FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended April 30, 1995
OR
[ ] 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 0-18183
G-III APPAREL GROUP, LTD.
(Exact of name of registrant as specified in its character)
Delaware 41-1590959
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
345 West 37th Street, New York, New York 10018
(Address of Principal Executive Office) (Zip Code)
(212) 629-883
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or 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 XX No
--------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 1, 1995.
Common Stock, $.01 par value per share: 6,459,381 shares.
Part I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements *
Consolidated Balance Sheets -
January 31, 1995 and April 30, 1995.......................3
Consolidated Income Statements -
For the Three Months Ended
April 30, 1994 and 1995...................................4
Consolidated Statements of Cash Flows -
For the Three Months Ended
April 30, 1994 and 1995...................................5
Notes to Financial Statements..................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations...................................................7-8
* The Balance Sheet at January 31, 1995 has been taken from the audited
financial statements at that date. All other financial statements are
unaudited.
- 2 -
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
JANUARY 31, APRIL 30,
ASSETS 1995 1995
(unaudited)
Current Assets:
Cash and Cash Equivalents $ 1,421 $ 411
Accounts Receivable - Net 13,414 4,704
Inventories - Net 25,532 29,187
Prepaid and Refundable Income Taxes 4,204 6,145
Prepaid Expense and Other Current Assets 466 782
-------- --------
Total Current Assets 45,037 41,229
-------- --------
Property, Plant and Equipment at Cost - Net 7,015 7,060
Deferred Income Taxes 1,717 1,717
Other Assets 803 884
-------- --------
$54,572 $50,890
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bankers' Acceptances and Notes Payable $12,907 $12,685
Current Maturities of Capital Leases 573 573
Accounts Payable 3,947 4,190
Accrued Expenses 2,152 1,732
Accrued Nonrecurring Charges 2,856 2,728
-------- --------
Total Current Liabilities 22,435 21,908
Obligations Under Capital Leases 1,479 1,359
Nonrecurring Charges - Long-Term 557 557
Stockholders' Equity:
Preferred stock, 1,000,000 shares authorized;
no shares issued and outstanding
Common Stock, $.01 par value: authorized,
20,000,000 shares; issued and outstanding,
6,459,381 shares on January 31, 1995 and on
April 30, 1995 65 65
Additional Paid-in capital 23,603 23,603
Retained Earnings 6,433 3,398
-------- --------
30,101 27,066
-------- --------
$54,572 $50,890
-------- --------
-------- --------
See Accompanying Notes to Financial Statement.
-3-
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in thousands, except share and per share amounts)
THREE MONTHS ENDED
-------------------------------
APRIL 30,
1994 (000'S) 1995
---- (unaudited) ----
Net Sales $ 20,157 $ 8,841
Commission Income 434
----------- -----------
Net Sales and Revenues 20,157 9,275
Cost of Goods Sold 18,599 8,584
----------- -----------
Gross Profit 1,558 691
Selling, General and
Administrative Expenses 6,356 5,343
----------- -----------
Operating Loss (4,798) (4,652)
Interest and Financing Charges, Net 489 406
----------- -----------
Loss Before Taxes (5,287) (5,058)
Income Taxes (Benefit) (2,357) (2,023)
----------- -----------
Net Loss $ (2,930) $ (3,035)
----------- -----------
----------- -----------
Loss per common share:
Primary;
Net Loss per common share $ (.45) $ (.47)
----------- -----------
----------- -----------
Weighted average number of
shares outstanding 6,495,557 6,459,381
----------- -----------
----------- -----------
Fully Diluted;
Net Loss per common share $ (.45) $ (.47)
----------- -----------
----------- -----------
Weighted average number of shares
outstanding 6,495,557 6,459,381
----------- -----------
----------- -----------
See Accompanying Notes to Financial Statements.
-4-
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
-----------------------
APRIL 30,
-----------------------
1994 1995
---- ----
(000's)
(unaudited)
Cash Flows from Operating Activities:
Net Loss $ (2,930) $ (3,035)
Adjustments to Reconcile Net Income:
Depreciation and Amortization 326 255
Changes in Operating Assets and Liabilities:
Accounts Receivable 3,444 8,710
Inventory (13,232) (3,655)
Prepaid and Refundable Income Taxes (2,515) (1,941)
Prepaid Expenses (1,293) (316)
Other Assets 47 (81)
Accounts Payable and Accrued Expenses 2,188 (177)
Accrued Nonrecurring Charge (128)
-------- --------
(11,035) 2,677
-------- --------
Net Cash (Used in) Operating Activities (13,965) (368)
-------- --------
Cash Flows for Investing Activities:
Capital Expenditures (205) (300)
Investment in Joint Venture (249)
-------- --------
Net Cash (Used in) Investing Activities: (454) (300)
-------- --------
Cash Flows from Financing Activities:
Borrowings under bankers' acceptances and notes 31,399 3,321
Repayments of bankers' acceptances and notes (16,400) (3,543)
Proceeds from capital lease obligations 1,053
Payment of capital lease obligations (117) (120)
-------- --------
Net Cash Provided by Financing Activities 15,935 (342)
-------- --------
Net Increase (Decrease) in Cash 1,516 (1010)
Cash at Beginning Period 833 1,421
-------- --------
Cash at End of Period $ 2,349 $ 411
-------- --------
-------- --------
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for:
Interest $ 581 $ 238
Income Taxes $ 32 $ 2
See Accompanying Notes to Financial Statements.
-5 -
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General Discussion
The results for the quarter ended April 30, 1995 are not necessarily indicative
of the results expected for the entire fiscal year. The accompanying financial
statements included herein are unaudited. In the opinion of management, all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of the financial position, results of operations and cash
flows for the interim periods presented have been reflected.
The accompanying financial statements should be read in conjunction with the
financial statements and notes included in the Company's Form 10K filed with the
Securities and Exchange Commission for the year ended January 31, 1995.
Note 2 - Inventories
January 31, April 30,
Inventories consist of: 1995 1995
---- ----
Finished products $23,107 $22,068
Work-in-process 52 214
Raw materials 2,373 6,905
------- -------
$25,532 $29,187
------- -------
------- -------
Note 3 - Net Earnings Per Common Share
Net earnings per common share is based on the weighted average number of common
shares and common share equivalents during each of the periods. Primary and
fully diluted earnings per share include the dilutive effect of unexercised
stock options.
Note 4 - Bankers' Acceptances and Notes Payable
The Company has a loan agreement with three banks for $48,000,000 through
January 30, 1996 and $40,000,000 through May 31, 1996, of which $40,000,000
through January 30, 1996 and $32,000,000 through May 31, 1996 is available for
direct borrowings and the unused balance for letters of credit. All amounts
available for borrowings are subject to borrowing base formulas.
Note 5 - Nonrecurring Charges
As of the year ended January 31, 1995, the Company had a remaining reserve of
approximately $3.4 million related to a cost reduction program. The status of
the components of the provision at the end of the period was:
Balance 1995 Balance
January 31, 1995 Activity April 30, 1995
---------------- -------- --------------
Disposal of Asian Facility $ 2,500 $ $ 2,500
Shut down of Domestic Facilities 779 (60) 719
Severance and related costs 334 (68) 266
------- -------- -------
$ 3,413 $ (128) $ 3,285
------- -------- -------
------- -------- -------
-6-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Net sales and revenues for the quarter ended April 30, 1995 were $9.3 million
compared to $20.2 million for the same quarter last year. The decrease in net
sales during the quarter was primarily due to lower sales in the Womens Leather
($6.8 million) and JL Colebrook ($2.1 million) divisions. The unusually warm
fall season in 1994 left retailers in an overstocked position and continued to
cause weak demand for outerwear apparel during this quarter. Additionally, a
decrease in net sales of $2.9 million during the quarter resulted from the
recognition by the Company of only commission income of $434,000 on certain
types of sales where the Company's customers provide letters of credit which are
transferred by the Company directly to overseas manufacturers. Prior to the
quarter ended July 31, 1994, the customer provided a letter of credit to the
Company and the Company opened a letter of credit to the manufacturer.
Accounting rules require the Company to recognize only commission income with
respect to transactions where the Company does not open a letter of credit. The
Company expects that it will increasingly utilize this type of letter of credit
transaction which results in lower net sales.
Gross profit was $691,000 for the quarter ended April 30, 1995, compared to the
$1.6 million in the same quarter last year. Gross profit as a percentage of net
sales and revenues was 7.5% for the quarter ended April 30, 1995, slightly lower
than 7.7% for the comparable quarter last year. While the change in the use of
certain letters of credit to transact sales did not impact gross profit dollars,
it did affect gross profit as a percentage of net sales and revenues since net
sales and revenues recognized from such transactions was lower. Had the Company
recognized the full amount of such sales, gross profit for the three months
ended April 30, 1995 would have been 5.8% of net sales and revenues. The
decrease in the gross profit percentage was a result of certain period costs
included in cost of goods sold being spread over lower net sales and revenues.
Selling, general and administrative expenses of $5.3 million for the quarter
ended April 30, 1995 were approximately $1.0 million less than in the same
period last year. As a percentage of net sales and revenues, selling, general
and administrative expenses were 57.6% in this quarter compared to 31.4% last
year. The increase as a percentage of net sales and revenues was the result of
lower reported net sales and revenues as described above. The lower selling,
general and administrative expenses were the result of the implementation of a
cost reduction program which began in the second half of the prior fiscal year.
The Company is continuing to monitor and reduce expense levels and expects
selling, general and administrative expenses to continue to decrease for the
reminder of the year, compared to last year, as a result of this program.
-7-
Interest expense of $406,000 was $83,000 lower in the quarter ended April 30,
1995, compared to interest expense of $489,000 in the same period last year. The
decrease is attributable to lower borrowing levels as a result of the Company
maintaining lower levels of inventory, which more than offset higher interest
rates.
Income tax benefit of $2.0 million reflects an effective tax rate of 40%. for
the quarter ended April 30, 1995, compared to an income tax benefit of $2.4
million which reflects an effective tax rate of 44.6% in the comparable period
in the prior year. The decreased effective tax rate for the current year results
from the anticipated lower provision for state and local taxes due to the tax
loss carry forward from the prior year.
As a result of the foregoing, for the three month period ended April 30, 1995,
the Company had a net loss of $3.0 million, or $.47 per share, compared to a net
loss of $2.9 million, or $0.45 per share, for the comparable period in the prior
year.
Liquidity and Capital Resources
As of June 13, 1995, the Company entered into an amended and restated loan
agreement with its three banks. This amended loan agreement, which expires May
31, 1996, provides for a collateralized working capital line of credit for a
maximum amount of $48 million through January 30, 1996 (reduced to $40 million
commencing January 31, 1996), of which a maximum of $40 million (reduced to $32
million commencing January 31, 1996) is available for direct borrowings and the
unused balance for letters of credit. All amounts available for borrowings are
subject to borrowing base formulas and overadvances specified in the agreement.
Direct borrowings bear interest at the agent's prime rate (9% as of June 1,
1995) plus 2%. All borrowings are collateralized by the assets of the Company.
The loan agreement requires the Company, among other covenants, to maintain
certain earnings and tangible net worth levels, and prohibits the payments of
cash dividends. As of April 30, 1995, there was $9.4 million of borrowings
outstanding and approximately $16.3 million of contingent liability under open
letters of credit. The amount borrowed under the line of credit varies based on
the Company's seasonal requirements. The amended loan agreement reduced the
maximum credit line available to the Company. The Company is planning to carry
lower levels of inventory in the current fiscal year compared to the prior year
and, as a result, believes that this facility will be sufficient to meet its
working capital needs. Inventories as of April 30, 1995 were $29.2 million
compared to $51.6 million as of April 30, 1994.
The Company's majority-owned Indonesian subsidiary has a line of credit with a
bank for approximately $3.5 million which is supported by a $2.0 million
stand-by letter of credit issued under the Company's loan agreement. As of April
30, 1995, the borrowing by the Indonesian subsidiary under its line of credit
approximated $3.3 million.
-8-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
G-III APPAREL GROUP, LTD.
(Registrant)
Date: June 14, 1995 By: /s/ Morris Goldfarb
-----------------------------
Morris Goldfarb
President and Chief
Executive Officer
Date: June 14, 1995 By: /s/ Alan Feller
-----------------------------
Alan Feller
Chief Financial Officer,
Treasurer, and Secretary
5
1000
JAN-31-1996
APR-30-1995
3-MOS
411
0
4,704
0
29,187
41,229
7,060
0
50,890
22,508
0
65
0
0
27,001
50,890
8,841
9,275
8,584
0
5,343
0
406
(5,058)
(2,023)
0
0
0
0
(3,035)
(.47)
(.47)
