WWD.com/beauty-industry-news/financial/st-john-knits-2004-net-declines-9-6-585815/
government-trade
government-trade

St. John Knits 2004 Net Declines 9.6%

St. John Knits saw its net income fall 9.6 percent to $13.4 million for the year ended Oct. 31, as sales gained 6.9 percent to $395.6 million.

NEW YORK — St. John Knits International Inc.’s bottom line for its fiscal year showed a 9.6 percent decline as sales gained 6.9 percent.

Income fell to $13.4 million, or $2.11 a diluted share, from $14.9 million, or $2.23, in the same year-ago period while sales climbed to $395.6 million from $370.1 million.

The results for the year ended Oct. 31, 2004, were reported in the firm’s annual report, or Form 10-K, filed to the Securities and Exchange Commission.

During fiscal 2004, the company decided to discontinue the sale of shoes, jewelry, accessories and home goods to its wholesale customers because of lower-than-expected overall profit margins. The products will continue to be sold in company-owned boutiques and outlet stores.

Knitwear is the company’s largest category, contributing $302.7 million to total sales. Sport, representing active lifestyle apparel, is the second largest category, contributing $67.8 million in yearly sales.

In the SEC filing, the company said it purchased $11.6 million of wool and $3.5 million of rayon, the primary raw materials in the production of its knitwear merchandise.

By distribution, the company’s domestic wholesale business contributed $188.7 million to total sales, with domestic retail bringing in $164.1 million, and the international business adding $42.8 million.

By geographic area, operations in the U.S. represented $352.8 million of the year’s total sales. Asia accounted for $28.8 million in sales, and Europe contributed $6.3 million. Sales from Canada added $4.9 million. Business in “other” geographic locations represented $2.8 million.

According to the report, selling, general and administrative expenses totaled $175.3 million, or 44.3 percent of sales. The company said in the filing that it is “highly leveraged,” with total debt of $207.2 million as of Oct. 31. Included in the debt is $107.8 million of senior debt, and a stockholders’ deficit of $83 million connected to the recapitalization of the company when Vestar Capital Partners helped take the firm private in 1999.

In other matters, the filing disclosed that Bob Gray, a director and former chief executive officer of the firm, has a consulting agreement with St. John Knits that is scheduled to end on Nov. 3, 2005. He retired at the end of fiscal 2002. According to the filing, Gray received $125,000 in 2004 under the terms of the agreement, and is expected to receive the same amount in 2005.

St. John Knit has a management agreement in place with Vestar Capital, which is related to the 1999 merger. Vestar provides St. John Knit with management services in exchange for an annual fee of $500,000, plus out-of-pocket expenses.