Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s common stock is ~~15,717,000~~15,727,000 (as of ~~June 5,~~September 4, 2014).


	May 3, 2014			February 1, 2014			August 2, 2014			February 1, 2014
ASSETS
Current Assets:
Cash and cash equivalents	$	26,609		$	26,989		$	49,218		$	26,989
Accounts receivable, net		183,146			146,392			110,532			146,392
Inventories		177,150			206,602			174,507			206,602
Investments, at fair value		21,221			15,398			23,955			15,398
Deferred income taxes		13,553			14,060			15,358			14,060
Prepaid income taxes		7,253			7,579			7,346			7,579
Prepaid expenses and other current assets		7,988			7,369			9,550			7,369

Total current assets		436,920			424,389			390,466			424,389
Property and equipment, net		60,113			59,912			61,632			59,912
Other intangible assets, net		211,256			211,485			210,660			211,485
Goodwill		6,022			6,022			6,022			6,022
Other assets		4,783			4,927			5,757			4,927

TOTAL	$	719,094		$	706,735		$	674,537		$	706,735

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	56,331		$	112,442		$	76,520		$	112,442
Accrued expenses and other liabilities		26,082			24,642			22,643			24,642
Accrued interest payable		1,036			4,095			3,990			4,095
Unearned revenues		5,114			5,013			5,257			5,013

Total current liabilities		88,563			146,192			108,410			146,192

Senior subordinated notes payable, net		150,000			150,000			150,000			150,000
Senior credit facility		64,567			8,162			—			8,162
Real estate mortgages		22,651			22,844			22,461			22,844
Deferred pension obligation		9,271			9,862			8,690			9,862
Unearned revenues and other long-term liabilities		16,616			14,732			16,248			14,732
Deferred income taxes		10,223			7,410			11,332			7,410

Total long-term liabilities		273,328			213,010			208,731			213,010

Total liabilities		361,891			359,202			317,141			359,202

Commitment and contingencies
Equity:
Preferred stock $.01 par value; 5,000,000 shares authorized; no shares issued or outstanding		—			—			—			—
Common stock $.01 par value; 100,000,000 shares authorized; 16,093,310 shares issued and outstanding as of May 3, 2014 and 15,901,956 shares issued and outstanding as of February 1, 2014		160			159
Common stock $.01 par value; 100,000,000 shares authorized; 16,116,003 shares issued and outstanding as of August 2, 2014 and 15,901,956 shares issued and outstanding as of February 1, 2014								161			159
Additional paid-in-capital		156,662			155,522			158,412			155,522
Retained earnings		214,052			206,277			212,436			206,277
Accumulated other comprehensive loss		(6,714	)		(7,468	)		(6,656	)		(7,468	)

Total		364,160			354,490			364,353			354,490
Treasury stock at cost; 400,516 as of May 3, 2014 and February 1, 2014		(6,957	)		(6,957	)
Treasury stock at cost; 400,516 as of August 2, 2014 and February 1, 2014								(6,957	)		(6,957	)

Total equity		357,203			347,533			357,396			347,533

TOTAL	$	719,094		$	706,735		$	674,537		$	706,735


	Three Months Ended				Three Months Ended						Six Months Ended
	May 3, 2014		May 4, 2013		August 2, 2014			August 3, 2013			August 2, 2014		August 3, 2013
Revenues:
Net sales	$	249,916	$	255,484	$	196,010		$	204,492		$	445,926	$	459,976
Royalty income		7,398		6,835		7,522			7,213			14,920		14,048

Total revenues		257,314		262,319		203,532			211,705			460,846		474,024
Cost of sales		169,649		173,638		133,068			143,159			302,717		316,797

Gross profit		87,665		88,681		70,464			68,546			158,129		157,227

Operating expenses:
Selling, general and administrative expenses		69,710		70,669		66,858			66,521			136,568		137,190
Depreciation and amortization		2,980		2,792		2,988			3,010			5,968		5,802

Total operating expenses		72,690		73,461		69,846			69,531			142,536		142,992
Gain on sale of long-lived assets		—		6,270		885			—			885		6,270

Operating income		14,975		21,490
Operating income (loss)						1,503			(985	)		16,478		20,505
Interest expense		3,716		3,803		3,605			3,722			7,321		7,525

Net income before income taxes		11,259		17,687
Income tax provision		3,484		6,367
Net (loss) income before income taxes						(2,102	)		(4,707	)		9,157		12,980
Income tax (benefit) provision						(486	)		(1,877	)		2,998		4,490

Net income	$	7,775	$	11,320
Net (loss) income					$	(1,616	)	$	(2,830	)	$	6,159	$	8,490

Net income per share:
Net (loss) income per share:
Basic	$	0.53	$	0.75	$	(0.11	)	$	(0.19	)	$	0.41	$	0.56

Diluted	$	0.52	$	0.74	$	(0.11	)	$	(0.19	)	$	0.41	$	0.55

Weighted average number of shares outstanding
Basic		14,782		15,024		14,906			15,112			14,844		15,068
Diluted		15,010		15,304		14,906			15,112			15,142		15,406


	Three Months Ended						Six Months Ended
	May 3, 2014			May 4, 2013			August 2, 2014			August 3, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,775		$	11,320		$	6,159		$	8,490
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,134			2,928			6,280			6,081
Provision for bad debts		299			13			253			(248	)
Amortization of debt issue cost		158			182			320			351
Amortization of premiums and discounts		127			15			223			31
Amortization of unrealized loss on pension liability		130			133			260			266
Deferred income taxes		3,270			840			2,523			4,115
Gain on sale of long-lived assets		—			(6,270	)		(885	)		(6,270	)
Share-based compensation		1,508			1,330			3,114			2,522
Changes in operating assets and liabilities:
Accounts receivable, net		(36,595	)		702			36,277			33,677
Inventories		29,942			14,761			32,603			3,599
Prepaid income taxes		337			3,443			245			(1,950	)
Prepaid expenses and other current assets		(599	)		880			(2,166	)		(409	)
Other assets		(11	)		52			(150	)		89
Deferred pension obligation		(591	)		(522	)		(1,172	)		(1,507	)
Accounts payable and accrued expenses		(55,191	)		(42,217	)		(38,636	)		(35,656	)
Accrued interest payable		(3,059	)		(2,958	)		(105	)		(5	)
Unearned revenues and other liabilities		2,059			1,122			1,835			875

Net cash used in operating activities		(47,307	)		(14,246	)
Net cash provided by operating activities								46,978			14,051

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(3,050	)		(7,200	)		(7,323	)		(14,587	)
Purchase of investments		(15,387	)		—			(22,897	)		—
Proceeds from investments maturities		9,490			—
Proceeds on sale of intangible asset		—			4,875
Proceeds from investment maturities								14,160			—
Proceeds on sale of intangible assets								—			4,875

Net cash used in investing activities		(8,947	)		(2,325	)		(16,060	)		(9,712	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from senior credit facility		110,991			129,344			159,402			214,131
Payments on senior credit facility		(54,586	)		(121,625	)		(167,564	)		(214,131	)
Payments on real estate mortgages		(200	)		(202	)		(396	)		(403	)
Payments on capital leases		(75	)		(78	)		(150	)		(157	)
Deferred financing fees								—			(25	)
Proceeds from exercise of stock options		—			27			197			124
Tax benefit from exercise of equity instruments		(95	)		(52	)		(144	)		96

Net cash provided by financing activities		56,035			7,414
Net cash used in financing activities								(8,655	)		(365	)

Effect of exchange rate changes on cash and cash equivalents		(161	)		(273	)		(34	)		(174	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(380	)		(9,430	)
NET INCREASE IN CASH AND CASH EQUIVALENTS								22,229			3,800
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		26,989			54,957			26,989			54,957

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	26,609		$	45,527		$	49,218		$	58,757


	Three Months Ended				Six Months Ended
	May 3, 2014		May 4, 2013		August 2, 2014		August 3, 2013
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	6,490	$	6,571	$	6,883	$	7,149

Income taxes	$	287	$	1,209	$	464	$	1,432

NON-CASH FINANCING AND INVESTING ACTIVITIES:
Accrued purchases of property and equipment	$	4	$	485	$	168	$	80

Note receivable on sale of intangible asset					$	1,250	$	—

The accompanying unaudited condensed consolidated financial statements of Perry Ellis International, Inc. and subsidiaries (“Perry Ellis” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the requirements of the Securities and Exchange Commission on 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 for annual financial statements. These condensed 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 February 1, 2014, filed with the Securities and Exchange Commission on April 15, 2014.

The information presented reflects all adjustments, which are in the opinion of management 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.

In March 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-05,“Foreign Currency Matters.” Accounting Standards Update (“ASU”) No. 2013-05 indicates that a cumulative translation adjustment (“CTA”) is attached to the parent’s investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. Thus, the entire amount of the CTA associated with the foreign entity would be released when there has been a sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity, loss of a controlling financial interest in an investment in a foreign entity (i.e., the foreign entity is deconsolidated), or step acquisition for a foreign entity (i.e., when an entity has changed from applying the equity method for an investment in a foreign entity to consolidating the foreign entity). ASU No. 2013-05 does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. ASU No. 2013-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU No. 2013-05 did not have a material impact on the Company’s results of operations or the Company’s financial position.

In July 2013, the FASB issued ASU No. 2013-11,“Income Taxes (Topic 740): Presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.” Under the amendments of this update an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The provisions of this update ~~will be~~are effective prospectively for the Company in fiscal years beginning after December 15, 2013, and for the interim periods within such fiscal years with early adoption and retrospective application permitted. The adoption of ASU No. 2013-11 did not have a material impact on the Company’s results of operations or the Company’s financial position.

In April 2014, the FASB issued ASU No. 2014-08,“Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU No. 2014-08 amends the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that

have (or will have) a major effect on an ~~entity's~~entity’s operations and financial results. The amendments require expanded disclosures for discontinued operations that would provide users of financial statements with more information about the assets, liabilities, revenues, and expenses of discontinued operations and disclosure of the pretax profit or loss of individually significant components of an entity that do not qualify for discontinued operations reporting. ASU No. 2014-08 is to be applied prospectively to all disposals (or classifications as held for sale) of components of an entity and all businesses or nonprofit activities that, on acquisition, are classified as held for sale that occur within fiscal years, and interim periods within those years, beginning after December 15, 2014. The adoption of ASU No. 2014-08 is not expected to have a material impact on the Company’s results of operations or the Company’s financial position.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” ASU No. 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”) that removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, provides more useful information to users of financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Companies can choose to apply the ASU using either the full retrospective approach or a modified retrospective approach. The Company is currently evaluating both methods of adoption and the impact, if any, that the adoption of this ASU will have on the Company’s results of operations or the Company’s financial position.

In June 2014, the FASB issued ASU No. 2014-12,“Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force).” ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU No. 2014-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Earlier adoption is permitted. The amendments can be applied either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards. The Company is currently evaluating both methods of adoption and the impact, if any, that the adoption of this ASU will have on the Company’s results of operations or the Company’s financial position.


	May 3,			February 1,			August 2,			February 1,
	2014			2014			2014			2014
	(in thousands)						(in thousands)
Trade accounts	$	199,476		$	160,332		$	122,983		$	160,332
Royalties		3,217			5,998			3,282			5,998
Other receivables		2,541			1,483			2,645			1,483

Total		205,234			167,813			128,910			167,813
Less: allowances		(22,088	)		(21,421	)		(18,378	)		(21,421	)

Total	$	183,146		$	146,392		$	110,532		$	146,392

Inventories are stated at the lower of cost (weighted moving average cost) or market. Cost principally consists of the purchase price, customs, duties, freight, and commissions to buying agents.


	May 3,		February 1,		August 2,		February 1,
	2014		2014		2014		2014
	(in thousands)				(in thousands)
Finished goods	$	176,617	$	205,971	$	174,177	$	205,971
Raw materials and in process		533		631		330		631

Total	$	177,150	$	206,602	$	174,507	$	206,602

The Company’s investments include marketable securities and certificates of deposit at ~~May 3,~~August 2, 2014 and February 1, 2014. Marketable securities are classified as available-for-sale and consist of corporate bonds with maturity dates less than two years. Certificates of deposit are classified as available-for-sale with ~~$4.8~~$5.9 million with maturity dates within one year or less and ~~$2.7~~$3.4 million with maturity dates over one year and less than two years. Investments are stated at fair value. The estimated fair value of the marketable securities is based on quoted prices in an active market (Level 1 fair value measures).


			Gross		Gross			Estimated
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Marketable securities	$	14,616	$	6	$	(1	)	$	14,621
Certificates of deposit		9,363		—		(29	)		9,334

Total investments	$	23,979	$	6	$	(30	)	$	23,955


	May 3,			February 1,			August 2,			February 1,
	2014			2014			2014			2014
	(in thousands)						(in thousands)
Furniture, fixtures and equipment	$	74,874		$	74,188		$	76,213		$	74,188
Buildings and building improvements		19,643			19,614			19,674			19,614
Vehicles		632			771			632			771
Leasehold improvements		41,276			40,335			44,512			40,335
Land		9,488			9,488			9,488			9,488

Total		145,913			144,396			150,519			144,396
Less: accumulated depreciation and amortization		(85,800	)		(84,484	)		(88,887	)		(84,484	)

Total	$	60,113		$	59,912		$	61,632		$	59,912

The above table of property and equipment includes assets held under capital leases as of:


	May 3,			February 1,			August 2,			February 1,
	2014			2014			2014			2014
	(in thousands)						(in thousands)
Furniture, fixtures and equipment	$	938		$	938		$	888		$	938
Less: accumulated depreciation and amortization		(620	)		(543	)		(643	)		(543	)

Total	$	318		$	395		$	245		$	395

For the three months ended ~~May 3,~~August 2, 2014 and ~~May 4,~~August 3, 2013, depreciation and amortization expense relating to property and equipment amounted to $2.9 million. For the six months ended August 2, 2014 and August 3, 2013, depreciation and amortization expense relating to property and equipment amounted to $5.8 million and ~~$2.7~~$5.6 million, ~~respectively, for each of the periods.~~respectively. These amounts include amortization expense for leased property under capital leases.

Trademarks included in other intangible assets, net, are considered indefinite-lived assets and totaled $205.5 million and $205.9 million at ~~May 3,~~August 2, 2014 and February 1, ~~2014.~~2014, respectively.

On August 1, 2014, the Company entered into a sales agreement, in the amount of $1.3 million, for the sale of Australian, Fiji and New Zealand trademark rights with respect to Jantzen. Payments on the purchase price are due in five installments of $250,000 over a five year period. Interest on the purchase price that remains unpaid will accrue at a rate of 3.5% per annum calculated on an annual basis. The first payment is due within four days of the completion date and has been paid. The remaining four payments are to be paid annually commencing on August 1, 2015 with the final payment to be made on August 1, 2018. As a result of this transaction, the Company recorded a gain of $0.9 million in the licensing segment.

During the fourth quarter of fiscal 2013, the Company entered into a sales agreement, in the amount of $7.5 million, for certain Asian trademark rights with respect to John Henry. This transaction closed in the first quarter of fiscal 2014. The Company collected proceeds of $4.9 million and $2.6 million during the first quarter of fiscal 2014

and the fourth quarter of fiscal 2013, respectively. As a result of this transaction, the Company recorded a gain of $6.3 million in the licensing segment. ~~The Company plans to continue executing on its domestic strategy of the John Henry brand as a modern lifestyle resource to select retailers and through its licensing relationships in Latin America.~~


	May 3,			February 1,			August 2,			February 1,
	2014			2014			2014			2014
	(in thousands)						(in thousands)
Customer lists	$	8,450		$	8,450		$	8,450		$	8,450
Less: accumulated amortization		(3,093	)		(2,863	)		(3,324	)		(2,863	)

Total	$	5,357		$	5,587		$	5,126		$	5,587

For the three months ended ~~May 3,~~August 2, 2014 and ~~May 4,~~August 3, 2013, amortization expense relating to customer lists amounted to ~~approximately $0.2~~$0.3 million, respectively, for each of the periods. For the six months ended August 2, 2014 and August 3, 2013, amortization expense relating to customer lists amounted to $0.5 million, for each period. Other intangible assets are amortized over their estimated useful lives of 10 years. Assuming no impairment, the estimated amortization expense for future periods based on recorded amounts as of ~~May 3,~~August 2, 2014, will be approximately $0.9 million a year from fiscal 2015 through fiscal 2017, and approximately $0.8 million a year from fiscal 2018 through fiscal 2019.

Borrowings and availability under letter of credit facilities consisted of the following as of:


	May 3,			February 1,			August 2,			February 1,
	2014			2014			2014			2014
	(in thousands)						(in thousands)
Total letter of credit facilities	$	45,338		$	45,329		$	45,337		$	45,329
Outstanding letters of credit		(11,408	)		(11,858	)		(11,595	)		(11,858	)

Total credit available	$	33,930		$	33,471		$	33,742		$	33,471

The Company’s accounting policy relating to advertising and related costs is to expense these costs in the period incurred. Advertising and related costs were approximately ~~$4.7~~$3.1 million and ~~$4.6~~$4.1 million for the three months ended ~~May 3,~~August 2, 2014 and ~~May 4,~~August 3, 2013, respectively, and $7.8 million and $8.7 million for the six months ended August 2, 2014 and August 3, 2013, respectively, and are included in selling, general and administrative ~~expenses.~~expenses in the accompanying condensed consolidated statements of operations.

Basic net (loss) income per share is computed by dividing net (loss) income by the weighted average shares of outstanding common stock. The calculation of diluted net (loss) income per share is similar to basic earnings per share except that the denominator includes potentially dilutive common stock. The potentially dilutive common stock included in the Company’s computation of diluted net income per share includes the effects of stock options, stock appreciation rights (“SARS”), and unvested restricted shares as determined using the treasury stock method.

The following table sets forth the computation of basic and diluted (loss) income per share:


	Three Months Ended				Three Months Ended						Six Months Ended
	May 3,		May 4,		August 2,			August 3,			August 2,		August 3,
	2014		2013		2014			2013			2014		2013
	(in thousands, except per share data)				(in thousands, except per share data)
Numerator:
Net income	$	7,775	$	11,320
Net (loss) income					$	(1,616	)	$	(2,830	)	$	6,159	$	8,490
Denominator:
Basic-weighted average shares		14,782		15,024		14,906			15,112			14,844		15,068
Dilutive effect: equity awards		228		280		—			—			298		338

Diluted-weighted average shares		15,010		15,304		14,906			15,112			15,142		15,406

Basic income per share	$	0.53	$	0.75
Basic (loss) income per share					$	(0.11	)	$	(0.19	)	$	0.41	$	0.56

Diluted income per share	$	0.52	$	0.74
Diluted (loss) income per share					$	(0.11	)	$	(0.19	)	$	0.41	$	0.55

Antidilutive effect:⁽¹⁾		1,360		1,171		1,825			1,945			1,109		1,939


	Changes in Equity
	(in thousands)
Equity at February 1, 2014	$	347,533
Comprehensive income		6,971
Share transactions under employee equity compensation plans		2,892

Equity at August 2, 2014	$	357,396

Equity at February 2, 2013	$	371,240
Comprehensive income		7,591
Share transactions under employee equity compensation plans		2,742

Equity at August 3, 2013	$	381,573


	Unrealized			Foreign			Unrealized						Unrealized			Foreign			Unrealized
	(Loss) Gain on			Currency Translation			(Loss) Gain on						(Loss) Gain on			Currency Translation			(Loss) Gain on
	Pension Liability			Adjustments, Net			Investments			Total			Pension Liability			Adjustments, Net			Investments			Total
				(in thousands)									(in thousands)
Balance, February 1, 2014	$	(5,866	)	$	(1,563	)	$	(39	)	$	(7,468	)	$	(5,866	)	$	(1,563	)	$	(39	)	$	(7,468	)
Other comprehensive income before reclassifications		—			636			38			674			—			638			15			653
Amounts reclassified from accumulated other comprehensive income		80			—			—			80			159			—			—			159

Balance, May 3, 2014	$	(5,786	)	$	(927	)	$	(1	)	$	(6,714	)
Balance, August 2, 2014													$	(5,707	)	$	(925	)	$	(24	)	$	(6,656	)

A summary of the impact on the condensed consolidated ~~statement~~statements of ~~income~~operations line items is as follows:


	Three Months Ended					Three Months Ended
	May 3, 2014		May 4, 2013			August 2, 2014		August 3, 2013
	(in thousands)					(in thousands)
Amortization of defined benefit pension items
Actuarial gains	$	130	$	133	Selling, general and administrative expenses	$	130	$	133	Selling, general and administrative expenses
Tax provision		50		52	Income tax provision		51		52	Income tax provision

Total, net of tax	$	80	$	81		$	79	$	81


						Six Months Ended
						August 2, 2014		August 3, 2013
						(in thousands)
Amortization of defined benefit pension items
Actuarial gains						$	260	$	266	Selling, general and administrative expenses
Tax provision							101		104	Income tax provision

Total, net of tax						$	159	$	162

For the three months ended May 3, 2014, the effective tax rate was 30.9% as compared to 36.0% for the three months ended May 4, 2013. The overall change in the effective tax rate is attributed to the prior year unfavorable disallowance of certain executive compensation and the prior year sale of certain intangible rights of the John Henry trademark as well as the change in ratio of income between domestic and foreign operations, of which the domestic operations are taxed at higher statutory tax rates.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company’s U.S. federal income tax returns for fiscal 2011 through fiscal 2014 are open tax years. The Company’s state tax filings are subject to varying statutes of limitations. The Company’s unrecognized state tax benefits are related to open tax years from fiscal 2005 through fiscal 2015, depending on each state’s particular statute of limitation. As of ~~May 3,~~August 2, 2014, the fiscal 2011 U.S. federal income tax return is under examination as well as various state, local, and foreign income tax returns by various taxing authorities.

The Company has a $0.8 million liability recorded for unrecognized tax benefits as of February 1, 2014, which includes interest and penalties of $0.3 million. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. All of the unrecognized tax benefits, if recognized, would affect the Company’s effective tax rate. During the three months and six months ended ~~May 3,~~August 2, 2014, the total amount of unrecognized tax benefits decreased by approximately ~~$68,000.~~$12,000 and $81,000, respectively. The change to the total amount of the unrecognized tax benefit for the three and six months ended ~~May 3,~~August 2, 2014 included ~~a decrease~~an increase in interest and penalties of approximately ~~$109,000.~~$6,000 and a decrease of approximately $103,000, respectively.

The Company does not currently anticipate a resolution within the next twelve months for any of the remaining unrecognized tax benefits as of ~~May 3,~~August 2, 2014. ~~The~~However, the statute of limitations related to the Company’s 2011 U.S. federal tax year ~~was extended to June 30, 2015. Therefore,~~will expire within the ~~Company does not anticipate any~~next twelve months. The lapse in the statute of limitations would be expected to ~~lapse or a~~ decrease to tax expense within the next twelve months. The expiration of the statute of limitations related to the Company’s 2011 U.S. federal tax year could result in a tax benefit of up to approximately $0.1 million.

During the ~~three months ended May 3, 2014,~~first and second quarters of fiscal 2015, the Company granted an aggregate of 240,852 and 12,504 shares of restricted stock to certain key employees, which vest primarily over a three-year period, at an estimated value of $3.6 million and $0.2 million, respectively. This value is being recorded as compensation expense on a straight-line basis over the vesting period of the restricted stock.

During the second quarter of fiscal 2015, the Company awarded to five directors an aggregate of 16,950 shares of restricted stock, which vest over a three year period at an estimated fair value of $0.3 million. This value is being recorded as compensation expense on a straight-line basis over the vesting period of the restricted stock.

~~During~~Also, during the ~~three months ended May 3, 2014,~~first and second quarters of fiscal 2015, the Company granted an aggregate of 5,883 and 5,157 SARs, to be settled in shares of common stock, to a ~~director.~~director, respectively. The SARs have an exercise price of $15.49 and $17.71, respectively, generally vest over a three-year period and have a seven-year term. The total fair value of the SARs, based on theBlack-Scholes Option Pricing Model, amounted to approximately $50,000 and $50,000, which is being recorded as compensation expense on a straight-line basis over the vesting period of each SAR.

In April and May 2014, a total of 42,132 and 1,000 shares of restricted stock vested, of which 17,929 and 404 shares were withheld to cover the employees’ statutory income tax ~~requirements.~~requirements, respectively. The estimated value of the withheld shares was $0.3 ~~million.~~million and $6,000, respectively.

The Company has four reportable segments: Men’s Sportswear and Swim, Women’s Sportswear, Direct-to-Consumer and Licensing. The Men’s Sportswear and Swim and Women’s Sportswear segments derive revenues from the design, import and distribution of apparel to department stores and other retail outlets, principally throughout the United States. The Direct-to-Consumer segment derives its revenues from the sale of the Company’s branded and licensed products through its retail stores and e-commerce platform. The Licensing segment derives its revenues from royalties associated with the use of the Company’s brand names, principally Perry Ellis, Jantzen, John Henry, Original Penguin, Gotcha, Farah, Savane, Pro Player, Laundry, Manhattan and Munsingwear.

The Company allocates certain corporate selling, general and administrative expenses based primarily on the revenues generated by each segment.


	Three Months Ended						Six Months Ended
	August 2,			August 3,			August 2,			August 3,
	2014			2013			2014			2013
	(in thousands)
Revenues:
Men’s Sportswear and Swim	$	147,175		$	152,594		$	342,174		$	351,271
Women’s Sportswear		26,240			32,326			60,727			72,120
Direct-to-Consumer		22,595			19,572			43,025			36,585
Licensing		7,522			7,213			14,920			14,048

Total revenues	$	203,532		$	211,705		$	460,846		$	474,024

Depreciation and amortization:
Men’s Sportswear and Swim	$	1,564		$	1,777		$	3,198		$	3,471
Women’s Sportswear		496			425			957			825
Direct-to-Consumer		889			777			1,735			1,438
Licensing		39			31			78			68

Total depreciation and amortization	$	2,988		$	3,010		$	5,968		$	5,802

Operating income (loss) :
Men’s Sportswear and Swim	$	(1,779	)	$	(3,413	)	$	9,254		$	7,828
Women’s Sportswear		(1,970	)		(864	)		(1,573	)		699
Direct-to-Consumer		(1,126	)		(2,412	)		(2,978	)		(5,265	)
Licensing⁽¹⁾		6,378			5,704			11,775			17,243

Total operating income (loss)	$	1,503		$	(985	)	$	16,478		$	20,505
Total interest expense		3,605			3,722			7,321			7,525

Total net (loss) income before income taxes	$	(2,102	)	$	(4,707	)	$	9,157		$	12,980

The Company sponsors a qualified pension plan. The following table provides the components of net benefit cost for the plan during the first ~~quarter~~three and six months of fiscal 2015 and 2014:


	Three Months Ended						Three Months Ended						Six Months Ended
	May 3,			May 4,			August 2,			August 3,			August 2,			August 3,
	2014			2013			2014			2013			2014			2013
	(in thousands)						(in thousands)
Service cost	$	63		$	63		$	63		$	63		$	126		$	126
Interest cost		433			406			433			406			866			812
Expected return on plan assets		(508	)		(555	)		(508	)		(555	)		(1,016	)		(1,110	)
Amortization of net gain		130			133
Amortization of net loss								130			133			260			266

Net periodic benefit cost	$	118		$	47		$	118		$	47		$	236		$	94

Accounts receivable, accounts payable, accrued interest payable and accrued expenses. The carrying amounts reported in the balance sheets approximate fair value due to theshort-term nature of these instruments.

Real estate mortgages. (classified within Level 2 of the valuation hierarchy) - —The carrying amounts of the real estate mortgages were approximately $23.0 million and $24.0 million at ~~May 3,~~August 2, 2014 and February 1, 2014, respectively. The carrying values of the real estate mortgages at ~~May 3,~~August 2, 2014 and February 1, 2014 approximate fair value since they were recently entered into and thus the interest rates approximate market.

Senior credit facility. The carrying amount of the senior credit facility approximates fair value due to the frequent resets of its floating interest rate.

Senior subordinated notes payable. (classified within Level 1 of the valuation hierarchy) - —The carrying amounts of the 7⁷/₈% senior subordinated notes payable were approximately $150.0 million at ~~May 3,~~August 2, 2014 and February 1, 2014. As of ~~May 3,~~August 2, 2014 and February 1, 2014, the fair value of the 7⁷/₈% senior subordinated notes payable was ~~$159.5~~$155.1 and $160.0 million, respectively, based on quoted market prices.

These estimated fair value amounts have been determined using available market information and appropriate valuation methods.

The Company leases approximately 66,000 square feet comprised of approximately 16,000 square feet for administrative offices, approximately 45,000 square feet for warehouse distribution and approximately 5,000 square feet for retail. These facilities, which are owned by the Company’s Chairman of the Board of Directors and Chief Executive Officer, were originally leased by the Company under a 10-year lease for the office space and a 10-year lease for the warehouse space. These facilities are in close proximity to the Company Headquarter. During fiscal 2015, the Company amended the leases to extend the term for 60 months, beginning July 1, 2014 and expiring June 30, 2019. Beginning July 1, 2014, the basic monthly rent will be $41,750 and will increase 3% on the first of each of the remaining 12-month periods during the extended term. The Company’s Governance Committee reviewed the terms of the lease extensions to ensure that they were reasonable and at market. This review included information from third party sources.

The Company is a defendant in Humberto Ordaz v. Perry Ellis International, Inc., Case No. BC490485 (Cal. Sup. Ct. 2012), involving claims for unpaid wages, missed breaks and related claims, which was originally filed on August 17, 2012 by a former employee in the Company’s California administrative offices. The lawsuit has been pleaded but not certified as a class action. Mediation has been scheduled for the third quarter of fiscal 2015, and formal discovery has been deferred until after the mediation. The Company believes that it has meritorious defenses to the claims alleged and is vigorously defending the matter.

The Company and several of its subsidiaries (the “Guarantors”) have fully and unconditionally guaranteed the senior subordinated notes payable on a joint and several basis. These guarantees are subject to release in limited circumstances (only upon the occurrence of certain customary conditions). The following are condensed consolidating financial statements, which present, in separate columns: Perry Ellis International, Inc. (Parent Only), the Guarantors on a combined, or where appropriate, consolidated basis, and the Non-Guarantors on a combined, or where appropriate, consolidated basis. Additional columns present eliminating adjustments and consolidated totals as of ~~May 3,~~August 2, 2014 and February 1, 2014 and for the three and six months ended ~~May 3,~~August 2, 2014 and ~~May 4,~~August 3, 2013. The combined Guarantors are 100% owned subsidiaries of Perry Ellis International, Inc., and have fully and unconditionally guaranteed the senior subordinated notes payable on a joint and several basis.

Effective June 2013, the Company changed its reporting entity structure through the merger of companies under common control. C&C California, LLC (“C&C California”) and Laundry, LLC (“Laundry”) were merged with Supreme International, LLC, a guarantor subsidiary. Prior to their merger and subsequent dissolution, C&C California and Laundry were previously non-guarantor subsidiaries. This change in reporting entity was retrospectively applied to the condensed consolidating financial statements and, consequently, amounts related to C&C California and Laundry are presented in the guarantor subsidiary column for all periods presented.

~~Additionally, subsequent~~Subsequent to the issuance of the February 2, 2013 financial statements, the Company determined that the condensed consolidating guarantor financial statements required an adjustment relating to the cash flow classification of certain intercompany transactions between the parent and its affiliates. As a result, the condensed consolidating financial statements have been adjusted to correct prior year amounts in the Condensed Consolidated Statements of Cash Flows to reflect certain intercompany activities between the parent and its subsidiaries as cash flows from investing activities that had previously been reflected within cash flows from financing activities.

The effect on the condensed consolidating statement of comprehensive income, as a result of the change in reporting entity, is a decrease of approximately ($0.2) million in net income and comprehensive income to the guarantor subsidiaries for the three months ended May 4, 2013 with a corresponding change to the non-guarantor for the respective period from the previously reported amounts.

The effect on the condensed consolidating statement of cash flows, as a result of the change in reporting entity, is an increase of approximately $29,000 in net cash used in operating activities, an increase of approximately $50,000 in net cash used in investing activities and an increase of approximately $79,000 in net cash provided by financing activities to the guarantor subsidiaries for the three months ended May 4, 2013 with a corresponding change to the non-guarantor for the respective period from the previously reported amounts.

~~The effect on the condensed consolidating statement of~~ cash flows as a result of the adjustment in intercompany activities is a decrease of approximately ($~~6.7)~~1.4) million in net cash from financing activities in the parent only column for the ~~three~~six months ended ~~May 4,~~August 3, 2013, respectively, with a corresponding change to the net cash from investing activity in the parent only column from the previously reported amounts.


	Parent Only		Guarantors		Non- Guarantors		Eliminations			Consolidated		Parent Only		Guarantors		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	3,126	$	23,483	$	—		$	26,609	$	—	$	21,409	$	27,809	$	—		$	49,218
Accounts receivable, net		—		160,243		22,903		—			183,146		—		88,389		22,143		—			110,532
Intercompany receivable, net		171,561		—		—		(171,561	)		—		177,595		—		—		(177,595	)		—
Inventories		—		157,246		19,904		—			177,150		—		152,013		22,494		—			174,507
Investment, at fair value		—		—		21,221		—			21,221		—		—		23,955		—			23,955
Deferred income taxes		—		13,309		244		—			13,553		—		14,987		371		—			15,358
Prepaid income taxes		6,599		—		—		654			7,253		5,439		—		662		1,245			7,346
Prepaid expenses and other current assets		—		6,903		1,085		—			7,988		—		8,661		889		—			9,550

Total current assets		178,160		340,827		88,840		(170,907	)		436,920		183,034		285,459		98,323		(176,350	)		390,466
Property and equipment, net		—		55,238		4,875		—			60,113		—		56,866		4,766		—			61,632
Other intangible assets, net		—		177,253		34,003		—			211,256		—		177,022		33,638		—			210,660
Goodwill		—		6,022		—		—			6,022		—		6,022		—		—			6,022
Investment in subsidiaries		327,701		—		—		(327,701	)		—		326,085		—		—		(326,085	)		—
Other assets		2,378		1,771		634		—			4,783		2,267		1,843		1,647		—			5,757

TOTAL	$	508,239	$	581,111	$	128,352	$	(498,608	)	$	719,094	$	511,386	$	527,212	$	138,374	$	(502,435	)	$	674,537

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	—	$	51,642	$	4,689	$	—		$	56,331	$	—	$	65,599	$	10,921	$	—		$	76,520
Accrued expenses and other liabilities		—		22,384		4,740		(1,042	)		26,082		—		18,227		4,867		(451	)		22,643
Accrued interest payable		1,036		—		—		—			1,036		3,990		—		—		—			3,990
Unearned revenues		—		3,323		1,791		—			5,114		—		3,368		1,889		—			5,257
Intercompany payable, net		—		147,461		25,639		(173,100	)		—
Intercompany payable , net													—		151,587		27,568		(179,155	)		—

Total current liabilities		1,036		224,810		36,859		(174,142	)		88,563		3,990		238,781		45,245		(179,606	)		108,410

Senior subordinated notes payable, net		150,000		—		—		—			150,000		150,000		—		—		—			150,000
Senior credit facility		—		64,567		—		—			64,567
Real estate mortgages		—		22,651		—		—			22,651		—		22,461		—		—			22,461
Deferred pension obligation		—		9,200		71		—			9,271		—		8,608		82		—			8,690
Unearned revenues and other long-term liabilities		—		14,260		2,356		—			16,616		—		14,209		2,039		—			16,248
Deferred income taxes		—		8,527		—		1,696			10,223		—		9,636		—		1,696			11,332

Total long-term liabilities		150,000		119,205		2,427		1,696			273,328		150,000		54,914		2,121		1,696			208,731

Total liabilities		151,036		344,015		39,286		(172,446	)		361,891		153,990		293,695		47,366		(177,910	)		317,141

Total equity		357,203		237,096		89,066		(326,162	)		357,203		357,396		233,517		91,008		(324,525	)		357,396

TOTAL	$	508,239	$	581,111	$	128,352	$	(498,608	)	$	719,094	$	511,386	$	527,212	$	138,374	$	(502,435	)	$	674,537


					Non-													Non-
	Parent Only		Guarantors		Guarantors		Eliminations			Consolidated		Parent Only			Guarantors			Guarantors			Eliminations			Consolidated
Revenues:
Net sales	$	—	$	225,331	$	24,585	$	—		$	249,916	$	—		$	173,789		$	22,221		$	—		$	196,010
Royalty income		—		4,520		2,878		—			7,398		—			4,570			2,952			—			7,522

Total revenues		—		229,851		27,463		—			257,314		—			178,359			25,173			—			203,532
Cost of sales		—		154,245		15,404		—			169,649		—			118,314			14,754			—			133,068

Gross profit		—		75,606		12,059		—			87,665		—			60,045			10,419			—			70,464
Operating expenses:
Selling, general and administrative expenses		—		60,554		9,156		—			69,710		—			56,876			9,982			—			66,858
Depreciation and amortization		—		2,769		211		—			2,980		—			2,752			236			—			2,988

Total operating expenses		—		63,323		9,367		—			72,690		—			59,628			10,218			—			69,846
Gain on sale of long-lived assets													—			—			885			—			885

Operating income		—		12,283		2,692		—			14,975		—			417			1,086			—			1,503
Interest expense		—		3,685		31		—			3,716		—			3,615			(10	)		—			3,605

Net income before income taxes		—		8,598		2,661		—			11,259
Income tax provision		—		2,220		1,264		—			3,484
Net (loss) income before income taxes													—			(3,198	)		1,096			—			(2,102	)
Income tax (benefit) provision													—			381			(867	)		—			(486	)

Equity in earnings of subsidiaries, net		7,775		—		—		(7,775	)		—		(1,616	)		—			—			1,616			—

Net income		7,775		6,378		1,397		(7,775	)		7,775
Net (loss) income													(1,616	)		(3,579	)		1,963			1,616			(1,616	)

Other comprehensive income		754		80		674		(754	)		754
Other comprehensive income (loss)													58			79			(21	)		(58	)		58

Comprehensive income	$	8,529	$	6,458	$	2,071	$	(8,529	)	$	8,529
Comprehensive (loss) income												$	(1,558	)	$	(3,500	)	$	1,942		$	1,558		$	(1,558	)


							Non-															Non-
	Parent Only			Guarantors			Guarantors			Eliminations			Consolidated			Parent Only			Guarantors			Guarantors			Eliminations			Consolidated
Revenues:
Net sales	$	—		$	236,245		$	19,239		$	—		$	255,484		$	—		$	423,911		$	36,065		$	—		$	459,976
Royalty income		—			4,034			2,801			—			6,835			—			8,322			5,726			—			14,048

Total revenues		—			240,279			22,040			—			262,319			—			432,233			41,791			—			474,024
Cost of sales		—			161,998			11,640			—			173,638			—			294,898			21,899			—			316,797

Gross profit		—			78,281			10,400			—			88,681			—			137,335			19,892			—			157,227
Operating expenses:
Selling, general and administrative expenses		—			62,954			7,715			—			70,669			—			121,845			15,345			—			137,190
Depreciation and amortization		—			2,602			190			—			2,792			—			5,423			379			—			5,802

Total operating expenses		—			65,556			7,905			—			73,461			—			127,268			15,724			—			142,992
Gain on sale of long-lived assets		—			(691	)		6,961			—			6,270			—			(691	)		6,961			—			6,270

Operating income		—			12,034			9,456			—			21,490			—			9,376			11,129			—			20,505
Interest expense		—			3,777			26			—			3,803			—			7,471			54			—			7,525

Net income before income taxes		—			8,257			9,430			—			17,687			—			1,905			11,075			—			12,980
Income tax provision		—			4,597			1,770			—			6,367			—			2,664			1,826			—			4,490

Equity in earnings of subsidiaries, net		11,320			—			—			(11,320	)		—			8,490			—			—			(8,490	)		—

Net income		11,320			3,660			7,660			(11,320	)		11,320
Net income (loss)																	8,490			(759	)		9,249			(8,490	)		8,490

Other comprehensive (loss) income		(324	)		81			(405	)		324			(324	)		(899	)		162			(1,061	)		899			(899	)

Comprehensive income	$	10,996		$	3,741		$	7,255		$	(10,996	)	$	10,996
Comprehensive income (loss)																$	7,591		$	(597	)	$	8,188		$	(7,591	)	$	7,591


							Non-															Non-
	Parent Only			Guarantors			Guarantors			Eliminations			Consolidated			Parent Only			Guarantors			Guarantors			Eliminations			Consolidated
NET CASH (USED IN) OPERATING ACTIVITIES:	$	(4,408	)	$	(45,242	)	$	(656	)	$	2,999		$	(47,307	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:																$	(182	)	$	39,319		$	4,842		$	2,999		$	46,978

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		—			(2,816	)		(234	)		—			(3,050	)		—			(6,895	)		(428	)		—			(7,323	)
Purchase of investments		—			—			(15,387	)		—			(15,387	)		—			—			(22,897	)		—			(22,897	)
Proceeds from investments maturities		—			—			9,490			—			9,490			—			—			14,160			—			14,160
Intercompany transactions		4,664			—			—			(4,664	)		—			163						—			(163	)		—

Net cash provided by (used in) investing activities		4,664			(2,816	)		(6,131	)		(4,664	)		(8,947	)		163			(6,895	)		(9,165	)		(163	)		(16,060	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from senior credit facility		—			110,991			—			—			110,991			—			159,402			—			—			159,402
Payments on senior credit facility		—			(54,586	)		—			—			(54,586	)		—			(167,564	)		—			—			(167,564	)
Payments on real estate mortgages		—			(200	)		—			—			(200	)		—			(396	)		—			—			(396	)
Payments on capital leases		—			(75	)		—			—			(75	)		—			(150	)		—			—			(150	)
Proceeds from exercise of stock options																	197			—			—			—			197
Tax benefit from exercise of equity instruments		(95	)		—			—			—			(95	)		(144	)		—			—			—			(144	)
Intercompany transactions		—			(4,946	)		443			4,503			—			—			(2,307	)		2,178			129			—

Net cash (used in) provided by financing activities		(95	)		51,184			443			4,503			56,035
Net cash provided by (used in) financing activities																	53			(11,015	)		2,178			129			(8,655	)
Effect of exchange rate changes on cash and cash equivalents		(161	)		—			(161	)		161			(161	)		(34	)		—			(34	)		34			(34	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		—			3,126			(6,505	)		2,999			(380	)		—			21,409			(2,179	)		2,999			22,229
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		—			—			29,988			(2,999	)		26,989			—			—			29,988			(2,999	)		26,989

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	3,126		$	23,483		$	—		$	26,609		$	—		$	21,409		$	27,809		$	—		$	49,218


							Non-															Non-
	Parent Only			Guarantors			Guarantors			Eliminations			Consolidated			Parent Only			Guarantors			Guarantors			Eliminations			Consolidated
NET CASH USED IN OPERATING ACTIVITIES:	$	(6,403	)	$	(7,537	)	$	(306	)	$	—		$	(14,246	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:																$	(1,406	)	$	16,272		$	(815	)	$	—		$	14,051

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		—			(6,534	)		(666	)		—			(7,200	)		—			(13,600	)		(987	)		—			(14,587	)
Proceeds on sale of intangible assets		—			—			4,875			—			4,875			—			—			4,875			—			4,875
Intercompany transactions		6,701			—			—			(6,701	)		—			1,360			—			—			(1,360	)		—

Net cash (used in) provided by investing activities		6,701			(6,534	)		4,209			(6,701	)		(2,325	)
Net cash provided by (used in) investing activities																	1,360			(13,600	)		3,888			(1,360	)		(9,712	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from senior credit facility		—			129,344			—			—			129,344			—			214,131			—			—			214,131
Payments on senior credit facility		—			(121,625	)		—			—			(121,625	)		—			(214,131	)		—			—			(214,131	)
Payments on real estate mortgages		—			(202	)		—			—			(202	)		—			(403	)		—			—			(403	)
Payments on capital leases		—			(78	)		—			—			(78	)		—			(157	)		—			—			(157	)
Deferred financing fees																	—			(25	)		—			—			(25	)
Proceeds from exercise of stock options		27			—			—			—			27			124			—			—			—			124
Tax benefit from exercise of equity instruments		(52	)		—			—			—			(52	)
Tax benefit from exercise of stock options																	96			—			—			—			96
Intercompany transactions		—			(5,848	)		(580	)		6,428			—			—			(7,785	)		6,599			1,186			—

Net cash provided by (used in) financing activities		(25	)		1,591			(580	)		6,428			7,414			220			(8,370	)		6,599			1,186			(365	)
Effect of exchange rate changes on cash and cash equivalents		(273	)		—			(273	)		273			(273	)		(174	)		—			(174	)		174			(174	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		—			(12,480	)		3,050			—			(9,430	)		—			(5,698	)		9,498			—			3,800
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		—			14,825			40,132			—			54,957
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR																	—			14,825			40,132			—			54,957

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	2,345		$	43,182		$	—		$	45,527
CASH AND CASH EQUIVALENTS AT END OF YEAR																$	—		$	9,127		$	49,630		$	—		$	58,757

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references to “Perry Ellis,” the “Company,” “we,” “us” or “our” include Perry Ellis International, Inc. and its subsidiaries. This management’s discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended February 1, 2014, filed with the Securities and Exchange Commission on April 15, 2014.

We caution readers that this report includes “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,” “believe,” “budget,” “contemplate,” “continue,” “could,” “envision,” “estimate,” “expect,” “guidance,” “indicate,” ~~“intend,~~��intend,” “may,” “might,” “plan,” “possibly,” “potential,” “predict,” “probably,” “pro-forma,” “project,” “seek,” “should,” “target,” or “will” or the negative thereof or other variations thereon and similar words or phrases or comparable terminology. We have based such forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and 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, many of which are beyond our control. These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the factors that could affect our financial performance, cause actual results to differ from our estimates, or underlie such forward-looking statements, are as set forth below and in various places in this report. These factors include, but are not limited to:

You are cautioned that all forward-looking statements involve risks and uncertainties, detailed in our filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are valid only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements to reflect new information or the occurrence of unanticipated events or otherwise.

Included in the footnotes to the consolidated financial statements in our Annual Report on Form 10-K for the year ended February 1, 2014 is a summary of all significant accounting policies used in the preparation of our consolidated financial statements. We follow the accounting methods and practices as required by accounting principles generally accepted in the United States of America (“GAAP”). In particular, our critical accounting policies and areas in which we use judgment are in the areas of revenue recognition, the estimated collectability of accounts receivable, the recoverability of obsolete or overstocked inventory, the impairment of long-lived assets that are our trademarks and goodwill, the recoverability of deferred tax assets and the measurement of retirement related benefits. We believe that there have been no significant changes to our critical accounting policies during the three and six months ended ~~May 3,~~August 2, 2014 as compared to those we disclosed in ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended February 1, 2014.

The following table sets forth, for the periods indicated, selected financial data expressed by segments and includes a reconciliation of EBITDA to operating income by segment, the most directly comparable GAAP financial measure:


	Three Months Ended						Three Months Ended						Six Months Ended
	May 3, 2014			May 4, 2013			August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
	(in thousands)						(in thousands)
Revenues by segment:
Men’s Sportswear and Swim	$	194,999		$	198,677		$	147,175		$	152,594		$	342,174		$	351,271
Women’s Sportswear		34,487			39,794			26,240			32,326			60,727			72,120
Direct-to-Consumer		20,430			17,013			22,595			19,572			43,025			36,585
Licensing		7,398			6,835			7,522			7,213			14,920			14,048

Total revenues	$	257,314		$	262,319		$	203,532		$	211,705		$	460,846		$	474,024


	Three Months Ended						Three Months Ended						Six Months Ended
	May 3, 2014			May 4, 2013			August 2, 2014			August 3, 2013			August 2, 2014			August 3, 2013
	(in thousands)						(in thousands)
Reconciliation of operating income to EBITDA
Operating income (loss) by segment:
Men’s Sportswear and Swim	$	11,033		$	11,241		$	(1,779	)	$	(3,413	)	$	9,254		$	7,828
Women’s Sportswear		397			1,563			(1,970	)		(864	)		(1,573	)		699
Direct-to-Consumer		(1,852	)		(2,853	)		(1,126	)		(2,412	)		(2,978	)		(5,265	)
Licensing		5,397			11,539			6,378			5,704			11,775			17,243
Total operating income	$	14,975		$	21,490

Total operating income (loss)							$	1,503		$	(985	)	$	16,478		$	20,505

Add:
Depreciation and amortization
Men’s Sportswear and Swim		1,634			1,694		$	1,564		$	1,777		$	3,198		$	3,471
Women’s Sportswear		461			400			496			425			957			825
Direct-to-Consumer		846			661			889			777			1,735			1,438
Licensing		39			37			39			31			78			68

Total depreciation and amortization		2,980			2,792		$	2,988		$	3,010		$	5,968		$	5,802

EBITDA by segment:
Men’s Sportswear and Swim	$	12,667		$	12,935		$	(215	)	$	(1,636	)	$	12,452		$	11,299
Women’s Sportswear		858			1,963			(1,474	)		(439	)		(616	)		1,524
Direct-to-Consumer		(1,006	)		(2,192	)		(237	)		(1,635	)		(1,243	)		(3,827	)
Licensing		5,436			11,576			6,417			5,735			11,853			17,311

Total EBITDA	$	17,955		$	24,282		$	4,491		$	2,025		$	22,446		$	26,307

EBITDA margin by segment
Men’s Sportswear and Swim		6.5%			6.5%			(0.1	%)		(1.1	%)		3.6	%		3.2	%
Women’s Sportswear		2.5%			4.9%			(5.6	%)		(1.4	%)		(1.0	%)		2.1	%
Direct-to-Consumer		(4.9%	)		(12.9%	)		(1.0	%)		(8.4	%)		(2.9	%)		(10.5	%)
Licensing		73.5%			169.4%			85.3	%		79.5	%		79.4	%		123.2	%
Total EBITDA margin		7.0%			9.3%			2.2	%		1.0	%		4.9	%		5.5	%

EBITDA consists of earnings before interest, depreciation and amortization and income taxes. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States of America, and does not represent cash flow from operations. The most directly comparable GAAP financial measure, presented above, is operating income. EBITDA and EBITDA margin are presented solely as a supplemental disclosure because management believes that they are a common measure of operating performance in the apparel industry.

The following is a discussion of the results of operations for the three and six month ~~period in the first quarter~~periods ended August 2, 2014 of the fiscal year ending January 31, 2015 (“fiscal 2015”) compared with the three and six month ~~period in the first quarter~~periods ended August 3, 2013 of the fiscal year ended February 1, 2014 (“fiscal 2014”).

Results of Operations—three and six months ended ~~May 3,~~August 2, 2014 compared to the three and six months ended ~~May 4.~~August 3, 2013.

Net sales. Men’s Sportswear and Swim net sales for the three months ended ~~May 3,~~August 2, 2014 were ~~$195.0~~$147.2 million, a decrease of ~~$3.7~~$5.4 million, or ~~1.9%~~3.5%, from ~~$198.7~~$152.6 million for the three months ended ~~May 4,~~August 3, 2013. The net sales decrease was attributed primarily to decreases in our private and exclusive branded products, partially offset by a 14% increase in golf lifestyle apparel and strength in Original Penguin.

Men’s Sportswear and Swim net sales for the six months ended August 2, 2014 were $342.2 million, a decrease of $9.1 million, or 2.6%, from $351.3 million for the six months ended August 3, 2013. The net sales decrease was attributed primarily to planned reductions in private and exclusive brands, partially offset by increases across our golf sportswear brands, Original Penguin and Nike swim.

Women’s Sportswear net sales for the three months ended ~~May 3,~~August 2, 2014 were ~~$34.5~~$26.2 million, a decrease of ~~$5.3~~$6.1 million, or ~~13.3%~~18.9%, from ~~$39.8~~$32.3 million for the three months ended ~~May 4,~~August 3, 2013. The net sales decrease was attributed to a shift in shipments for Rafaella into the second half of fiscal 2105, and lower sales in contemporary Laundry dresses as we refined distribution to focus on full price specialty stores and reduced programs to the special markets channel.

Women’s Sportswear net sales for the six months ended August 2, 2014 were $60.7 million, a decrease of $11.4 million, or 15.8%, from $72.1 million for the six months ended August 3, 2013. The net sales decrease was primarily due to decreases in our contemporary Laundry ~~dress~~dresses and in Rafaella due to a shift in special market business to the second half of fiscal 2015.

Direct-to-Consumer net sales for the three months ended ~~May 3,~~August 2, 2014 were ~~$20.4~~$22.6 million, an increase of ~~$3.4~~$3.0 million, or ~~20.0%~~15.3%, from ~~$17.0~~$19.6 million for the three months ended ~~May 4,~~August 3, 2013. The net sales increase was attributed to a 2.7% comparable same store sales increase driven by increased conversion as well as a higher average dollar per transaction in both Perry Ellis and Original Penguin stores. We also experienced increases in ecommerce comparable sales of 20% over last year.

Direct-to-Consumer net sales for the six months ended August 2, 2014 were $43.0 million, an increase of $6.4 million, or 17.5%, from $36.6 million for the six months ended August 3, 2013. The increase was driven by a ~~5.6%~~4.0% comparable same store sales increase driven by Perry Ellis as well as by our direct e-commerce sales, which posted a ~~43%~~30.0% comparable sales increase.

Royalty income. Royalty income for the three months ended ~~May 3,~~August 2, 2014 was ~~$7.4~~$7.5 million, an increase of ~~$0.6~~$0.3 million, or ~~8.8%~~4.2%, from ~~$6.8~~$7.2 million for the three months ended ~~May 4,~~August 3, 2013. The net sales increase was attributed to Original Penguin partnerships for footwear and international licensed retail stores, as well as eight new licensing agreements executed during the period.

Royalty income for the six months ended August 2, 2014 was $14.9 million, an increase of $0.9 million, or 6.4%, from $14.0 million for the six months ended August 3, 2013. Royalty income increases were attributed to increases in ~~our~~the Perry Ellis and Original Penguin businesses as well as increases in our licensed only businesses.

Gross profit.Gross profit was ~~$87.7~~$70.5 million for the three months ended ~~May 3,~~August 2, 2014, ~~a decrease~~an increase of ~~$1.0~~$2.0 million, or ~~1.1%,~~2.9 %, from ~~$88.7~~$68.5 million for the three months ended ~~May 4,~~August 3, 2013. ~~This decrease~~The increase is attributed to growth in direct-to-consumer, international expansion in Europe as well as increases in golf life style apparel and in Original Penguin sportswear. Gross profit was $158.1 million for the six months ended August 2, 2014, an increase of $0.9 million, or 0.6%, from $157.2 million for the six months ended August 3, 2013. This increase is attributed to net sales ~~mix composition~~increases described above and the factors described within the gross profit margin section below.

Gross profit margin. As a percentage of total revenue, gross profit margins were ~~34.1%~~34.6% for the three months ended ~~May 3,~~August 2, 2014, as compared to ~~33.8%~~32.4% for the three months ended ~~May 4,~~August 3, 2013, an expansion of 220 basis points. The increase was primarily attributed to an emphasis on higher margin channels and geographies, as well as the direct-to-consumer segment mix through lower promotions in all venues. For the six months ended August 2, 2014, gross profit margins were 34.3% as a percentage of total revenue as compared to 33.2% for the six months ended August 3, 2013, an increase of 30110 basis points. This increase is primarily associated with factors described above as well as higher margins in our Perry Ellis and Rafaella collection ~~businesses, as well as a favorable mix from higher margin international businesses and licensing.~~businesses. The margin expansion also reflected reduced freight costs as a result of the infrastructure rationalization program initiated last year.

Selling, general and administrative ~~expenses.~~expenses. Selling, general and administrative expenses for the three months ended ~~May 3,~~August 2, 2014 were ~~$69.7~~$66.9 million, ~~a decrease~~an increase of ~~$1.0~~$0.4 million, or ~~1.4%~~0.6%, from ~~$70.7~~$66.5 million for the three months ended ~~May 4,~~August 3, 2013. The increase reflects costs associated with streamlining and consolidation of

our operations including direct-to-consumer and private label business exits. The increase also reflects additional investment in brand marketing initiatives for our national brands, investment in Europe for our golf platform and Original Penguin as well as negative currency translation of $0.3 million due to the strengthening of the US dollar. These increases were partially offset by reduced employee costs, travel costs and professional fees.

Selling, general and administrative expenses for the six months ended August 2, 2014 were $136.6 million, a decrease of $0.6 million, or 0.4%, from $137.2 million for the six months ended August 3, 2013. from the decrease was ~~in line with our expectations. We realized favorability from~~due to reduced headcount in our infrastructure, as well as, reduced design, travel, samples and ~~sample~~professional fees expenses. These reductions were partially offset by costs associated with streamlining and consolidation of our operations as describe above. We ~~did, however, make~~also made additional investment in brand marketing for our national brands as well as investment in Europe for our golf platform and Original ~~Penguin.~~Penguin during this period. Also, during the ~~three~~six months ended ~~May 4,~~August 3, 2013 we experienced costs in the amount of $1.2 million related to our relocation of our New York offices and $0.8 million in costs associated with the sale of the Asian rights of the John Henry trademark that were not repeated during the ~~three~~six months ended ~~May 3,~~August 2, 2014.

EBITDA. Men’s Sportswear and Swim EBITDA margin for the three months ended ~~May~~August 2, 2014 increased 100 basis points to (0.1%), from (1.1%) for the three months ended August 3, 2013. Men’s Sportswear and Swim EBITDA margin for the six months ended August 2, 2014 ~~and May 4, 2013 remained flat at 6.5%.~~increased 40 basis points to 3.6%, from 3.2% for the six months ended August 3, 2013. The EBITDA margin was ~~adversely~~favorably impacted ~~by reduced leverage~~ from ~~the increased~~cost savings as a result of our infrastructure ~~expenditures planned~~review as well as increases in ~~this segment during fiscal 2015.~~our golf and sportswear brands. During fiscal 2014, the margin was also negatively impacted by costs associated with our relocation of our New York offices.

Women’s Sportswear EBITDA margin for the three months ended ~~May 3,~~August 2, 2014 decreased ~~240~~420 basis points to ~~2.5%~~(5.6%), from ~~4.9%~~(1.4%) for the three months ended ~~May 4,~~August 3, 2013. Women’s Sportswear EBITDA margin for the six months ended August 2, 2014 decreased 310 basis points to (1.0%), from 2.1% for the six months ended August 3, 2013. The EBITDA margin was negatively impacted by the reduced leverage due to the decrease in net sales described above. However, the margin was positively impacted by the increase in gross margin experienced in Rafaella sportswear. During fiscal 2014, the margin was negatively impacted by costs associated with the relocation of our New York offices.

Direct-to-Consumer EBITDA margin for the three months ended ~~May 3,~~August 2, 2014 increased ~~800~~740 basis points to ~~(4.9%~~(1.0%), from ~~(12.9%~~(8.4%) for the three months ended ~~May 4,~~August 3, 2013. Direct-to-Consumer EBITDA margin for the six months ended August 3, 2013 increased 760 basis points to (2.9%), from (10.5%) for the six months ended August 3, 2013. The increase was primarily attributable to the increase ofin revenue from our stores and e-commerce business, as described above. Because of this increase in revenue, we were able to realize a favorable leverage in selling, general and administrative expenses.

Licensing EBITDA margin for the three months ended ~~May 3,~~August 2, 2014 ~~decreased~~increased 580 basis points to ~~73.5%~~85.3%, from ~~169.4%~~79.5% for the three months ended ~~May 4,~~August 3, 2013. AsThe increase is primarily attributed to the increase in royalty income attributed to Original Penguin partnerships for footwear and international licensed retail stores, as well as eight new licensing agreements. Additionally the margin was positively impacted by the sale of certain Jantzen rights as described ~~below, during~~below. Licensing EBITDA margin for the ~~three~~six months ended ~~May 4,~~August 2, 2014 decreased to 79.4%, from 123.2% for the six months ended August 3, 2013. During the six months ended August 3, 2013, we had a gain on the sale of the Asian rights of the John Henry ~~brand.~~brand, as described below. The gain was the primary reason for the higher EBITDA margin in the first ~~quarter~~half of fiscal 2014.

Depreciation and amortization. Depreciation and amortization for the three months ended ~~May 3,~~August 2, 2014, was $3.0 million, remaining flat, from $3.0 million for the three months ended August 3, 2013. Depreciation and amortization for the six months ended August 2, 2014, was $6.0 million, an increase of $0.2 million, or ~~7.1%~~3.4%, from ~~$2.8~~$5.8 million for the ~~three~~six months ended ~~May 4,~~August 3, 2013. The increase is attributed to depreciation related to our capital expenditures, primarily in the direct-to-consumer segment, and leasehold ~~improvements made during fiscal 2014.~~improvements.

Gain on sale of long-lived assets. During the second quarter of fiscal 2015, we entered into a sales agreement, in the amount of $1.3 million, for the sale of Australian, Fiji and New Zealand trademark rights with respect to Jantzen. Payments on the purchase price are due in five installments of $250,000 over a five year period. Interest on the purchase price that remains unpaid will accrue at a rate of 3.5% per annum calculated on an annual basis. As a result of this transaction, we recorded a gain of $0.9 million in the licensing segment.

During the fourth quarter of fiscal 2013, we entered into a sales agreement, in the amount of $7.5 million, for certain Asian trademark rights with respect our John Henry brand. The transaction closed in the first quarter of fiscal 2014. As a result of this transaction, we recorded a gain of $6.3 million. This gain was included in our licensing segment’s operating income. ~~We plan to continue to execute our domestic strategy for the John Henry brand as a modern lifestyle resource to select retailers as well as its licensing relationships in Latin America.~~

Interest expense. Interest expense for the three months ended ~~May 3,~~August 2, 2014 was ~~$3.7~~$3.6 million, a decrease of $0.1 million, or ~~2.6%~~2.7%, from ~~$3.8~~$3.7 million for the three months ended ~~May 4,~~August 3, 2013. Interest expense for the six months ended August 2, 2014 was $7.3 million, a decrease of $0.2 million, or 2.7%, from $7.5 million for the six months ended August 3, 2013. The primary reason for the decrease is related to the savings generated from the refinancing of our mortgage loans in the second half of fiscal ~~2014.~~2014, as well as lower average borrowings on our credit facility as compared to our borrowings in the prior year.

Income taxes.The income tax ~~expense~~benefit for the three months ended ~~May 3,~~August 2, 2014, was ~~$3.5~~$0.5 million, a decrease of ~~$2.9~~$1.4 million, as compared to ~~$6.4~~$1.9 million for the three months ended ~~May 4,~~August 3, 2013. For the three months ended ~~May 3,~~August 2, 2014, our effective tax rate was ~~30.9%~~23.1% as compared to ~~36.0%~~39.9% for the three months ended ~~May 4,~~August 3, 2013. Our income tax expense for the six months ended August 2, 2014, was $3.0 million, a decrease of $1.5 million, as compared to $4.5 million for the six months ended August 3, 2013. For the six months ended August 2, 2014, our effective tax rate was 32.7% as compared to 34.6% for the six months ended August 3, 2013. The overall change in the effective tax rate is attributed to the unfavorable disallowance of certain executive compensation in fiscal 2014, ~~and~~ the sale of certain intangible rights ofrelated to the John Henry trademark in fiscal 2014, ~~as well as~~and the change in ratio of income between domestic and foreign operations, of which the domestic operations are taxed at higher statutory tax rates.

Net (loss) income.Net ~~income~~loss for the three months ended ~~May 3,~~August 2, 2014 was ~~$7.8~~$1.6 million, ~~a decrease~~an improvement of ~~$3.5~~$1.2 million, or ~~31.0%~~42.9%, as compared to ~~$11.3~~a loss of $2.8 million for the three months ended ~~May 4,~~August 3, 2013. Net income for the six months ended August 2, 2014 was $6.2 million, a decrease of $2.3 million, or 27.1%, as compared to $8.5 million for the six months ended August 3, 2013. The changes in operating results were due to the items described above.

We rely principally on cash flow from operations and borrowings under our senior credit facility to finance our operations, acquisitions and capital expenditures; and to a lesser extent, on letter of credit facilities for the acquisition of a small portion of our inventory purchases. We believe that our working capital requirements will decrease for fiscal 2015 driven primarily by lower levels of inventory associated with ~~strong~~stronger inventory management. As of ~~May 3,~~August 2, 2014, our total working capital was ~~$348.4~~$282.1 million as compared to $278.2 million as of February 1, 2014 and ~~$290.7~~$275.7 million as of ~~May 4,~~August 3, 2013. We believe that our cash flows from operations and availability under our senior credit facility and remaining letter of credit facilities are sufficient to meet our working capital ~~needs and capital expenditure needs over the next year.~~needs. We also believe that our real estate assets, which had a net book value of ~~$23.1~~$23.0 million at ~~May 3,~~August 2, 2014, have a higher market value. These real estate assets may provide us with additional capital resources. Additional borrowings against these real estate assets, however, would be subject to certain loan to value criteria established by lending institutions. As of ~~May 3,~~August 2, 2014, we had mortgage loans on these properties totaling ~~$23.5~~$23.3 million.

We consider the undistributed earnings of our foreign subsidiaries as of ~~May 3,~~August 2, 2014, to be indefinitely reinvested and, accordingly, no ~~United States~~U.S. income taxes have been provided thereon. As of ~~May 3,~~August 2, 2014, the amount of cash associated with indefinitely reinvested foreign earnings was approximately ~~$23.5~~$27.8 million. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Net cash ~~used in~~provided by operating activities was ~~$47.3~~$47.0 million for the ~~three~~six months ended ~~May 3,~~August 2, 2014, as compared to cash ~~used in~~provided by operating activities of ~~$14.2~~$14.1 million for the ~~three~~six months ended ~~May 4,~~August 3, 2013.

The cash ~~used in~~provided by operating activities for ~~three~~the six months ended ~~May 3,~~August 2, 2014, is primarily attributable to ~~an increase~~a decrease in accounts receivable of ~~$36.6~~$36.3 million due to the timing of shipments as compared to prior year as well as decreased inventory of $32.6 million due to improved inventory management. This was partially offset by a decrease in accounts payable and accrued expenses of $55.2 million and a decrease in accrued interest payable of $3.1 million; which was partially offset by a decrease in inventory of $29.9 million associated with strong inventory management. As a result of$38.6 million. For the ~~decrease in sales for the first quarter of fiscal as compared to prior quarter,~~six months ended August 2, 2014, our inventory turnover ratio decreased slightly to 3.3 as compared to ~~3.9~~3.8 for the comparable ~~quarter~~period in fiscal 2014. While the turnover decreased, inventory levels declined as noted above resulting from tighter inventory

management. In addition, inventory decreased as compared to the same period last year. Additionally prepaid expenses and other current assets increased by $2.2 million, offset by an increase in unearned revenue and other liabilities of $1.8 million. The cash ~~used in~~provided by operating activities for the ~~three~~six months ended ~~May~~August 3, 2013 is primarily attributable to a decrease in accounts receivable of $33.7 million and a decrease in inventory of $3.6 million associated with inventory management; which was offset by a decrease in accounts payable and accrued expenses of ~~$42.2~~$35.7 million ~~a decrease~~and an increase in ~~accrued interest payable~~prepaid income taxes of ~~$3.0 million; which was partially offset by a decrease in inventory of $14.8 million associated with strong inventory management.~~$1.9 million. As a result of the decrease in inventory for the ~~first quarter of fiscal 2014,~~six months ended August 3, 2013, our inventory turnover ratio increased to ~~3.9~~3.8 as compared to ~~3.3~~3.5 for the comparable ~~quarter~~period in fiscal 2013.

Net cash used in investing activities was ~~$8.9~~$16.1 million for the ~~three~~six months ended ~~May 3,~~August 2, 2014, as compared to cash used in investing activities of ~~$2.3~~$9.7 million for the ~~three~~six months ended ~~May 4,~~August 3, 2013. The net cash used during the first ~~three~~six months of fiscal 2015 primarily reflects the purchase of investments of ~~$15.4~~$22.9 million and the purchase of property and equipment of ~~$3.1~~$7.3 million primarily for ~~leaseholds;~~leasehold improvements and store fixtures; which was partially offset by the proceeds from the maturities of investments in the amount of ~~$9.5~~$14.2 million. ~~We anticipate capital expenditures during the remainder of fiscal 2015 of $11.0 million to $12.0 million in new leasehold improvements, technology, systems, retail stores, and other expenditures.~~

The net cash used during the first ~~three~~six months of fiscal 2014 primarily reflects the purchase of property and equipment of ~~$7.2~~$14.6 million, primarily for leaseholds; which was partially offset by proceeds on the sale of certain Asian trademark rights with respect to John Henry of $4.9 million.

Net cash ~~provided by~~used in financing activities was ~~$56.0~~$8.7 million for the ~~three~~six months ended ~~May 3,~~August 2, 2014, as compared to ~~the~~ cash ~~provided by~~used in financing activities of ~~$7.4~~$0.4 million for the ~~three~~six months ended ~~May 4,~~August 3, 2013. The net cash ~~provided~~used during the first ~~three~~six months of fiscal 2015 primarily reflects net ~~borrowings~~payments on our senior credit facility of ~~$56.4 million; which was partially offset by~~$8.2 million, payments of ~~$0.2~~$0.4 million on our mortgage ~~loans.~~loans and payments on capital leases of $0.2 million; partially offset by proceeds from exercises of stock options of $0.2 million. The net cash ~~provided~~used during the first ~~three~~six months of fiscal 2014 primarily reflects ~~net borrowings on our senior credit facility of $7.7 million; which was partially offset by~~ payments of ~~$0.2~~$0.4 million on our mortgage ~~loans.~~loans and payments on capital leases of $0.2 million; partially offset by proceeds from exercises of stock options of $0.1 million and a tax benefit from the exercise of stock options of $0.1 million.

Our Board of Directors ~~has~~ authorized us to purchase, from time to time and as market and business conditions ~~warrant,~~warranted, up to $60 million of our common stock for cash in the open market or in privately negotiated transactions through October 31, 2014. Although our Board of Directors allocated a maximum of $60 million to carry out the program, we are not obligated to purchase any specific number of outstanding shares and will reevaluate the program on an ongoing basis.

During fiscal 2014, we repurchased shares of our common stock at a cost of $7.0 million. There ~~has~~have been no open market purchases during fiscal 2015. As of ~~May 3,~~August 2, 2014 and February 1, 2014, there were 400,516 shares of treasury stock outstanding at a cost of approximately $7.0 million, respectively.

In March 2011, we issued $150 million 7⁷/₈% senior subordinated notes, due April 1, 2019. The proceeds of this offering were used to retire the $150 million 8⁷/₈% senior subordinated notes due September 15, 2013 and to repay a portion of the outstanding balance on the senior credit facility. The proceeds to us were $146.5 million yielding an effective interest rate of 8.0%.

Certain Covenants. The indenture governing the senior subordinated notes contains certain covenants which restrict our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness in certain circumstances, pay dividends or make other distributions on, redeem or repurchase capital stock, make investments or other restricted payments, create liens on assets to secure debt, engage in transactions with affiliates, and effect a consolidation or merger. We are not aware of any non-compliance with any of our covenants in this indenture. We could be materially harmed if we violate any covenants because the ~~indenture's~~indenture’s trustee could declare the outstanding notes, together with accrued interest, to be immediately due and payable, which we may not be able to satisfy. In addition, a violation could also constitute a cross-default under the senior credit facility, the letter of credit facilities and the real estate mortgages resulting in all of our debt obligations becoming immediately due and payable, which we may not be able to satisfy.

On January 9, 2014, we amended and restated our existing senior credit facility (the “Credit Facility”), with Wells Fargo Bank, National Association, as agent for the lenders, and Bank of America, N.A., as syndication agent. The Credit Facility provides a revolving credit facility of up to an aggregate amount of $125 million, subject to increases from time to time in increments of $25 million up to a maximum of $200 million. The Credit Facility was extended through December 1, 2018. ~~At May 3,~~We had no outstanding borrowings at August 2, 2014 and we had borrowings of $8.2 million at February 1, 2014, ~~we had outstanding borrowings of $64.6 million and $8.2 million, respectively,~~ under the Credit Facility.

Certain Covenants. The Credit Facility contains certain financial and other covenants, which, among other things, require us to maintain a minimum fixed charge coverage ratio if availability falls below certain thresholds. We are not aware of any non-compliance with any of our covenants in this Credit Facility. These covenants may restrict our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness and liens in certain circumstances, redeem or repurchase capital stock, make certain investments or sell assets. We may pay cash dividends subject to certain restrictions set forth in the covenants including, but not limited to, meeting a minimum excess availability threshold and no occurrence of a default. We could be materially harmed if we violate any covenants, as the lenders under the Credit Facility could declare all amounts outstanding, together with accrued interest, to be immediately due and payable. If we are unable to repay those amounts, the lenders could proceed against our assets and the assets of our subsidiaries that are borrowers or guarantors. In addition, a covenant violation that is not cured or waived by the lenders could also constitute a cross-default under certain of our other outstanding indebtedness, such as the indenture relating to our 7 7/8% senior subordinated notes due April 1, 2019, our letter of credit facilities, or our real estate mortgage loans. Such a cross-default could result in all of our debt obligations becoming immediately due and payable, which we may not be able to satisfy.

Borrowing Base. Borrowings under the Credit Facility are limited to a borrowing base calculation, which generally restricts the outstanding balance to the sum of (a) 87.5% of eligible receivables plus (b) 87.5% of eligible foreign accounts up to $1.5 million plus (c) the lesser of (i) the inventory loan limit, which equals 80% of the maximum credit under the Credit Facility at the time, (ii) a maximum of 70.0% of eligible finished goods inventory, or 90.0% of the net recovery percentage (as defined in the Credit Facility) of eligible inventory.

Interest. Interest on the outstanding principal balance drawn under the Credit Facility accrues at the prime rate and at the rate quoted by the agent for Eurodollar loans. The margin adjusts quarterly, in a range of 0.50% to 1.00% for prime rate loans and 1.50% to 2.00% for Eurodollar loans, based on the previous quarterly average of excess availability plus excess cash on the last day of the previous quarter.

Security. As security for the indebtedness under the Credit Facility, we granted to the lenders a first priority security interest (subject to liens permitted under the Credit Facility to be senior thereto) in substantially all of our existing and future assets, including, without limitation, accounts receivable, inventory, deposit accounts, general intangibles, equipment and capital stock or membership interests, as the case may be, of certain subsidiaries, and real estate but excluding our non-U.S. subsidiaries and all of our trademark portfolio.

As of ~~May 3,~~August 2, 2014, we maintained two U.S. dollar letter of credit facilities totaling $45.0 million and one letter of credit facility totaling $0.3 million utilized by our United Kingdom subsidiary. Each documentary letter of credit is secured primarily by the consignment of merchandise in transit under that letter of credit and certain subordinated liens on our assets.

During fiscal 2014, we decreased the letter of credit sublimit in our Senior Credit Facility to $30.0 million. As of ~~May 3,~~August 2, 2014 and February 1, 2014, there was ~~$33.9~~$33.7 million and $33.5 million, respectively, available under our existing letter of credit facilities.

In July 2010, we paid off the then existing real estate mortgage loan and refinanced our main administrative office, warehouse and distribution facility in Miami with a $13.0 million mortgage loan. The loan is due on August 1, 2020. The interest rate has been modified since the refinancing date. The interest rate was 4.25% per annum and monthly payments of principal and interest of $71,000 were due based on a 25-year amortization with the outstanding principal due at maturity. In July 2013, we amended the mortgage loan agreement to modify the

interest rate. The interest rate was reduced to 3.90% per annum and the terms were restated to reflect new monthly payments of principal and interest of $69,000 based on a 25-year amortization with the outstanding principal due at maturity. At ~~May 3,~~August 2, 2014, the balance of the real estate mortgage loan totaled ~~$11.6~~$11.5 million, net of discount, of which ~~$365,000~~$369,000 is due within one year.

In June 2006, we entered into a mortgage loan for $15 million secured by our Tampa facility. The loan is due on January 23, 2019. The mortgage loan has been refinanced and the interest rate has been modified since such date. The interest rate was 4.00% per annum and quarterly payments of principal and interest of $248,000 were due based on a 20-year amortization with the outstanding principal due at maturity. In January 2014, we amended the mortgage loan to modify the interest rate. The interest rate was reduced to 3.25% per annum and the terms were restated to reflect new monthly payments of principal and interest of approximately $68,000 based on a 20-year amortization with the outstanding principal due at maturity. At ~~May 3,~~August 2, 2014, the balance of the real estate mortgage loan totaled ~~$11.8~~$11.7 million, net of discount, of which approximately ~~$435,000~~$438,000 is due within one year.

The real estate mortgage loans contain certain covenants. We are not aware of any non-compliance with any of these covenants. If we violate any covenants, the lender under the real estate mortgage loan could declare all amounts outstanding thereunder to be immediately due and payable, which we may not be able to satisfy. A covenant violation could also constitute a cross-default under our senior credit facility, the letter of credit facilities and the indenture relating to our senior subordinated notes resulting in all our debt obligations becoming immediately due and payable, which we may not be able to satisfy.

We are not a party to any “off-balance sheet arrangements” as defined by applicable GAAP and SEC rules.

We do not believe that inflation or foreign currency fluctuations significantly affected our results of operations for the three and six months ended ~~May 3,~~August 2, 2014.

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. 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.

We are exposed to market risks for the pricing of cotton and other fibers, which may impact fabric prices. Fabric is a portion of the overall product cost, which includes various components. We manage our fabric prices by using a combination of different strategies including the utilization of sophisticated logistics and supply chain management systems, which allow us to maintain maximum flexibility in our global sourcing of products. This provides us with the ability to re-direct our sourcing of products to the most cost-effective jurisdictions. In addition, we may modify our product offerings to our customers based on the availability of new fibers, yield enhancement techniques and other technological advances that allow us to utilize more cost effective fibers. Finally, we also have the ability to adjust our price points of such products, to the extent market conditions allow. These factors, along with our foreign-based sourcing offices, allow us to procure product from lower cost countries or capitalize on certain tariff-free arrangements, which help mitigate any commodity price increases that may occur. We have not historically managed, and do not currently intend to manage, commodity price exposures by using derivative instruments.

Our current exposure to foreign exchange risk is not significant and accordingly, we have not entered into any transactions to hedge against those risks.

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) of the Securities Exchange Act. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~May 3,~~August 2, 2014 in ensuring that the information

required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended ~~May 3,~~August 2, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

See Footnote 19 to the Condensed Consolidated Financial Statements, included in this filing, for further information.

We repurchased the following amounts of our common stock during the ~~first~~second quarter of fiscal 2015:


Period	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾		Maximum Approximate Dollar Value that May Yet Be Purchased under the Plans or Programs		Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾		Maximum Approximate Dollar Value that May Yet Be Purchased under the Plans or Programs
April 30, 2014		17,929	⁽²⁾	$	15.10		—	$	17,000,000
May 20, 2014											404	⁽²⁾	$	14.69		—	$	17,000,000

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.


	PAGE
PART I: FINANCIAL INFORMATION

Item 1:

Condensed Consolidated Balance Sheets (Unaudited) as of ~~May 3,~~August 2, 2014 and February 1, 2014		1

Condensed Consolidated Statements of ~~Income~~Operations (Unaudited) for the three and six months ended ~~May 3,~~August 2, 2014 and ~~May 4,~~August 3, 2013		2

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) for the three and six months ended ~~May 3,~~August 2, 2014 and ~~May 4,~~August 3, 2013		3

Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~three~~six months ended ~~May 3,~~August 2, 2014 and ~~May 4,~~August 3, 2013		4

Notes to Unaudited Condensed Consolidated Financial Statements		6

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations		2022

Item 3:

Quantitative and Qualitative Disclosures About Market Risk		2730

Item 4:

Controls and Procedures		2731

PART II: OTHER INFORMATION		28

Item 1:

Legal Proceedings		31

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds		2831

Item 6:

Exhibits		2932


Exhibit Number	Exhibit Description	Where Filed

31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)	Filed herewith.

31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)	Filed herewith.

32.1	Certification of Principal Executive Officer pursuant to Section 1350	Filed herewith.

32.2	Certification of Principal Financial Officer pursuant to Section 1350	Filed herewith.

101.INS	XBRL Instance Document	Filed herewith.

101.SCH	XBRL Taxonomy Extension Schema	Filed herewith.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed herewith.

101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed herewith.

101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed herewith.

101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed herewith.


Exhibit Number		Exhibit Description

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)

32.1		Certification of Principal Executive Officer pursuant to Section 1350

32.2		Certification of Principal Financial Officer pursuant to Section 1350

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase


	Three Months Ended
	May 3, 2014		May 4 2013
Net income	$	7,775	$	11,320
Other comprehensive income:
Foreign currency translation adjustments, net		636		(405	)
Unrealized gain on pension liability, (net of tax provision of $50 in 2015 and $52 in 2014)		80		81
Unrealized gain on investments		38		—

Total other comprehensive income		754		(324	)

Comprehensive income	$	8,529	$	10,996

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company