MILAN — Simint SpA, the Italian company that operates the troubled A/X Armani Exchange business in the U.S., reported Thursday a staggering accumulated loss of $115 million (184 billion lire) for the 10 months ended Feb. 28, which was largely attributed to write-offs on its balance sheet.
At the same time, the Modena-based sportswear manufacturer announced a financial restructuring designed to rebuild the company’s capital base.
Simint has previously reported losses due to problems with its U.S. subsidiary, which is up for sale. The 10-month loss was reported after a 10-hour meeting of Simint’s new board of directors on Wednesday.
The firm’s fiscal year ends April 30, and it customarily reports at the half and yearend. This is the first time it has reported figures for 10 months. Comparable figures from a year ago were not given. The firm also did not report sales. In its most recent sales report, the company said sales for the first half ended Oct. 31, 1993, were $98.4 million (157.4 billion lire), virtually flat with a year earlier.
The board met into the evening to complete a thorough review of the balance sheet, based on an analysis conducted by an external accounting firm.
The consolidated loss — incorporating results from its share of minority-owned interests into the parent’s results — amounted to $97.5 million (156 billion lire). The difference between this figure and the accumulated loss figure was attributed to the devaluation of minority interests controlled by Simint, the company said.
Of the total accumulated loss, $93.8 million (150 billion lire) was attributed to write-offs, while the remaining $21.3 million (34 billion lire) reflect operating losses.
Losses at Simint USA in the 10 months totaled $13.8 million (22 billion lire), a Simint spokesman said.
Simint added that it is considering legal action against the previous management — namely, former chairman Francesco Micheli and former managing director Luca Ramella — for possible irregularities in the balance sheet.
“The loss essentially emerged due to different ways of handling the balance sheet,” the spokesman said.
“Whereas the previous directors had calculated certain items as assets to be amortized, the current review has considered them as costs,” he said. These items include evaluations of stocks and goodwill.
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Giorgio Armani controls 22 percent of Simint, which now primarily consists of the Armani Jeans and A/X businesses. The Italian company produces the Armani jeans line, while the U.S. subsidiary operates the A/X retail chain.
Following changes in Simint’s shareholder base that have seen Giorgio Armani become the company’s largest shareholder, Simint no longer produces Moschino jeans or owns the Marina Yachting and Best Company brands. The Moschino licensing contract was canceled last month, and the latter businesses were sold to former chairman Micheli in connection with his divestment of his interest in the group earlier this year.
The second largest shareholder is Singapore businessman Ong Beng Seng with 20 percent, while Milan investment bank Sige controls a 10 percent stake. The remainder is quoted on the Milan stock exchange.
Ong Beng Seng — who had already controlled 10 percent of Simint USA and last week boosted his control of the parent company — is reportedly among those interested in acquiring the U.S. unit. As reported, J.P. Morgan, which has been given the mandate to sell Simint USA, has received several offers, but the Simint spokesman in Milan said he didn’t have any new developments to announce about the sale.
“I know there have been contacts made, but I don’t know anything more,” he said.
Simint’s board of directors proposed that the company’s reserves, in the amount of $87.5 million (140 billion lire), be used to wipe out the majority of the losses, while the outstanding $27.5 million (44 billion lire) could be temporarily covered by freezing the payment of credits Simint owes to majority shareholders Armani and investment bank Sige. Simint made no mention of Seng in this deal.
The operation is expected to be approved by Simint shareholders at an extraordinary meeting of shareholders set for June 15.According to the Simint spokesman, Armani has agreed to defer his Simint credits, which amount to $26.3 million (42 billion lire) on two conditions: that the company sell off its U.S. subsidiary as soon as possible, and that it institute a restructuring plan immediately.
Sige, which has credits with Simint of $3.1 million (5 billion lire), has also agreed to the plan, the spokesman said. Spokesmen for Armani and Sige could not be reached for comment.
Simint stock has been suspended from trading on the Milan stock market for about two weeks, with no sign yet from stock market watchdog agency Consob — which had been looking for more news about the company’s financial situation — about when it will be readmitted.