Cygne Designs, Inc. Announces First Quarter 2002 Results.Business Editors Company Also Announces Termination of Jordan Operations, Agreement to Sell Certain Related Assets, Agreement Not to Form Joint Venture Previously Announced, and Informal Settlement of Tax Audit Cygne Designs, Inc. (OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). BB: CYDS CYDS Centre for Youth Drug Studies (Australia) .OB) today announced results of operations for the first quarter ended May 4, 2002. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the first quarter ended May 4, 2002 were $7,099,000, a decrease of $3,131,000, or 31%, from the comparable prior period. Net sales from the Americas and Far East for the first quarter of 2002 were $5,207,000, a decrease of $5,023,000 or 49% from $10,230,000 in the first quarter of 2001. The decrease in sales for the first quarter was primarily attributed to a decrease in sales to The Limited, Inc. of $1,622,000 and Dillard's of $3,193,000. The Limited, Inc. accounted for 75% of the net sales for the first quarter of 2002 compared to 54% in the comparable period in 2001. Net sales from the Middle East for the first quarter of 2002 were $1,892,000. The Company acquired its Jordanian Knit business in the second quarter of 2001. As a result of the sale of the Jordanian Knit business in June 2002, the Company will not have the sales in the future. Net income for the first quarter ended May 4, 2002 was $2,254,000 or $0.18 on a basic and dilutive per share basis, compared to a net income of $61,000 or breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations on a basic and dilutive per share basis in the comparable prior period in 2001. On June 10, 2002, the Company entered into an agreement effective June 1, 2002 to sell its Knit business in Jordan to the House and Garden Company D/B/A D/B/A Doing Business As Century Knits ("CK") and Century Investment Group ("CIG CIG Ceiling (height above ground level to base of clouds) CIG Conference Intergouvernementale (French: Intergovermental Conference) CIG Conservation Innovation Grants (USDA NRCS) ") ("Jordan Knit disposition"). The Jordan Knit disposition consists of substantially all of the assets of Prosperity Textiles Ltd. ("Prosperity"), the Company's wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. in Jordan. The purchase price is $400,000 plus the book value of the assets being sold. CK will assume substantially all of the customer and vendor purchase orders. In addition, the Company has agreed not to compete with CK for Knit business in Jordan for five years in consideration of $350,000. Prosperity will retain all cash, accounts receivables accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and accounts payable. On April 1, 2002, Cygne Designs, Inc. ("Cygne") and Boscan Middle East Investments Limited ("BMEI BMEI Backfit Master Equipment Inventory BMEI Biologia Molecular de Eucariontes Inferiores ") signed a letter of intent to form a Joint Venture to be the exclusive entity through which Cygne and BMEI will sell knit clothing manufactured in Jordan. Both Cygne and BMEI were doing business in Jordan as sellers and manufacturers of knit clothing. On June 6, 2002, both parties agreed not to form the joint venture. The U.S. Internal Revenue Service (the "IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. ") is conducting an audit of the U.S. Federal income tax returns filed by GJM GJM Golden Jubilee Medal GJM Gay Japanese Male (US) Inc. for its taxable years Taxable year The 12-month period an individual uses to report income for income tax purposes. For most individuals, their tax year is the calendar year. ending December 31, 1990 through October 7, 1994 (the date of GJM (US) Inc. was acquired by the Company). The IRS had informally proposed a Federal income tax deficiency against GJM (US) Inc. of approximately $16,000,000 (including some penalties but not interest). Representatives of the IRS have informally stated to the Company that the IRS will not allege To state, recite, assert, or charge the existence of particular facts in a Pleading or an indictment; to make an allegation. allege v. any tax deficiency against the Company as a result of this audit. The Company has received a draft closing agreement from the IRS, which reflects such informal statements. The Company expects a final closing agreement to be fully signed by the IRS and the Company shortly. As a result of this settlement, the Company reversed a tax accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of $4,800,000 established in connection with the potential deficiency at May 4, 2002. Cygne Designs, Inc. is a private label manufacturer of women's career and casual apparel. Statements contained in this press release, which are not historical facts, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as that term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. All forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those, projected. Such risks and uncertainties are discussed more fully in the Company's Annual Report on from 10-K for the year ended February 2, 2002 and the Company's other filings with the Securities and Exchange Commission.
CYGNE DESIGNS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
Quarters Ended
---------------------------
May 4 May 5
2002 2001
--------- -----------
Net sales
Americas and Far East $ 5,207 $ 10,230
Middle East 1,892 --
------- -------
7,099 10,230
Cost of goods sold
Americas and Far East 4,988 8,926
Middle East 3,233 --
------- -------
8,221 8,926
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Gross (loss) profit (1,122) 1,304
Selling, general and
administrative expenses 1,003 1,256
Write off of other intangibles 213 --
Amortization of other intangibles 42 --
------- -------
(Loss) income from operations (2,380) 48
Interest income 2 28
Interest expense (160) (6)
------- -------
(Loss) income before provision for
income taxes (2,538) 70
(Benefit) provision for income taxes (4,792) 9
------- -------
Net income $ 2,254 $ 61
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Net income per share-basic and
dilutive $ 0.18 $ 0.00
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Weighted average number of common shares
outstanding-basic and dilutive 12,438 12,438
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