1999. The principal shareholder of Isaco is the
father-in-law of the Company's President and Chief Operating Officer. Royalty
income earned from the License

F-13
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

13. RELATED PARTY TRANSACTIONS--(CONTINUED)

Agreement amounted to approximately $243,000, $296,000 and $298,000 for the
fiscal years ended January 31, 1997, 1998 and 1999, respectively.

In January 1998, the Company entered into two additional three-year
license agreements with Isaco for use of the Natural Issue brand in the United
States and its territories and possessions to market lines of hosiery and
neckwear. The license agreement for neckwear provides for a guaranteed minimum
annual royalty of $15,000 and the license agreement for hosiery provides for a
guaranteed minimum annual royalty of $25,000 during the first year, increasing
by $5,000 in each subsequent year.

14. STOCK OPTIONS AND WARRANTS

STOCK OPTIONS--The Company adopted a 1993 Stock Option Plan (the "1993
Plan") and a Directors Stock Option Plan (the "Directors Plan") (collectively,
the "Stock Option Plans"), under which shares of common stock are reserved for
issuance upon the exercise of the options. The number of shares issuable under
the Directors Plan is 150,000. The 1993 Plan was amended during fiscal 1999 to
increase the number of shares issuable from 450,000 shares to 900,000 shares.
The Stock Option Plans are designed to serve as an incentive for attracting and
retaining qualified and competent employees, directors, consultants, and
independent contractors of the Company. The 1993 Plan provides for the granting
of both incentive stock options and nonstatutory stock options. Incentive stock
options may only be granted to employees. Only non-employee directors are
eligible to receive options under the Directors Plan. All matters relating to
the Directors Plan are administered by a committee of the Board of Directors
consisting of two or more employee directors, including selection of
participants, allotment of shares, determination of price and other conditions
of purchase, except that the per share exercise price of options granted under
the Directors Plan may not be less than the fair market value of the common
stock on the date of grant.

Options can be granted under the 1993 Plan on such terms and at such
prices as determined by the Board of Directors, or a committee thereof, except
that the per share exercise price of incentive stock options granted under the
1993 Plan may not be less than the fair market value of the common stock on the
date of grant, and in the case of an incentive stock option granted to a 10%
shareholder, the per share exercise price will not be less than 110% of such
fair market value. The aggregate fair market value of the shares covered by
incentive stock options granted under the 1993 Plan that become exercisable by
a grantee in any calendar year is subject to a $100,000 limit.

On December 9, 1998, in order to provide an appropriate incentive to
certain members of management whose stock option exercise prices were higher
than the market price on that date, the Company allowed certain options to be
repriced. This repricing was at the consent of the option holders, and all
other terms of the options, including grant dates and exercise dates, remain
intact and in accordance with the 1993 Plan.

F-14
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

14. STOCK OPTIONS AND WARRANTS--(CONTINUED)

A summary of the status of the option plans as of and for the changes
during each of the three years in the period ended January 31, 1999 is
presented below:

<TABLE>
<CAPTION>
OPTION PRICE PER SHARE OPTIONS EXERCISABLE
--------------------------------- -----------------------------
NUMBER NUMBER WEIGHTED AVERAGE
OF SHARES LOW HIGH WEIGHTED OF SHARES EXERCISE PRICE
------------- ---------- ----------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding January 31, 1996 218,250 $ 6.33 $ 10.75 $ 7.71 114,938 $ 8.06
Granted 1997 ................ 90,000 $ 6.67 $ 10.75 $ 8.87
Exercised 1997 .............. (7,500) $ 6.50 $ 6.50 $ 6.50
Cancelled 1997 .............. (7,500) $ 6.50 $ 6.50 $ 6.50
-------
Outstanding January 31, 1997 293,250 $ 6.33 $ 10.75 $ 8.01 192,938 $ 8.14
Granted 1998 ................ 24,000 $ 9.17 $ 10.17 $ 9.84
Exercised 1998 .............. (26,250) $ 6.67 $ 10.75 $ 7.73
Cancelled 1998 .............. --
-------
Outstanding January 31, 1998 291,000 $ 6.33 $ 10.75 $ 7.92 221,750 $ 7.90
Granted 1999 ................ 387,000 $ 9.75 $ 15.75 $ 13.18
Exercised 1999 .............. (103,125) $ 6.33 $ 10.67 $ 7.36
Cancelled 1999 .............. (8,875) $ 10.67 $ 15.25 $ 10.96
--------
Outstanding January 31, 1999 566,000 $ 6.67 $ 15.75 $ 11.95 410,375 $ 12.66
========
</TABLE>

The following table summarizes the information about options outstanding
at January 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------- -------------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL LIFE AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING (IN YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------------------- ------------- ------------------ ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 6.50 - $ 9.75 152,750 3.0 $ 8.20 135,625 $ 8.19
$ 10.00 - $15.00 172,250 4.7 $ 10.69 42,750 $ 10.12
$ 15.25 - $15.75 241,000 9.1 $ 15.73 232,000 $ 15.75
</TABLE>

F-15
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

14. STOCK OPTIONS AND WARRANTS--(CONTINUED)

As described in Note 2, the Company accounts for stock-based compensation
using the provisions of APB No. 25 and related interpretations. No compensation
expense has been recognized in the years ended January 31, 1997, 1998 and 1999
as the exercise prices for stock options granted are equal to their fair market
value at the time of grant. Had compensation cost for options granted been
determined in accordance with the fair value provisions of SFAS 123, the
Company's net income and net income per share would have been as follows for
the years ended January 31:

1997 1998 1999
--------------- ---------------- ---------------
Net income:
As reported ......... $ 5,844,019 $ 7,178,162 $ 8,581,679
=========== ============ ============
Pro forma ........... $ 5,710,383 $ 7,026,242 $ 8,145,789
=========== ============ ============
Net income per share:
As reported
Basic .............. $ 0.89 $ 1.10 $ 1.29
=========== ============ ============
Diluted ............ $ 0.89 $ 1.08 $ 1.27
=========== ============ ============
Pro forma:
Basic ............... $ 0.87 $ 1.07 $ 1.22
=========== ============ ============
Diluted ............. $ 0.87 $ 1.05 $ 1.20
=========== ============ ============

The fair value for these options was estimated at the grant date using the
Black-Scholes Option Pricing Model with the following weighted-average
assumptions for 1997, 1998 and 1999:

1997 1998 1999
--------- --------- ---------
Risk free interest rate ................ 6.5% 6.5% 6.5%
Dividend yield ......................... 0.0% 0.0% 0.0%
Volatility factors ..................... 58.0% 45.9% 67.3%
Weighted average life (years) .......... 5.0 5.0 5.0

Using the Black-Scholes Option Pricing Model, the estimated
weighted-average fair value per option granted in 1997, 1998 and 1999 were
$4.97, $5.99 and $9.22, respectively.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its stock options.

The pro forma amounts may not be representative of the future effects on
reported net income and net income per share that will result from the future
granting of stock options, since the pro forma compensation expense is
allocated over the periods in which options become exercisable and new option
awards are granted each year.

F-16
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

14. STOCK OPTIONS AND WARRANTS--(CONTINUED)

WARRANTS--In conjunction with the Company's initial public offering in May
1993, the Company granted 180,000 warrants entitling the holders of each
warrant to purchase one share of common stock at an exercise price of $9.35 per
share. The warrants became exercisable on May 21, 1995. All warrants were
exercised during fiscal 1999.

15. SEGMENT INFORMATION

The Company is engaged principally in one line of business, that being a
leading designer and marketer of a broad line of high quality men's sportswear,
including sport and dress shirts, golf sportswear, sweaters, urban wear, casual
and dress pants and shorts to all levels of retail distribution. We own or
license the brands under which most of our products are sold. The percentage of
our revenues from branded products amounted to 75% in fiscal 1998 and 81% in
fiscal 1999. Sales to any one customer exceeding ten percent amounted to 15%,
12% and 12% for the year ended January 31, 1997; 12% and 13% for the year ended
January 31, 1998; and 15%, 10% and 10% for the year ended January 31, 1999. The
Company does not believe that these concentrations of sales and credit risk
represent a material risk of loss with respect to its financial position as of
January 31, 1999.

16. COMMITMENTS AND CONTINGENCIES

The Company has licensing agreements, as licensee, for the use of certain
branded and designer labels. The license agreements expire on varying dates
through December 31, 2000. Total royalty payments under these license
agreements amounted to approximately $405,000, $330,000 and $573,000 for the
years ended January 31, 1997, 1998 and 1999, respectively, and were classified
as selling, general and administrative expenses.

The Company is party to an employment agreement with Oscar Feldenkreis,
the Company's President and Chief Operating Officer, which expires in May 2000,
and is subject to annual renewal. The employment agreement currently provides
for an annual salary of $350,000, subject to annual cost-of-living increases,
and an annual bonus as may be determined by the Compensation Committee in its
discretion, up to a maximum of $500,000. The employment agreement requires Mr.
Feldenkreis to devote his full-time to the affairs of the Company. Upon
termination of the employment agreement by reason of the employee's death or
disability, Mr. Feldenkreis or his estate will receive a lump sum payment equal
to one year's salary plus a bonus as may be determined by the Compensation
Committee in its discretion. The employment agreement also prohibits Mr.
Feldenkreis from directly or indirectly competing with the Company for one year
after termination of his employment for any reason except the Company's
termination of Mr. Feldenkreis without cause.

The Company is also party to an employment agreement with George
Feldenkreis, the Company's Chairman of the Board and Chief Executive Officer,
expiring in May 2000, and is subject to annual renewal. The employment
agreement currently provides for an annual salary of $375,000, subject to
annual cost-of-living increases, and an annual bonus as may be determined by
the Compensation Committee in its discretion, up to a maximum of $250,000.
Pursuant to his employment agreement, Mr. Feldenkreis devotes a majority of his
working time to the affairs of the Company. George Feldenkreis' employment
agreement contains termination and non-competition provisions similar to those
set forth in Oscar Feldenkreis' agreement.

F-17
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

16. COMMITMENTS AND CONTINGENCIES--(CONTINUED)

The Company consolidated its administrative offices and warehouses and
distribution facilities into a 238,000 square foot facility in Miami. The lease
has a term of five years, minimum annual rental of approximately $1,000,000 and
requires a minimum contingent rental payment at the termination of the lease of
$12,325,000. The minimum contingent rental payment is not required if, at the
Company's option, the lease is renewed after the five year term.

Minimum aggregate annual commitments for all of the Company's
noncancelable operating lease commitments, including the related party leases
described in Note 13 and the minimum contingent rental payment described above,
are as follows.

YEAR ENDING JANUARY 31,
- -------------------------
2000 ................. $ 1,461,800
2001 ................. 1,335,600
2002 ................. 1,206,200
2003 ................. 13,154,500
2004 ................. 372,100
------------
Total ............... $ 17,530,200
============

Rent expense for these leases, including the related party rent payments
discussed in Note 13, amounted to $1,078,000, $1,460,000, and $1,946,000 for
the fiscal years ended January 31, 1997, 1998 and 1999, respectively.

The Company guarantees up to $600,000 of letters of credit of an
unaffiliated entity.

Upon consummation of the John Henry/Manhattan acquisition described in
Note 17, the Company will be required to pay Icahn Associates Corp. or its
affiliates ("IAC") a financial advisory fee of $1.0 million. In addition, IAC
has the right to acquire 1,320,000 shares of the Company's common stock at $12
per share. Simultaneously with the exercise of the right, IAC will be required
to enter into a two-year standstill agreement and will receive certain
registration rights with respect to the shares.

The Company is subject to claims and suits against it, as well as the
initiator of claims and suits against others, in the ordinary course of its
business, including claims arising from the use of its trademarks. The Company
does not believe that the resolution of any pending claims will have a material
adverse affect on its financial position, results of operations or cash flows.

F-18
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

17. SUBSEQUENT EVENTS

PERRY ELLIS INTERNATIONAL, INC. In January 1999, the Company agreed to buy
Perry Ellis International, Inc. for approximately $75.0 million in cash. Perry
Ellis International, Inc. is a privately-held company, which owns and licenses
the Perry Ellis brand, currently one of the top selling brands in specialty
chains and department stores in the United States. Perry Ellis International,
Inc. is currently the licensor under approximately 34 license agreements,
primarily for various categories of men's wear, boys' wear and fragrances.
During the year ended December 31, 1998, Perry Ellis International, Inc. had
revenues of $16.2 million. The Company anticipates completing the Perry Ellis
International acquisition in early April, 1999.

SENIOR SUBORDINATED NOTES. Concurrently with the Company's acquisition of
Perry Ellis International, Inc., the Company intends to issue $100,000,000 in
senior subordinated notes due 2009.

JOHN HENRY/MANHATTAN. In December 1998, the Company entered into an
agreement to buy certain assets of the John Henry and Manhattan dress shirt
business from Salant Corporation, which is currently in a Chapter 11 bankruptcy
proceeding. On February 24, 1999, the bankruptcy court approved the purchase for
approximately $44.2 million in cash. The assets consist of the John Henry,
Manhattan and Lady Manhattan trademarks and trade names, license agreements, the
existing dress shirt inventory with a value of approximately $17.2 million and
certain manufacturing equipment. The Company will also assume a lease for the
Mexican dress shirt manufacturing facility and other ordinary course of business
liabilities. This acquisition is expected to close on or about March 22, 1999.
The Company has entered into an agreement with Phillips-Van Heusen Corporation
to license the John Henry and Manhattan brands. The agreement also provides that
Phillips-Van Heusen will buy the existing dress shirt inventory from the Company
at the Company's cost concurrent with the closing of the John Henry/Manhattan
acquisition.

F-19
<PAGE>

SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999

18. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
1Q 2Q 3Q 4Q TOTAL
------------ ------------ ------------ ------------ -------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 31, 1999
Net Sales ........................ $ 60,085 $ 49,709 $ 65,012 $ 46,541 $ 221,347
Royalty income ................... 1,022 981 492 562 3,057
-------- -------- -------- -------- ---------
Total revenues ................... 61,107 50,690 65,504 47,103 224,404
Gross Profit ..................... 15,648 13,166 16,085 13,307 58,206
Net Income ....................... 2,637 1,053 2,812 2,080 8,582
Net income per share:
Basic ........................... $ 0.40 $ 0.16 $ 0.42 $ 0.31 $ 1.29
Diluted ......................... $ 0.39 $ 0.15 $ 0.42 $ 0.31 $ 1.27

FISCAL YEAR ENDED JANUARY 31, 1998
Net Sales ........................ $ 48,841 $ 42,037 $ 54,550 $ 45,261 $ 190,689
Royalty income ................... 1,123 1,051 887 971 4,032
-------- -------- -------- -------- ---------
Total revenues ................... 49,964 43,088 55,437 46,232 194,721
Gross Profit ..................... 12,963 10,538 12,477 12,752 48,730
Net Income ....................... 2,149 826 2,411 1,792 7,178
Net income per share:
Basic ........................... $ 0.33 $ 0.13 $ 0.37 $ 0.27 $ 1.10
Diluted ......................... $ 0.33 $ 0.12 $ 0.36 $ 0.27 $ 1.08

FISCAL YEAR ENDED JANUARY 31, 1997
Net Sales ........................ $ 37,807 $ 31,159 $ 46,746 $ 41,661 $ 157,373
Royalty income ................... 28 70 405 1,151 1,654
-------- -------- -------- -------- ---------
Total revenues ................... 37,835 31,229 47,151 42,812 159,027
Gross Profit ..................... 8,672 6,824 11,116 10,369 36,981
Net Income ....................... 1,615 689 1,974 1,566 5,844
Net income per share:
Basic (1) ....................... $ 0.25 $ 0.11 $ 0.30 $ 0.24 $ 0.89
Diluted ......................... $ 0.25 $ 0.10 $ 0.30 $ 0.24 $ 0.89
</TABLE>

- ----------------
(1) Total does not equal sum of quarters due to effect of the weighted
averaging of shares outstanding.

F-20
<PAGE>

INDEPENDENT AUDITORS' REPORT

Perry Ellis International, Inc.:

We have audited the accompanying balance sheet of Perry Ellis
International, Inc. as of December 31, 1997 and December 31, 1998, and the
related statement of operations, undistributed income and cash flows for the
three years ended December 31, 1996, December 31, 1997 and December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based
upon our audit.

We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement.

An audit includes examining on a test basis evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Perry Ellis International,
Inc. as of December 31, 1997 and December 31, 1998, and the results of its
operations and cash flows for the three years ended December 31, 1996, December
31, 1997, and December 31, 1998, in conformity with generally accepted
accounting principles.

/s/ Saul L. Klaw & Co., P.C.
Certified Public Accountants

Dated: March 12, 1999

F-21
<PAGE>

PERRY ELLIS INTERNATIONAL, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1998
------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash Balances ..................................................... $ 527,161 $1,776,722
Due from Licensees ................................................ 389,281 944,885
Prepaid Expenses .................................................. 758,171 543,383
Prepaid Franchise Taxes ........................................... -0- 75,232
Unexpired Insurance ............................................... 41,317 43,200
Employee Loan Receivable .......................................... -0- 6,183
---------- ----------
Total Current Assets ............................................... 1,715,930 3,389,605
Fixed Assets ....................................................... 1,995,817 2,016,958
Less: Accumulated Depreciation ..................................... (647,380) (875,444)
Security Deposits .................................................. 47,688 32,334
---------- ----------
Total Assets ....................................................... $3,112,055 $4,563,453
========== ==========
LIABILITIES
Current Liabilities
Accounts Payable, Expenses ........................................ $ 542,170 $ 163,443
Accrued Payroll ................................................... 500,425 452,884
Employment Termination Payable, Current ........................... 90,000 108,296
Franchise Taxes Payable ........................................... 610,058 -0-
---------- ----------
Total Current Liabilities .......................................... 1,742,653 724,623
---------- ----------
CAPITAL
Capital Stock--no par value; 200 shares authorized; 50 shares issued
and outstanding .................................................. 1,000 1,000
Undistributed Income ............................................... 1,368,402 3,837,830
---------- ----------
Total Capital ...................................................... 1,369,402 3,838,830
---------- ----------
Total Liabilities and Capital ...................................... $3,112,055 $4,563,453
========== ==========
</TABLE>

(See Notes to Financial Statements)

F-22
<PAGE>

PERRY ELLIS INTERNATIONAL, INC.

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Royalty Revenues ................ $12,191,490 $15,739,291 $16,210,696
Less Agent's Commission ......... 1,273,879 78,750 33,750
----------- ----------- -----------
Net Royalty Revenues ............ 10,917,611 15,660,541 16,176,946
Operating Expenses .............. 5,544,425 7,334,551 8,625,713
Non-recurring Items ............. 3,273,529 -0- -0-
----------- ----------- -----------
Operating Income ................ 2,099,657 8,325,990 7,551,233
Interest Income ................. 143,765 135,537 32,061
----------- ----------- -----------
Income Before Taxes ............. 2,243,422 8,461,527 7,583,294
State and Local Taxes ........... 218,631 852,072 760,346
----------- ----------- -----------
Net Income for the Year ......... $ 2,024,791 $ 7,609,455 $ 6,822,948
=========== =========== ===========
</TABLE>

(See Notes to Financial Statements)

F-23
<PAGE>

PERRY ELLIS INTERNATIONAL, INC.

UNDISTRIBUTED INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Balance at Beginning ......................... $2,826,046 $3,437,637 $1,368,402
Net Income for the Year ...................... 2,024,791 7,609,455 6,822,948
---------- ---------- ----------
Total ........................................ 4,850,837 11,047,092 8,191,350
---------- ---------- ----------
Less Distributions to Stockholder during year:
Dividend Paid ........................... 1,390,000 9,625,000 4,325,000
Foreign Tax Credits ..................... 23,200 53,690 28,520
---------- ---------- ----------
Total ........................................ 1,413,200 9,678,690 4,353,520
---------- ---------- ----------
Balance at End ............................... $3,437,637 $1,368,402 $3,837,830
========== ========== ==========
</TABLE>

(See Notes to Financial Statements)

F-24
<PAGE>

PERRY ELLIS INTERNATIONAL, INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1997 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash Flow from Operating Activities:
Net Income .............................................. $ 2,024,791 $ 7,609,455 $ 6,822,948
Depreciation ............................................ 212,000 225,783 228,064
Loss on Investment in Limited Partnership ............... 154,187 -0- -0-
Changes in Operating Assets and Liabilities:
Due from Licensees ..................................... 167,120 (362,559) (555,604)
Prepaid Expenses ....................................... (265,840) (396,439) 212,905
Other Current Assets ................................... -0- -0- (6,183)
Accounts Payable ....................................... 486,503 (140,906) (378,727)
Accrued Payroll ........................................ (24,814) 325,192 (47,541)
Corporate Taxes Payable ................................ (350,947) 610,058 (685,290)
Employment Termination ................................. (75,000) (126,000) 18,296
Commissions Payable .................................... 200,000 (200,000) -0-
Non-Current Assets ..................................... (851) (846) 15,354
Non-Current Liabilities ................................ (216,000) (90,000) -0-
------------ ------------ ------------
Net Cash Provided by Operating Activities ................ 2,311,149 7,453,738 5,624,222
------------ ------------ ------------
Cash Flow from Investing Activities:
(Credit) for Disposal of Service Agreement .............. (1,000,001) 1,000,001 -0-
(Additions) to Fixed Assets ............................. (47,461) (87,160) (21,141)
------------ ------------ ------------
Net Cash (Used) Provided by Investing Activities ......... (1,047,462) 912,841 (21,141)
------------ ------------ ------------
Cash Flow from Financing Activities:
Distribution to Stockholders ............................ (1,413,200) (9,678,690) (4,353,520)
------------ ------------ ------------
Net (Decrease) Increase in Cash Flows .................... (149,513) (1,312,111) 1,249,561
Cash at Beginning of Year ................................ 1,988,785 1,839,272 527,161
------------ ------------ ------------
Cash at End of Year ...................................... $ 1,839,272 $ 527,161 $ 1,776,722
============ ============ ============
Supplemental Disclosure of
Cash Flow Information:
Taxes Paid ............................................. $ 627,773 $ 192,652 $ 1,446,000
============ ============ ============
</TABLE>

(See Notes to Financial Statements)

F-25
<PAGE>

PERRY ELLIS INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998

1. DESCRIPTION OF BUSINESS

The Company was incorporated on September 12, 1978 and operates as a
licensor. Its income consists primarily of royalties received from licensees
under licensing agreements. Revenues to a major customer accounted for
approximately 36% in 1997 and 1998.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial 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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FINANCIAL INSTRUMENTS

The Company's financial instruments include cash, receivables and
payables, for which carrying amounts approximate fair value due to the
short-term nature of the instruments.

FIXED ASSETS

Fixed Assets consist of fixtures, equipment and improvements and are
stated at cost.

Depreciation is computed using the straight-line basis over the estimated
useful life of the assets. The useful lives range from five to ten years.

Maintenance and Repairs are expensed as incurred. Expenditures for major
renewals are capitalized. Upon the sale, replacement or retirement of assets,
the cost and accumulated depreciation or amortization thereon are removed from
the accounts.

INCOME TAXES

The Company has qualified as a small business ("S") corporation under the
Internal Revenue Code. The federal income tax effect of income and losses is
passed through to the stockholders. Consequently, there is no provision for
federal income taxes in the financial statements. However, the Company is
subject to state and local income taxes in certain taxing districts in which it
does business.

F-26
<PAGE>

PERRY ELLIS INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998

3. CASH BALANCES

Cash balances consist of the following:

1997 1998
----------- -----------
Cash in Checking and Savings Accounts ........... $519,972 $1,559,711
Cash in Pierpont Money Market Accounts .......... 7,189 217,011
-------- ----------
Total ........................................... $527,161 $1,776,722
======== ==========

4. DUE FROM LICENSEES

The balance due from licensees in the amount of $944,885 represents
charges of advertising and other expenses advanced for the account of the
individual licensees of the Company.

5. PREPAID EXPENSES

The prepaid expense balance consists of the following:

1997 1998
----------- ----------
Deposit for Advertising Campaign ............... $197,785 $ 75,718
Deposit Paid for Photoshoots ................... 424,441 444,365
Deposit for Outdoor Systems Billboard .......... -0- 20,486
Deposit for Trade Shows ........................ 116,592 -0-
Other Expenses ................................. 19,353 2,814
-------- --------
Total .......................................... $758,171 $543,383
======== ========

6. PROPERTY AND EQUIPMENT

Property and equipment balances consist of the following:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Furniture, fixtures and equipment ........................ $ 420,329 $ 437,763
Leasehold improvements ................................... 1,575,488 1,579,195
---------- ----------
1,995,817 2,016,958
Less: accumulated depreciation and amortization .......... (647,380) (875,444)
---------- ----------
Total .................................................... $1,348,437 $1,141,514
========== ==========
</TABLE>

7. ACCRUED PAYROLL

Accrued Payroll consists of incentive bonuses earned by executives during
the calendar year and payable in the following year.

8. PENSION PLAN

The Company has a Money Purchase and Profit Sharing Plan in effect. All
employees are eligible to participate in both plans upon the completion of one
year of service and reaching the age of 21. The Company is required to
contribute 10% of the compensation of all participants to the Money Purchase
Pension Plan on an annual basis. There is no contribution requirement for the
Proft Sharing Plan. Employees are not required to contribute to either plan.

The contributions for the calendar year 1997 aggregated $127,066 and for
1998, $66,265.

F-27
<PAGE>

PERRY ELLIS INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998

9. RENTS

The Company leases its executive and design offices. As at December 31,
1998, total minimum rentals are approximately as follows:

1999 ............... $215,000
2000 ............... 230,000
2001 ............... 246,000
Thereafter ......... 478,000

Rent expense for this lease amounted to approximately $196,000, $197,000
and $219,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.

10. SUBSEQUENT EVENT

In January 1999, the Company's sole shareholder agreed to sell 100% of the
Company's outstanding common stock to Supreme International Corporation for
approximately $75 million in cash. The sale is expected to close in April 1999.

F-28
<PAGE>

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

INTRODUCTION

The following sets forth the Unaudited Pro Forma Combined Financial
Information of Supreme as of and for the fiscal year ended January 31, 1999,
giving effect to the Perry Ellis acquisition under the "purchase" method of
accounting, and the Rule 144A offering of an aggregate principal amount of
$100.0 million in senior subordinated notes due 2009. Supreme's Unaudited Pro
Forma Combined Income Statement Information presents the acquisition of Perry
Ellis International, Inc. and the Rule 144A offering as if they had been
consummated on February 1, 1998. The Unaudited Pro Forma Combined Balance Sheet
Information of Supreme presents the Perry Ellis International acquisition and
the Rule 144A offering as if they had been consummated on January 31, 1999. The
Unaudited Pro Forma Combined Financial Information of the combined companies
are presented for illustrative purposes only, and therefore do not purport to
present the financial position or results of operations of Supreme had the
Perry Ellis International acquisition and the Rule 144A offering occurred on
the dates indicated, nor are they necessarily indicative of the results of
operations which may be expected to occur in the future.

The historical financial information for Supreme and Perry Ellis
International, Inc. has been derived from the audited financial statements of
Supreme and Perry Ellis International, Inc., respectively, included in Item 8.
The pro forma adjustments relating to the acquisition and integration of Perry
Ellis International, Inc. represent Supreme's preliminary determinations of
these adjustments and are based upon available information and certain
assumptions Supreme considers reasonable under the circumstances. Final amounts
could differ from those set forth herein.

The Unaudited Pro Forma Combined Financial Information does not give
effect to the pending John Henry/Manhattan acquisition and the related
Phillips-Van Heusen transactions. See "Item 6. Selected Financial Data--Summary
Pro Forma and Supplemental Financial Information."

F-29
<PAGE>

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

BALANCE SHEET

BALANCE SHEET JANUARY 31, 1999

<TABLE>
<CAPTION>
HISTORICAL(1) PRO FORMA
--------------------------- ----------------------------------
SUPREME PERRY ELLIS ADJUSTMENTS(2) COMBINED
----------- ------------- -------------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash ............................................. $ 174 $ 1,777 $ (1,777)(a) $ 174
Accounts receivable, net ......................... 38,970 945 -- 39,915
Inventories ...................................... 32,966 -- -- 32,966
Deferred income taxes ............................ 1,091 -- -- 1,091
Deposits for acquisitions ........................ 6,000 -- (5,000)(b) 1,000
Other current assets ............................. 2,040 667 (75)(c) 2,632
-------- -------- -------- --------
Total Current Assets .......................... 81,241 3,389 (6,852) 77,778
Property and equipment, net ....................... 7,852 1,142 (900)(d) 8,094
Intangible assets, net ............................ 18,843 -- 74,104 (e) 92,947
Other assets ...................................... 1,022 32 3,479 (f) 4,533
-------- -------- -------- --------
Total Assets .................................. $108,958 $ 4,563 $ 69,831 $183,352
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable ................................. $ 4,596 $ 163 -- $ 4,759
Accrued expenses ................................. 4,931 561 -- 5,492
Other current liabilities ........................ 414 -- $ 640 (g) 1,054
-------- -------- -------- ---------
Total Current Liabilities ..................... 9,941 724 640 11,305
Deferred income taxes ............................. 560 -- -- 560
Senior Credit Facility ............................ 33,511 -- (26,970)(h) 6,541
Notes offered in the Rule 144A offering ........... -- -- 100,000 (i) 100,000
-------- -------- -------- --------
Total Liabilities ............................. 44,012 724 73,670 118,406
Stockholders' equity .............................. 64,946 3,839 (3,839)(j) 64,946
-------- -------- -------- --------
Total Liabilities and Stockholders' Equity..... $108,958 $ 4,563 $ 69,831 $183,352
======== ======== ======== ========
</TABLE>

See Notes to Unaudited Pro Forma Combined Financial Information.

F-30
<PAGE>

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

INCOME STATEMENT

YEAR ENDED JANUARY 31, 1999

<TABLE>
<CAPTION>
HISTORICAL(1) PRO FORMA
----------------------------- -----------------------------------
SUPREME PERRY ELLIS ADJUSTMENTS(3) COMBINED
------------- ------------- ------------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales ............................................. $ 221,347 $ -- $ -- $ 221,347
Royalty income ........................................ 3,057 16,177 -- 19,234
--------- -------- -------- ---------
Total revenues ........................................ 224,404 16,177 -- 240,581
Cost of sales ......................................... 166,198 -- -- 166,198
--------- -------- -------- ---------
Gross profit .......................................... 58,206 16,177 -- 74,383
Selling, general, and administrative expenses ......... 41,639 8,594 1,059 (a) 51,292
--------- -------- -------- ---------
Operating income ...................................... 16,567 7,583 (1,059) 23,091
Interest expense ...................................... 3,494 -- 9,298 (b) 12,792
--------- -------- -------- ---------
Income before provision for income taxes .............. 13,073 7,583 (10,357) 10,299
Provision for income taxes ............................ 4,491 760 (954)(c) 4,297
--------- -------- -------- ---------
Net income ............................................ $ 8,582 $ 6,823 $ (9,403) $ 6,002
========= ======== ======== =========
Other Operating Data:
Ratio of earnings to fixed charges(4) ................ 4.2x -- -- 1.8x
Depreciation and amortization ........................ $ 2,161 $ 228 $ 3,525 $ 5,914
EBITDA(5) ............................................ $ 18,728 $ 7,811 $ 2,466 $ 29,005
</TABLE>

See Notes to Unaudited Pro Forma Combined Financial Information.

F-31
<PAGE>

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

(DOLLARS IN THOUSANDS)

(1) The year ended January 31, 1999 is Supreme's historical financial reporting
period. For the pro forma year ended January 31, 1999 Perry Ellis
International, Inc. financial information has been included as of and for
the twelve months ended December 31, 1998 because they have historically
reported on a calendar year end. Supreme believes the effect of the
difference in these reporting periods is not significant and is not
reflected in the Unaudited Pro Forma Combined Financial Information.

(2) The purchase price is $75,000, adjusted for working capital less other
agreed upon adjustments. Based upon the Perry Ellis International, Inc.
December 31, 1998 balance sheet, the purchase price is calculated as
follows:

PURCHASE PRICE DETERMINATION:
Gross purchase price .......................... $ 75,000
Net adjustments to purchase price ............. (449)
--------
Net purchase price ......................... $ 74,551
========
PURCHASE PRICE ALLOCATION:
Current assets ................................ $ 1,537
Property, plant and equipment ................. 242
Other assets .................................. 32
Trademarks .................................... 74,104
Accounts payable and accrued expenses ......... (1,364)
--------
Net purchase price ......................... $ 74,551
========

For purposes of preparing the Unaudited Pro Forma Combined Balance Sheet,
the Perry Ellis assets acquired and liabilities assumed have been recorded
at their estimated fair values. A final determination of the required
purchase accounting adjustments and of the fair value of the assets and
liabilities of Perry Ellis International, Inc. acquired or assumed has not
yet been made. Accordingly, the purchase accounting adjustments made in
connection with the development of the unaudited pro forma financial
information reflect the Company's best estimate based upon currently
available information.

<TABLE>
<CAPTION>
AS OF
JANUARY 31, 1999
-----------------
<S> <C> <C>
(a) Cash balances of Perry Ellis International, Inc. which are not being
acquired ............................................................. $ (1,777)
(b) Deposit applied to Perry Ellis International acquisition ............. (5,000)
(c) Other current assets of Perry Ellis International, Inc. which are not
being acquired ....................................................... (75)
(d) Property, plant and equipment have been adjusted to their estimated
fair value ........................................................... (900)
(e) Trademarks acquired .................................................. 74,104
(f) Deferred financing costs related to the notes offered in the
Rule 144A offering ................................................... 3,479
(g) Liabilities assumed, including severance and acquisition
costs payable ........................................................ 640
(h) Pay down of Senior Credit Facility ................................... (26,970)
(i) Issuance of notes offered in the Rule 144A offering .................. 100,000
(j) Elimination of Perry Ellis International, Inc.'s stockholders' equity (3,839)
</TABLE>

F-32
<PAGE>

(3) The pro forma income statement data for the year ended January 31, 1999
present the effects of the Perry Ellis International acquisition and the
Rule 144A offering, in each case as if they occurred as of the beginning
of such period, including:

<TABLE>
<S> <C> <C>
(a) Adjustments to selling, general and administrative expenses:
Decrease in depreciation expense to reflect the fair value and useful lives
of the acquired property, plant and equipment ................................. $ (180)
Amortization expense of trademarks (straight line--20 years) .................. 3,705
Elimination of consulting fees, licensing fees, severance costs, occupancy
costs and employment costs that will not be incurred by the Company ........... (2,466)
--------
Total adjustment to selling, general and administrative expenses ................ 1,059
--------
(b) The pro forma adjustments to interest expense arising from the Perry Ellis
International acquisition and the offering of the notes in the Rule 144A
offering are presented below:
Reduction of interest expense related to the:
Lower balance outstanding under the credit facility (at 7.60%) ................ (2,050)
Additional interest cost related to:
The notes offered in the Rule 144A offering ................................... 11,000
Amortization of deferred financing costs ...................................... 348
--------
Total adjustment to interest expense ............................................ 9,298
--------
(c) Adjustment to the provision for income taxes at an effective rate of 34.4% ...... (954)
--------
Total adjustment to income statement ............................................ $ 9,403
========
</TABLE>

In addition to the above, the company believes additional cost savings will
be realized through the combination of the two companies.

(4) For purpose of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist of interest expense,
amortization of deferred debt issuance costs and the portion of rental
expense of the Lease deemed representative of the interest factor.

(5) EBITDA represents net income before taking into consideration interest
expense, income tax expense, depreciation expense, and amortization
expense. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and does not represent cash flow
from operations. Accordingly, do not regard this figure as an alternative
to net income or as an indicator of our operating performance or as an
alternative to cash flows as a measure of liquidity. We believe that
EBITDA is widely used by analysts, investors and other interested parties
in our industry but is not necessarily comparable with similarily titled
measures for other companies. See "Statements of Cash Flow" in our
consolidated financial statements and in the financial statements of Perry
Ellis International, Inc. contained elsewhere in this Item 8.

F-33
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<S> <C>
3.1 Registrant's Second Amended and Restated Articles of Incorporation
10.27 Amendment to Amended and Restated Loan and Security Agreement dated as of August 1, 1998
23.2 Consent of Deloitte & Touche LLP
27.1 Financial Data Schedule (SEC use only)
</TABLE>

EXHIBIT 3.1

SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SUPREME INTERNATIONAL CORPORATION

ARTICLE I

The name of the corporation is SUPREME INTERNATIONAL CORPORATION
(hereinafter called the "Corporation").

ARTICLE II

The current mailing address of the principal place of business of the
Corporation is 3000 Northwest 107th Avenue, Miami, Florida 33172.

ARTICLE III

The aggregate number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is Thirty-One Million
(31,000,000), consisting of (i) Thirty Million (30,000,000) shares of common
stock, par value $.01 per share (the "Common Stock") and (ii) One Million
(1,000,000) shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock"). The designations and the preferences, limitations and relative rights
of the Preferred Stock and the Common Stock of the Corporation are as follows:

A. PROVISIONS RELATING TO THE COMMON STOCK.

1. Except as otherwise required by law or as may be provided by the
resolutions of the Board of Directors authorizing the issuance of any class or
series of the Preferred Stock, as herein provided, all rights to vote and all
voting power shall be vested exclusively in the holders of the Common Stock.

2. Subject to the rights of the holders of the Preferred Stock, the
holders of the Common Stock shall be entitled to receive when, as and if
declared by the Board of Directors, out of funds legally available therefor,
dividends and other distributions payable in cash, property, stock (including
shares of any class or series of the Corporation, whether or not shares of such
class or series are already outstanding) or otherwise.

3. If the Corporation shall in any manner split, subdivide or combine
the outstanding shares of the Common Stock, then the outstanding shares of the
Common Stock shall be proportionately split, subdivided or combined in the same
manner and on the same basis as the outstanding shares of the class that has
been split, subdivided or combined.

4. Upon liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, and after the holders of the Preferred Stock
shall have been paid in full the amounts to which they shall be entitled, if
any, or a sum sufficient for such payment in full

<PAGE>

have been set aside, the remaining net assets of the Corporation, if any, shall
be divided among and paid ratably to the holders of Common Stock.

B. PROVISIONS RELATING TO PREFERRED STOCK

1. The Preferred Stock may be issued from time to time, in one or more
classes or series, the shares of each class or series to have such designations
powers, preferences and rights, and qualifications, limitations and restrictions
thereof as are stated and expressed herein and in the resolution or resolutions
providing for the issuance of such class or series adopted by the Board of
Directors as hereinafter prescribed.

2. Authority is hereby expressly granted to and vested in the Board of
Directors to authorize the issuance of the Preferred Stock from time to time, in
one or more classes or series, to determine and take necessary proceedings fully
to effect the issuance conversion and redemption of any such Preferred Stock,
and, with respect to each class or series of Preferred Stock, to fix and state
by the resolution or resolutions from time to time adopted providing for the
issuance thereof the following:

(a) whether or not the class or series is to have voting
rights, special or conditional, full or limited, or is to be without voting
rights;

(b) the number of shares to constitute the class or series and
the designations thereof;

(c) the preferences and relative, participating, optional or
other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, with respect to any class or series;

(d) whether or not the shares of any class or series shall be
redeemable and if redeemable the redemption price or prices, and the time or
times at which and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;

(e) whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and if such retirement or
sinking fund or funds be established, the periodic amount thereof and the terms
and provisions relative to the operation thereof;

(f) the dividend rate, whether dividends are payable in cash,
stock or other property of the Corporation, the conditions upon which and the
times when such dividends are payable, the preference to or the relation to the
payment of the dividends payable, on any other class or classes or series of
stock, whether or not such dividend shall be cumulative or noncumulative, and
if cumulative, the date or dates from which such dividends shall accumulate;

<PAGE>

(g) the preferences, if any, and the amounts thereof that the
holders of any class or series thereof shad be entitled to receive upon the
voluntary or involuntary dissolution of, or upon any distribution of the assets
of, the Corporation;

(h) whether or not the shares of any class or series shall be
convertible into, or exchangeable for, the shares of any other class or classes
or of any other series of the same or any other class or classes of the
Corporation and the conversion rice or prices or ratio or ratios or the rate or
rates at which such conversion or exchange may be made, with such adjustments,
if any, as shall be stated and expressed or provided for in such resolution or
resolutions; and

(i) such other special rights and protective provisions with
respect to any class or series as the Board of Directors may deem advisable.

The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board of Directors may increase the number of shares of Preferred
Stock designated for any existing class or series by a resolution adding to such
class or series authorized and unissued shares of the Preferred Stock not
designated for any other class or series. The Board of Directors may decrease
the member of shares of the Preferred Stock designated for any existing class or
series by a resolution, subtracting from such series unissued shares of the
Preferred Stock designated for such class, or series, and the shares so
subtracted shall become authorized, unissued and undesignated shares of the
Preferred Stock.

C. GENERAL PROVISIONS

1. Except as may be provided by the resolutions of the Board of
Directors authorizing the issuance of ANY CLASS or SERIES of Preferred Stock, as
hereinabove provided, cumulative voting by any shareholder is hereby expressly
denied.

2. No shareholder of this Corporation shall have, by reason of its
holding shares of any class or series of stock of the Corporation, any
preemptive or preferential rights to purchase or subscribe for any other shares
of any class or series of this Corporation now or hereafter authorized, and any
other equity securities, or any notes, debentures, warrants, bonds or other
securities convertible into or carrying options or warrants to purchase shares
of any class, now or hereafter authorized, whether or not the issuance of any
such shares, or such notes, debentures, bonds or other securities, would
adversely affect the dividend or voting rights of such shareholder.

ARTICLE IV

For business not specified in a notice of meeting to be properly
introduced by a shareholder at a meeting of shareholders, such shareholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
A shareholder's notice must be delivered to or mailed as received by the
Secretary of the Corporation, either by personal delivery or by United States
mail, postage prepaid. With respect to an annual meeting of shareholders, to be
timely, notice must be received not less than 60, no more than 90 days prior to
such meeting. With

<PAGE>

respect to meetings of shareholders for which less than 70 days notice of the
date of the meeting is given, to be timely, notice must be received no later
than the close of business on the tenth day following the earlier of the day
notice of the meeting was mailed, or the day public disclosure of the meeting
was made. A shareholders' notice must set forth as to each matter the
shareholder proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (ii) the name and record address of the
shareholder proposing such business, (iii) the class, series and number of
shares of stock which are beneficially owned by the shareholder, and (iv) any
material interest of the shareholder in such business. The chairman of the
meeting may refuse to acknowledge any shareholder who attempts to introduce
business without compliance with the foregoing procedure.

ARTICLE V

Except as otherwise required by law, the Corporation shall not be
required to hold a special meeting of shareholders of the Corporation unless (in
addition to any requirements of law) (i) requested in writing by the holders of
not less than 50 percent of all the votes entitled to be cast on any issue
proposed or to be considered at the proposed special meeting; (ii) called by the
Board of Directors pursuant to a resolution approved by a majority of the entire
Board of Directors; or (iii) called by the Chairman of the board or President of
the Corporation or the Corporation's Chief Executive Officer.

ARTICLE VI

A. NUMBER OF DIRECTORS. The number of directors constituting the
Corporation's Board of Directors shall not be less than three (3) nor more than
fifteen (15), and the exact number of Directors shall be fixed from time to time
in the manner provided in the Bylaws of the Corporation.

B. TERM OF OFFICE. The Board of Directors shall be divided into three
classes, designated as Class I, Class II and Class III. The number of directors
in each class shall be determined by the Board of Directors and shall consist of
as nearly equal a number of directors as practicable. The term of the Class I
directors initially shall expire at the first annual meeting of shareholders
ensuing after the 1998 Annual Meeting of Shareholders; the term of Class II
directors initially shall expire at the second Annual Meeting of Shareholders
ensuing after the 1998 Annual Meeting of Shareholders; and the term of Class III
directors initially shall expire at the third Annual Meeting of Stockholders
ensuing after the 1998 Annual Meeting of Shareholders. In the case of each
class, the directors shall serve until their respective successors are duly
elected and qualified. At each Annual Meeting of Shareholders, directors of the
respective class whose term expires shall be elected, and the directors chosen
to succeed those whose terms shall have expired shall be elected to hold office
for a term to expire at the third ensuing Annual Meeting of Stockholders after
their election, and until their respective successors are elected and qualified.

C. VACANCIES. A director may resign at any time by giving written
notice to the Corporation, the Board of Directors or the Chairman of the Board
of Directors. Such resignation

<PAGE>

shall take effect when the notice is delivered unless the notice specifies a
later effective date, in which event the Board of Directors may fill the pending
vacancy before the effective date if they provide that the successor does not
take office until the effective date. Any vacancy occurring in the Board of
Directors and any directorship to be filled by reason of an increase in the size
of the Board of Directors shall be filled by the affirmative vote of a majority
of the current directors though less than a quorum of the Board of Directors, or
may be filled by an election at an annual or special meeting of the shareholders
called for that purpose, unless otherwise provided by law. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office, or until the next election of one or more directors by shareholders if
the vacancy is caused by an increase in the number of directors.

ARTICLE VII

Nominations for the election of directors may be made by the Board of
Directors or by any shareholder entitled to vote for the election of directors.

ARTICLE VIII

Directors of the Corporation shall not be personally liable for
monetary damages to the Corporation to the fullest extent permitted by Florida
law.

ARTICLE IX

This Corporation may insure and shall indemnify and shall advance
expenses on behalf of its officers and directors and any persons serving at the
request of the Corporation as an officer, director, member, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise to
the fullest extent not prohibited by law in existence either now or hereafter.

ARTICLE X

The Corporation shall exist perpetually unless sooner dissolved
according to law.

IN WITNESS WHEREOF, the undersigned, for the purpose of amending and
restating the Corporation's Articles of Incorporation pursuant to laws of the
State of Florida, has executed these Amended and Restated Articles of
Incorporation as of September 18, 1998.

SUPREME INTERNATIONAL CORPORATION

By: /s/ GEORGE FELDENKREIS
---------------------------------------------------
George Feldenkreis, Chairman and Chief
Executive Officer

<PAGE>

SUPREME INTERNATIONAL CORPORATION
SECRETARY'S CERTIFICATE

I, Fanny Hanano, the duly elected, qualified and acting Secretary of
SUPREME INTERNATIONAL CORPORATION, a Florida corporation (the "Corporation"), do
hereby certify that the attached Second Amended and Restated Articles of
Incorporation of the Corporation were adopted by the shareholders on July 31,
1998, with a sufficient number of votes cast for the approval of the amendments.

IN WITNESS WHEREOF, I have executed this Certificate as of September 18,
1998.

/s/ FANNY HANANO
---------------------------
Fanny Hanano, Secretary

EXHIBIT 10.27

AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT

THIS AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the
"Amendment") is made and entered into effective as of the first day of August,
1998, by and among NATIONSBANK, N.A., as agent for the financial institutions
party to the Loan Agreement (as hereafter defined) from time to time (the
"Agent"), the financial institutions party to the Loan Agreement from time to
time (the "Lenders"), and SUPREME INTERNATIONAL CORPORATION, a Florida
corporation (the "Borrower").

W I T N E S S E T H :

WHEREAS, Agent, Borrower and Lenders entered into that certain Amended and
Restated Loan and Security Agreement, dated March 31, 1998 (the "Loan
Agreement"), pursuant to which the Agent and the Lenders agreed to extend
Revolving Credit Loans to the Borrower, and

WHEREAS, the Borrower has requested that the Lenders increase the maximum
amount of the Revolving Credit Facility and otherwise amend the Loan Agreement,
and the Agent and the Lenders have agreed to do so, subject to the terms and
conditions contained herein.

NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

1. All capitalized terms used herein and not otherwise expressly defined
herein shall have the respective meanings given to such terms in the Loan
Agreement.

2. The Loan Agreement is amended by deleting the existing definitions of
"Borrowing Base" and "Revolving Credit Facility" from Section 1.1 and
substituting the following in lieu thereof:

"BORROWING BASE" means at any time the lesser of (a) the Revolving
Credit Facility minus the Standby Letter of Credit Reserve and (b) an
amount equal to the sum of:

<PAGE>

(i) 85% (or such lesser percentage as the Agent may in its sole and
absolute discretion determine from time to time) of the face value of Eligible
Receivables due and owing at such time, PLUS

(ii) THE LESSER OF

(A) 90% (or such lesser percentage as the Agent may in its sole and
absolute discretion determine from time to time) of the Factoring Credit
Balances due and owing at such time, AND

(B) $15,000,000.00, PLUS

(iii) THE LESSER OF

(A) from August 1, 1998 through November 30, 1998, 60% (or such lesser
percentage as the Agent may in its sole and absolute discretion determine
from time to time) of the lesser of cost (computed on a first-in-first-out
basis) and fair market value of Eligible Inventory at such time, and from
December 1, 1998 and thereafter, 50% (or such lesser percentage as the
Agent may in its sole and absolute discretion determine from time to time)
of the lesser of cost (computed on a first-in-first-out basis) and fair
market value of Eligible inventory at such time, AND

(B) $25,000,000.00, PLUS

(iv) THE LESSER OF

(A) the fair market value as determined by the Agent of the Borrower's
Intellectual Property on which the Agent has a first priority, perfected
Security Interest pursuant to the Trademark Assignment, AND

(B) $5,000,000.00, MINUS

(v) the Standby Letter of Credit Reserve and such other reserves as the
Agent may determine from time to time in the exercise of its reasonable credit
judgment.

"REVOLVING CREDIT FACILITY" means the facility for the Revolving Credit
Loans in the principal sum of up to $60,000,000 or such lesser or greater amount
as shall be agreed upon from time to time in writing by the Agent, the Lenders
and the Borrower.

-2-

<PAGE>

3. The Loan Agreement is amended to add the following new Section 6.1(aa):

Section 6.1 (aa) YEAR 2000 COMPLIANCE. The Borrower has (a) initiated a
review and assessment of all areas within its and each of its Subsidiaries'
business and operations (including those affected by suppliers, vendors and
customers) that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Borrower or any of its
Subsidiaries (or suppliers, vendors and customers) may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), (b) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (c) to date, implemented
that plan in accordance with that timetable. Based on the foregoing, the
Borrower believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 compliant").

4. The Loan Agreement is amended to add the following new Section 9.10:

Section 9.10 YEAR 2000 COMPLIANCE. The Borrower will promptly notify the
Agent in the event the Borrower discovers or determines that any computer
application (including those of its suppliers, vendors and customers) that is
material to its or any of its Subsidiaries' business and operations will not be
Year 2000 compliant (as defined in SECTION 6.1 (AA)).

5. The Loan Agreement is amended by deleting the existing Section 11.5 and
substituting the following in lieu thereof:

Section 11.5 CAPITAL EXPENDITURES. Make or incur any Capital
Expenditures, except that the Borrower may make or incur Capital
Expenditures in an amount not to exceed, in the aggregate, $4,000,000.00
for the 1999 fiscal year, and $2,000,000.00 during any fiscal year
thereafter.

6. Borrower agrees to pay a fee of $12,500.00 to the Agent for the pro rata
benefit of the Lenders for establishing and making available the increased
Revolving Credit Facility.

7. The Borrower hereby restates, ratifies, and reaffirms each and every
term, condition, representation and warranty heretofore made by it under or in
connection with the execution and delivery of the Loan Agreement as amended
hereby and the other loan documents executed and/or delivered in connection
herewith (the "Loan Documents") as fully as though

-3-

<PAGE>

such representations and warranties had been made on the date hereof and with
specific reference to this Amendment and the Loan Documents.

8. As amended hereby, the Loan Agreement shall be and remain in full force
and effect, and shall constitute the legal, valid, binding and enforceable
obligations of the Borrower to the Agent and the Lenders.

9. The Borrower agrees to pay on demand all costs and expenses of the Agent
in connection with the preparation, execution, delivery and enforcement of this
Amendment and all other Loan Documents and any other transactions contemplated
hereby, including, without limitation, the fees and out-of-pocket expenses of
legal counsel to the Agent.

10. To induce the Agent and each Lender to enter into this Amendment, the
Borrower hereby (i) represents and warrants that, as of the date hereof, and
after giving effect to the terms hereof, there exists no Event of Default (or
any event which, with the giving of notice or the passage of time, or both,
would constitute an Event of Default) under the Loan Agreement or any of the
Loan Documents; and (ii) acknowledges and agrees that no right of offset,
defense, counterclaim, claim, causes of action or objection in favor of the
Borrower against the Agent or any Lender exists arising out of or with respect
to any of the indebtedness, the Loan Agreement, or any of the other Loan
Documents, or with respect to the administration or funding of the indebtedness.

11. The Borrower agrees to take such further action as the Agent or any
Lender shall reasonably request in connection herewith to evidence the
amendments herein contained to the Loan Agreement.

12. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.

13. This Amendment shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties hereto.

14. This Amendment shall be governed by, and construed in accordance with,
the laws of the State of Georgia, other than its laws respecting choice of law.

-4-

<PAGE>

IN WITNESS WHEREOF, the Borrower, the Agent and each Lender have caused
this Amendment to be duly executed under seal by their authorized officers in
several counterparts, all as of the date first above written.

BORROWER:

SUPREME INTERNATIONAL CORPORATION
[CORPORATE SEAL]

By: /s/ George Feldenkreis
-------------------------------------------
Name: George Feldenkreis
Title: Chairman

LENDERS:

NATIONSBANK, N.A.

By: /s/ Stuart A. Hall
-------------------------------------------
Name: Stuart A. Hall
Title: VICE PRESIDENT

Address: 600 Peachtree Street, N.E.
13 Plaza
Atlanta, Georgia 30308
Attn.: Business Credit
Facsimile No.: 404-607-6439

SUNTRUST BANK, MIAMI, N.A.

By: /s/ M. M. Perdomo
-------------------------------------------
Name: M. M. Perdomo
Title: SVP

Address: MC1042
777 Brickell Avenue
Miami, Florida 33131-2803
Attn.: Manuel Perdomo
Facsimile No.: 305-577-5017

<PAGE>

SOUTHTRUST BANK, NATIONAL
ASSOCIATION

By: /s/ Steven W. Davis
-------------------------------------------
Name: Steven W. Davis
Title: VP

Address: 420 N. 20th Street, 9th Floor
Birmingham, Alabama 35203
Attn.: Steven W. Davis
Facsimile No.: 205-254-4240

FIRST UNION NATIONAL BANK

By: /s/ Lloyd Kossally
-------------------------------------------
Name: Lloyd Kossally
Title: SR. VICE PRESIDENT

Address: FL6011
200 Biscayne Boulevard
Miami, Florida 33131
Attn.: Charles Klenk
Facsimile No.: 305-789-4902

HAMILTON BANK, N.A.

By: Vanessa Bryscis
-------------------------------------------
Name: Vanessa Bryscis
Title: VICE PRESIDENT

Address: 3150 N.W. 57th Avenue
Miami, FL 33178
Attn.: Vanessa Bryscis
Facsimile No.: 305 594 9816
Phone: 305 717 5682

<PAGE>

AGENT:

NATIONSBANK, N.A.

By: /s/ Stuart A. Hall
-------------------------------------------
Name: Stuart A. Hall
Title: VICE PRESIDENT

Address: 600 Peachtree Street, N.E.
13 Plaza
Atlanta, Georgia 30308
Attn.: Business Credit
Facsimile No.: 404-607-6439

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No.
333-69613 of Supreme International Corporation on Form S-8 of our report dated
March 12, 1999 appearing in the Annual Report on Form 10-K of Supreme
International Corporation for the year ended January 31, 1999.

DELOITTE & TOUCHE LLP

Miami, Florida,
March 15, 1999

<ARTICLE> 5

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<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
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<SECURITIES> 0
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