Donnkenny Inc. Reports Profit of $2.2 Million before Cumulative Effect of Accounting Change for Year-End 2002.Business Editors NEW YORK--(BUSINESS WIRE)--March 18, 2003 Donnkenny, Inc. (OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). BB:DNKY) today released its financial results for the year and fourth quarter of 2002. Daniel Daniel, book of the Bible Daniel, book of the Bible. It combines "court" tales, perhaps originating from the 6th cent. B.C., and a series of apocalyptic visions arising from the time of the Maccabean emergency (167–164 B.C. H. Levy To assess; raise; execute; exact; tax; collect; gather; take up; seize. Thus, to levy a tax; to levy a Nuisance; to levy a fine; to levy war; to levy an execution, i.e., to levy or collect a sum of money on an execution. A seizure. , Chairman & CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. ; said: "We are very pleased with our continuing profit performance, despite a very difficult retail environment. This is our second straight year of significant improvement. The results are due to our continuing emphasis on, and improvement to, our gross margin, tight expense control and proper management of our inventory levels, which led to lower markdowns. The sales decrease was mostly due to the elimination of unprofitable product lines, which we have previously reported, and also by the continuing poor retail sales environment." Levy continued, "We feel that the Company is in good condition from an operating standpoint The Standpoint is a newspaper published in the British Virgin Islands. It was originally published under the name Pennysaver, largely as a shopping-coupon promotional newspaper, but since emerged as one of the most influential sources of journalism in the , but the general economic climate, the uncertainty surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. the war with Iraq Iraq or Irak (both: ēräk`, ĭrăk`), officially Republic of Iraq, republic (2005 est. pop. 26,075,000), 167,924 sq mi (434,924 sq km), SW Asia. , and the continued drop in consumer confidence, are all cause for concern. We will continue to control our expenses and inventories very carefully." For the year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 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 were $107.1 million vs. $152.2 million in 2001. Operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. for year-end 2002 was $4.3 million vs. a profit of $4.5 million in 2001. Gross margin for 2002 as a percent of sales was 25.0% vs. 22.8% in 2001. Selling, General and Administrative expenses were $22.3 million for 2002 vs. $28.4 million for 2001. Net income before cumulative effect of change in accounting principle was $2.2 million for the year vs. a profit of $44,000 for the year 2001. Net Income per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share before the accounting change was $0.50 per share vs. net income of $0.01 per share for 2001. In the first quarter of 2002, the Company adopted SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142 "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ." SFAS 142 requires that companies change the accounting for goodwill from an amortization method to an impairment-only approach. This resulted in a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge for the accounting change of $28.7 million. The Company ceased the amortization of goodwill and intangible assets in 2002. Net loss for the year 2002 was $26.6 million vs. a profit of $44,000 for the year 2001. Net loss per diluted share for year-end 2002 was $(6.08) vs. a profit of $.01 for 2001. The average number of common shares and common stock equivalents outstanding for the purpose of computing computing - computer diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of was 4,417,796 in 2002, vs. 4,387,685 in 2001. For the fourth quarter of 2002, net sales were $29.6 million vs. $40.1 million in 2001. Operating profit was $1.0 million in 2002 vs. a profit of $0.7 million in 2001. Selling, General and Administrative expenses were $6.3 million in 2002 vs. $7.9 million in 2001. Gross margin as a percent of sales was 24.4% for fourth quarter 2002 vs. 22.4% for the same period in 2001. Net income for the fourth quarter of 2002 was $0.6 million vs. a profit of $15,000 for the same time a year ago. Net income per diluted share for fourth quarter 2002 was $0.14 vs. a 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 in 2001. The average number of common shares and common stock equivalents outstanding for the purpose of computing diluted earnings per share were 4,408,182 compared to 4,383,672 in the fourth quarter of 2001. Donnkenny designs, manufactures, imports and markets a broad line of moderately priced women's sportswear. The Company's major labels include Pierre Cardin
Except for historical information contained herein, the statements in this release are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of 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. 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. involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include a softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. of retailer or consumer acceptance of the Company's products or pricing pressures and other competitive factors. These and other risks are more fully described in the Company's 10-K and 10-Q filings with the Securities and Exchange Commission.
DONNKENNY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
December December
31, 31,
2002 2001
--------------------
ASSETS
CURRENT ASSETS:
Cash $ 66 $ 39
Accounts receivable, net of allowances for bad
debts of $116 and $104, respectively 20,634 25,225
Recoverable income taxes 203 381
Inventories, net 15,949 17,773
Deferred tax assets - 1,662
Prepaid expenses and other current assets 615 1,220
Assets held for sale 402 788
--------- ---------
Total current assets 37,869 47,088
PROPERTY, PLANT AND EQUIPMENT, NET 4,515 5,379
OTHER ASSETS 234 368
GOODWILL - 25,367
OTHER INTANGIBLE ASSETS 821 4,198
--------- ---------
TOTAL $ 43,439 $ 82,400
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES:
Current portion of long-term debt $ 253 $ 933
Accounts payable 10,101 7,760
Accrued expenses and other current liabilities 2,209 3,504
--------- ---------
Total current liabilities 12,563 12,197
--------- ---------
LONG-TERM DEBT 23,730 34,844
DEFERRED TAX LIABILITIES - 1,662
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock $.01 par value; authorized 500
shares, issued none
Common stock, $.01 par value; authorized 20,000
shares, issued and outstanding 4,367 44 44
Additional paid-in capital 50,449 50,449
Accumulated deficit (43,347) (16,796)
--------- ---------
Total stockholders' equity 7,146 33,697
--------- ---------
TOTAL $ 43,439 $ 82,400
========= =========
DONNKENNY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except share and per share data)
Year Ended Year Ended Year Ended
December December December
31, 31, 31,
2002 2001 2000
----------- ----------- -----------
NET SALES $ 107,102 $ 152,180 $ 151,055
COST OF SALES 80,345 117,497 124,073
----------- ----------- -----------
Gross Profit 26,757 34,683 26,982
OPERATING EXPENSES:
Selling, general and
administrative expenses 22,339 28,367 28,194
Amortization of intangibles - 1,489 1,437
Provision for settlement of
litigation - - 599
Write-down of assets held for
sale 150 300 -
Restructuring charge - - 500
----------- ----------- -----------
Operating income (loss) 4,268 4,527 (3,748)
OTHER EXPENSE:
Interest expense 2,039 4,703 5,097
----------- ----------- -----------
Income (loss) before income
taxes 2,229 (176) (8,845)
INCOME TAX EXPENSE (BENEFIT) 36 (220) 88
----------- ----------- -----------
Income (loss) before cumulative
effect of change in accounting
principle 2,193 44 (8,933)
Cumulative effect of change in
accounting principle (no tax
benefit recognized) 28,744 - -
----------- ----------- -----------
NET INCOME (LOSS) $ (26,551) $ 44 $ (8,933)
=========== =========== ===========
Basic earnings per common share:
Income (loss) before accounting
change $ 0.50 $ 0.01 $ (2.26)
Cumulative effect of accounting
change (6.58) - -
----------- ----------- -----------
Net income (loss) $ (6.08) $ 0.01 $ (2.26)
=========== =========== ===========
Diluted earnings per common share:
Income (loss) before accounting
change $ 0.50 $ 0.01 $ (2.26)
Cumulative effect of accounting
change (6.51) - -
----------- ----------- -----------
Net income (loss) $ (6.01) $ 0.01 $ (2.26)
=========== =========== ===========
Shares used in the calculation of
earnings per share:
Basic 4,367,417 4,367,417 3,956,679
=========== =========== ===========
Diluted 4,417,796 4,387,685 3,956,679
=========== =========== ===========
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