		PAGE
PART I: FINANCIAL INFORMATION
Item 1:
Consolidated Balance Sheets as of ~~April 30,~~July 31, 2002 ~~(Unaudited)~~ and January 31, 2002 (Unaudited)		1
Consolidated Statements of Income (Unaudited) for the three and six months ended ~~April 30,~~July 31, 2002 and 2001		2
Consolidated Statements of Cash Flows (Unaudited) for the ~~three~~six months ended ~~April 30,~~July 31, 2002 and 2001		3
Notes to Unaudited Consolidated Financial Statements		4

Item 2: ~~Management's~~
Management’s Discussion and Analysis of Financial Condition and Results of Operations 16		19

Item 3:
Quantitative and Qualitative Disclosures About Market Risk		26

Item 4:
Internal Controls		27

PART II: OTHER INFORMATION 24		28
Signature 25		29
Certification		30

See Notes to Unaudited Consolidated Financial Statements.
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended April 30, ------------------------------------------ 2002 2001 ----------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,766,200 $ 3,197,600 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 502,162 1,473,140 Amortization of debt issue cost 189,169 157,337 Amortization of bond discount 74,589 41,000 Minority Interest 32,020 - Other 12,628 (33,959) Changes in operating assets and liabilities (net of effects of acquisitions): Accounts receivable, net (17,947,365) (6,655,503) Inventories 10,815,158 3,293,816 Other current assets and prepaid income taxes 186,734 621,937 Other assets (1,673,546) (830,379) Accounts payable and accrued expenses 213,988 (836,325) Income taxes payable 515,525 1,381,032 Accrued interest payable (2,555,087) (2,970,245) Other current liabilities and unearned revenues 320,866 (528,637) ----------------- ---------------- Net cash used in operating activities (4,546,959) (1,689,186) ----------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (831,473) (189,337) Payment on purchase of intangible assets (12,218) (41,469) Payment for acquired business (25,050,474) - ----------------- ---------------- Net cash used in investing activities: (25,894,165) (230,806) ----------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (payments) proceeds from senior credit facility (21,756,094) 2,185,892 Net proceeds from senior secured notes 55,589,250 - Purchase of treasury stock - (149,260) Proceeds from exercise of stock options 316,184 - ----------------- ---------------- Net cash provided by financing activities: 34,149,340 2,036,632 ----------------- ---------------- Effect of exchange rate changes on cash and cash equivalents 9,044 - ----------------- ---------------- NET INCREASE IN CASH 3,717,260 116,640 CASH AT BEGINNING OF YEAR 1,303,978 344,741 ----------------- ---------------- CASH AT END OF PERIOD $ 5,021,238 $ 461,381 ================= ================ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 6,634,281 $ 7,062,012 ================= ================ Income taxes $ 2,422,500 $ 652,872 ================= ================ NON-CASH FINANCING AND INVESTING ACTIVITIES: Change in fair value of mark-to-market interest rate swap/option $ 1,188,684 $ - ================= ================

Six Months Ended July 31,


2002

2001

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income    $ 6,947,453    $ 4,684,507
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization    1,073,142    3,010,280
Amortization of debt issue cost    393,698    309,674
Amortization of bond discount    165,973    82,000
Deferred income taxes    1,837,737    —
Minority interest    9,844    —
Other    20,710    (25,888 )
Changes in operating assets and liabilities (net of effects of acquisitions):
Accounts receivable, net    (3,020,536 )    9,591,940
Inventories    14,407,999    5,932,620
Other current assets and prepaid income taxes    (2,742,217 )    425,759
Other assets    (2,212,635 )    (458,937 )
Accounts payable and accrued expenses    4,883,846    (1,336,995 )
Income taxes payable    (1,381,551 )    1,704,094
Accrued interest payable    1,052,963    (43,308 )
Other current liabilities and unearned revenues    721,593    732,741


Net cash provided by operating activities    22,158,019    24,608,487


CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment    (17,025,684 )    (1,505,667 )
Payment on purchase of intangible assets    (18,737 )    (83,106 )
Payment for acquired businesses    (25,050,474 )    —


Net cash used in investing activities:    (42,094,895 )    (1,588,773 )


CASH FLOWS FROM FINANCING ACTIVITIES:

Net payments from senior credit facility    (21,756,094 )    (22,929,773 )
Net proceeds from senior secured notes    55,589,250    —
Net proceeds from real estate mortgage    11,600,000    —
Purchase of treasury stock    —      (308,356 )
Proceeds from exercise of stock options    1,237,005    6,875


Net cash provided by (used in) financing activities:    46,670,161    (23,231,254 )


NET INCREASE (DECREASE) IN CASH    26,733,285    (211,540 )
CASH AT BEGINNING OF YEAR    1,303,978    344,741


CASH AT END OF PERIOD    $ 28,037,263    $ 133,201


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest    $ 6,759,806    $ 7,651,220


Income taxes    $ 4,929,500    $ 1,277,872


NON-CASH FINANCING AND INVESTING ACTIVITIES:

Change in fair value of mark-to-market interest rate swap/option    $ 4,990,177    $ —


See Notes to Unaudited Consolidated Financial ~~Statements. 3~~ Statements
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
Item 1.    NOTES TO ~~THE~~UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~
1.    GENERAL
The accompanying unaudited consolidated financial statements of Perry Ellis International, Inc. and subsidiaries ("(“Perry ~~Ellis"~~Ellis” or the ~~"Company"~~“Company”) have been prepared in accordance with accounting principles generally accepted in the United States ~~("GAAP"~~(“GAAP”) for interim financial information and in accordance with the requirements of 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 required by GAAP. These consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes included in the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended January 31, 2002. Certain amounts in the prior period have been reclassified to conform to the current ~~period's~~period’s presentation.
In our opinion, the information presented reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the interim periods. Results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire fiscal year.
2.    INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, ~~first- out~~first-out basis and consist principally of finished goods.
3.    LETTER OF CREDIT FACILITIES
Borrowings and availability under letter of credit facilities consist of the following as of: April 30, January 31, 2002 2002 --------------- -------------- Total letter of credit facilities $ 64,400,000 $ 44,362,500 Outstanding letters of credit (21,322,191) (11,035,880) --------------- -------------- Total available $ 43,077,809 $ 33,326,620 =============== ==============

July 31, 2002

January 31, 2002

Total letter of credit facilities    $ 59,362,500    $ 44,362,500
Outstanding letters of credit    (34,383,782 )    (11,035,880 )


Total credit available    $ 24,978,718    $ 33,326,620


4.    ADVERTISING AND RELATED COSTS
The ~~Company's~~Company’s accounting policy relating to advertising and related costs is to expense these costs in the period incurred. Advertising and related costs were ~~$1.4~~$1.1 million and ~~$2.2~~$1.0 million for the three months ended ~~April 30,~~July 31, 2002 and ~~April 30,~~July 31, 2001, respectively and $2.6 million and $3.3 million for the six months ended July 31, 2002 and July 31, 2001, respectively. 4
5.     PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful lives of property and equipment consists of the following: Avg. Useful Asset Class Lives in Years --------------------------------- ------------------------ Furniture, fixtures and equipment 7 Vehicles 7 Leasehold Improvements 11
Asset Class
Avg. Useful Lives in Years
Furniture, fixtures and equipment 7
Vehicles 7
Leasehold improvements 11
6.     SEGMENT INFORMATION
In accordance with ~~SFAS~~Statement of Financial Accounting Standards (“SFAS”) No. 131, ~~"Disclosure~~“Disclosure About Segments of an Enterprise and Related Information,"” our principal business segments are grouped into the generation of revenues from sale of products and royalties from licensing activity. These segments are identified and managed by the Company based on the products and services offered by each. The Product segment derives its revenues from the design, importation and distribution of apparel ~~and swimwear~~ to various retail channels, which include regional, national and international mass merchants, chain stores, department stores and other specialty retail stores, principally throughout the United States, Puerto Rico and Canada. The Licensing segment derives its revenues from royalties associated with the licensing of its brand names to third parties, principally Perry ~~Ellis(R)~~Ellis^®, John ~~Henry(R)~~Henry^®, ~~Manhattan(R)~~Manhattan^® and ~~Munsingwear(R)~~Munsingwear^®. Trademark costs have been allocated among the segments where the brands are shared. Shared selling, general and administrative expenses are allocated amongst the segments based upon department utilization rates. THREE MONTHS ENDED APRIL 30, -------------------------------------- 2002 2001 -------------------------------------- Revenues: Product $ 78,619,092 $ 80,462,674 Licensing 6,076,793 6,065,629 --------------- --------------- Total Revenues $ 84,695,885 $ 86,528,303 =============== =============== Operating Income Product $ 6,126,099 $ 5,886,615 Licensing 5,467,563 3,254,248 --------------- --------------- Total Operating Income $ 11,593,662 $ 9,140,863 =============== =============== 5

Three Months Ended July 31,

Six Months Ended July 31,

2002

2001

2002

2001
Revenues:
Product    $ 56,394,030    $ 58,712,256    $ 135,013,122    $ 139,174,929
Licensing    7,600,633    6,857,434    13,677,426    12,923,064




Total Revenues    $ 63,994,663    $ 65,569,690    $ 148,690,548    $ 152,097,993




Operating Income:
Product    $ 707,501    $ 1,907,262    $ 6,833,602    $ 7,793,877
Licensing    6,524,377    4,130,633    11,991,938    7,384,883




Total Operating Income    $ 7,231,878    $ 6,037,895    $ 18,825,540    $ 15,178,760




7.     ~~ACQUISITION OF~~ JANTZEN ACQUISITION
On March 22, 2002, the Company acquired the Jantzen swimwear business from subsidiaries of VF Corporation for approximately $24.0 million, excluding ~~fees~~costs related to the transaction. The acquisition was financed with a portion of the proceeds from a $57.0 million private offering of ~~9 1/2%~~9½% senior secured notes, which closed simultaneously with the acquisition.
The Jantzen assets acquired consist primarily of the Jantzen trademarks and tradenames, license agreements, certain equipment, other items of personal property, showroom leases and inventory relating to the 2003 season, which ~~commences on~~commenced in July 1, 2002. As part of this acquisition, the Company also acquired ~~the~~ licenses for the Tommy ~~Hilfiger(R)~~Hilfiger^® brand for ~~women's~~women’s swimwear and for the ~~Nike(R)~~Nike^® brand for ~~women's~~women’s and ~~girl's~~girl’s swimwear, ~~men's~~men’s and ~~boy's~~boy’s racing swimsuits, swim equipment, swimwear accessories and apparel.
In connection with the Jantzen acquisition, the Company entered into a lease agreement with VF Corporation to occupy ~~Jantzen's~~Jantzen’s Portland, Oregon administrative facility for an initial six-month period. In addition, the Company entered into a lease agreement to occupy a portion of ~~Jantzen's~~Jantzen’s Seneca, South Carolina distribution center facility for a one-year period. The Company was also granted a right of first refusal to purchase the Seneca distribution center ~~facility, which~~facility. The option was exercised on May 20, 2002 at a price of $2.5 million. The Company anticipates closing on this purchase ~~in approximately 90 days.~~ by the end of September 2002.
The Jantzen 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 Jantzen acquired or assumed has not yet been made. The following is a summary of the purchase price and ~~management's~~management’s estimate of the purchase price allocation. (Dollars in Thousands) Purchase price determination: Net purchase price $ 23,978 Liabilities assumed and expenses incurred in connection with the acquisition 3,030 ---------- Gross purchase price $ 27,008 ---------- Purchase price allocation: Inventories $ 2,191 Machinery and equipment 465 Trademarks 24,352 ---------- Gross purchase price $ 27,008 Less: liabilities assumed (1,957) ---------- Cash paid for acquisition and acquisition cost $ 25,051 ---------- 6

(Dollars in Thousands)

Purchase price determination:
Net purchase price      $ 23,978
Liabilities assumed and expenses incurred in connection with the acquisition      3,030

Gross purchase price      $ 27,008

Purchase price allocation:
Inventories      $ 2,191
Machinery and equipment      465
Trademarks      24,352

Gross purchase price      $ 27,008
Less: liabilities assumed      (1,957 )

Cash paid for acquisition and acquisition cost      $ 25,051

8.     PRO FORMA FINANCIAL INFORMATION
The pro forma financial information presented below, gives effect to the Jantzen acquisition, the offering of the senior secured notes and repayment of the senior credit facility, in each case as if they occurred as of the beginning of the ~~quarters~~fiscal year for the three and six months ended ~~April 30,~~July 31, 2002 and 2001. The information presented below is for illustrative purposes only and is not indicative of results, which would have been achieved, or results, which may be achieved in the future. THREE MONTHS ENDED APRIL 30, ------------------------------ 2002 2001 ------------------------------ (Dollars in Thousands) Total Revenues $ 86,725 $ 96,984 ----------- ------------ Net Income $ 5,015 $ 4,250 ----------- ------------ Net Income per Share Basic $ 0.79 $ 0.65 ----------- ------------ Diluted $ 0.78 $ 0.64 ----------- ------------

Three Months Ended July 31,

Six Months Ended July 31,

2002

2001

2002

2001

(Dollars in Thousands)

(Dollars in Thousands)
Total Revenues      $ 63,995      $ 71,407      $ 150,720      $ 168,391




Net Income      $ 2,181      $ 1,418      $ 7,197      $ 5,668




Net Income per Share
Basic      $ 0.34      $ 0.22      $ 1.13      $ 0.87




Diluted      $ 0.34      $ 0.22      $ 1.12      $ 0.86




9. SHARE REPURCHASE On July 11, 2000, the Board of Directors of Perry Ellis approved a share repurchase program in which up to 500,000 shares of common stock may be purchased from time to time during the following 12 months. On July 11, 2001, the Board of Directors extended the current share repurchase program for an additional year, and on September 25, 2001 increased the number of shares authorized for repurchase to 750,000 shares. The shares may be purchased in the open market or in privately negotiated transactions. On March 26, 2002, the Company retired 51,500 shares, which totaled all shares held in the treasury. 10.     RECENT ACCOUNTING PRONOUNCEMENT
In April 2001, the Financial Accounting Standards Board ~~("FASB"~~(��FASB”) Emerging Issues Task Force ~~("EITF"~~(“EITF”) reached a consensus on Issue No. 01-09, ~~"Accounting~~“Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the ~~Vendor's~~Vendor’s Products)."” This issue addresses the recognition, measurement and income statement classification of consideration from a vendor to a customer in connection with the ~~customer's~~customer’s purchase or promotion of the ~~vendor's~~vendor’s products. This consensus is expected to only impact revenue and expense classifications by immaterial amounts and have no effect on reported income.
Beginning in the first quarter of fiscal 2003, the Company ~~recognized the impact of~~adopted EITF Issue No. 01-09 on sales incentives in its financial statements and restated previously issued 7 financial statements to reflect the provisions of these guidelines. The net impact from the adoption of these rules did not impact operating income, net income or the financial position of the Company, but resulted in the reclassification of certain selling, general and administrative expenses to net sales.
In July 2001, the FASB issued ~~Statement of Financial Accounting Standards ("SFAS")~~SFAS No. 141, ~~"Business Combinations."~~“Business Combinations.” SFAS No. 141 requires the use of the purchase method of accounting for all business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. SFAS No. 141 also addresses the recognition and measurement of goodwill and other intangibles assets acquired in a business combination. SFAS No. 141 isdid not ~~expected to~~ have a significant effect on the financial position or results of operations of the ~~Company upon adoption.~~ Company.
In July 2001, the FASB issued SFAS No. 142, ~~"Goodwill~~“Goodwill and Other Intangible Assets",” which changes the accounting treatment as it applies to goodwill and other identifiable intangible assets with indefinite useful lives from an amortization method to an impairment-only approach. Under SFAS No. 142, proper accounting treatment requires annual assessment for any impairment of the carrying value of the assets based upon an estimation of the fair value of the identifiable intangible asset with an indefinite useful life, or in the case of goodwill of the reporting unit to which the goodwill pertains. Impairment losses, if any, arising from the initial
application of SFAS No. 142 are to be reported as a cumulative effect of a change in accounting principle. The effective date of this statement is for fiscal years beginning after December 15, 2001. The Company has adopted SFAS No. 142 for its fiscal year beginning February 1, 2002.
In accordance with SFAS No. 142, the Company obtained a valuation of all its trademarks from a third party independent valuation firm. Based on this valuation, no significant impairment was identified. Under SFAS No. 142, goodwill and identifiable intangible assets with an indefinite useful life are no longer subject to amortization. SFAS No. 142 does not permit the restatement of previously issued financial statements, but does require the disclosure of prior results adjusted to exclude amortization expense related to goodwill and intangible assets, which are no longer being amortized. Basic and diluted earnings per share for the ~~first~~ three months ~~of fiscal 2002,~~ended July 31, 2001, adjusted to exclude amounts no longer being amortized under the provisions of SFAS No. 142, were ~~$0.58~~$0.33 and ~~$0.59,~~$0.32, respectively.
THREE MONTHS ENDED APRIL 30, ------------------------------------------- 2002 2001 ------------------------------------------- Net Income: Reported net Income $ 4,766,200 $ 3,197,600 Intangible amortization 649,536 ------------------------------------------- Adjusted net income $ 4,766,200 $ 3,847,136 ------------------------------------------- Basic Earnings Per Share Reported basic earnings per share $ 0.75 $ 0.49 Intangible amortization 0.10 ------------------------------------------- Adjusted basic earnings per share $ 0.75 $ 0.59 ------------------------------------------- Diluted Earnings Per Share Reported diluted earnings per share $ 0.75 $ 0.48 Intangible amortization 0.10 ------------------------------------------- Adjusted diluted earnings per share $ 0.75 $ 0.58 -------------------------------------------
8 Basic and diluted earnings per share for the six-month period ended July 31, 2001 were $0.91.

Three Months Ended July 31,

Six Months Ended July 31,

2002

2001

2002

2001
Net income
Reported net income    $ 2,181,253    $ 1,486,907    $ 6,947,453    $ 4,684,507
Intangible amortization    —      654,000    —      1,320,000




Adjusted net income    $ 2,181,253    $ 2,140,907    $ 6,947,453    $ 6,004,507




Basic earnings per share
Reported basic earnings per share    $ 0.34    $ 0.23    $ 1.09    $ 0.71
Intangible amortization    —      0.10    —      0.20




Adjusted basic earnings per share    $ 0.34    $ 0.33    $ 1.09    $ 0.91




Diluted earnings per share
Reported diluted earnings per share    $ 0.34    $ 0.23    $ 1.08    $ 0.71
Intangible amortization    —      0.09    —      0.20




Adjusted diluted earnings per share    $ 0.34    $ 0.32    $ 1.08    $ 0.91




On October 3, 2001, the FASB issued SFAS No. 144. ~~"Accounting~~“Accounting for the Impairment or Disposal of Long-Lived Assets",” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While SFAS No. 144 supersedes SFAS No. 121 ~~"Accounting~~“Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of",” it retains many of the fundamental provisions of that Statement. SFAS No. 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30, ~~"Reporting~~“Reporting the Results of ~~Operations---Reporting~~Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions",” for the disposal of a segment of a business. The effective date of this statement is for fiscal years beginning after December 15, 2001. SFAS No. 144 is not expected to have a significant effect on the financial position or the results of operation of the Company. ~~11.~~
In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB No. 13, and Technical Corrections,” (“SFAS 145”) which all but eliminates the
presentation in income statements of debt extinguishments as extraordinary items. SFAS 145 will be effective for fiscal years beginning after May 15, 2002. The Company plans to implement SFAS 145 at the beginning of fiscal 2004. SFAS 145 is not expected to have a significant effect on the financial position or results of operations of the Company.
In July 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit of Disposal Activities,” (“SFAS 146”) which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to exit or disposal plan. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. SFAS 146 is not expected to have a significant effect on the financial position or results of operations of the Company.
10.    DERIVATIVES FINANCIAL INSTRUMENTS
The Company adopted FASB Statement No. 133, ~~"Accounting~~“Accounting for Derivative Instruments and Hedging Activities,"” as amended by SFAS 138, effective February 1, 2001. SFAS 133 requires that all derivative financial instruments such as interest rate swap contracts and foreign exchange contracts, be recognized in the financial statements and measured at fair value regardless of the purpose or intent for holding them. Changes in the fair value of derivative financial instruments are either recognized in income or ~~shareholders'~~shareholders’ equity (as a component of comprehensive income), depending on whether the derivative is being used to hedge changes in fair value or cash flows. The adoption of SFAS 133 did not have a material effect on the Company financial ~~statements~~ statements.
The Company has entered into derivative financial instruments in order to manage the overall borrowing costs associated with its senior subordinated notes. At ~~April 30,~~July 31, 2002, the Company has an interest rate swap agreement with a notional amount of $40.0 million dollars maturing on April 1, 2006. The swap is a fair value hedge as it has been designated against the senior subordinated notes carrying a fixed rate of interest and converts such notes to variable rate debt. The hedge qualifies for short-cut accounting and accordingly, the interest rate swap contracts are reflected at fair value in the ~~Company's~~Company’s consolidated balance ~~sheet and the related portion of fixed-rate debt being hedged adjusted for an offsetting amount with no effect on the statement of income.~~ sheet.
At ~~April 30,~~July 31, 2002, the Company also had an interest rate cap maturing on April 1, 2006 and a basis swap maturing on April 3, 2003, both with a notional amount of $40.0 million dollars. The interest rate cap effectively hedges against increases in the variable rate of interest paid on the interest rate swap and the basis swap ~~decreased~~decreases the spread on the interest rate swap for 18 months. Neither of these derivatives qualified for hedge accounting and accordingly, are reflected at fair value in the ~~Company's~~Company’s consolidated balance sheet with the offset being recognized in income for the current period. Interest expense for the three and six months ended ~~April 30,~~July 31, 2002 has been decreased by approximately $0.1 million and increased by approximately ~~$0.3~~$0.2 million, respectively as a result of the recognition of these derivatives.
In conjunction with the March 2002 offering of $57.0 million of ~~9 1/2%~~9½% senior secured notes due March 15, 2009, the Company entered into interest rate swap and option agreements (the ~~"March~~“March Swap ~~Agreement"~~Agreement”) for an aggregate notional amount of $57.0 million in order to minimize the debt servicing costs associated with the notes. The March Swap Agreement is scheduled to terminate on March 15, 2009. Under the March Swap Agreement, the Company is entitled to receive semi-annual interest payments on September 15 and March 15 at a fixed rate of ~~9 1/2%~~9½% and are obligated to make semi-annual interest payments on September 15 and March 15
at a floating rate based on the three-month LIBOR rate plus 369 basis points for the period from March 22, 2002 through March 15, 2009. The March Swap Agreement has optional call provisions with trigger dates of March 15, 2005, March 15, 2006 and March 15, 2007, which contain premium requirements in the event the call is exercised.
The March Swap Agreement is a fair value hedge as it has been designated against the senior secured notes carrying a fixed rate of interest and converts such notes to variable rate debt. The hedge qualifies for short-cut accounting and accordingly, the interest rate swap contracts are reflected at fair value in the ~~company's~~company’s consolidated balance ~~sheet and the related portion of fixed-rate debt being hedged adjusted for an offsetting amount with no effect on the statement of income. 9~~ ~~12.~~sheet.
11.    CONSOLIDATING CONDENSED FINANCIAL STATEMENTS
The following are consolidating condensed financial statements, which present, in separate columns: Perry Ellis International, Inc., the Guarantors on a combined, or where appropriate, consolidated basis, and the Non-Guarantors on a consolidated basis. Additional columns present eliminating adjustments and consolidated totals as of ~~April 30,~~July 31, 2002 and January 31, 2002, and for the three months and six months ended ~~April 30,~~July 31, 2002 and 2001. The combined Guarantors are wholly owned subsidiaries of Perry Ellis International, Inc., and have fully and unconditionally guaranteed the senior secured notes on a joint and several basis. The Company has not presented separate financial statements and other disclosures concerning the combined Guarantors because management has determined that such information is not material to investors.
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF ~~APRIL 30,~~JULY 31, 2002
Non- Parent Only Guarantors Guarantors Eliminations Consolidated -------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 3,821,412 $ 13,035 $1,186,791 $ 5,021,238 Accounts receivable, net 67,166,558 820,706 456,537 (126,191) 68,317,610 Intercompany Receivable - Guarantors 2,004,517 (2,004,517) - Intercompany Receivable - Non Guarantors 594,291 (594,291) Inventories 34,309,934 2,375,251 99,846 36,785,031 Deferred income taxes 2,384,316 2,384,316 Other current assets 1,580,945 98,680 7,429 1,687,054 ---------------- ----------- ---------- ----------- ------------ Total current assets 111,861,973 3,307,672 1,750,603 (2,724,999) 114,195,249 Property and equipment, net 11,057,982 629,700 32,624 11,720,306 Intangible assets, net 117,949,912 24,341,697 142,291,609 Investment in subsidiaries (147,955) 147,955 - Other 5,940,447 598,085 6,538,532 ---------------- ----------- ---------- ----------- ------------ TOTAL $ 246,662,359 $28,877,154 $1,783,227 $(2,577,044) $274,745,696 ================ =========== ========== =========== ============ LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 5,271,590 $ 151,641 $ 136,785 $ (126,191) $ 5,433,825 Accrued expenses 3,239,113 2,527,013 197,225 5,963,351 Intercompany Payable - Parent 2,004,517 594,291 (2,598,808) - Income taxes payable 2,260,833 (394,369) 30,612 1,897,076 Accrued interest payable 1,064,688 189,222 1,253,910 Unearned Revenues 1,911,320 1,911,320 Other current liabilities 2,533,641 4,664 120,753 2,659,058 ---------------- ----------- ---------- ----------- ------------ Total current liabilities 16,281,185 4,482,688 1,079,666 (2,724,999) 19,118,540 Senior subordinated notes payable, net 99,161,293 99,161,293 Deferred income tax 6,749,832 6,749,832 Senior secured notes payable, net 32,179,377 24,583,368 56,762,745 ---------------- ----------- ---------- ----------- ------------ Total long-term liabilities 138,090,502 24,583,368 - - 162,673,870 ---------------- ----------- ---------- ----------- ------------ Total liabilities 154,371,687 29,066,056 1,079,666 (2,724,999) 181,792,410 ---------------- ----------- ---------- ----------- ------------ Minority Interest 654,735 654,735 ---------------- ----------- ---------- ----------- ------------ 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; 6,322,974 shares issued and outstanding as of April 30, 2002. 63,229 100 556,954 (557,054) 63,229 Additional paid-in-capital 26,192,003 26,192,003 Retained earnings 66,152,444 (189,002) (516,007) 705,009 66,152,444 Accumulated other comprehensive income (117,004) 7,879 (109,125) ---------------- ----------- ---------- ----------- ------------ Total 92,290,672 (188,902) 48,826 147,955 92,298,551 Common stock in treasury at cost ---------------- ----------- ---------- ----------- ------------ Total stockholders' equity 92,290,672 (188,902) 48,826 147,955 92,298,551 ---------------- ----------- ---------- ----------- ------------ TOTAL $ 246,662,359 $28,877,154 $1,783,227 $(2,577,044) $274,745,696 ================ =========== ========== =========== ============
10

Parent Only

Guarantors

Non-Guarantors

Eliminations

Consolidated

ASSETS

Current Assets:
Cash and cash equivalents    $ 26,374,822    $ 540,708      $ 1,121,733       $ 28,037,263
Accounts receivable, net    50,308,207    2,856,008      390,987    (164,421 )    53,390,781
Intercompany receivable—Guarantors    7,167,838            (7,167,838 )    —
Intercompany receivable—Non Guarantors    753,904            (753,904 )
Inventories, net    26,241,795    6,669,305      281,090       33,192,190
Deferred income taxes    2,485,355               2,485,355
Prepaid income taxes    580,450    741,499      50,505       1,372,454
Other current assets    2,468,173    758,077      4,926       3,231,176





Total current assets    116,380,544    11,565,597      1,849,241    (8,086,163 )    121,709,219
Property and equipment, net    26,035,440    1,292,360      33,345       27,361,145
Intangible assets, net    117,956,431    24,351,550            142,307,981
Investment in subsidiaries    (528,124 )            528,124    —
Other    10,095,567    573,785            10,669,352





TOTAL    $ 269,939,858    $ 37,783,292      $ 1,882,586    $ (7,558,039 )    $ 302,047,697





LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable    $ 7,054,143    $ 3,400,043      $ 61,901    $ (164,421 )    $ 10,451,666
Accrued expenses    2,933,318    2,639,651      52,251       5,625,220
Intercompany payable—Parent       7,167,838      753,904    (7,921,742 )    —
Accrued interest payable    4,105,073    756,887            4,861,960
Unearned revenues    2,136,863               2,136,863
Other current liabilities    2,812,836    6,210      15,196       2,834,242





Total current liabilities    19,042,233    13,970,629      983,252    (8,086,163 )    25,909,951
Senior subordinated notes payable, net    100,672,892               100,672,892
Senior secured notes payable, net    34,532,440    24,611,583            59,144,023
Real estate mortgage    11,600,000         556,922    (556,922 )    11,600,000
Deferred income tax    8,688,608    —              8,688,608





Total long-term liabilities    155,493,940    24,611,583      556,922    (556,922 )    180,105,523





Total liabilities    174,536,173    38,582,212      1,540,174    (8,643,085 )    206,015,474





Minority Interest            623,485    31    623,516





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; 6,416,390 shares issued and outstanding as of July 31, 2002    64,164    100      63    (163 )    64,164
Additional paid-in-capital    27,111,889               27,111,889
Retained earnings    68,333,698    (789,488 )      (295,690 )    1,085,178    68,333,698
Accumulated other comprehensive income    (106,066 )    (9,532 )      14,554       (101,044 )





Total    95,403,685    (798,920 )      (281,073 )    1,085,015    95,408,707
Common stock in treasury at cost





Total stockholders' equity    95,403,685    (798,920 )      (281,073 )    1,085,015    95,408,707





TOTAL    $ 269,939,858    $ 37,783,292      $ 1,882,586    $ (7,558,039 )    $ 302,047,697





PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 2002
Non- Parent Only Guarantors Guarantors Eliminations Consolidated --------------- ------------ ------------ -------------- -------------- ASSETS Current Assets: Cash and cash equivalents $ 115,441 $ 9,557 $ 1,178,980 $ 1,303,978 Accounts receivable, net 49,636,377 21,064 712,804 50,370,245 Intercompany Receivable - Guarantors 915,506 (915,506) - Intercompany Receivable - Non Guarantors 698,854 (698,854) Inventories 45,110,440 206,686 91,921 45,409,047 Deferred income taxes 2,384,316 2,384,316 Prepaid income taxes - Other current assets 1,729,653 156,510 1,886,163 ------------- --------- ----------- ------------ ------------- Total current assets 100,590,587 393,817 1,983,705 (1,614,360) 101,353,749 Property and equipment, net 10,862,844 34,490 10,897,334 Intangible assets, net 117,938,894 - 117,938,894 Investment in subsidiaries 128,354 (128,354) Other 3,866,993 3,710 3,870,703 ------------- --------- ----------- ------------ ------------- TOTAL $ 233,387,672 $ 397,527 $ 2,018,195 $ (1,742,714) $ 234,060,680 ============= ========= =========== ============ ============= LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 5,760,265 $ 34,504 $ 171,599 $ 5,966,368 Accrued expenses 3,202,176 27,426 30,000 3,259,602 Intercompany Payable - Parent 915,506 698,854 (1,614,360) - Income taxes payable 1,617,168 (395,722) 160,105 1,381,551 Accrued interest payable 3,808,997 3,808,997 Current portion - senior credit agreement 21,819,334 (63,240) 21,756,094 Unearned Revenues 1,838,929 1,838,929 Other current liabilities 2,315,918 3,704 90,961 2,410,583 ------------- --------- ----------- ------------ ------------- Total current liabilities 40,362,787 585,418 1,088,279 (1,614,360) 40,422,124 Senior subordinated notes payable, net 99,071,515 99,071,515 Deferred income tax 6,749,832 6,749,832 Long term debt - senior credit agreement - - ------------- --------- ----------- ------------ ------------- Total long-term liabilities 105,821,347 - - - 105,821,347 ------------- --------- ----------- ------------ ------------- Total liabilities 146,184,134 585,418 1,088,279 (1,614,360) 146,243,471 ------------- --------- ----------- ------------ ------------- Commitments and Contingencies (Note 20) Minority Interest 613,671 613,671 ------------- --------- ----------- ------------ ------------- 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; 6,337,440 shares issued and 6,286,740 shares outstanding as of January 31, 2002 63,374 100 556,954 (557,054) 63,374 Additional paid-in-capital 26,286,040 26,286,040 Retained earnings 61,386,244 (187,991) (240,709) 428,700 61,386,244 Accumulated other comprehensive income (121,753) (121,753) ------------- --------- ----------- ------------ ------------- Total 87,613,905 (187,891) 316,245 (128,354) 87,613,905 Common stock in treasury at cost; 50,700 shares as of January 31, 2002 (410,367) (410,367) ------------- --------- ----------- ------------ ------------- Total stockholders' equity 87,203,538 (187,891) 316,245 (128,354) 87,203,538 ------------- --------- ----------- ------------ ------------- TOTAL $ 233,387,672 $ 397,527 $ 2,018,195 $ (1,742,714) $ 234,060,680 ============= ========= =========== ============ =============
11

Parent Only

Guarantors

Non-
Guarantors

Eliminations

Consolidated

ASSETS

Current Assets:
Cash and cash equivalents    $ 115,441    $ 9,557    $ 1,178,980       $ 1,303,978
Accounts receivable, net    49,636,377    21,064    712,804       50,370,245
Intercompany receivable—Guarantors    915,506          (915,506 )    —
Intercompany receivable—Non Guarantors    698,854          (698,854 )    —
Inventories    45,110,440    206,686    91,921       45,409,047
Deferred income taxes    2,384,316             2,384,316
Other current assets    1,729,653    156,510          1,886,163





Total current assets    100,590,587    393,817    1,983,705    (1,614,360 )    101,353,749
Property and equipment, net    10,862,844       34,490       10,897,334
Intangible assets, net    117,938,894             117,938,894
Investment in subsidiaries    128,354          (128,354 )    —
Other    3,866,993    3,710          3,870,703





TOTAL    $ 233,387,672    $ 397,527    $ 2,018,195    $ (1,742,714 )    $ 234,060,680





LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable    $ 5,760,265    $ 34,504    $ 171,599       $ 5,966,368
Accrued expenses    3,202,176    27,426    30,000       3,259,602
Intercompany payable—Parent       915,506    698,854    (1,614,360 )    —
Income taxes payable    1,617,168    (395,722 )    160,105       1,381,551
Accrued interest payable    3,808,997             3,808,997
Current portion—senior credit facility    21,819,334       (63,240 )       21,756,094
Unearned revenues    1,838,929             1,838,929
Other current liabilities    2,315,918    3,704    90,961       2,410,583





Total current liabilities    40,362,787    585,418    1,088,279    (1,614,360 )    40,422,124
Senior subordinated notes payable, net    99,071,515             99,071,515
Deferred income tax    6,749,832             6,749,832





Total long-term liabilities    105,821,347    —      —      —      105,821,347





Total liabilities    146,184,134    585,418    1,088,279    (1,614,360 )    146,243,471





Commitment and Contingencies (Note 20)
Minority Interest          613,671       613,671





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; 6,337,440 shares issued and 6,286,740 shares outstanding as of January 31, 2002.    63,374    100    556,954    (557,054 )    63,374
Additional paid-in-capital    26,286,040             26,286,040
Retained earnings    61,386,244    (187,991 )    (240,709 )    428,700    61,386,244
Accumulated other comprehensive income    (121,753 )             (121,753 )





Total    87,613,905    (187,891 )    316,245    (128,354 )    87,613,905
Common stock in treasury at cost    (410,367 )             (410,367 )





Total stockholders' equity    87,203,538    (187,891 )    316,245    (128,354 )    87,203,538





TOTAL    $ 233,387,672    $ 397,527    $ 2,018,195    $ (1,742,714 )    $ 234,060,680





PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED ~~APRIL 30,~~JULY 31, 2002
Non- Parent Only Guarantors Guarantors Eliminations Consolidated ------------- ------------ ------------ -------------- --------------- Revenues Net Sales $ 76,358,233 $ 1,613,179 $ 647,680 $ 78,619,092 Royalty Income 6,076,793 - - 6,076,793 ------------- ----------- ----------- ------------- -------------- Total Revenues 82,435,026 1,613,179 647,680 84,695,885 Cost of Sales 56,376,420 989,908 565,771 57,932,099 ------------- ----------- ----------- ------------- -------------- Gross Profit 26,058,606 623,271 81,909 26,763,786 Operating Expenses Selling, General and Administrative Expenses 13,662,591 383,705 464,090 14,510,386 Depreciation and Amortization 623,286 34,586 1,866 659,738 ------------- ----------- ----------- ------------- -------------- Total Operating Expenses 14,285,877 418,291 465,956 15,170,124 ------------- ----------- ----------- ------------- -------------- Operating Income 11,772,729 204,980 (384,047) 11,593,662 Interest Expense 3,664,946 200,943 842 3,866,731 ------------- ----------- ----------- ------------- -------------- Income Before Minority Interest and Income Tax Provision 8,107,783 4,037 (384,889) 7,726,931 Minority Interest - - 32,020 32,020 Equity in earnings of subsidiaries, net 276,310 (276,310) - Income Taxes 3,065,273 5,048 (141,610) 2,928,711 ------------- ----------- ----------- ------------- -------------- Net Income $ 4,766,200 $ (1,011) $ (275,299) $ 276,310 $ 4,766,200 ============= =========== =========== ============= ==============
12

Parent Only

Guarantors

Non-Guarantors

Eliminations

Consolidated

Revenues
Net sales    $ 54,033,985    $ 2,306,370      $ 53,675       $ 56,394,030
Royalty income    7,211,015    389,618      —         7,600,633





Total revenues    61,245,000    2,695,988      53,675       63,994,663
Cost of sales    41,145,933    1,337,971      51,930       42,535,834





Gross profit    20,099,067    1,358,017      1,745       21,458,829
Operating expenses
Selling, general and administrative expenses    12,097,939    1,705,643      (319,721 )       13,483,861
Depreciation and amortization    653,631    90,180      (721 )       743,090





Total operating expenses    12,751,570    1,795,823      (320,442 )       14,226,951





Operating income    7,347,497    (437,806 )      322,187       7,231,878
Interest expense    3,185,809    600,107      277       3,786,193





Income before minority interest and income tax provision    4,161,688    (1,037,913 )      321,910       3,445,685
Minority interest    —      —        (22,176 )       (22,176 )
Equity in earnings of subsidiaries, net    442,080            (442,080 )    —
Income taxes    1,538,355    (375,515 )      123,768       1,286,608





Net income    $ 2,181,253    $ (662,398 )      $ 220,318    $ 442,080    $ 2,181,253





PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED ~~APRIL 30,~~JULY 31, 2001
Non- Parent Only Guarantors Guarantors Eliminations Consolidated ------------- ------------ ------------ -------------- -------------- Revenues Net Sales $ 74,415,254 $ (52,569) $ 6,099,989 $ 80,462,674 Royalty Income 6,065,629 - - 6,065,629 ------------- ----------- ------------ ----------- ------------- Total Revenues 80,480,883 (52,569) 6,099,989 86,528,303 Cost of Sales 56,720,976 2,717 4,057,916 60,781,609 ------------- ----------- ------------ ----------- ------------- Gross Profit 23,759,907 (55,286) 2,042,073 25,746,694 Operating Expenses Selling, General and Administrative Expenses 12,997,944 80,480 1,929,069 15,007,493 Depreciation and Amortization 1,597,588 750 1,598,338 ------------- ----------- ------------ ----------- ------------- Total Operating Expenses 14,595,532 81,230 1,929,069 16,605,831 ------------- ----------- ------------ ----------- ------------- Operating Income 9,164,375 (136,516) 113,004 9,140,863 Interest Expense 4,081,449 4,065 6,253 4,091,767 ------------- ----------- ------------ ----------- ------------- Income Before Minority Interest and Income Tax Provision 5,082,926 (140,581) 106,751 5,049,096 Minority Interest - Equity in earnings of subsidiaries, net 16,610 (32,049) (16,610) (32,049) Income Taxes 1,901,936 (58,423) 40,032 1,883,545 ------------- ----------- ------------ ----------- ------------- Net Income $ 3,197,600 $ (82,158) $ 98,768 $ (16,610) $ 3,197,600 ============= =========== ============ =========== =============
13

Parent Only

Guarantors

Non-Guarantors

Eliminations

Consolidated

Revenues
Net sales    $ 58,303,855    $ 203,778      $ 204,623       $ 58,712,256
Royalty income    6,857,434    —        —         6,857,434





Total revenues    65,161,289    203,778      204,623       65,569,690
Cost of sales    44,810,360    154,021      146,856       45,111,237





Gross profit    20,350,929    49,757      57,767       20,458,453
Operating expenses
Selling, general and administrative expenses    12,499,733    196,551      85,453       12,781,737
Depreciation and amortization    1,627,083    11,738      —         1,638,821





Total operating expenses    14,126,816    208,289      85,453       14,420,558





Operating income    6,224,113    (158,532 )      (27,686 )       6,037,895
Interest expense    3,638,899    8,186      —         3,647,085





Income before minority interest and income tax provision    2,585,214    (166,718 )      (27,686 )       2,390,810
Equity in earnings of subsidiaries, net    128,852    (7,515 )         (128,852 )    (7,515 )
Income taxes    969,455    (62,685 )      (10,382 )       896,388





Net income    $ 1,486,907    $ (111,548 )      $ (17,304 )    $ 128,852    $ 1,486,907





PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~ INCOME (UNAUDITED)
FOR THE ~~THREE~~SIX MONTHS ENDED ~~APRIL 30,~~JULY 31, 2002
Non- Parent Only Guarantors Guarantors Eliminations Consolidated ------------- ------------ ------------ -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,766,200 $ (1,011) $ (275,299) $ 276,310 $ 4,766,200 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 495,064 5,232 1,866 502,162 Amortization of debt issue cost 172,191 16,978 189,169 Amortization of bond discount 57,611 16,978 74,589 Minority Interest - - 32,020 32,020 Equity in earnings of subsidiaries, net 276,310 (276,310) - Other 4,749 - 7,879 12,628 Changes in operating assets and liabilities (net of effects of acquisitions): Accounts receivable, net (18,514,629) 289,369 151,704 126,191 (17,947,365) Inventories 10,800,506 22,577 (7,925) 10,815,158 Other current assets and prepaid income taxes 136,333 57,830 (7,429) 186,734 Other assets (1,056,961) (616,585) - (1,673,546) Accounts payable and accrued expenses (451,739) 659,506 132,412 (126,191) 213,988 Income taxes payable 643,665 1,353 (129,493) 515,525 Accrued interest payable (2,744,309) 189,222 - (2,555,087) Other current liabilities and unearned revenues 290,114 960 29,792 320,866 ------------ ------------ ----------- ------------- -------------- Net cash provided by (used in) operating activities (5,124,895) 642,409 (64,473) - (4,546,959) ------------ ------------ ----------- ------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (666,773) (164,700) - (831,473) Payment on purchase of intangible assets (22,071) 9,853 - (12,218) Payment for acquired businesses, net of cash acquired - (25,050,474) (25,050,474) ------------ ------------ ----------- ------------- -------------- Net cash used in investing activities: (688,844) (25,205,321) - - (25,894,165) ------------ ------------ ----------- ------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (payments) proceeds from senior credit facility (21,819,334) - 63,240 (21,756,094) Net proceeds from senior secured notes 31,022,860 24,566,390 55,589,250 Proceeds from exercise of stock options 316,184 - 316,184 ------------ ------------ ----------- ------------- -------------- Net cash provided by financing activities: 9,519,710 24,566,390 63,240 - 34,149,340 ------------ ------------ ----------- ------------- -------------- Effect of exchange rate changes on cash and cash equivalents 9,044 9,044 ------------ ------------ ----------- ------------- -------------- NET INCREASE IN CASH 3,705,971 3,478 7,811 3,717,260 CASH AT BEGINNING OF YEAR 115,441 9,557 1,178,980 1,303,978 ------------ ------------ ----------- ------------- -------------- CASH AT END OF YEAR $ 3,821,412 $ 13,035 $ 1,186,791 $ - $ 5,021,238 ============ ============ =========== ============= ============
14

Parent Only

Guarantors

Non-Guarantors

Eliminations

Consolidated
Revenues
Net sales    $ 130,392,218    $ 3,919,549      $ 701,355       $ 135,013,122
Royalty income    13,167,641    509,785      —         13,677,426





Total revenues    143,559,859    4,429,334      701,355       148,690,548
Cost of sales    97,522,353    2,327,879      617,701       100,467,933





Gross profit    46,037,506    2,101,455      83,654       48,222,615
Operating expenses
Selling, general and administrative expenses    25,740,351    2,109,375      144,521       27,994,247
Depreciation and amortization    1,276,918    124,765      1,145       1,402,828





Total operating expenses    27,017,269    2,234,140      145,666       29,397,075





Operating income    19,020,237    (132,685 )      (62,012 )       18,825,540
Interest expense    6,848,506    803,449      969       7,652,924





Income before minority interest and income tax provision    12,171,731    (936,134 )      (62,981 )       11,172,616
Minority interest    —      —        9,844       9,844
Equity in earnings of subsidiaries, net    656,478            (656,478 )    —
Income taxes    4,567,800    (334,637 )      (17,844 )       4,215,319





Net income    $ 6,947,453    $ (601,497 )      $ (54,981 )    $ 656,478    $ 6,947,453





PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JULY 31, 2001

Parent Only

Guarantors

Non-
Guarantors

Eliminations

Consolidated
Revenues
Net sales    $ 132,719,108    $ 151,209    $ 6,304,612       $ 139,174,929
Royalty income    12,923,064    —      —         12,923,064





Total revenues    145,642,172    151,209    6,304,612       152,097,993
Cost of sales    101,531,336    156,738    4,204,772       105,892,846





Gross profit    44,110,836    (5,529 )    2,099,840       46,205,147
Operating expenses
Selling, general and administrative expenses    25,543,831    228,368    2,014,522       27,786,721
Depreciation and amortization    3,225,420    14,246    —         3,239,666





Total operating expenses    28,769,251    242,614    2,014,522       31,026,387





Operating income    15,341,585    (248,143 )    85,318       15,178,760
Interest expense    7,720,348    12,251    6,254       7,738,853





Income before minority interest and income tax provision    7,621,237    (260,394 )    79,064       7,439,907
Minority interest    —      —      —         —
Equity in earnings of subsidiaries, net    82,878    —      24,534    (82,878 )    24,534
Income taxes    2,853,852    (103,566 )    29,648       2,779,934





Net income    $ 4,684,507    $ (156,828 )    $ 73,950    $ 82,878    $ 4,684,507





PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE ~~THREE~~SIX MONTHS ENDED ~~APRIL 30,~~JULY 31, 2002

Parent Only

Guarantors

Non-  Guarantors

Eliminations

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)    $ 6,947,453    $ (601,497 )      $ (54,981 )    $ 656,478    $ 6,947,453
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization    1,003,407    68,590      1,145       1,073,142
Amortization of debt issue cost    362,273    31,425      —         393,698
Amortization of bond discount    120,780    45,193      —         165,973
Deferred income taxes    1,837,737    —        —         1,837,737
Minority Interest    —      —        9,844       9,844
Equity in earnings of subsidiaries, net    656,478    —        —      (656,478 )    —
Other    15,688    (9,532 )      14,554       20,710
Changes in operating assets and liabilities (net of effects of acquisitions):
Accounts receivable, net    (6,979,212 )    3,417,388      376,867    164,421    (3,020,536 )
Inventories    18,868,645    (4,271,477 )      (189,169 )       14,407,999
Other current assets and prepaid income taxes    (1,343,720 )    (1,343,066 )      (55,431 )       (2,742,217 )
Other assets    (1,600,670 )    (611,965 )      —         (2,212,635 )
Accounts payable and accrued expenses    1,025,020    4,010,693      12,554    (164,421 )    4,883,846
Income taxes payable    (1,617,168 )    395,722      (160,105 )       (1,381,551 )
Accrued interest payable    296,076    756,887      —         1,052,963
Other current liabilities and unearned revenues    794,852    2,506      (75,765 )       721,593





Net cash provided by (used in) operating activities    20,387,639    1,890,867      (120,487 )    —      22,158,019





CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment    (16,140,199 )    (885,485 )      —         (17,025,684 )
Payment on purchase of intangible assets, net    (28,590 )    9,853      —         (18,737 )
Payment for acquired businesses, net of cash acquired    —      (25,050,474 )            (25,050,474 )





Net cash used in investing activities:    (16,168,789 )    (25,926,106 )      —      —      (42,094,895 )





CASH FLOWS FROM FINANCING ACTIVITIES:

Net (payments) proceeds from senior credit facility    (21,819,334 )    —        63,240       (21,756,094 )
Net proceeds from senior secured notes    31,022,860    24,566,390            55,589,250
Net proceeds from real estate mortgage    11,600,000               11,600,000
Proceeds from exercise of stock options    1,237,005    —              1,237,005





Net cash provided by financing activities:    22,040,531    24,566,390      63,240    —      46,670,161





NET (DECREASE) INCREASE IN CASH    26,259,381    531,151      (57,247 )       26,733,285
CASH AT BEGINNING OF YEAR    115,441    9,557      1,178,980       1,303,978





CASH AT END OF YEAR    $ 26,374,822    $ 540,708      $ 1,121,733    $ —      $ 28,037,263





PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 31, 2001
Non- Parent Only Guarantors Guarantors Eliminations Consolidated ------------- ------------ ------------ -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,197,600 $ (82,158) $ 98,768 (16,610) $ 3,197,600 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,472,390 750 1,473,140 Provision for bad debts Provision for deferred taxes Amortization of debt issue cost 157,337 157,337 Amortization of bond discount 41,000 41,000 Minority Interest - - Equity in earnings of subsidiaries, net (16,610) 16,610 - Other (33,959) (33,959) Changes in operating assets and liabilities (net of effects of acquisitions): Accounts receivable, net (5,145,321) (284,610) (1,225,572) (6,655,503) Inventories 3,448,856 65,204 (220,244) 3,293,816 Other current assets and prepaid income taxes 91,144 530,793 621,937 Other assets (804,587) 6,300 (32,092) (830,379) Accounts payable and accrued expenses (2,261,483) 38,064 1,387,094 (836,325) Income taxes payable 1,612,442 (499,398) 267,988 1,381,032 Accrued interest payable (2,970,245) - (2,970,245) Other current liabilities and unearned revenues (528,637) - (528,637) ------------ ----------- ------------ ------------- ------------- Net cash provided by (used in) operating activities (1,740,073) (225,055) 275,942 - (1,689,186) ------------ ----------- ------------ ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (189,337) (189,337) Payment on purchase of intangible assets (41,469) (41,469) Proceeds from sale of trademark - Payment for acquired businesses, net of cash acquired - - ------------ ----------- ------------ ------------- ------------- Net cash used in investing activities: (230,806) - - (230,806) ------------ ----------- ------------ ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) in borrowings under term loan - Net (payments) proceeds from senior credit facility 2,185,892 2,185,892 Net proceeds from senior subordinated notes - - Debt issuance costs - - Tax benefit for exercise of non-qualified stock options - Purchase of treasury stock (149,260) (149,260) Proceeds from exercise of stock options - - ------------ ----------- ------------ ------------- ------------- Net cash provided by financing activities: 2,036,632 - - 2,036,632 ------------ ----------- ------------ ------------- ------------- NET (DECREASE) INCREASE IN CASH 65,753 (225,055) 275,942 - 116,640 CASH AT BEGINNING OF YEAR 65,843 278,898 - 344,741 ------------ ----------- ------------ ------------- ------------- CASH AT END OF YEAR $ 131,596 $ 53,843 $ 275,942 $ - $ 461,381 ============ =========== ============ ============= =============
15

Parent Only

Guarantors

Non-Guarantors

Eliminations

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)    $ 4,684,507    $ (156,828 )      $ 73,950    $ 82,878    $ 4,684,507
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization    3,004,836    5,444      —         3,010,280
Amortization of debt issue cost    309,674    —        —         309,674
Amortization of bond discount    82,000    —        —         82,000
Equity in earnings of subsidiaries, net    82,878    —        —      (82,878 )    —
Other    (25,888 )    —        —         (25,888 )
Changes in operating assets and liabilities (net of effects of acquisitions):
Accounts receivable, net    10,365,313    66,139      (854,137 )    14,625    9,591,940
Inventories    6,130,380    (153,240 )      (44,520 )       5,932,620
Other current assets and prepaid income taxes    83,009    342,750      —         425,759
Other assets    (432,776 )    (1,354 )      (24,807 )       (458,937 )
Accounts payable and accrued expenses    (1,966,063 )    23,170      620,523    (14,625 )    (1,336,995 )
Income taxes payable    1,939,355    (503,538 )      268,277       1,704,094
Accrued interest payable    (43,308 )    —        —         (43,308 )
Other current liabilities and unearned revenues    728,639    4,102      —         732,741





Net cash provided by (used in) operating activities    24,942,556    (373,355 )      39,286    —      24,608,487





CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment    (1,505,667 )    —        —         (1,505,667 )
Payment on purchase of intangible assets, net    (83,106 )    —        —         (83,106 )





Net cash used in investing activities:    (1,588,773 )    —        —      —      (1,588,773 )





CASH FLOWS FROM FINANCING ACTIVITIES:

Net repayments in borrowings under term loan    (22,929,773 )    —        —         (22,929,773 )
Purchase of treasury stock    (308,356 )    —        —         (308,356 )
Proceeds from exercise of stock options    6,875    —        —         6,875





Net cash used in financing activities:    (23,231,254 )    —        —      —      (23,231,254 )





NET INCREASE (DECREASE) IN CASH    122,529    (373,355 )      39,286       (211,540 )
CASH AT BEGINNING OF YEAR    65,843    278,898      —         344,741





CASH AT END OF YEAR    $ 188,372    $ (94,457 )      $ 39,286    $ —      $ 133,201





Item 2:    ~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ~~Forward - Looking~~
Forward-Looking Statements
We caution readers that this report includes ~~"forward-looking statements"~~“forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations rather than historical facts and they are indicated by words or phrases such as ~~"anticipate," "estimate," "expect," "project," "believe," "intend," "envision,"~~“anticipate,” “estimate,” “expect,” “project,” “believe,” “intend,” “envision,” and similar words or phrases. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Some of the factors that would affect our financial performance, cause actual results to differ from our estimates, or underlie such forward-looking statements, are set forth in various places in this report. These factors include: .
general economic conditions; .
the effectiveness of our planned advertising, marketing and promotional campaigns; .
our ability to carry out growth strategies; .
our ability to contain costs; .
our ability to integrate acquired businesses, trademarks, tradenames and licenses into our existing organization and operations; .
our future capital needs and the ability to obtain financing; .
our ability to predict consumer preferences; .
our ability to compete; .
the termination or non-renewal of any material license agreements to which we are a party; .
anticipated trends and conditions in our industry, including future consolidation; .
changes in fashion trends and customer acceptance of both new designs and newly introduced products; .
the level of consumer spending for apparel and other merchandise; .
competition among department and specialty stores; .
possible disruption in commercial activities due to terrorist activity and armed conflict; and .
other factors set forth in this report and in our other filings with the Securities and Exchange Commission. 16
Critical Accounting Policies
Financial Reporting Release No. 60 requires all registrants to outline critical accounting policies or methods used in the preparation of its financial statements. Included in the footnotes to the consolidated financial statements in the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended January 31, 2002 is a summary of all significant accounting policies used in the preparation of the ~~Company's~~Company’s consolidated financial statements. The Company follows the accounting methods and practices as required by Accounting Principles Generally Accepted in the United States ~~Generally Accepted Accounting Principles ("~~of America (“U.S. ~~GAAP"~~GAAP”). In particular, the Company uses judgment in areas such as determining the allowance for recoverability of customer accounts receivable, provision for customer sales returns and allowances, inventory valuations, and provisions for assets impairments on ~~long- lived~~long-lived assets.
Results of Operations
The following is a discussion of the results of operations for the ~~first quarter of the fiscal year ending January~~three and six month periods ended July 31, ~~2003 ("fiscal 2003")~~2002 compared with the ~~first quarter of the fiscal year~~three and six month periods ended ~~January~~July 31, ~~2002 ("fiscal 2002"), and a discussion of the changes in financial condition during the three months of fiscal 2003.~~ 2001
Items Affecting Comparability of ~~the First Quarter Fiscal 2003 with First Quarter~~ Fiscal 2002 Period
Adoption of ~~New Accounting Standards.~~SFAS No. 142. As is more completely disclosed in Note 119 to the Consolidated Financial Statements, the Company adopted SFAS No. 142, ~~"Goodwill~~“Goodwill and Other Intangible Assets,"” as of February 1, 2002. Under the provisions of SFAS No. 142, goodwill is no longer amortized after the date of adoption. Intangible assets as of the date of adoption are evaluated to determine if they have finite or indefinite useful lives. Intangible assets determined to have finite lives are amortized over those lives and intangible assets that have indefinite useful lives are not amortized. SFAS No. 142 does not permit the restatement of previously issued financial statements, but does require the disclosure of prior years results adjusted to exclude amortization expense related to goodwill and intangible assets which are no longer being amortized. Basic and diluted earnings per share for the ~~first quarter of fiscal 2002,~~three months ended July 31, 2001, adjusted to exclude amounts no longer being amortized under the provisions of SFAS No. 142, were ~~$0.58~~$0.33 and ~~$0.59,~~$0.32, respectively. Basic and diluted earnings per share for the six-month period ended July 31, 2001 were $0.91.
Adoption of ~~Accounting Standard for the Recording and Reporting of Sales Incentives.~~EITF Issue No. 01-09. As is more completely disclosed in Note 119 to the Consolidated Financial Statements, the Company adopted Emerging Issues Task Force ~~("EITF"~~(“EITF”) Issue No. 01-09, ~~"Accounting~~“Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the ~~Vendor's~~Vendor’s Products," ”as of February 1, ~~2002.~~2002. The provisions of EITF No. 01-09, relates to the measurement, recognition and presentation of certain sales incentives offered to the ~~company's~~company’s customers. These new accounting rules apply to certain sales incentives such as discounts, coupons, rebates and certain payments made to retailers for shelf space or reimbursement of advertising costs. These accounting rules generally require these incentives to be reflected as a reduction in revenue on the income statement rather than selling, general and administrative expense. Upon adoption of these 17 rules at the beginning of fiscal 2003, all prior financial statement results have been restated to reflect the impact of the change. Previously reported net sales for the first ~~quarter~~and second quarters of fiscal 2002 were reduced by $403,000 and $214,000, respectively to conform to the new accounting standard. The adoption of this new accounting standard had no impact on the ~~Company's~~Company’s income before minority interest and income taxes, net income or financial position. ~~Consolidated~~
Results ~~- First Quarter of Fiscal 2003~~Of Operations—Three and Six Months Ended July 31, 2002 Compared with ~~First Quarter of Fiscal 2002~~ Three and Six Months Ended July 31, 2001.
Total ~~revenues.~~revenues.    Total revenues consist of net sales and royalty income. Total revenues for the three months ended ~~April 30,~~July 31, 2002 were ~~$84.7~~$64.0 million, a decrease of ~~2.1%~~2.4% from ~~$86.5~~$65.6 million for the second quarter of the fiscal year ended January 31, 2002 ~~quarter.~~(“fiscal 2002”). Total revenues for the six months ended July 31, 2002 decreased 2.2% to $148.7 million from $152.1 million for the six months ended July 31, 2001. The decrease was due mainly to a ~~reduction~~decrease in net sales as discussed below. ~~Royalty income for the fiscal quarter 2003 was unchanged from the fiscal 2002 quarter.~~
Net ~~sales.~~sales.    Net sales decreased ~~$1.9~~$2.3 million or ~~2.4%~~3.9% to ~~$78.6~~$56.4 million for the second quarter of the fiscal year ending January 31, 2003 ~~quarter~~(“fiscal 2003”) from ~~$80.5~~$58.7 million in the fiscal 2002 second quarter. ~~Fiscal 2002 quarter~~The decrease was mainly due to a reduction of net sales in the mass merchant and specialty retail channels of distribution offset in part by initial net sales of the Jantzen swimwear line acquired in March 2002. Net sales decreased $4.2 million or 3.0% to $135.0 million for the six months ended July 31, 2002 from $139.2 million for the six months ended July 31, 2001. Net sales for the six months ended July 31, 2001 included ~~$6.1~~$6.3 million from sales of Perry Ellis America shoes by the ~~Company's~~Company’s European subsidiary. In periods both prior and subsequent to such quarter this product was sold by a third party licensee and accordingly, the Company only recognized royalty income from those sales during those periods. The decrease in net sales in Europe and in the ~~fiscal 2003 quarter~~mass merchants and specialty retail channels of distribution as described above in the six month period ended July 31, 2002 was offset in part by an increase in net sales in the United States and ~~Canada. Royalty income.~~ Canada and initial net sales of the Jantzen swimwear line.
Royalty income ~~was unchanged at $6.1 million~~.    Royalty income for the three months ended ~~April 30,~~July 31, 2002 was $7.6 million, an increase of 10.8% from $6.9 million for the comparable July 31, 2001 fiscal 2002 quarter. Royalty income for the six months ended July 31, 2002 increased 5.8% to $13.7 million from $12.9 million for the six months ended July 31, 2001. The increase in royalty income for the three and ~~2001.~~ six months ended July 31, 2002 was due primarily to increased royalty income from licenses for the Perry Ellis brand and initial royalties from licenses for the Jantzen brand.
Cost of ~~sales.~~sales.    Cost of sales for the ~~fiscal 2003 quarter of $57.9 million was $2.9~~three months ended July 31, 2002 decreased $2.6 million or ~~4.8% lower than $60.8~~5.7% to $42.5 million from $45.1 million in the comparable fiscal 2002 ~~quarter~~quarter. For the six months ended July 31, 2002, cost of sales of $100.5 million was $5.4 million, or 5.1% lower than $105.9 million for the six months ended July 31, 2001. The decrease in costs of sales for the three and six month periods ended July 31, 2002 was due mainly to the decrease in net sales to certain channels of distribution as described above. As a percentage of net sales, cost of sales for the three months ended July 31, 2002 decreased to ~~73.7% in the fiscal 2003 quarter~~75.4% from ~~75.5%~~76.8% for three months ended July 31, 2001. As a percentage of net sales, cost of sales for the six months ended July 31, 2002 decreased to 74.4% from 76.1% for the comparable period ~~ended April 30, 2002,~~of fiscal 2002. The decrease in cost of sales as a percentage of net sales for the three and six month periods of fiscal 2003 was due primarily to improvements in the Company’s sourcing costs, more effective inventory management and a change in ~~our~~ sales mix from private to branded label products.
Gross Profit.    For the three months ended ~~April 30,~~July 31, 2002, gross profit increased ~~4.3%~~4.9% to ~~$26.8~~$21.5 million ~~compared to $25.7~~from $20.5 million for the comparable fiscal 2002 quarter. For the six months of fiscal 2003, ~~quarter, private label~~ gross profit increased ~~slightly by 0.6%, while branded product~~4.4% to $48.2 million from $46.2 million for the comparable fiscal 2002 period. The increase in gross profit ~~increased by 4.6% from~~for the ~~fiscal~~ three and six month periods ended July 31,
2002 ~~quarter.~~ is primarily attributable to improvements in the Company’s sourcing costs, more effective inventory management and a change in the Company’s product mix.
Selling, general and administrative expenses.    Selling, general and administrative expenses, excluding depreciation and amortization, ~~decreased $0.5~~increased $0.7 million or ~~3.3%~~5.5%, to ~~$14.5~~$13.5 million infor the ~~fiscal 2003~~ quarter ended July 31, 2002 from ~~$15.0~~$12.8 million infor the fiscal 2002 quarter. As a percentage of total revenue, selling, general and administrative expenses were ~~17.1%~~21.1% in the fiscal 2003 quarter compared to ~~17.3%~~19.5% in the comparable fiscal 2002 quarter. The ~~decrease~~increase in selling, general and administrative costs for the quarter ended July 31, 2002 is primarily attributable to the increase in operating expenses of $1.5 million related to the Jantzen acquisition, offset by lower operating expenses throughout the rest of the Company’s operations. Selling, general and administrative expenses, excluding depreciation and amortization, increased $0.2 million or 0.7%, to $28.0 million for the six months ended July 31, 2002 from $27.8 million in the comparable fiscal ~~2003 quarter~~2002 period. As a percentage of total revenue, selling, general and administrative expenses were 18.8% in the six month period ended July 31, 2002 compared to 18.3% in the comparable fiscal 2002 period. The increase in selling, general and administrative costs for the six month period ended July 31, 2002 of fiscal is primarily attributable to the elimination of expenses of our European subsidiary of ~~$1.2~~$2.0 million, offset by operating expenses incurred by ~~initial~~ Jantzen operations of $1.7 million, expenses of the Company’s Canadian joint venture of $0.3 million and increased expenses of the ~~Company's Canadian-joint venture of~~Company’s retail outlet by $0.2 million.
Depreciation and amortization.    Depreciation and amortization decreased $0.9 million for the three months ended ~~April 30,~~July 31, 2002 to $0.7 million from $1.6 million in the comparable quarter of fiscal 2002. Depreciation and amortization decreased $1.8 million for the six months ended July 31, 2002 to $1.4 million from $3.2 million in the comparable fiscal 2002 ~~quarter.~~period. The decrease is due primarily to the adoption of SFAS No. 142, ~~"Goodwill~~“Goodwill and Other Intangible Assets,"” as of February 1, 2002. Under the provisions of SFAS No. 142, goodwill is no longer 18 amortized after the date of adoption. Intangible assets as of the date of adoption are evaluated to determine if they have finite or indefinite useful lives. Intangible assets determined to have finite lives are amortized over those lives and intangible assets that have indefinite useful lives are not amortized.
Interest expense.    Interest expense ~~decreased $0.2~~increased $0.1 million or ~~4.9%~~3.8% for the three months ended ~~April 30,~~July 31, 2002 to ~~$3.9~~$3.8 million from ~~$4.1~~$3.7 million in the comparable fiscal 2002 quarter. The increase is mainly due to the 9¹/2% senior secured notes issued in March 2002, offset by the reduction in borrowings, favorable interest rates and the interest rate swap agreements on the Company’s 12¹/4% senior subordinated notes and the 9¹/2% senior secured notes. Interest expense decreased $0.1 million or 1.1% for the six months ended July 31, 2002 to $7.6 million from $7.7 million in the comparable fiscal 2002 period. The decrease is mainly due to the reduction in borrowings, favorable interest rates and the interest rate swap agreements on the ~~Company's~~Company’s 12 ~~1/4%~~¹/4% senior subordinated notes and the 9 ~~1/2%~~¹/2% senior secured ~~notes.~~ notes, offset by the 9¹/2% senior secured notes issued in March 2002.
Income taxes.    For the three months and six months ended ~~April 30,~~July 31, 2002, the effective tax rate was 37.3% and 37.7% as compared to 37.6% and 37.3% for the ~~fiscal~~comparable 2002 ~~quarter.~~ period.
Net income.    Net income for the three months ended ~~April 30,~~July 31, 2002 increased ~~$1.6~~$0.7 million to ~~$4.8~~$2.2 million from ~~$3.2~~$1.5 million for the comparable fiscal 2002 quarter. As a percentage of total revenues, net income was ~~5.7%~~3.4% for the three months ended ~~April 30,~~July 31, 2002, compared to ~~3.7%~~2.3% in the comparable fiscal 2002 quarter. Net income for the six months ended July 31, 2002
increased $2.3 million to $6.9 million from $4.6 million for the comparable fiscal 2002 period. As a percentage of total revenues, net income was 4.7% for the six months ended July 31, 2002, compared to 3.1% in the comparable fiscal 2002 period. The increase in net income was due to changes described above.
Liquidity and Capital Resources
The Company relies primarily upon cash flow from operations and borrowings under its senior credit facility to finance operations and expansion. Cash ~~used in~~provided by operating activities was ~~$2.6~~$22.2 million in the ~~three~~six months ended ~~April 30,~~July 31, 2002, compared to cash ~~used in~~provided by operating activities of ~~$1.7~~$24.6 million in the comparable fiscal 2002 quarter. The decrease of ~~$.9~~$2.4 million in the level of cash provided by operating activities is primarily attributable to ~~earnings~~lower depreciation and toamortization, an increase in accounts receivable, ~~offset by~~and a decrease in ~~inventory.~~ inventory, offset in part by higher earnings.
Net cash used in investing activities was ~~$27.9~~$42.1 million for the ~~three~~six months ended ~~April 30,~~July 31, 2002, which primarily reflects the $27.0 million purchase ~~price~~ of the Jantzen business (including fees related to the transaction) and purchases of computer equipment and related software enhancement cost of $0.8 million. In addition, the Company used $17.0 million for the purchase of property, plant and equipment which included the $14.5 million contingent rental payment that was required by the termination of the synthetic lease.
Net cash provided by financing activities for the ~~three~~six months ended ~~April 30,~~July 31, 2002 totaled ~~$34.1~~$46.7 million, which was primarily the result of net proceeds of the offering of the ~~9 1/2%~~9½% senior secured notes ~~offering~~ of $ 55.6 million, net repayments of borrowings under the ~~Company's~~Company’s senior credit facility of $21.8 million, ~~and~~ proceeds from the exercise of employee stock options of ~~$0.3 million.~~ $1.2 million and the real estate mortgage of $11.6 million on the Company’s main administrative office, warehouse and distribution facility.
Senior Credit Facility
In March 2002, the Company amended its senior credit facility with a group of banks. As amended, the senior credit facility now provides the Company with a revolving credit line up to an aggregate amount of $60.0 million. This amendment was done concurrently with the private offering of $57.0 million of 9 ~~1/2%~~½% senior secured notes. The indebtedness under the senior credit facility rankspari passu with the senior secured notes. The following is a description of the terms of the senior credit facility, as amended, and does not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of the senior credit facility. ~~As of April 30, 2002, the Company had no short-term borrowings under the senior credit facility and 19~~ ~~had net cash of approximately $5.0 million as compared to $40.1 million of borrowings outstanding as of April 30, 2001.~~
Certain Covenants.    The senior credit facility contains certain covenants, which require us to maintain certain financial ratios, a minimum net worth and which restrict the payment of dividends. The Company is currently in compliance with all its covenants. The senior credit facility expires on October 1, 2002 and as such the Company has classified its credit facility as current in the consolidated balance sheet as of April 30, 2002. The Company is currently in active discussions to renew or replace its existing senior credit facility. Management believes this discussion will be successfully completed prior to the October 1, 2002 expiration date.
Borrowings Base.    Borrowings under the senior credit facility are limited under its terms to a borrowing base calculation, which generally restricts the outstanding balances to the sum of a) 80.0% of eligible receivables plus b) 90.0% of our eligible factored accounts receivables plus c) 60.0% of eligible inventory minus d) the full amount of all outstanding letters of credit issued pursuant to the senior credit facility which are not fully secured by cash collateral.
The maximum amount of borrowing under the senior credit facility attributable to eligible inventory is $30.0 million. ~~The borrowing base has been further reduced by a $9.0 million reserve, which must be maintained until the expiration date of our synthetic lease in June 2002, as described below.~~
Interest.    Interest on the principal balance under the senior credit facility accrues, at the ~~Company's~~Company’s option, at either a) the ~~Company's~~Company’s bank prime lending rate with adjustments depending upon the ~~Company's~~Company’s ratio of indebtedness to EBITDA at the time of borrowing or b) 2.75% above the rate quoted by the ~~Company's~~Company’s bank as the average London Inter-bank Offered Rate ~~("LIBOR"~~(“LIBOR”) for 1, 2, 3 and 6-month Eurodollar deposits with adjustments depending upon the ~~Company's~~Company’s ratio of indebtedness to EBIDTA at the time of borrowing.
Security.    As security for the indebtedness under the senior credit facility, the Company granted the lenders a first priority security interest in substantially all of the ~~Company's~~Company’s existing and future assets, including, without limitation, accounts receivable, inventory deposit accounts, general intangibles and equipment. Lenders under the senior credit facility have a second priority security interest in the ~~Company's~~Company’s trademarks. ~~Letters~~
As of July 31, 2002, the Company had no short-term borrowings under the senior credit facility and had net cash of approximately $28.0 million as compared to $15.0 million of borrowings outstanding as of July 30, 2001.
The senior credit facility expires on October 1, 2002. In August 2002, the Company signed a proposal letter with Congress Financial Corporation for a new $60.0 million three year secured revolving facility. Management believes that it will enter into the facility prior to the October 1, 2002 expiration date of the current credit facility.
Letter of Credit Facility
As of ~~April 30,~~July 31, 2002, the Company maintained four US dollar letter of credit facilities totaling ~~$62.0~~$57.0 million and one Canadian dollar letter of credit facility totaling ~~$3.75~~$2.4 million ~~Canadian dollars~~ utilized by the ~~Company's consolidated Joint Venture in Canada.~~Company’s Canadian joint venture. Each letter of credit is secured by the consignment of merchandise in transit under that letter of credit. As of ~~April 30,~~July 31, 2002, there was ~~$43.1~~$25.0 million available under existing letter of credit facilities. 20
Senior Secured Notes
On March 22, 2002, the Company completed a private offering of $57.0 million ~~9 1/2%~~9½% senior secured notes due 2009. The proceeds of the private offering were used to fund the Jantzen acquisition, to reduce the amount of outstanding debt under the senior credit facility and as additional working capital.
The senior secured notes are secured by a first priority security interest granted in our existing portfolio of trademarks and licenses, including the trademarks and licenses acquired in the Jantzen acquisition; all license agreements with respect to these trademarks; and all income, royalties and other payments with respect to such licenses. The senior secured notes are senior secured obligations of Perry Ellis and rankpari passu in right of payment with all of our existing and future senior indebtedness. The senior secured notes are effectively senior to all unsecured indebtedness of Perry Ellis to the extent of the value of the assets securing the notes. ~~Synthetic Lease~~
Real Estate Transaction
The Company ~~occupies~~occupied its main administrative office, warehouse and distribution facility under a synthetic operating lease for a 240,000 square foot facility in Miami. The lease, as amended, ~~expires~~expired on June 30, 2002, and ~~requires~~required a ~~minimum contingent~~ rental payment at ~~the~~ termination ~~of the lease~~ of $14.5 million. ~~The minimum contingent rental~~
On June 30, 2002, the Company made the required payment is not required if, at the Company's option, the lease is renewed after the initial five-year term. The synthetic lease was entered into with a group of financial institutions to finance the acquisition and construction of our corporate headquarters. The financial institutions assumed the Company's obligation to purchase the facility and, in turn, leased the facility to the Company. The obligations under the synthetic lease ~~are secured by a security interest in substantially all our existing~~ and ~~future assets, whether tangible or intangible, including, without limitation, accounts receivable, inventory deposit accounts, general intangibles, intellectual property and equipment.~~partially refinanced the facility with an $11.6 million mortgage. The ~~Company is in the process of arranging new financing to replace the synthetic lease through a~~ mortgage ~~lender. The Company~~ has ~~received a satisfactory commitment from such lender, subject to additional due diligence, has scheduled a closing date on or about June 30, 2002. In addition to~~ customary covenants found in secured lending agreements, the synthetic lease also contains various restrictive financial and other covenants including, without limitation, (a) prohibitions on the incurrence of additional indebtedness or guarantees, (b) restrictions on the creation of additional liens, (c) certain limitations on dividends and distributions or capital expenditures by Perry Ellis, (d) restrictions on mergers or consolidations, sales of assets, investments and transactions with affiliates and (e) certain financial maintenance tests. Such financial maintenance tests, include, among others, (i) a maximum funded indebtedness to EBITDA ratio, (ii) a minimum current ratio, (iii) a minimum net worth and (iv) a minimum fixed charge coverage ratio.agreements. As of ~~April 30,~~July 31, 2002, the Company is in compliance with ~~all~~ the customary covenants. 21
Contractual Obligations and Commercial Commitments
The following tables illustrate our contractual obligations and commercial commitments as of ~~April 30,~~July 31, 2002 and include the effects of the transactions and amendments discussed above that occurred during the ~~first~~second quarter ended ~~April 30, 2002 and subsequent to January~~July 31, 2002.
- --------------------------------------------------------------------------------------------------------------- Payments Due by Period --------------------------------------------------------------------------------- Contractual Less than 1 - 3 4 - 5 After 5 Obligations Total 1 year years years years - --------------------------------------------------------------------------------------------------------------- Senior Secured Notes $100,000,000 - - $100,000,000 - =============================================================================================================== Senior Subordinated Notes $ 57,000,000 - - - $57,000,000 =============================================================================================================== Senior Credit Facility $ -0- $ - - - =============================================================================================================== Operating Leases $ 24,707,426 $16,287,740 $5,308,848 $ 1,505,766 $ 1,605,072 =============================================================================================================== Total Contractual Cash Obligations $181,707,426 $16,287,740 $5,308,848 $101,505,766 $58,605,072 ===============================================================================================================
- ----------------------------------------------------------------------------------------------------- Amount of Commitment Expiration Per Period ------------------------------------------------------ Other Total Commercial Amounts Less than 1 - 3 4 - 5 After 5 Commitments Committed 1 year years years years - ----------------------------------------------------------------------------------------------------- Letter of Credit $21,322,191 $21,322,191 - - - ===================================================================================================== Stand by Letters of Credit $ 8,250,000 $ 5,500,000 - $2 ,750,000 - ===================================================================================================== Total Commercial Commitments $29,572,191 $26,822,191 - $ 2,750,000 - =====================================================================================================

Payments Due by Period
Contractual Obligations

Total

Less than 1 year

1-3 years

4-5 years

After 5 years
Senior secured notes    $ 100,000,000    $ —      $ —      $ 100,000,000    $ —





Senior subordinated notes    $ 57,000,000    $ —      $ —      $ —      $ 57,000,000





Real estate mortgage    $ 11,600,000       $ 135,493    $ 301,624    $ 11,162,883





Operating leases    $ 10,142,281    $ 2,175,572    $ 3,325,977    $ 3,101,517    $ 1,539,215





Total contractual cash obligations    $ 178,742,281    $ 2,175,572    $ 3,461,470    $ 103,403,141    $ 69,702,098






Amount of Commitment Expiration Per Period
Other Commercial Commitments

Total

Less than
1 year

1-3 years

4-5 years

After 5 years
Letter of credit    $ 34,383,782    $ 34,383,782    $ —      $ —      $ —





Stand by letters of credit    $ 2,750,000    $ —      $ —      $ 2,750,000    $ —





Total commercial commitments    $ 37,133,782    $ 34,383,782    $ —      $ 2,750,000    $ —





Management believes that the combination of borrowing availability under the amended senior credit facility, letter of credit facilities, 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
The Company does not believe that inflation or foreign currency fluctuations significantly affected its results of operations for the three and six months ended ~~April 30, 2002. 22~~ ~~Quantitative and Qualitative Disclosures about Market Risks~~ July 31, 2002 of fiscal 2003.
Item 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The market risk inherent in our financial statements represents the potential changes in the fair value, earnings or cash flows arising from changes in interest rates or foreign currency exchange rates. We manage this exposure through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Our policy allows the use of derivative financial instruments for identifiable market risk exposure, including interest rate and foreign currency fluctuations. We do not enter into derivative financial contracts for trading or other speculative purposes except for as discussed below.
In August 2001, the Company entered into an interest rate swap, option and interest rate cap agreements (the ~~"August~~“August Swap ~~Agreement"~~Agreement”), for an aggregate notional amount of $40.0 million in order to minimize its debt servicing costs associated with its $100.0 million of 12.25% senior subordinated notes due April 1, 2006. The August Swap Agreement was subsequently modified through a basis swap entered into in October 2001 (the ~~"October~~“October Swap Agreement,"” and collectively with the August Swap Agreement, the ~~"Swap Agreement"~~“Swap Agreement”). The Swap Agreement is scheduled to terminate on April 1, 2006. Under the Swap Agreement, the Company is entitled to receive semi-annual interest payments on October 1, and April 1, at a fixed rate of 12.25% and is obligated to make semi-annual interest payments on October 1, and April 1, at a floating rate based on the ~~6- month~~6-month LIBOR rate plus 715 basis points for the 18 months period October 1, 2001 through March 31, 2003 (per October Swap Agreement); and 3-month LIBOR rate plus 750 basis point for the period April 1, 2003 through April 1, 2006 (per the August Swap Agreement). The Swap Agreement has optional call provisions with trigger dates of April 1, 2003, April 1, 2004 and April 1, 2005, which contain certain premium requirements in the event the call is exercised.
The fair value of the August 2001 swap and the option component of the Swap Agreement recorded on the ~~Company's~~Company’s Consolidated Balance Sheet was ~~$0.1~~($0.3) million and ~~$0.1~~$1.6 million, respectively, as of ~~April 30,~~July 31, 2002. The interest rate cap and basis swap component of the Swap Agreement did not qualify for hedge accounting treatment under the SFAS No. 133, resulting in ~~$0.3~~$0.1 million ~~increase~~decrease in interest expense for the three months ended July 2002 of fiscal 2003 and an increase of $0.2 million in interest expense for the six months ended July 2002 of fiscal 2003 on the Statement of Operations for the ~~first quarter~~three and six months ended ~~April 30, 2002.~~ July 31, 2002 of fiscal 2003.
In conjunction with the March 2002 offering of $57.0 million of ~~9 1/2%~~9½% senior secured notes due March 15, 2009, the Company entered into interest rate swap and option agreements (the ~~"March~~“March Swap ~~Agreement"~~Agreement”) for an aggregate notional amount of $57.0 million in order to minimize the debt servicing costs associated with the notes. The March Swap Agreement is scheduled to terminate on March 15, 2009. Under the March Swap Agreement, the Company is entitled to receive semi-annual interest payments on September 15 and March 15 at a fixed rate of ~~9 1/2%~~9½% are obligated to make semi-annual interest payments on September 15 and March 15 at a floating rate based on the three-month LIBOR rate plus 369 basis points for the period from March 22, 2002 through March 15, 2009. The March Swap Agreement has optional call provisions with trigger dates of March 15, 2005, March 15, 2006 and March 15, 2007, which contain premium requirements in the event the call is exercised.
The fair value of the March 2002 swap and the option component of the March Swap Agreement recorded on the ~~Company's~~Company’s Consolidated Balance Sheet was ~~$1.7~~$3.9 million and ($~~0.6)~~0.4) million, respectively, as of ~~April 30,~~July 31, 2002.
The Company current exposure to foreign exchange risk is not significant and accordingly, the Company has not entered into any transactions to hedge against those risks. 23
Item 4:    INTERNAL CONTROLS
Not applicable
PART II:    OTHER INFORMATION ~~ITEM 1. Legal Proceedings~~
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
Not applicable.
ITEM 5. Other Information
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Index to Exhibits
Exhibit Number
Description
99.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
99.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
(b) Reports of Form 8-K:
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 Not applicable. 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) On April 2, 2002, the Company filed a Report on Form 8-K to disclose its acquisition of Jantzen and the completion of the related private offering of $57.0 million in 9 1/2% senior secured notes. 24
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: June 14,~~
Date: September 13, 2002 By:
/s/    TIMOTHY B. PAGE
Timothy B. Page
Chief Financial Officer
Certification
I, George Feldenkreis, certify that:
1.  I have reviewed the Registrant’s Form 10-Q quarterly report for the period ended July 31, 2002 ~~By: /s/~~(the “Report”).
2.  Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report.
3.  Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in the Report.
By:
/s/    GEORGE FELDENKREIS
George Feldenkreis
Chairman and Chief Executive Officer
(Chief Executive Officer)
I, Timothy B. Page, ~~----------------------- Timothy B. Page, Chief Financial Officer 25~~

Florida		59-1162998
(State or other jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

3000 N.W. 107 Avenue
Miami, Florida		33172
(Address of Principal Executive Offices)		(Zip Code)

	July 31, 2002			January 31, 2002
ASSETS
Current Assets:
Cash and cash equivalents	$	28,037,263		$	1,303,978
Accounts receivable, net		53,390,781			50,370,245
Inventories, net		33,192,190			45,409,047
Deferred income taxes		2,485,355			2,384,316
Prepaid income taxes		1,372,454			—
Other current assets		3,231,176			1,886,163

Total current assets		121,709,219			101,353,749
Property and equipment, net		27,361,145			10,897,334
Intangible assets, net		142,307,981			117,938,894
Other		10,669,352			3,870,703

TOTAL	$	302,047,697		$	234,060,680

LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	10,451,666		$	5,966,369
Accrued expenses		5,625,220			3,259,602
Income taxes payable		—			1,381,551
Accrued interest payable		4,861,960			3,808,997
Current portion—senior credit facility		—			21,756,094
Unearned revenues		2,136,863			1,838,929
Other current liabilities		2,834,242			2,410,583

Total current liabilities		25,909,951			40,422,125
Senior subordinated notes payable, net		100,672,892			99,071,515
Senior secured notes payable, net		59,144,023			—
Real estate mortgage		11,600,000			—
Deferred income tax		8,688,608			6,749,832

Total long-term liabilities		180,105,523			105,821,347

Total liabilities		206,015,474			146,243,472

Minority Interest		623,516			613,671

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; 6,416,390 shares issued and outstanding as of July 31, 2002 and 6,337,440 shares issued and 6,286,740 shares outstanding as of January 31, 2002		64,164			63,374
Additional paid-in-capital		27,111,889			26,286,040
Retained earnings		68,333,698			61,386,243
Accumulated other comprehensive income		(101,044	)		(121,753	)

Total		95,408,707			87,613,904
Common stock in treasury at cost; 50,700 shares as of January 31, 2002		—			(410,367	)

Total stockholders' equity		95,408,707			87,203,537

TOTAL	$	302,047,697		$	234,060,680

	Three Months Ended July 31,						Six Months Ended July 31,
	2002			2001			2002		2001
Revenues
Net sales	$	56,394,030		$	58,712,256		$	135,013,122	$	139,174,929
Royalty income		7,600,633			6,857,434			13,677,426		12,923,064

Total revenues		63,994,663			65,569,690			148,690,548		152,097,993
Cost of sales		42,535,834			45,111,237			100,467,933		105,892,846

Gross profit		21,458,829			20,458,453			48,222,615		46,205,147
Operating expenses
Selling, general and administrative expenses		13,483,861			12,781,737			27,994,247		27,786,721
Depreciation and amortization		743,090			1,638,821			1,402,828		3,239,666

Total operating expenses		14,226,951			14,420,558			29,397,075		31,026,387

Operating income		7,231,878			6,037,895			18,825,540		15,178,760
Interest expense		3,786,193			3,647,085			7,652,924		7,738,853

Income before minority interest and income tax provision		3,445,685			2,390,810			11,172,616		7,439,907
Minority interest		(22,176	)		—			9,844		—
Share of income(loss) from unconsolidated subsidiary		—			(7,515	)		—		24,534
Income taxes		1,286,608			896,388			4,215,319		2,779,934

Net income	$	2,181,253		$	1,486,907		$	6,947,453	$	4,684,507

Net income per share
Basic	$	0.34		$	0.23		$	1.09	$	0.71

Diluted	$	0.34		$	0.23		$	1.08	$	0.71

Weighted average number of shares outstanding
Basic		6,384,932			6,579,537			6,386,341		6,579,919
Diluted		6,449,468			6,594,699			6,451,341		6,594,705

	July 31, 2002			January 31, 2002
Total letter of credit facilities	$	59,362,500		$	44,362,500
Outstanding letters of credit		(34,383,782	)		(11,035,880	)

Total credit available	$	24,978,718		$	33,326,620

Asset Class		Avg. Useful Lives in Years
Furniture, fixtures and equipment		7
Vehicles		7
Leasehold improvements		11

	(Dollars in Thousands)
Purchase price determination:
Net purchase price	$	23,978
Liabilities assumed and expenses incurred in connection with the acquisition		3,030

Gross purchase price	$	27,008

Purchase price allocation:
Inventories	$	2,191
Machinery and equipment		465
Trademarks		24,352

Gross purchase price	$	27,008
Less: liabilities assumed		(1,957	)

Cash paid for acquisition and acquisition cost	$	25,051

	Parent Only			Guarantors			Non-Guarantors			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	26,374,822		$	540,708		$	1,121,733					$	28,037,263
Accounts receivable, net		50,308,207			2,856,008			390,987			(164,421	)		53,390,781
Intercompany receivable—Guarantors		7,167,838									(7,167,838	)		—
Intercompany receivable—Non Guarantors		753,904									(753,904	)
Inventories, net		26,241,795			6,669,305			281,090						33,192,190
Deferred income taxes		2,485,355												2,485,355
Prepaid income taxes		580,450			741,499			50,505						1,372,454
Other current assets		2,468,173			758,077			4,926						3,231,176

Total current assets		116,380,544			11,565,597			1,849,241			(8,086,163	)		121,709,219
Property and equipment, net		26,035,440			1,292,360			33,345						27,361,145
Intangible assets, net		117,956,431			24,351,550									142,307,981
Investment in subsidiaries		(528,124	)								528,124			—
Other		10,095,567			573,785									10,669,352

TOTAL	$	269,939,858		$	37,783,292		$	1,882,586		$	(7,558,039	)	$	302,047,697

LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	7,054,143		$	3,400,043		$	61,901		$	(164,421	)	$	10,451,666
Accrued expenses		2,933,318			2,639,651			52,251						5,625,220
Intercompany payable—Parent					7,167,838			753,904			(7,921,742	)		—
Accrued interest payable		4,105,073			756,887									4,861,960
Unearned revenues		2,136,863												2,136,863
Other current liabilities		2,812,836			6,210			15,196						2,834,242

Total current liabilities		19,042,233			13,970,629			983,252			(8,086,163	)		25,909,951
Senior subordinated notes payable, net		100,672,892												100,672,892
Senior secured notes payable, net		34,532,440			24,611,583									59,144,023
Real estate mortgage		11,600,000						556,922			(556,922	)		11,600,000
Deferred income tax		8,688,608			—									8,688,608

Total long-term liabilities		155,493,940			24,611,583			556,922			(556,922	)		180,105,523

Total liabilities		174,536,173			38,582,212			1,540,174			(8,643,085	)		206,015,474

Minority Interest								623,485			31			623,516

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; 6,416,390 shares issued and outstanding as of July 31, 2002		64,164			100			63			(163	)		64,164
Additional paid-in-capital		27,111,889												27,111,889
Retained earnings		68,333,698			(789,488	)		(295,690	)		1,085,178			68,333,698
Accumulated other comprehensive income		(106,066	)		(9,532	)		14,554						(101,044	)

Total		95,403,685			(798,920	)		(281,073	)		1,085,015			95,408,707
Common stock in treasury at cost

Total stockholders' equity		95,403,685			(798,920	)		(281,073	)		1,085,015			95,408,707

TOTAL	$	269,939,858		$	37,783,292		$	1,882,586		$	(7,558,039	)	$	302,047,697

	Parent Only			Guarantors			Non- Guarantors			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	115,441		$	9,557		$	1,178,980					$	1,303,978
Accounts receivable, net		49,636,377			21,064			712,804						50,370,245
Intercompany receivable—Guarantors		915,506									(915,506	)		—
Intercompany receivable—Non Guarantors		698,854									(698,854	)		—
Inventories		45,110,440			206,686			91,921						45,409,047
Deferred income taxes		2,384,316												2,384,316
Other current assets		1,729,653			156,510									1,886,163

Total current assets		100,590,587			393,817			1,983,705			(1,614,360	)		101,353,749
Property and equipment, net		10,862,844						34,490						10,897,334
Intangible assets, net		117,938,894												117,938,894
Investment in subsidiaries		128,354									(128,354	)		—
Other		3,866,993			3,710									3,870,703

TOTAL	$	233,387,672		$	397,527		$	2,018,195		$	(1,742,714	)	$	234,060,680

LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	5,760,265		$	34,504		$	171,599					$	5,966,368
Accrued expenses		3,202,176			27,426			30,000						3,259,602
Intercompany payable—Parent					915,506			698,854			(1,614,360	)		—
Income taxes payable		1,617,168			(395,722	)		160,105						1,381,551
Accrued interest payable		3,808,997												3,808,997
Current portion—senior credit facility		21,819,334						(63,240	)					21,756,094
Unearned revenues		1,838,929												1,838,929
Other current liabilities		2,315,918			3,704			90,961						2,410,583

Total current liabilities		40,362,787			585,418			1,088,279			(1,614,360	)		40,422,124
Senior subordinated notes payable, net		99,071,515												99,071,515
Deferred income tax		6,749,832												6,749,832

Total long-term liabilities		105,821,347			—			—			—			105,821,347

Total liabilities		146,184,134			585,418			1,088,279			(1,614,360	)		146,243,471

Commitment and Contingencies (Note 20)
Minority Interest								613,671						613,671

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; 6,337,440 shares issued and 6,286,740 shares outstanding as of January 31, 2002.		63,374			100			556,954			(557,054	)		63,374
Additional paid-in-capital		26,286,040												26,286,040
Retained earnings		61,386,244			(187,991	)		(240,709	)		428,700			61,386,244
Accumulated other comprehensive income		(121,753	)											(121,753	)

Total		87,613,905			(187,891	)		316,245			(128,354	)		87,613,905
Common stock in treasury at cost		(410,367	)											(410,367	)

Total stockholders' equity		87,203,538			(187,891	)		316,245			(128,354	)		87,203,538

TOTAL	$	233,387,672		$	397,527		$	2,018,195		$	(1,742,714	)	$	234,060,680

	Parent Only			Guarantors			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	6,947,453		$	(601,497	)	$	(54,981	)	$	656,478		$	6,947,453
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,003,407			68,590			1,145						1,073,142
Amortization of debt issue cost		362,273			31,425			—						393,698
Amortization of bond discount		120,780			45,193			—						165,973
Deferred income taxes		1,837,737			—			—						1,837,737
Minority Interest		—			—			9,844						9,844
Equity in earnings of subsidiaries, net		656,478			—			—			(656,478	)		—
Other		15,688			(9,532	)		14,554						20,710
Changes in operating assets and liabilities (net of effects of acquisitions):
Accounts receivable, net		(6,979,212	)		3,417,388			376,867			164,421			(3,020,536	)
Inventories		18,868,645			(4,271,477	)		(189,169	)					14,407,999
Other current assets and prepaid income taxes		(1,343,720	)		(1,343,066	)		(55,431	)					(2,742,217	)
Other assets		(1,600,670	)		(611,965	)		—						(2,212,635	)
Accounts payable and accrued expenses		1,025,020			4,010,693			12,554			(164,421	)		4,883,846
Income taxes payable		(1,617,168	)		395,722			(160,105	)					(1,381,551	)
Accrued interest payable		296,076			756,887			—						1,052,963
Other current liabilities and unearned revenues		794,852			2,506			(75,765	)					721,593

Net cash provided by (used in) operating activities		20,387,639			1,890,867			(120,487	)		—			22,158,019

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(16,140,199	)		(885,485	)		—						(17,025,684	)
Payment on purchase of intangible assets, net		(28,590	)		9,853			—						(18,737	)
Payment for acquired businesses, net of cash acquired		—			(25,050,474	)								(25,050,474	)

Net cash used in investing activities:		(16,168,789	)		(25,926,106	)		—			—			(42,094,895	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) proceeds from senior credit facility		(21,819,334	)		—			63,240						(21,756,094	)
Net proceeds from senior secured notes		31,022,860			24,566,390									55,589,250
Net proceeds from real estate mortgage		11,600,000												11,600,000
Proceeds from exercise of stock options		1,237,005			—									1,237,005

Net cash provided by financing activities:		22,040,531			24,566,390			63,240			—			46,670,161

NET (DECREASE) INCREASE IN CASH		26,259,381			531,151			(57,247	)					26,733,285
CASH AT BEGINNING OF YEAR		115,441			9,557			1,178,980						1,303,978

CASH AT END OF YEAR	$	26,374,822		$	540,708		$	1,121,733		$	—		$	28,037,263

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Senior secured notes	$	100,000,000	$	—	$	—	$	100,000,000	$	—

Senior subordinated notes	$	57,000,000	$	—	$	—	$	—	$	57,000,000

Real estate mortgage	$	11,600,000			$	135,493	$	301,624	$	11,162,883

Operating leases	$	10,142,281	$	2,175,572	$	3,325,977	$	3,101,517	$	1,539,215

Total contractual cash obligations	$	178,742,281	$	2,175,572	$	3,461,470	$	103,403,141	$	69,702,098


	Amount of Commitment Expiration Per Period
Other Commercial Commitments	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Letter of credit	$	34,383,782	$	34,383,782	$	—	$	—	$	—

Stand by letters of credit	$	2,750,000	$	—	$	—	$	2,750,000	$	—

Total commercial commitments	$	37,133,782	$	34,383,782	$	—	$	2,750,000	$	—


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

		Not applicable.

ITEM 5.		Other Information

		Not applicable

ITEM 6.		Exhibits and Reports on Form 8-K

Exhibit Number		Description
99.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act

99.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act


Date: September 13, 2002	By:	/s/ TIMOTHY B. PAGE
		Timothy B. Page Chief Financial Officer


By:		/s/ GEORGE FELDENKREIS
		George Feldenkreis Chairman and Chief Executive Officer (Chief Executive Officer)


By:		/s/ TIMOTHY B. PAGE
		Timothy B. Page Chief Financial Officer (Chief Financial Officer)

Exhibit Number		Exhibit Description

99.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act

99.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act