18. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

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, 2014 and February 1, 2014 and for the three months ended May 3, 2014 and May 4, 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 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) million in net cash from financing activities in the parent only column for the three months ended May 4, 2013 with a corresponding change to the net cash from investing activity in the parent only column from the previously reported amounts.

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)

AS OF MAY 3, 2014

(amounts in thousands)


	Parent Only		Guarantors		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	3,126	$	23,483	$	—		$	26,609
Accounts receivable, net		—		160,243		22,903		—			183,146
Intercompany receivable, net		171,561		—		—		(171,561	)		—
Inventories		—		157,246		19,904		—			177,150
Investment, at fair value		—		—		21,221		—			21,221
Deferred income taxes		—		13,309		244		—			13,553
Prepaid income taxes		6,599		—		—		654			7,253
Prepaid expenses and other current assets		—		6,903		1,085		—			7,988

Total current assets		178,160		340,827		88,840		(170,907	)		436,920
Property and equipment, net		—		55,238		4,875		—			60,113
Other intangible assets, net		—		177,253		34,003		—			211,256
Goodwill		—		6,022		—		—			6,022
Investment in subsidiaries		327,701		—		—		(327,701	)		—
Other assets		2,378		1,771		634		—			4,783

TOTAL	$	508,239	$	581,111	$	128,352	$	(498,608	)	$	719,094

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	—	$	51,642	$	4,689	$	—		$	56,331
Accrued expenses and other liabilities		—		22,384		4,740		(1,042	)		26,082
Accrued interest payable		1,036		—		—		—			1,036
Unearned revenues		—		3,323		1,791		—			5,114
Intercompany payable, net		—		147,461		25,639		(173,100	)		—

Total current liabilities		1,036		224,810		36,859		(174,142	)		88,563

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

Total long-term liabilities		150,000		119,205		2,427		1,696			273,328

Total liabilities		151,036		344,015		39,286		(172,446	)		361,891

Total equity		357,203		237,096		89,066		(326,162	)		357,203

TOTAL	$	508,239	$	581,111	$	128,352	$	(498,608	)	$	719,094

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF FEBRUARY 1, 2014

(amounts in thousands)


	Parent Only		Guarantors		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	—	$	29,988	$	(2,999	)	$	26,989
Accounts receivable, net		—		123,539		22,853		—			146,392
Intercompany receivable, net		174,075		—		—		(174,075	)		—
Inventories		—		183,216		23,386		—			206,602
Investments, at fair value		—		—		15,398		—			15,398
Deferred income taxes		—		13,806		254		—			14,060
Prepaid income taxes		5,141		—		1,193		1,245			7,579
Prepaid expenses and other current assets		—		6,578		791		—			7,369

Total current assets		179,216		327,139		93,863		(175,829	)		424,389
Property and equipment, net		—		55,046		4,866		—			59,912
Other intangible assets, net		—		177,482		34,003		—			211,485
Goodwill		—		6,022		—		—			6,022
Investment in subsidiaries		319,926		—		—		(319,926	)		—
Other assets		2,486		1,822		619		—			4,927

TOTAL	$	501,628	$	567,511	$	133,351	$	(495,755	)	$	706,735

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	—	$	104,480	$	10,961	$	(2,999	)	$	112,442
Accrued expenses and other liabilities		—		19,294		5,799		(451	)		24,642
Accrued interest payable		4,095		—		—		—			4,095
Unearned revenues		—		3,192		1,821		—			5,013
Intercompany payable, net		—		151,253		24,997		(176,250	)		—

Total current liabilities		4,095		278,219		43,578		(179,700	)		146,192

Senior subordinated notes payable, net		150,000		—		—		—			150,000
Senior credit facility		—		8,162		—		—			8,162
Real estate mortgages		—		22,844		—		—			22,844
Deferred pension obligation		—		9,792		70		—			9,862
Unearned revenues and other long-term liabilities		—		12,064		2,668		—			14,732
Deferred income taxes		—		5,712		2		1,696			7,410

Total long-term liabilities		150,000		58,574		2,740		1,696			213,010

Total liabilities		154,095		336,793		46,318		(178,004	)		359,202

Total equity		347,533		230,718		87,033		(317,751	)		347,533

TOTAL	$	501,628	$	567,511	$	133,351	$	(495,755	)	$	706,735

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE MONTHS ENDED MAY 3, 2014

(amounts in thousands)


					Non-
	Parent Only		Guarantors		Guarantors		Eliminations			Consolidated
Revenues:
Net sales	$	—	$	225,331	$	24,585	$	—		$	249,916
Royalty income		—		4,520		2,878		—			7,398

Total revenues		—		229,851		27,463		—			257,314
Cost of sales		—		154,245		15,404		—			169,649

Gross profit		—		75,606		12,059		—			87,665
Operating expenses:
Selling, general and administrative expenses		—		60,554		9,156		—			69,710
Depreciation and amortization		—		2,769		211		—			2,980

Total operating expenses		—		63,323		9,367		—			72,690
Operating income		—		12,283		2,692		—			14,975
Interest expense		—		3,685		31		—			3,716

Net income before income taxes		—		8,598		2,661		—			11,259
Income tax provision		—		2,220		1,264		—			3,484

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

Net income		7,775		6,378		1,397		(7,775	)		7,775

Other comprehensive income		754		80		674		(754	)		754

Comprehensive income	$	8,529	$	6,458	$	2,071	$	(8,529	)	$	8,529

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE MONTHS ENDED MAY 4, 2013

(amounts in thousands)


							Non-
	Parent Only			Guarantors			Guarantors			Eliminations			Consolidated
Revenues:
Net sales	$	—		$	236,245		$	19,239		$	—		$	255,484
Royalty income		—			4,034			2,801			—			6,835

Total revenues		—			240,279			22,040			—			262,319
Cost of sales		—			161,998			11,640			—			173,638

Gross profit		—			78,281			10,400			—			88,681
Operating expenses:
Selling, general and administrative expenses		—			62,954			7,715			—			70,669
Depreciation and amortization		—			2,602			190			—			2,792

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

Operating income		—			12,034			9,456			—			21,490
Interest expense		—			3,777			26			—			3,803

Net income before income taxes		—			8,257			9,430			—			17,687
Income tax provision		—			4,597			1,770			—			6,367

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

Net income		11,320			3,660			7,660			(11,320	)		11,320

Other comprehensive (loss) income		(324	)		81			(405	)		324			(324	)

Comprehensive income	$	10,996		$	3,741		$	7,255		$	(10,996	)	$	10,996

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MAY 3, 2014

(amounts in thousands)


							Non-
	Parent Only			Guarantors			Guarantors			Eliminations			Consolidated
NET CASH (USED IN) OPERATING ACTIVITIES:	$	(4,408	)	$	(45,242	)	$	(656	)	$	2,999		$	(47,307	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		—			(2,816	)		(234	)		—			(3,050	)
Purchase of investments		—			—			(15,387	)		—			(15,387	)
Proceeds from investments maturities		—			—			9,490			—			9,490
Intercompany transactions		4,664			—			—			(4,664	)		—

Net cash provided by (used in) investing activities		4,664			(2,816	)		(6,131	)		(4,664	)		(8,947	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from senior credit facility		—			110,991			—			—			110,991
Payments on senior credit facility		—			(54,586	)		—			—			(54,586	)
Payments on real estate mortgages		—			(200	)		—			—			(200	)
Payments on capital leases		—			(75	)		—			—			(75	)
Tax benefit from exercise of equity instruments		(95	)		—			—			—			(95	)
Intercompany transactions		—			(4,946	)		443			4,503			—

Net cash (used in) provided by financing activities		(95	)		51,184			443			4,503			56,035
Effect of exchange rate changes on cash and cash equivalents		(161	)		—			(161	)		161			(161	)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	3,126		$	23,483		$	—		$	26,609

PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MAY 4, 2013

(amounts in thousands)


							Non-
	Parent Only			Guarantors			Guarantors			Eliminations			Consolidated
NET CASH USED IN OPERATING ACTIVITIES:	$	(6,403	)	$	(7,537	)	$	(306	)	$	—		$	(14,246	)

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

Net cash (used in) provided by investing activities		6,701			(6,534	)		4,209			(6,701	)		(2,325	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from senior credit facility		—			129,344			—			—			129,344
Payments on senior credit facility		—			(121,625	)		—			—			(121,625	)
Payments on real estate mortgages		—			(202	)		—			—			(202	)
Payments on capital leases		—			(78	)		—			—			(78	)
Proceeds from exercise of stock options		27			—			—			—			27
Tax benefit from exercise of equity instruments		(52	)		—			—			—			(52	)
Intercompany transactions		—			(5,848	)		(580	)		6,428			—

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

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	2,345		$	43,182		$	—		$	45,527