GIII Apparel's Acquisitions Help To Spur 51% Sales Gain

GIII Apparel's (GIII) FY06 sales increased by 51.2% to $324.1 million. GIII reported net income of $7.1 million, compared to net income of $703,000 last year. The results for this year include an after-tax non-cash compensation charge of approximately $890,000 related to the vesting of restricted shares of common stock previously granted to key management. The prior year's results include a non-cash charge of $882,000 associated with the GIII's sale of its joint venture interest in a factory in China.

GIII's results of operations include the results of the Marvin Richards and Winlit divisions from July 11, 2005, the date the company acquired the stock of Marvin Richards and certain assets from Winlit. The increases in net sales and net income during the period were primarily due to including these two new divisions in the results of operations.

For 4Q06, net sales increased by 80.0% to $69.1 million. The company reported a net loss of $2.8 million, compared to a net loss of $2.7 million during the same period last year.

Morris Goldfarb, COB/CEO, said, "We are very pleased to have finished a strong year with an expanded range of capabilities, and with unprecedented opportunities for growth. The strategic acquisitions we completed during the year have positioned us to create significant businesses in the women's suit and sportswear categories. We expanded our relationship with Phillips-Van Heusen Corp. with the addition of the Calvin Klein women's suit license. In addition, we are excited about our recent signing of Sean John women's sportswear. Combined with the strongest mix of outerwear brands in our history, we are confident that the year ahead will be an exciting one for us."

GIII issued guidance for FY07. It is forecasting net sales of approximately $400 million and diluted EPS of 58¢-62¢. This compares to a FY06 diluted EPS of 58¢. Results for FY07 will include the full year of operations of the acquired companies, as well as a full year of interest expense and depreciation and amortization expense relating to the acquisitions.

It is forecasting net sales of approximately $15 million for 1Q07 and a net loss per share of 70¢-74¢ as compared to a net loss per share of 43¢ in 1Q06. The period historically results in seasonal losses. The higher projected 1Q loss this year is due primarily to the inclusion of the results of the companies acquired in July, as well as higher interest expenses and depreciation and amortization costs relating to the acquisitions.