SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-21764
PERRY ELLIS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-1162998
(State or other jurisdiction of (IRS Employer Identification
Incorporation or organization) Number)
3000 N.W. 107 AVENUE
MIAMI, FLORIDA 33172
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 592-2830
Former name, former address and fiscal year, if changed since last report
SUPREME INTERNATIONAL CORPORATION
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the registrant's common stock is 6,724,374
(as of September 10, 1999).
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1:
Consolidated Balance Sheets
as of July 31, 1999 (Unaudited) and January 31, 1999 1
Consolidated Statements of Operations (Unaudited)
for the three and six months ended July 31, 1999
and July 31, 1998 2
Consolidated Statements of Cash Flows (Unaudited)
for the six months ended July 31, 1999
and July 31, 1998 3
Notes to Consolidated Financial Statements 4
ITEM 2:
Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
Year 2000 Readiness Disclosure 11
PART II: OTHER INFORMATION 13
Signature 15
<PAGE>
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, 1999 JANUARY 31, 1999
------------- ----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 431,961 $ 173,493
Accounts receivable, net 38,878,937 38,969,845
Inventories 31,140,539 32,965,655
Deferred income taxes 1,091,482 1,091,482
Deposits for acquisitions -- 6,000,000
Prepaid income taxes 944,134 --
Other current assets 1,511,769 2,040,200
------------ ------------
Total current assets 73,998,822 81,240,675
PROPERTY AND EQUIPMENT, NET 7,562,001 7,851,592
INTANGIBLE ASSETS, NET 123,556,520 18,842,797
OTHER 5,562,174 1,022,467
------------ ------------
TOTAL $210,679,517 $108,957,531
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,094,265 $ 4,595,688
Accrued expenses 3,745,646 4,754,077
Accrued interest payable 4,254,675 177,448
Other current liabilities 2,356,142 413,505
------------ ------------
Total current liabilities 14,450,728 9,940,718
Bonds payable, net 98,906,667 --
Deferred income taxes 559,727 559,728
Long term debt-senior credit agreement 13,462,727 33,511,157
Long term debt-term loan 13,750,000 --
------------ ------------
Total liabilities 141,129,849 44,011,603
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value; 1,000,000
shares authorized; no shares issued or
outstanding
Common stock - $.01 par value; 30,000,000
shares authorized; 6,724,374 and 6,712,374
shares issued and outstanding as of
July 31, 1999 and January 31, 1999, respectively 67,243 67,123
Additional paid-in-capital 28,911,195 28,806,455
Retained earnings 40,571,230 36,072,350
------------ ------------
Total stockholders' equity 69,549,668 64,945,928
------------ ------------
TOTAL $210,679,517 $108,957,531
============ ============
</TABLE>
1
<PAGE>
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
REVENUES:
<S> <C> <C> <C> <C>
Net sales $ 45,273,099 $ 49,709,495 $104,751,870 $109,794,686
Royalty income 6,743,539 981,760 9,060,056 2,003,544
------------ ------------ ------------ ------------
TOTAL REVENUES 52,016,638 50,691,255 113,811,926 111,798,230
COST OF SALES 33,309,249 37,523,864 77,481,828 82,982,874
------------ ------------ ------------ ------------
GROSS PROFIT 18,707,389 13,167,391 36,330,098 28,815,356
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 10,790,031 9,982,307 20,969,826 20,129,949
DEPRECIATION 325,590 203,605 591,337 435,544
AMORTIZATION 1,078,028 330,609 1,790,881 597,696
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 12,193,649 10,516,521 23,352,044 21,163,189
------------ ------------ ------------ ------------
OPERATING INCOME 6,513,740 2,650,870 12,978,054 7,652,167
INTEREST EXPENSE 3,957,925 977,828 5,905,911 1,863,987
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 2,555,815 1,673,042 7,072,143 5,788,180
INCOME TAXES 948,724 620,271 2,573,263 2,095,044
------------ ------------ ------------ ------------
NET INCOME $ 1,607,091 $ 1,052,771 $ 4,498,880 $ 3,693,136
============ ============ ============ ============
NET INCOME PER SHARE:
BASIC $ 0.24 $ 0.16 $ 0.67 $ 0.56
============ ============ ============ ============
DILUTED $ 0.23 $ 0.15 $ 0.66 $ 0.55
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING:
BASIC 6,724,341 6,703,135 6,723,786 6,643,318
============ ============ ============ ============
DILUTED 6,870,131 6,832,821 6,836,268 6,760,950
============ ============ ============ ============
</TABLE>
See notes to consolidated statments
2
<PAGE>
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
------------------------------
JULY 31, JULY 31,
1999 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 4,498,880 $ 3,693,136
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,382,218 1,033,241
Amortization of bond discount 54,667 --
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net 1,068,462 (392,462)
Inventories 1,825,116 (5,281,565)
Other current assets 1,253,363 (1,620,998)
Other assets (4,682,009) 968,655
Accounts payable and accrued expenses (1,509,854) 1,974,225
Accrued interest payable 4,077,227 60,023
Other current liabilities 526,108 (309,127)
------------- -------------
Net cash provided by operating activities: 9,494,178 125,128
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (251,500) (3,612,354)
Payment on purchase of other intangible assets (223,160) (85,119)
Payment for acquired businesses (101,419,490) --
------------- -------------
Net cash used in investing activities: (101,894,150) (3,697,473)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in borrowings under credit facilities 13,750,000 (3,000,000)
Net (payments) proceeds from long term debt (20,048,430) 5,668,869
Net proceeds from bonds payable 98,852,000 --
Proceeds from exercise of stock options 104,870 425,653
------------- -------------
Net cash provided by financing activities: 92,658,440 3,094,522
------------- -------------
NET INCREASE (DECREASE) IN CASH 258,468 (477,823)
CASH AT BEGINNING OF YEAR 173,493 1,010,256
------------- -------------
CASH AT END OF PERIOD $ 431,961 $ 532,433
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,525,944 $ 1,863,811
============= =============
Income taxes $ 4,871,580 $ 1,307,023
============= =============
</TABLE>
3
<PAGE>
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q and therefore do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations and changes in cash flows in conformity with
generally accepted accounting principles. The unaudited consolidated financial
statements should be read in conjunction with the audited financial statements
and related notes included in the Company's Annual Report on Form 10-K for the
year ended January 31, 1999. In the opinion of management, the unaudited
consolidated financial statements contain all adjustments necessary for a fair
presentation of the interim periods presented and all adjustments are of a
normal and recurring nature. The results of operations for the three and six
months ended July 31, 1999 are not necessarily indicative of the results which
may be expected for the entire fiscal year. In June 1999 Supreme International
Corporation changed its name to Perry Ellis International, Inc. (the "Company").
Certain amounts in the prior periods have been reclassified to conform to the
current periods' presentation.
2. INVENTORIES
Inventories consist principally of finished goods and are stated at the lower of
cost or market on a first-in first-out basis.
3. LETTER OF CREDIT FACILITIES
JULY 31, JANUARY 31,
1999 1999
------------ ------------
Total letter of credit facilities $ 60,000,000 $ 60,000,000
Outstanding letters of credit (23,702,967) (23,831,172)
------------ ------------
Total Available $ 36,297,033 $ 36,168,828
============ ============
4. SENIOR CREDIT AGREEMENT
The Company amended its revolving senior credit agreement effective August 12,
1999 upon substantially similar terms. The agreement now provides for borrowings
at the company's option of Libor plus 2.25%, or the bank's prime rate plus
0.25%. The interest rate spread may vary based upon the ratio of Consolidated
Funded Indebtedness, as defined in the Agreement, to earnings before interest,
taxes, depreciation and amortization (EBITDA).
4
<PAGE>
5. BONDS PAYABLE (SENIOR SUBORDINATED NOTES)
The Company issued $100 million in bonds on April 6, 1999 as Senior Subordinated
Notes bearing interest at 12 1/4%. The actual proceeds to the Company were
$98,852,000 after the deduction of discounts. The Company will pay interest on
the notes on April 1 and October 1 of each year, commencing on October 1, 1999.
The notes will mature on April 1, 2006. The notes may be redeemed in whole, or
in part, at any time on or after April 1, 2003. In addition, on or before April
1, 2002, the Company may redeem up to 35% of the aggregate principal amount of
the notes with the net proceeds of a public equity offering if at least 65% of
the aggregate principal amount of the notes originally issued remains
outstanding after such redemption.
6. STOCKHOLDERS' EQUITY
The following is a schedule of the activity in common stock and additional
paid-in capital:
COMMON STOCK ADDITIONAL
SHARES AMOUNT PAID-IN CAPITAL
----------- ----------- ---------------
Balance, January 31, 1999 6,712,374 $ 67,123 $28,806,455
Exercise of stock options 12,000 120 104,740
----------- ----------- -----------
Balance, July 31, 1999 6,724,374 $ 67,243 $28,911,195
=========== =========== ===========
7. ACQUISITIONS
On March 29, 1999 the Company acquired the John Henry, Manhattan and Lady
Manhattan trademarks for $27 million. On April 6, 1999 the Company acquired all
the outstanding capital stock of Perry Ellis International, Inc. for
approximately $75 million in cash. Perry Ellis International, Inc. was a
privately held company which owned and licensed the Perry Ellis brand name,
currently one of the top selling brands in specialty chains and department
stores in the United States.
The acquisitions were accounted for using the purchase method of accounting, and
accordingly, the financial statements include the results of operations of the
acquisitions commencing on April 1, 1999 for John Henry/Manhattan acquisition;
and April 6, 1999 for the Perry Ellis acquisition. Costs in excess of the
carrying value of the net tangible assets acquired were allocated to the
trademarks acquired, are being amortized over a 40 year life, and were
determined as follows:
5
<PAGE>
Purchase price $102,000,000
Plus purchase price adjustments 1,684,624
Plus expenses incurred in connection with the
acquisition 5,885,243
------------
Adjusted purchase price 109,569,867
Tangible asset acquired:
Cash 2,150,377
Accounts receivable 977,553
Other current assets 1,669,067
PP&E 19,599
------------
104,753,271
Liabilities assumed:
Accounts payables and accrued expenses: 1,416,529
------------
Trademarks $106,169,800
============
8. SUPPLEMENTAL CASH FLOW INFORMATION
The following information presents the non-cash impact on the balance sheets of
assets acquired and liabilities assumed in connection with the Perry Ellis, John
Henry and Manhattan acquisitions. The non-cash effects of these investing
activities during the six months ended July 31, 1999 were as follows:
SIX MONTHS
ENDED
JULY 31, 1999
-------------
Adjusted Purchase Price $ 109,569,867
Less cash acquired (2,150,377)
Less deposits in prior period (6,000,000)
-------------
Net cash paid for acquisitions $ 101,419,490
=============
9. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information presented below, based under the assumption
that operations were in effect for each of the periods ending July 31, 1998 and
1999, gives effect to (i) the John Henry/Manhattan acquisition; (ii) the Perry
Ellis International, Inc. acquisition, and (iii) the offering of the Senior
Subordinated Notes. The information presented below is for illustrative
information purposes only and is not indicative of results which would have been
achieved or results which may be achieved in the future.
6
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------- ------------ ------------ ------------
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1999 1998 1999 1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total revenues $ 52,017,000 $ 55,221,710 $117,736,367 $121,790,391
============= ============ ============ ============
Net income $ 1,607,000 $ 338,674 $ 3,913,661 $ 1,331,471
============= ============ ============ ============
Net income per share (diluted) $ 0.23 $ 0.05 $ 0.57 $ 0.20
============= ============ ============ ============
</TABLE>
11. BUSINESS SEGMENTS
The Company's principal segments are grouped between the generation of revenues
from products and royalties. The Licensing segment derives its revenues from
royalties associated from the use of its brand names, principally Perry Ellis,
John Henry, Manhattan and Munsingwear. The Product segment derives its revenues
from the design, import and distribution of apparel to department stores and
other retail outlets, principally throughout the United States. This is the
first year that management has segregated the operations for the two segments.
Shared selling, general and administrative expenses are allocated amongst the
segments.
THREE MONTHS SIX MONTHS
ENDED ENDED
JULY 31, 1999 JULY 31, 1999
------------ ------------
Revenues:
Product $ 45,273,099 $104,751,869
Licensing 6,743,539 9,060,057
------------ ------------
Total Revenues $ 52,016,638 $113,811,926
============ ============
Operating Income
Product $ 2,852,105 $ 8,157,670
Licensing 3,661,635 4,820,384
------------ ------------
Total Operating Income $ 6,513,740 $ 12,978,054
============ ============
Income Before Taxes
Product $ 2,043,511 $ 6,444,756
Licensing 512,304 627,387
------------ ------------
Total Income Before Taxes $ 2,555,815 $ 7,072,143
============ ============
Depreciation and Amortization
Product $ 571,395 $ 1,084,185
Licensing 832,223 1,298,033
------------ ------------
7
<PAGE>
Total Depreciation and Amortization $ 1,403,618 $ 2,382,218
============ ============
Identifiable Assets
Product $ 94,364,485
Licensing 113,847,455
Corporate 2,467,577
------------
Total Identifiable Assets $210,679,517
============
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITON AND RESULTS
OF OPERATIONS
Perry Ellis International, Inc., formerly Supreme International Corporation (the
"Company") cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements which may be deemed to have been made in this
report or which are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in this report that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may", "will", "expect",
"believe", "anticipate", "intend", "could", "would", "estimate", or "continue"
or the negative other variations thereof or comparable terminology are intended
to identify forward-looking statements. Factors which may affect the Company's
results include, but are not limited to, risk related to fashion trends; the
retail industry; reliance on key customers; contract manufacturing; foreign
sourcing; imports and export restrictions; competition; seasonality; rapid
expansion of business; dependence on key personnel and other factors discussed
herein and in the Company's filings with the Securities and Exchange Commission
(the "Commission").
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JULY 31, 1999 AS COMPARED TO THREE AND SIX MONTHS
ENDED JULY 31, 1998.
TOTAL REVENUES. Total revenues consist of net sales and royalty income. Total
revenues for the three and six months ended July 31, 1999 increased $1.3 million
or 2.6% to $52.0 million and $2.0 million or 1.8% to $113.8 million,
respectively, from $50.7 million and $111.8 million in the year ago periods,
primarily as a result of the growth in royalty income from the recent John
Henry/Manhattan and Perry Ellis acquisitions.
NET SALES. Net sales for the three and six months ended July 31, 1999, declined
$4.4 million or 8.9% to $45.3 million and $5.0 million or 4.6%, to $104.8
million, from $49.7 million and $109.8 million respectively in the year ago
periods. The decrease in sales was the result of the Company's exit from the
boy's business, softness in the market for golf apparel and the closure of some
retail customers.
ROYALTY INCOME. Royalty income for the three months ended July 31, 1999
increased $5.8 million to $6.7 million from $1.0 million in the same period a
year ago. For the six months ended July 31, 1999, royalty income was $9.1
million compared to $2.0 million
8
<PAGE>
for the same period a year ago. The increase in royalty income for these two
periods is principally attributable to heavy income generated by our
acquisitions of the John Henry, Manhattan and Perry Ellis.
COST OF SALES. Cost of sales for the three and six month periods ended July 31,
1999 decreased $4.2 million, or 11.2% and $5.5 million, or 6.6% to $33.3 million
and $77.5 million, from $37.5 million and $82.9 million respectively, reflecting
the decrease in net sales in both periods. As a percentage of net sales in the
year ago periods, cost of sales decreased slightly to 73.6% for the three months
ended July 31, 1999 from 75.5% for the same period a year ago. For the six month
period ended July 31, 1999, cost of sales as a percentage of net sales decreased
to 74.0% from 75.6% during the six months ended July 31, 1998. The decline in
the cost of sales as a percentage of net sales is a reflection of the
introduction of new brands at higher gross margins, the shift in the Company's
product mix to more branded products and the discontinuance of the boy's
business which generated lower gross margins.
Gross profit was $18.7 million and $36.3 million, respectively, for the three
and six month periods ended July 31, 1999 compared to $13.2 million and $28.8
million for the same periods a year ago. The increases in gross profit reflect
the improvement in cost of sales and the increase in licensing revenue which has
no associated cost of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, excluding depreciation and amortization, increased $0.8
million or 8.1% and $0.8 million or 4.2%, respectively, for the three and six
month periods ended July 31, 1999 to $10.8 million and $21.0 million from $10.0
million and $20.1 million, respectively, in the year ago periods. As a
percentage of net sales, selling general and administrative expenses were 23.8%
and 20.0% for the three and six months ended July 31, 1999 compared to 20.1% and
18.3 % in the comparable periods a year ago. The increase in selling, general
and administrative costs in the three months ended July 31, 1999, is primarily
attributable to personnel costs associated with the Company's recent
acquisitions. Depreciation and amortization expenses for the three and six
months ended July 31, 1999 increased to $1.4 million and $2.4 million,
respectively, from $0.5 million and $1.0 million in the comparable periods a
year ago, reflecting the increased amortization from the recent acquisitions.
INTEREST EXPENSE. Interest expense increased $3.0 million and $4.0 million for
the three and six months ended July 31, 1999, to $4.0 million and $5.9 million
from $1.0 million and $1.9 million in the comparable periods a year ago. The
increase is attributable to the additional interest resulting from the $100
million Senior Subordinated Notes. The proceeds of this financing were used for
Perry Ellis and to repay debt under the senior credit facility(the "Senior
Credit Facility").
INCOME TAXES. For the three and six month periods ended July 31, 1999, the
Company's effective tax rate was 37.1% and 36.4% compared to 37.1% and 36.2%,
respectively, for the comparable periods in 1998.
9
<PAGE>
NET INCOME. Net income for the three and six months ended July 31, 1999
increased $0.6 million or 52.7% to $1.6 million or 3.0% of total revenue and
$0.8 million or 21.8% to $4.5 million or 4.0% of total revenue, respectively.
Net income was 2.1% and 3.3%, respectively, of total revenue in the comparable
prior periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies primarily upon cash flow from operations and borrowings under
the Senior Credit Facility to finance operations and expansion. Cash provided by
operating activities was $9.5 million for the six months ended July 31, 1999
compared to $0.1 million for the same period last year. The current years
operation includes approximately $4.1 million of accrued interest expense which
is payable semi-annually and will be paid beginning October 1, 1999. The balance
of the increase is primarily attributable to the growth in net income, including
depreciation and amortization and a decrease in inventory levels
Net cash used in investing activities was $101.9 million for the six months
ended July 31, 1999 principally reflects the purchase price of the John
Henry/Manhattan and the Perry Ellis acquisitions.
Net cash provided by financing activities for the six months ended July 31, 1999
totaled $92.7 million which was primarily the result of the net proceeds of a
$98.9 million subordinated debt offering and a net increase of $13.8 million in
borrowings under the term loan agreement, offset by a decrease of $20.0 million
in borrowings under the revolving credit agreement. These funds were used for
the John Henry/Manhattan and the Perry Ellis acquisitions
The Company has a Senior Credit Facility which consists of a $75.0 million
revolving credit facility and a $15.0 million amortizing term loan facility.
Borrowings under the revolving credit facility are limited under term to a
borrowing base calculation, which generally restricts the outstanding balances
to 85.0% of eligible receivables plus 60.0% of eligible inventories, as defined.
Interest on borrowings is variable based, at the Company's option and as a
function of total debt to EBITDA, upon either LIBOR plus 2.25%, or the agent's
bank's prime rate plus 0.25%. The Senior Credit Facility contains certain
covenants, the most restrictive of which requires the Company to maintain
certain financial ratios and minimum net worth. In addition, the Senior Credit
Facility restricts the payment of dividends and is secured by all of the
Company's assets. The term loan agreement requires quarterly principal payments
of $1,250,000 which began July 1999 and contains covenants similar to the
revolving credit facility.
The Company also maintains three letter of credit facilities which total $60.0
million. Each letter of credit is collaterized by the consignment of merchandise
in transit under that letter of credit. As of July 31, 1999, there was $36.3
million available under these facilities. One of the facilities expires in June
2000, one in July 2000 and the other facility for $7.0 million has no set
expiration date.
10
<PAGE>
Management believes that the combination of borrowing availability under the
Revolving Credit Agreement, existing working capital and funds anticipated to be
generated from operating activities will be sufficient to meet the Company's
anticipated operating and capital needs in the foreseeable future.
YEAR 2000 ISSUES
BACKGROUND. The year 2000 issue refers to the inability of certain data
sensitive computer chips, software and systems to recognize a two-digit date
field as belonging to the 21st century. Many computer software programs, as well
as certain hardware equipment containing date-sensitive data, were structured to
utilize a two-digit date field. Accordingly, these programs may not be able to
properly recognize dates in the year 2000 and later, which could result in
significant system and equipment failures. This is a significant issue for most,
if not all, companies, with far reaching implications, some of which cannot be
anticipated or predicted with any degree of certainty. Perry Ellis recognized
that it needed to take action to ensure that its operations would not be
adversely impacted by Year 2000 software failures.
We have undertaken a study of our functional application systems to determine
their compliance with year 2000 issues and, to the extent of noncompliance, the
required remediation. As a result of such study, we believe that the majority of
our systems are year 2000 compliant. To date, the expenses incurred by Perry
Ellis in order to become year 2000 compliant, including computer software costs,
have been $0.25 million and the current additional estimated cost to complete
such remediation is expected to be $0.1 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 the Company has relationships, such as its banking institutions,
customers, payroll processors and others is ongoing. We have inquired, and 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
have received indications that many of them are either compliant or in the
process of remediation. We will continue to monitor these third party entities
to determine the impact on the business of the Company and the actions the
Company must take, if any, in the event of non-compliance by any of these third
parties. Our initial assessment of compliance by third parties is that there is
not a material business risk to the Company posed by any such noncompliance and,
as such, we have not yet developed any related contingency plans.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
The Company does not believe that inflation or foreign currency fluctuations
significantly affected its results of operations for the three or six months
ended July 31, 1999 and 1998.
11
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) On June 11, 1999 the Company held its Annual Meeting of
Shareholders ( the "Meeting")
(b) Not applicable
(c) At the Meeting, the following matters were voted upon:
(I) ELECTION OF DIRECTORS
The following table sets forth the name of each nominee and the voting with
respect to each nominee for director.
FOR WITHHOLD AUTHORITY
--- ------------------
Ronald L. Buch 4,891,549 211,810
Salomon Hanono 4,898,049 204,810
(II) APPROVAL OF AMENDMENT TO COMPANY'S ARTICLE OF INCORPORATION.
Approval of an Amendment to the Company's Articles of Incorporation to
change the Company's name to "Perry Ellis International, Inc."
For 5,056,304 Against 44,965 Abstain 7,590
--------- ------ -----
12
<PAGE>
(iii) APPROVAL OF AMENDMENT TO 1993 STOCK OPTION PLAN
Approval of the Amendment to the Company's 1993 Stock Option Plan to
increase the number of shares of Common Stock issuable under the Plan to
1,500,000 shares.
For 3,871,091 Against 283,991 Abstain 10,745 Not Voted 937,032
--------- ------- ------ -------
(IV) RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
Ratification of Appointment of Deloitte & Touche LLP as the Company's
independent public accountants for the year ending January 31, 1999.
For 5,057,859 Against 44,335 Abstain 665
--------- ------ ---
ITEM 5. Other Information
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule (for SEC only)
(b) Reports on Form 8-K - On June 23, the Company filed a
current report on Form 8-K to disclose that it had changed
its name from Supreme International Corporation to Perry
Ellis International, Inc.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.-
Date: September 14, 1999 By: /S/NEAL S. NACKMAN
----------------------------------
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 431,961
<SECURITIES> 0
<RECEIVABLES> 38,878,937
<ALLOWANCES> 0
<INVENTORY> 31,140,539
<CURRENT-ASSETS> 73,998,822
<PP&E> 7,562,001
<DEPRECIATION> 0
<TOTAL-ASSETS> 210,679,517
<CURRENT-LIABILITIES> 14,450,728
<BONDS> 0
0
0
<COMMON> 67,243
<OTHER-SE> 69,482,425
<TOTAL-LIABILITY-AND-EQUITY> 210,679,517
<SALES> 104,751,870
<TOTAL-REVENUES> 113,811,926
<CGS> 77,481,828
<TOTAL-COSTS> 77,481,828
<OTHER-EXPENSES> 23,352,044
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,905,911
<INCOME-PRETAX> 7,072,143
<INCOME-TAX> 2,573,263
<INCOME-CONTINUING> 4,498,880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,498,880
<EPS-BASIC> .67
<EPS-DILUTED> .66
</TABLE>
