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, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-18183
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G-III APPAREL GROUP, LTD.
(Exact of name of registrant as specified in its charter)
Delaware 41-1590959
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
345 West 37th Street, New York, New York 10018
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(Address of Principal Executive Office) (Zip Code)
(212) 629-8830
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(Registrant's telephone number, including area code)
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(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_______
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 1, 1996.
Common Stock, $.01 par value per share: 6,467,336 shares.
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Part I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements *
Consolidated Balance Sheets -
January 31, 1996 and April 30, 1996....................3
Consolidated Statements of Operations -
For the Three Months Ended
April 30, 1995 and 1996................................4
Consolidated Statements of Cash Flows -
For the Three Months Ended
April 30, 1995 and 1996................................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, 1996 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, except share and per share amounts)
JANUARY 31, APRIL 30,
1996 1996
ASSETS (unaudited)
Current Assets:
Cash and Cash Equivalents $ 7,617 $ 3,122
Accounts Receivable - Net 8,995 5,157
Inventories - Net 14,207 18,196
Prepaid and Refundable Income Taxes 502 2,907
Prepaid Expense & Other Current Assets 968 1,165
-------- -------
Total Current Assets 32,289 30,547
Property and Equipment at Cost - Net 6,324 6,000
Other Assets 927 1,022
Deferred Income Taxes 1,717 1,717
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$ 41,257 $ 39,286
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 2,980 $ 3,384
Current Maturities of Obligations Under
Capital Leases 571 571
Accounts Payable 2,469 2,905
Accrued Expenses 1,751 2,584
Accrued Nonrecurring Charges 2,294 2,238
------- -------
Total Current Liabilities 10,065 11,682
Obligations Under Capital Leases 919 771
Nonrecurring Charges - Long Term 557 557
Stockholders' Equity:
Preferred stock, 1,000,000 shares authorized;
no shares issued and outstanding
Common Stock, $.01 par value: authorized
20,000,000 shares; issued and outstanding,
6,465,836 shares on January 31, 1996 and
on April 30, 1996 65 65
Additional Paid-in Capital 23,615 23,615
Retained Earnings 6,036 2,596
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29,716 26,276
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$ 41,257 $ 39,286
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See Accompanying Notes to Financial Statements.
-3-
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
THREE MONTHS ENDED
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APRIL 30,
---------
1995 1996
---- ----
(Unaudited)
Net Sales $ 9,275 $ 5,063
Cost of Goods Sold 8,612 4,911
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Gross Profit 663 152
Selling, General and
Administrative Expenses 5,315 5,660
------ ------
Operating Loss (4,652) (5,508)
Interest and Financing Charges, Net 406 212
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Loss Before Taxes (5,058) (5,720)
Income Taxes (Benefit) (2,023) (2,280)
-------- -------
Net Loss $ (3,035) $ (3,440)
======== =======
Loss per common share:
Primary and Fully Diluted;
Net Loss per common share $ (.47) $ (.53)
==== =====
Weighted average number of
shares outstanding 6,459,381 6,465,836
========= =========
See Accompanying Notes to Financial Statements.
-4-
G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
THREE MONTHS ENDED
---------------------------------
APRIL 30,
---------
1995 1996
---- ----
(Unaudited)
Cash Flows from Operating Activities:
Net Loss $ (3,035) $ (3,440)
Adjustment to Reconcile Net Loss:
Depreciation and Amortization 255 364
Changes in Operating Assets and Liabilities:
Accounts Receivable 8,710 3,838
Inventory (3,655) (3,989)
Prepaid and refundable Income Taxes (1,941) (2,405)
Prepaid Expenses (316) (197)
Other Assets (81) (95)
Accounts Payable and Accrued Expenses (177) 1,269
Accrued Nonrecurring Charge (128) (56)
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Net Cash (Used in) Operating Activities (368) (7,299)
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Cash Flows for Investing Activities:
Capital Expenditures (300) (93)
Capital Dispositions 0 53
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Net Cash (Used in) Investing Activities: (300) (40)
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Cash Flows from Financing Activities:
Borrowings of notes payable 3,321 404
Repayments of notes payable (3,543) 0
Payment of capital lease obligations (120) (148)
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Net Cash Provided by Financing Activities (342) 256
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Net (Decrease) in Cash (1,010) (4,495)
Cash at Beginning of Period 1,421 7,617
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Cash at End of Period $ 411 $ 3,122
=========== =========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for:
Interest $ 238 $ 109
Income Taxes $ 2 $ 1
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 of the three month period ended April 30, 1996 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.
Certain reclassifications have been made to conform to the 1996 presentation.
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, 1996.
Note 2 - Inventories (in thousands)
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January 31, April 30,
Inventories consist of: 1996 1996
---- ----
Finished products....................... $ 12,112 $ 13,388
Work-in-process......................... 49 513
Raw materials........................... 2,046 4,295
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$ 14,207 $ 18,196
======== ========
Note 3 - Net Loss Per Common Share
Net loss per common share is based on the weighted average number of common
shares outstanding during each of the periods, adjusted for the dilutive effect
of the common share equivalents, when applicable.
Note 4 - Notes Payable
The Company has a loan agreement with three banks for $48,000,000 through
October 30, 1996 and $40,000,000 through May 31, 1997, of which $40,000,000
through October 30, 1996 and $30,000,000 through May 31, 1997 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, 1996, the Company had a remaining reserve of
approximately $2.9 million related to a cost reduction program. The status of
the components of the provision at the end of the period was:
(in thousands)
Balance 1996 Balance
January 31, 1996 Activity April 30, 1996
---------------- -------- --------------
Severance and related costs $ 161 $ (40) $ 121
Closure of domestic
and foreign facilities 2,690 (16) 2,674
----- ----- -----
$ 2,851 $ (56) $ 2,795
===== ===== =====
-6-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Net sales for the three months ended April 30, 1996 were $5.1 million compared
to $9.3 million for the same period last year. The decrease in net sales during
the quarter was primarily due to lower sales in the JL Colebrook ($2.5 million)
and Womens Leather ($1.5 million) divisions. These declines resulted from
weakness in retail sales of outerwear apparel. The Company expects that the
softness in the outerwear apparel market will continue to adversely affect sales
in the quarter ending July 31, 1996.
Gross profit was $152,000 for the quarter ended April 30, 1996, compared to
$663,000 in the same period last year. Gross profit as a percentage of net sales
was 3.0% for the three months ended April 30, 1996, compared to 7.1% for the
same period last year. 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.
Selling, general and administrative expenses of $5.7 million for the three
months ended April 30, 1996 were approximately $345,000 more than in the same
period last year. The increase in selling, general and administrative expenses
compared to last year resulted from start-up costs relating to new product
development in branded merchandise, which includes licensed product under the
Kenneth Cole label, as well as development of new distribution channels. These
increases were partially offset by savings resulting from the sub-lease of a
warehouse in March, 1996. The Company continues to monitor and seeks to reduce
expense levels whenever possible.
For the three months ended April 30, 1996, interest and financing charges was
$212,000, a decrease of $194,000 from the same period of the prior year. The
decrease is attributable to lower borrowing levels as a result of the Company
maintaining lower levels of inventory.
Income tax benefit of $2.3 million reflects an effective tax rate of 40% for the
three months ended April 30, 1996, compared to an income tax benefit of $2.0
million which reflected the same effective tax rate of 40% in the comparable
period of the prior year.
As a result of the foregoing, for the three month period ended April 30, 1996,
the Company had a net loss of $3.4 million, or $.53 per share, compared to a net
loss of $3.0 million, or $.47 per share, for the comparable period in the prior
year.
-7-
Liquidity and Capital Resources
The Company has a loan agreement, which expires May 31, 1997, providing for a
collateralized working capital line of credit for a maximum amount of $48
million through October 30, 1996 (reduced to $40 million commencing October 31,
1996), of which a maximum of $40 million (reduced to $30 million commencing
October 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 (8.25% as of June 1,
1996) plus 1.75%. 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
payment of cash dividends. As of April 30, 1996, there were no direct borrowings
outstanding and approximately $11.1 million of contingent liability under open
letters of credit. The amount borrowed under the line of credit varies based
upon the Company's seasonal requirements.
The Company's wholly-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, 1996, the borrowing by the Indonesian subsidiary under its line of credit
approximated $3.4 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, 1996 By: /s/ MORRIS GOLDFARB
-----------------------------------
Morris Goldfarb
President and Chief
Executive Officer
Date: June 14, 1996 By: /s/ ALAN FELLER
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Alan Feller
Chief Financial Officer,
Treasurer, and Secretary
-9-
5
1,000
JAN-31-1997
FEB-1-1996
APR-30-1996
3-MOS
3,122
0
7,887
(2,730)
18,196
30,547
12,781
6,781
39,286
11,682
0
65
0
0
26,211
39,286
5,063
5,063
4,911
4,911
0
0
212
(5,720)
(2,280)
(3,440)
0
0
0
(3,440)
(.53)
(.53)
