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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended October 31, 2004

OR

For the transition period from                      to                     

Commission File Number 333-73107

ST. JOHN KNITS INTERNATIONAL, INCORPORATED

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (949) 863-1171

Securities registered pursuant to Section 12(b) or 12(g) of the Act:

None

Securities registered pursuant to Section 15(d) of the Act:

Title of each class:

12 ¹/2% Senior Subordinated Notes due 2009

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨*

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.*

* The Registrant is not subject to the reporting requirements of Item 405.

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ¨ No þ

The aggregate market value of Registrant’s Common Stock held by nonaffiliates was approximately $13,097,000 as of May 2, 2004, the last business day of the Registrant’s most recently completed second fiscal quarter (based on the closing price of the Common Stock on such date as reported on the OTC Bulletin Board quotation system).

As of January 26, 2005, the Registrant had 6,289,953 shares of Common Stock outstanding.

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INDEX

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PART I

Overview

St. John Knits International, Incorporated (“SJKI” and together with its subsidiaries, the “company”) is a leading designer, manufacturer and marketer of fine women’s clothing and accessories. The St. John name has been associated with high quality women’s knitwear for over 40 years. The company’s core knitwear product line consists of a collection of lifestyle clothing for women’s business, evening and casual needs. The company manufactures its products primarily to order and distributes them on a highly selective basis through a group of upscale retailers with whom it has long-term relationships, as well as through company-owned retail boutiques and outlet stores.

The company’s core knitwear products are considered unique and highly desirable by customers due to their classic styling, durability, comfort, fit and quality. These attributes, combined with selective distribution and targeted advertising, have created a loyal base of customers.

The company’s products are organized primarily into six separate product lines: Knitwear, Sport, Shoes, Jewelry, Accessories and Home Accessories.

Knitwear. The company organizes its Knitwear into four groups: Collection, Evening, Basics and Couture. Due to the breadth of each product group, the company competes in most segments of women’s designer clothing. The company’s knitwear products are sold as a collection of lifestyle clothing for women’s business, evening and casual needs. Due to its all-purpose weight, St. John knitwear is a year-round product, not confined to a single season or climate. The company manufactures all of its knitwear products and designs knitwear collections to encourage consumers to coordinate outfits, resulting in multiple product purchases within a group.

Collection. The company is best known for its Collection line consisting of elegant ready-to-wear styles. This line of daytime knit fashions includes sophisticated dresses and suits that focus on a classic tailored look. The Collection line also includes jackets, pants, skirts, coats and sweaters. All items in the line are sold as separates.

Evening. The Evening line consists of dresses, gowns and separates. The look of the Evening line is one of understated elegance enhanced by innovative touches, such as layers of transparent paillettes and sequins, embroidered sleeves or embellished collars and cuffs.

Basics. The Basics line is comprised of products which are sold throughout the year and which generally do not vary by season. These products consist of classic jackets, skirts and pants that are an integral part of women’s wardrobes, in solid black. Simplicity of design allows these products to be combined with any number of styles from any of the company’s product lines and worn for daytime or dressed up for evening. Retailers’ inventories of Basics products tend to be maintained throughout the year and reordered as necessary.

Couture. The Couture line is the company’s most exclusive group of day and evening apparel and is produced in limited quantities. The day group includes dresses, jackets, pants, skirts and tops which are designed with luxurious trims, embroidery and embellishments. The evening group consists jackets, skirts, pants, dresses and gowns. Both groups are designed using a variety of luxurious fabrics, trims, paillettes and stones.

Sport. St. John Sport is a line of active lifestyle clothing which includes jackets, skirts, pants, tops and jeans and is targeted to the designer sportswear customer as well as the company’s core Knitwear customers. The line is manufactured in the company’s production facilities and by select outside contractors located throughout the world. The line includes various knit styles along with woven garments made from fabrics purchased primarily in Italy and Asia.

Non-apparel. The non-apparel group consists of shoes, jewelry, accessories and home accessories. During the fourth quarter of fiscal 2004, the company made the decision to discontinue the sale of these products to its wholesale customers due to the lower than expected overall profit margins the company was experiencing. These products are currently being sold in the company owned boutiques and outlet stores. Below is a brief description of each of these product lines.

Shoes. The St. John Shoe line consists of pumps, sling backs, loafers, boots and sandals, manufactured in Italy using high quality Italian leather. Some shoe styles are designed to match the look and colors of the Knitwear line.

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Jewelry. The Jewelry line is comprised of fashion jewelry, including earrings, necklaces, chokers, pins and bracelets. The Jewelry line is manufactured in the company’s production facilities.

Accessories. The Accessories line is comprised primarily of handbags and belts. Handbags are manufactured in Italy using the highest quality Italian leather and fabrics. Belts are manufactured primarily in the company’s production facilities.

Home Accessories. The company manufactures various home accessory items in its production facilities. These items are sold through company-owned retail stores and select wholesale customers. These items were also sold in St. John Home stores, until they were closed in early fiscal 2003.

The following table details the approximate range of suggested retail prices by product line. The suggested retail prices are indicative of individual item prices.

Sales by Product Line

The following is a comparison of the net sales by product line for fiscal years 2004, 2003 and 2002 :

Licenses

During the first quarter of fiscal 2004, the company licensed the right to manufacture and sell swimsuits under the St. John name to a third party. The license expires on December 31, 2009. The St. John Swimsuit Collection offers a wide range of styles, including many with the company’s signature elements.

The company has licensed the right to manufacture and sell coats under the St. John name to a third party. The license expires on March 31, 2005. The St. John Coat Collection, which is manufactured under the license agreement, offers the classic style, elegance and superior quality the St. John customer has come to expect. The company retained the right to also manufacture and sell coats in company-owned retail stores.

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The company has also licensed to third parties the right to use the St. John name on retail stores at specified locations in South Korea, Russia, Kuwait and the United Arab Emirates. There currently are 19 such stores located in South Korea and one in Russia, Kuwait and the United Arab Emirates. The company does not receive royalties for the use of its name on these retail locations, but benefits through the sale of products to the licensees.

Manufacturing

The company has developed a vertically integrated manufacturing process which it believes is unique and critical to its success. During fiscal 2004, approximately 86% of the products sold by the company were manufactured at the company’s own facilities. The company twists and dyes its yarn, as well as knits, constructs, presses and finishes its knitwear products in its six facilities located in Southern California and one facility located in Mexico. The company manufactures its knitwear using its highly automated electronic knitting machines coupled with a skilled labor force. The company also manufactures the hardware used on its garments as well as its Jewelry and Home Accessories lines. Products not manufactured by the company include a portion of the Sport product line, as well as the Shoe and Accessories product lines.

The company believes that its vertical integration differentiates it from other apparel manufacturers and has been critical to its success because it enables the company to manufacture products to order, maximize manufacturing flexibility and maintain superior quality control. The company believes that the ability to produce to order limits its exposure to both the inventory and market risks associated with many apparel companies that source products internationally. The company’s in-house manufacturing capabilities also enable it to quickly increase production of popular styles. The company’s ability to control the manufacturing process allows it to consistently produce garments to its high quality standards.

The manufacturing process for its Knitwear line begins with the twisting together of wool and rayon on the company’s precision twisting machines in a unique process that produces the company’s signature yarn. The twisted yarn is transferred to the company’s dye house for dyeing based on garment orders received. The dyed yarn is knitted on the company’s computerized electronic knitting machines and then cut, assembled and finished in the company’s facilities. The company’s jewelry and hardware manufacturing plants produce the buttons and buckles for garments, as well as bracelets, earrings, necklaces, chokers and pins. The company also manufactures many of its woven products, as well as blouses, jeans and certain scarves.

The company operates a manufacturing facility in Mexico. This facility gives the company additional manufacturing capacity as well as the ability to lower the cost of certain labor-intensive items through reduced labor costs. Employees from the U.S. operations are on hand to ensure that the quality control program is strictly followed.

Quality Control

The company has achieved its quality reputation by vertically integrating its manufacturing processes and maintaining control over its operations. The expansion into dyeing, yarn twisting and jewelry and hardware manufacturing was due primarily to the inability of outside suppliers to provide products meeting the company’s standards on a consistent and timely basis. The company’s quality control program is designed to enable all finished goods to meet the company’s standards, and includes inspection points throughout the manufacturing processes. During the manufacturing processes, every garment is individually inspected at the completion of each major manufacturing process and again prior to shipping. In addition, the company uses outside contractors for the manufacturing of its shoes, handbags and certain woven products. The company has instituted procedures to maintain the quality of products manufactured by these contractors.

Design

The company designs its garments to be consistent with its classic, timeless style. To accomplish this goal, design teams reference the prior season’s designs and patterns to establish a basis for the current season’s lines. The design teams also work closely with the sales force to incorporate current consumer preferences into the season’s line. Dye lots are kept consistent with prior years to enable consumers to augment their wardrobes over several seasons. Once design parameters for a particular item are established, the design teams work with the manufacturing group to plan construction details and hardware attachments, such as buttons, to ensure efficient manufacturing. The design management team has an average of 12 years of experience with the company.

Distribution

The company’s products are distributed primarily through a select group of specialty retailers and company owned retail boutiques and outlet stores.

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Wholesale Customers. The company selectively distributes its products through some of the nation’s leading upscale retailers, including Saks Fifth Avenue, Neiman Marcus and Nordstrom, each of which accounted for more than 10% of the company’s net sales in fiscal 2004 (approximately 42.0% collectively) and have been customers of the company for over 30, 25 and 20 years, respectively. The company distributes its products to approximately 300 locations in the U.S. The company works with these and other customers to create in-store boutiques, which are designated areas devoted exclusively to the company’s products. Other significant customers of the company include select Bloomingdales, Marshall Field’s and Belks stores.

St. John Boutiques and Outlet Stores. In order to diversify its product distribution and enhance name recognition, the company began opening its own retail boutiques in 1989 and currently operates 32 such boutiques in the U.S. and Canada. Most of the company’s boutiques showcase the entire line of apparel products, which has helped to expand the distribution and enhance the brand awareness. The company also operates 13 outlet stores. The company’s outlet stores primarily sell seconds, design samples and slow-moving inventory from the company’s full-price boutiques.

St. John Home Stores. During 1997, the company began opening home furnishing stores and operated three such stores during fiscal 2002 under the name St. John Home. In addition, the company operated one St. John Home outlet store in Nevada. The company closed its last St. John Home store and the St. John Home outlet store during fiscal 2003.

International. The company sells its products to specialty retailers in Asia, Europe, Canada and Mexico. In Asia, the company has established relationships with a number of highly qualified retailers, including Lane Crawford in Hong Kong and China and ShinSegae in South Korea, and is seeking to increase its penetration in these accounts. In Japan, the company operates a wholly owned subsidiary that distributes its products throughout Japan and operates a number of small retail shops which are located within larger department stores, two in-hotel shops and two freestanding retail boutiques. The company operates one retail boutique in western Canada and one small boutique and one retail shop in Hong Kong. The company’s European efforts involve expanding and upgrading its relationships with high quality independent wholesale customers, principally in the United Kingdom, Germany, Belgium, Switzerland and the Netherlands. The company distributes its products to approximately 205 locations outside the U.S. During fiscal 2004, international sales to wholesale customers and sales through the company’s subsidiaries in Japan, Canada and Hong Kong accounted for approximately 11% of the company’s net sales.

The following table presents net sales by distribution category for fiscal years 2004, 2003 and 2002:

Business Segment Information

The company has two reportable business segments, wholesale and retail sales. The company’s wholesale sales business consists primarily of six divisions: Knitwear, Sport, Shoes, Jewelry, Accessories and Home Accessories. For segment reporting purposes, international sales are aggregated into the wholesale business segment. For fiscal 2004 and 2003, retail sales were primarily generated through the company’s boutiques and outlet stores. Management evaluates segment performance based primarily on revenue and earnings from operations. For segment information regarding net sales, operating profits, assets, capital expenditures and depreciation and amortization, as well as certain geographic information regarding net sales, see Note 17 of “Notes to Consolidated Financial Statements,” included herein.

Marketing

The company markets its Collection, Evening and Couture lines four times a year, during the Fall and Cruise/Spring seasons. These lines are shown beginning in January for delivery between May and October and beginning in July for delivery between November and April. Orders for each of these six-month delivery periods are received after showings, and the goods are then made to order. The company markets its Sport line three times per year. The company markets its Basics line throughout the year.

The company shows its product lines to wholesale buyers in its New York and Irvine showrooms. Members of the company’s senior management team work closely with major customers to develop sales plans and to determine the appropriate mix of merchandise. These detailed sales plans are based on past purchases, expected sales growth and profitability.

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The company also shows its products in its Dusseldorf, Germany and Tokyo, Japan showrooms, as well as in other foreign countries at various times during the year using its outside sales representatives.

The company’s strategy is to sell its products to its wholesale accounts and to facilitate the sale of its products through to the ultimate consumer. The company employs a sales team, showroom personnel and customer service representatives. The sales team is currently comprised of 38 U.S. and five international field representatives. The sales team establishes and maintains in-store boutique presentations, develops close working relationships with store management and trains key sales people to be St. John specialists. The St. John specialists at certain key wholesale accounts are eligible for the company’s incentive rewards. In addition, the company’s customer service representatives monitor computerized information on each store’s sales and styles sold in an effort to track and increase sales.

In order to promote its upscale image, the company advertises in both national and international fashion magazines, including Vanity Fair, Vogue and W. In fiscal 2004, the company spent approximately $14.0 million on advertising. Management believes that this advertising approach enhances the company’s image. The company’s advertising features Kelly Gray as its Signature Model. The company also designs and produces seasonal exclusive St. John catalogs, which are distributed at the discretion of individual retailers and the company’s retail boutiques. Distribution is usually limited to target repeat purchasers or those who meet the company’s consumer profile.

Raw Materials and Suppliers

The company’s primary raw materials in the production of its Knitwear are wool and rayon. In fiscal 2004, the company purchased approximately $11.6 million of wool and approximately $3.5 million of rayon. The company uses the highest quality wool, primarily from Australia. Generally, a wool commitment is taken with the company’s primary U.S. spinner for a set quantity of wool based on the company’s forecasted wool requirements for approximately one year. Multiple spinners are available, both domestically and internationally, with comparable pricing for spun Australian wool yarn. The company generally holds an inventory of twisted yarn sufficient for approximately six weeks of production to protect it from potential supply interruptions. Rayon is available in raw or dyed form from various European and Japanese suppliers.

In addition to wool and rayon, the company purchases yarn and fabric from various suppliers and has little difficulty in satisfying its requirements from Europe and Asia. Certain raw materials used in the manufacture of paillettes are purchased from a supplier in Europe. The company believes that there are limited sources for these items.

Competition

Due to its history of strong sales and market leadership in designer knitwear, the company believes that it faces limited direct competition for its core product offerings. In addition, the company believes that the risk of strong new competitors is further limited given its substantial investment in knitwear production technology and its strong relationships with its wholesale customers. In a broader context, the company does compete with such successful designers as Armani, Calvin Klein, Chanel, Donna Karan and Escada.

Trademarks

The company owns and uses several trademarks, principal among which are St. John^®, St. John by Marie Gray^® and St. John Sport^®. The company’s principal marks are registered with the United States Patent and Trademark Office and in the other major jurisdictions in the world where the company does business or may eventually do business. The company regards its trademarks and other proprietary rights as valuable assets and believes that they have significant value in the marketing of its products. The company vigorously protects its trademarks against infringement.

Regulation

The company is subject to a variety of federal, state and local laws and regulations including those relating to zoning, land use, environmental protection, workplace safety and product labeling and safety. The company is also subject to laws governing its relationship with its employees, including minimum wage requirements, overtime, working conditions and work permit requirements. Although the company believes that it is and has been in material compliance with all of the various regulations applicable to its business, the company cannot assure that requirements will not change in the future or that it will not incur significant costs to comply with such requirements.

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Geographic Information

The following table presents information related to the geographic areas in which the company operated during fiscal years 2004, 2003 and 2002:

For information on the Company’s assets by geographic area see Note 17 of “Notes to Consolidated Financial Statements,” included herein.

The Company

SJKI became the parent company of St. John Knits, Inc., a California corporation (“St. John”) and its subsidiaries as a result of mergers consummated in July 1999. On July 7, 1999, (i) SJKAcquisition, Inc., a California corporation and direct wholly owned subsidiary of SJKI, merged with and into St. John, with St. John surviving the merger (the “reorganization merger”) and (ii) Pearl Acquisition Corp. (“Pearl”), a Delaware corporation and direct wholly owned subsidiary of Vestar/Gray Investors LLC, a Delaware limited liability company, merged with and into SJKI, with SJKI surviving the merger (the “acquisition merger” and together with the reorganization merger, the “mergers”), as contemplated by the Agreement and Plan of Merger, dated as of February 2, 1999, among SJKI, St. John, SJKAcquisition and Pearl. As a result of the mergers, St. John became a wholly owned subsidiary of SJKI. Immediately after the mergers, SJKI was approximately 7% owned by former shareholders of St. John, other than Bob Gray, Marie Gray and Kelly Gray, and approximately 93% owned by Vestar/Gray Investors LLC. At the time, Vestar/Gray Investors LLC was approximately 84% owned by an affiliate of Vestar Capital Partners III, L.P., 9% owned by Bob and Marie Gray and 7% owned by Kelly Gray. The company financed the mergers with proceeds from senior secured credit facilities of $190.0 million, an equity contribution by Vestar/Gray Investors LLC of $146.5 million, a subordinated debt offering of $100.0 million and the issuance of preferred stock of $25.0 million. SJKI was incorporated in Delaware during fiscal 1999. Prior to the mergers, SJKI was incorporated in Barbados as a “large FSC” under Section 922 of the Internal Revenue Code of 1986, as amended. St. John was incorporated during 1962.

Employees

At October 31, 2004, the company had approximately 4,925 full-time employees. In the U.S. there were approximately 7 employees in management positions, 240 in design and sample production, 2,380 in production, 240 in quality control, 485 in retail, 95 in sales and advertising and the balance in clerical and office positions. In addition, the company had approximately 1,120 full-time employees working at the company’s manufacturing facility in Mexico and approximately 70 employees working at the company’s subsidiary in Japan, principally in retail and various clerical and office positions. The company is not party to any labor agreements. The company believes a significant number of its employees are highly skilled and that turnover among these employees has been minimal. The company considers its relationship with its employees to be good and has not experienced any interruption of its operations due to labor disputes.

Backlog

At October 31, 2004, the company had unfilled customer orders for the Cruise/Spring season of approximately $147.6 million compared with approximately $142.3 million as of November 2, 2003. Orders for the Cruise/Spring season are generally shipped during November through April. The company’s experience has been that the cancellations, rejections or returns of orders do not materially reduce the amount of sales realized from its backlog.

Risk Factors

Substantial Leverage and Debt Service. The company is highly leveraged. As of October 31, 2004, the company had total debt of approximately $207.2 million, of which approximately $107.8 million was senior debt, and a stockholders’ deficit of approximately $83.0 million, which resulted from the recapitalization of the company in connection with the mergers. In addition, the company may borrow money under its revolving credit facility which is intended to be used primarily for working capital. Subject to restrictions in the senior credit facilities and the indenture governing the company’s senior subordinated notes, the company may borrow more money for working capital, capital expenditures, acquisitions or other purposes.

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The high level of debt could have important consequences, including the following:

The company expects to obtain the money to pay expenses and the principal and interest on its outstanding notes and senior credit facilities from operations and from loans under its revolving credit facility. The ability to pay such amounts will depend on the company’s future performance, which will be affected by financial, business, economic and other factors. The company cannot control many of these factors, such as economic conditions in the markets and pressure from competitors. The company cannot be certain that the money it earns will be sufficient to pay principal and interest on the debt and meet any other obligations. If the money is not sufficient, the company may be required to refinance all or part of its existing debt, sell assets or borrow more money. The company cannot guarantee that it will be able to refinance its debt, sell assets or borrow more money on terms that are acceptable. In addition, the terms of existing or future debt agreements, including its senior credit facilities and the indenture governing its notes, may restrict the company from adopting any of these alternatives.

The inability to refinance the company’s credit agreement could affect its ability to operate its business. The company is currently negotiating with potential lenders to refinance its existing credit facility. If the company is unable to negotiate a new credit facility it may not be able to meet its payment obligations under its current agreements which could cause such debt, together with accrued interest, to be declared immediately due and payable.

Covenant restrictions may limit the company’s ability to operate its business. The indenture governing the company’s senior subordinated notes contains covenants that, among other things:

The indenture also restricts, subject to certain exceptions, the company’s ability to consolidate and merge with or to transfer all or substantially all of its assets to another party.

Under the company’s senior credit facilities, the company must also comply with certain specified financial ratios and tests that may restrict its ability to make distributions or other payments to investors and creditors and if the company does not comply with these or other covenants and restrictions contained in the senior credit facilities it could default. Such debt, together with accrued interest, could then be declared immediately due and payable. The company’s ability to comply with these provisions may be affected by events beyond its control.

Although the company believes that it has been in compliance and that it will be able to maintain compliance with its current financial tests there can be no assurance that it will be able to do so. The restrictions imposed by such covenants may adversely affect the ability of the company to take advantage of favorable business opportunities. Failure to comply with the terms of such covenants could result in acceleration of the indebtedness represented by the company’s notes.

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Competition and/or an economic downturn could have a material adverse effect on the company’s business. The apparel industry is highly competitive. The company competes primarily on the basis of price and quality. The company believes that its success depends in large part on its ability to anticipate, gauge and respond to changing consumer demands in a timely manner. The company cannot assure that it will always be successful in this regard. If these demands are misjudged sales may suffer, which could adversely affect the business, financial condition and results of operations of the company.

The company competes with numerous domestic and foreign designers, brands and manufacturers of apparel and accessories, some of which may be significantly larger and more diversified and have greater financial and other resources than the company. Increased competition from these and future competitors could reduce sales and adversely affect the company’s operating results. Because of its debt level, the company may be less able to respond effectively to such competition than others.

The apparel industry is cyclical. Purchases of apparel generally tend to decline during recessions and also may decline at other times. A recession in the general economy or uncertainties regarding future economic prospects could affect consumer spending habits and have a material adverse effect on the company’s business, financial condition and results of operations.

The loss of one or more of the company’s primary customers could have a material adverse effect on its business. The company, like many of its competitors, sells to retailers. In recent years, the retail industry has experienced consolidation and other ownership changes. In the future, retailers in the U.S. and in foreign markets may have financial problems or consolidate, undergo restructurings or reorganizations, or realign their affiliations, any of which could decrease the number of stores that carry the St. John product or increase the ownership concentration within the retail industry. Any such change could have a negative impact on the company.

During fiscal 2004 and 2003, net sales to the company’s three largest wholesale customers, Saks Fifth Avenue, Neiman Marcus and Nordstrom, totaled approximately 42% and 44% of net sales, respectively, with each exceeding 10% individually. Net sales to the company’s largest wholesale customer accounted for approximately 15% of net sales in fiscal 2004 and 16% of net sales in fiscal 2003. Although the company has long-established relationships with many of its customers, there are no long-term sales agreements. The loss of or significant decrease in business from any of its major customers could have a material adverse effect on the company’s business, financial condition and results of operations.

The company is controlled by Vestar Capital Partners III, L.P.(“Vestar”). Vestar beneficially owns approximately 81% of the outstanding common stock of SJKI. As a result, Vestar is able to effectively control the outcome of all matters requiring a stockholder vote, including the election of a majority of the directors of SJKI. Such ownership of common stock may have the effect of delaying, deferring or preventing a change of control.

A significant increase in the price or a decrease in the availability of wool or rayon, the company’s primary raw materials, could have a material adverse effect on the company’s business. The company’s principal raw materials are wool and rayon. In fiscal 2004, the company purchased approximately $11.6 million of wool and approximately $3.5 million of rayon. The price of wool and rayon may fluctuate significantly depending on world demand. There can be no assurances that such fluctuation in the price of wool or rayon will not affect the company’s business, financial condition and results of operations.

The company imports wool primarily from Australia. It also imports other raw materials, including rayon, from Europe and Japan. In addition, the company’s shoes, handbags and certain woven products are manufactured in Europe and Asia. The company’s imported materials and products are subject to United States Customs duties which comprise a material portion of the cost of the merchandise. A substantial increase in customs duties could have a material adverse effect on the company’s business, financial condition and results of operations. The United States and the countries in which materials and products are produced or sold may, from time to time, impose new quotas, duties, tariffs or other restrictions, or adversely adjust prevailing quota, duty or tariff levels, any of which could have a material adverse effect on the company.

International operations expose the company to additional political, economic and regulatory risks not faced by businesses that operate only in the U.S. The company conducts international operations in Mexico, Europe, Asia and Canada. In fiscal 2004, approximately 11% of the company’s sales occurred outside the U.S., and approximately 14% of the company’s products were manufactured by third-party contractors, many of which were outside the United States. International operations are subject to risks similar to those affecting the U.S. operations in addition to a number of other risks, including:

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In addition, various jurisdictions outside the U.S. have laws limiting the right and ability of non-U.S. subsidiaries and affiliates to pay dividends and remit earnings to affiliated companies unless specified conditions exist. The company’s ability to expand the manufacture and sale of its products internationally is also limited by the necessity of obtaining regulatory approval in new countries.

The company’s financial performance on a U.S. dollar denominated basis can be significantly affected by fluctuations in currency exchange rates. From time to time the company may enter into agreements to seek to reduce our foreign currency exposure, but the company cannot assure that it will be successful.

Changes in, or the costs of complying with, various governmental regulations could have a material adverse effect on the company’s business. The company is subject to a variety of federal, state and local laws and regulations including those relating to zoning, land use, environmental protection and workplace safety. It is also subject to laws governing its relationship with its employees, including minimum wage requirements, overtime, working conditions and work permit requirements. Although the company believes that it is and has been in material compliance with all of the various regulations applicable to its business, it cannot assure that requirements will not change in the future or that it will not incur significant costs to comply with such requirements.

The loss or infringement of the company’s trademarks and other proprietary rights could have a material adverse effect on business. The company believes that its trademarks and other proprietary rights are important to its success and competitive position. Accordingly, the company devotes substantial resources to the establishment and protection of its trademarks on a worldwide basis. There can be no assurances that such actions taken to establish and protect its trademarks and other proprietary rights will be adequate to prevent imitation of the company’s products by others or to prevent others from seeking to block sales of its products as violative of their trademarks and proprietary rights. Moreover, there can be no assurances that others will not assert rights in, or ownership of, trademarks and other proprietary rights of the company or that it will be able to successfully resolve such conflicts. In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States. The loss of such trademarks and other proprietary rights, or the loss of the exclusive use of such trademarks and other proprietary rights, could have a material adverse effect on the company’s business, financial condition and results of operations.

A major earthquake or other natural disaster in southern California could have a material adverse effect on the company’s business. The company’s executive offices and the major portion of its production facilities are in Irvine, California, which is located near major earthquake fault lines. If there is a major earthquake or any other natural disaster in these areas, it could significantly disrupt the company’s operations. If the company’s manufacturing operations were impacted, it could materially disrupt production capabilities and result in the company experiencing a significant delay in delivery, or substantial shortage, of its products.

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The principal executive offices of the company are located at 17622 Armstrong Avenue, Irvine, California 92614.

Company-owned Properties

The general location, use and approximate size of the only company-owned property is set forth below. Such property is used in the company’s wholesale business segment.

Leased Properties

The general location, use, approximate size and lease expiration date of the company’s principal leased properties are set forth below. All of such properties are used in the company’s retail business segment except as noted.

As of October 31, 2004, annual base rents for the company’s leased properties listed in the table above ranged from approximately $160,000 to $1,500,000. In general, the terms of these leases provide for rent escalations dependent upon either increases in the lessor’s operating expenses or fluctuations in the consumer price index in the relevant geographical area.

The company believes that there are facilities available for lease in the event that either the productive capacities of the company’s manufacturing facilities need to be expanded or a current lease of a facility expires. The company also leases space for 27 additional retail boutiques, one additional showroom, two additional manufacturing and warehouse facilities and 13 outlet stores.

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The company is involved from time to time in litigation incidental to its business. Management believes that the outcome of any current litigation will not have a material effect upon the results of operations or financial condition of the company.

Not applicable.

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PART II

SJKI’s common stock is quoted on the OTC Bulletin Board quotation system under the symbol “SJKI.” The following table sets forth, for each of the full quarterly periods indicated, the quarterly high and low bid quotations for SJKI’s common stock as reported by the OTC Bulletin Board. The prices in the table represent prices between dealers and do not include adjustments for retail mark-ups, markdowns or commissions and may not represent actual transactions.

As of January 26, 2005, there were approximately 25 holders of record of SJKI’s common stock.

SJKI has never declared dividends on its common stock and does not intend to pay dividends on its common stock in the future. SJKI’s ability to pay dividends depends upon the receipt of dividends from St. John, which is a wholly owned subsidiary of SJKI. In addition, SJKI’s ability to pay dividends on its common stock is restricted by the terms of its senior credit facilities and the indenture governing its senior subordinated notes as well as limitations under applicable law and other factors the board of directors deems relevant. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and Note 9 of “Notes to Consolidated Financial Statements.”

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The following selected financial data has been derived from the consolidated financial statements of the company. This information should be read in conjunction with the company’s audited consolidated financial statements and notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Management’s discussion and analysis should be read in conjunction with the company’s consolidated financial statements and the notes related thereto.

Results of Operations

The following table is derived from the company’s consolidated statements of income and sets forth, for the periods indicated, the results of operations as a percentage of net sales:

Fiscal 2004 Compared to Fiscal 2003

Net sales for fiscal 2004 increased by $25.5 million, or 6.9% as compared to fiscal 2003. This increase was principally attributable to (i) an increase in sales by company-owned retail boutiques of approximately $10.0 million, approximately half of which was due to the relocation of two existing retail boutiques located in Beverly Hills, California and Chicago, Illinois and the addition of two new retail boutiques which were opened since the beginning of fiscal 2003, (ii) an increase in sales to domestic wholesale customers of approximately $7.7 million, (iii) an increase in international sales of approximately $6.2 million, primarily due to expanding operations in Japan and increased sales by the retail boutique located in Vancouver, Canada and (iv) an increase in sales by company-owned retail outlet stores of approximately $2.8 million, due to the addition of three new retail outlet stores, which were opened since the beginning of fiscal 2003. These increases were partially offset by a decrease in sales of approximately $1.3 million for the St. John Home stores, which were closed during the first six months of fiscal 2003. Sales for company-owned retail boutiques open at least one year increased 7.1% during fiscal 2004 as compared to fiscal 2003. The overall increase in net sales was primarily due to a shift in sales to higher priced Knitwear garments and increased unit sales of the Sport product line during fiscal 2004 as compared to the prior year. The company has made the decision to close four of its retail boutiques during fiscal 2005 and, combined with its decision in the fourth quarter of fiscal 2004 to stop selling its non-apparel products to its wholesale customers, is therefore expecting net sales to decrease slightly during fiscal 2005 as compared to fiscal 2004. This anticipated decrease in net sales is not expected to materially impact operating income.

Gross profit for fiscal 2004 increased by $2.9 million, or 1.4% as compared with fiscal 2003, but decreased as a percentage of net sales to 54.7% from 57.7%. This decrease as a percentage of net sales was primarily the result of a decrease in the gross profit margin for the Knitwear and Sport product lines due to a change in the mix of the products being manufactured and sold to lower margin styles and increased labor costs relating to the Knitwear product line. In addition, the company recorded an increase to cost of sales of approximately $3.2 million to write down the non-apparel inventory to its estimated net realizable value due to the company’s decision to curtail the sale of non-apparel items to its wholesale customers. These decreases were partially offset by an increase in the gross profit margin resulting from increased sales at company-owned retail boutiques, which on a consolidated basis have a higher gross profit margin than sales to wholesale customers.

Selling, general and administrative expenses for fiscal 2004 increased by $12.0 million, or 7.4% over fiscal 2003, and increased as a percentage of net sales to 44.3% from 44.1%. Selling, general and administrative expenses increased during the period primarily due to (i) an increase of approximately $6.0 million resulting from the opening of two new retail boutiques, the relocation of five retail boutiques, the expansion of four retail boutiques and the opening of three new retail outlet stores since the beginning of fiscal 2003, (ii) the write down of the book value of the assets related to four of the company’s retail boutiques of $4.4 million, (iii) an increase in costs related to the company’s expanding operations in Japan of approximately $2.4 million, (iv) executive recruiting and related costs of approximately $1.1 million, (v) an increase in commission expense for boutique

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employees of approximately $0.9 million related to the increase in sales and (vi) approximately $0.5 million in costs related to the closure of one of the company’s manufacturing facilities during the first quarter of fiscal 2004. The $4.4 million write down of retail boutique assets consisted primarily of leasehold improvements and was due to the company’s decision to close such boutiques during fiscal 2005. These increases were partially offset by a decrease in advertising expenses of approximately $2.0 million, a decrease of approximately $1.9 million due to the closure of the St. John Home stores during fiscal 2003 and a decrease in design sample expenses of approximately $0.5 million.

Operating income for fiscal 2004 decreased by $9.1 million, or 18.1% as compared to fiscal 2003. Operating income as a percentage of net sales decreased to 10.4% from 13.6% during the same period. This decrease in operating income as a percentage of net sales was due to a decrease in the gross profit margin combined with an increase in selling, general and administrative expenses as a percentage of net sales.

Interest expense for fiscal 2004 decreased by $2.9 million, or 11.7% from fiscal 2003. This decrease was primarily due to a decrease in the average debt balance from fiscal 2003, as well as a reduction in interest rates on the company’s variable rate debt.

Other expenses decreased from $1.5 million for fiscal 2003 to income of less than $0.1 million for fiscal 2004. This decrease in other expenses was primarily due to a loss of $0.9 million recorded on the disposition of fixed assets during fiscal 2003, a gain of approximately $0.4 million recorded on the sale of one of the company’s manufacturing facilities during fiscal 2004 and an increase in royalty income of approximately $0.2 million during fiscal 2004 as compared to fiscal 2003.

Income taxes for fiscal 2004 decreased by $3.2 million from fiscal 2003. The tax rate decreased from 38.9% to 31.7% during the same period. This decrease in the tax rate was primarily due to an adjustment recorded during the first quarter of fiscal 2004 to reduce the company’s tax liability for potential income tax audit issues which were resolved during the period.

Fiscal 2003 Compared to Fiscal 2002

Net sales for fiscal 2003 increased by $7.9 million, or 2.2% as compared to fiscal 2002. This increase was principally attributable to (i) an increase in sales by company-owned retail outlet stores of approximately $9.7 million, including $5.2 million related to the addition of four retail outlet stores since the beginning of fiscal 2002, (ii) an increase in sales by company-owned retail boutiques of approximately $8.1 million, due to an increase in sales of $10.1 million related to six new retail boutiques which were added since the beginning of fiscal 2002 and (iii) an increase in international sales of approximately $4.6 million. These increases were partially offset by a decrease in sales to domestic wholesale customers of approximately $10.4 million, primarily due to a reduction of approximately $8.5 million associated with the bankruptcy filing and subsequent liquidation of Jacobson Stores, Inc. (“Jacobson”) and a decrease in sales of approximately $4.0 million for the St. John Home stores, which the company closed in early fiscal 2003. Sales for company-owned retail boutiques open at least one year decreased 1.2% during fiscal 2003 as compared to fiscal 2002. The overall increase in net sales was primarily the result of increased unit sales of the Knitwear product line.

Gross profit for fiscal 2003 increased by $5.8 million, or 2.8% as compared with fiscal 2002, and increased as a percentage of net sales to 57.7% from 57.3%. This increase in the gross profit margin was predominately the result of an increase in the gross profit margin for the company-owned retail boutiques due to lower point of sale markdowns.

Selling, general and administrative expenses for fiscal 2003 increased by $19.3 million, or 13.4% over fiscal 2002, and increased as a percentage of net sales to 44.1% from 39.7%. Selling, general and administrative expenses increased during the period primarily due to (i) an increase in expenses of approximately $11.6 million, resulting from the opening of six company-owned retail boutiques, the relocation of three retail boutiques, the expansion of two retail boutiques and the opening of four retail outlet stores since the beginning of fiscal 2002, (ii) an increase in the expenses for the purchase of design samples of approximately $2.7 million, (iii) an increase in advertising expenses of approximately $2.3 million, relating to an increase in the number of print ads placed during fiscal 2003, (iv) an increase in costs related to the company’s expanding operations in Japan of approximately $1.3 million, (vi) an increase in bad debt expenses of approximately $1.0 million, primarily relating to the Jacobson bankruptcy and (vii) an increase in design salary expense of approximately $0.9 million. The increase in expenses for the new and relocated/expanded retail boutiques and outlet stores is primarily comprised of rent, depreciation, salaries and other operational expenses.

Operating income for fiscal 2003 decreased by $13.5 million, or 21.2% as compared to fiscal 2002. Operating income as a percentage of net sales decreased to 13.6% from 17.6% during the same period. This decrease in operating income as a percentage of net sales was due to an increase in selling, general and administrative expenses as a percentage of net sales, which was partially offset by an increase in the gross profit margin for the period.

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Interest expense for fiscal 2003 increased by $0.7 million, or 3.0% from fiscal 2002. This increase was due to an increase in the debt balance resulting from the conversion of the company’s preferred stock and accrued dividends to senior subordinated 15.25% notes during July 2002. These notes were subsequently paid off during May 2003 using the proceeds from an additional borrowing of $30.0 million under the company’s credit agreements and excess cash on hand. This increase in interest expense was partially offset by a reduction in interest rates during fiscal 2003 on the company’s variable rate debt.

Liquidity and Capital Resources

The company’s primary cash requirements are to fund payments required to service the company’s debt, to fund the company’s working capital needs, primarily inventory and accounts receivable, and for the purchase of property and equipment. During fiscal 2004, cash provided by operating activities was $30.9 million. Cash provided by operating activities was primarily generated by net income, a decrease in accounts receivable and an increase in accounts payable, while cash used in operating activities was primarily used to fund an increase in inventories. The decrease in accounts receivable was primarily due to lower wholesale sales in October 2004 as compared to October 2003. Inventory increased in each of the three categories, finished goods, work in process and raw materials, with the largest increase coming in the finished goods category. The increase in finished goods inventory was primarily due to an increase in the Knitwear division as the company increased its inventory level of some styles of finished garments in anticipation of reorders and had completed certain styles for shipment in November 2004. In addition, finished goods inventory increased in the retail division and in Japan. The increase in raw materials was primarily due to an increase in the Knitwear division as the company increased its yarn inventory with additional types of yarn. Work in process inventory also increased for the Knitwear division as the company increased the number of garments in the production cycle. Cash provided by investing activities was $15.6 million during fiscal 2004. The principal source of cash provided by investing activities was the sale of the company’s facilities located in Irvine and San Ysidro, California, which were subsequently leased back, and the sale of the company’s manufacturing facility in Van Nuys, California, while the principal use of cash in investing activities was for (i) the construction of leasehold improvements for upgrades to company-owned retail boutiques, (ii) the construction of leasehold improvements for new, relocated or expanded retail boutiques, (iii) upgrades to the manufacturing operations, including the purchase of electronic knitting machines, (iv) the construction of St. John shops within the company’s major wholesale customer locations and (v) costs incurred to upgrade the company’s computer systems. Cash used in financing activities was $48.4 million during fiscal 2004, resulting from required debt prepayments of approximately $23.9 million arising from the sale of the properties noted above, a $5.0 million voluntary prepayment and scheduled payments made on the company’s long-term debt and the redemption of $5.0 million of the company’s redeemable common stock from its former Chief Executive Officer.

As of October 31, 2004, the company had approximately $72.9 million in working capital and $17.8 million in cash and cash equivalents. The company’s principal source of liquidity is internally generated funds. As part of its credit facility with a syndicate of banks, the company also has a $25.0 million revolving commitment, which expires on July 31, 2005. The revolving commitment is secured and borrowings thereunder bear interest at the company’s choice of the bank’s borrowing rate (4.75% at October 31, 2004) plus 1.75% or LIBOR (2.19% at October 31, 2004) plus 2.75%. The availability of funds under the revolving commitment is subject to the company’s continued compliance with certain covenants, including a covenant that sets the maximum amount the company can spend annually on the acquisition of fixed or capital assets, and certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio and a minimum interest expense coverage ratio. As of October 31, 2004, the company was in compliance with all covenants and no amounts were outstanding under the revolving commitment. The company is currently negotiating the renewal or replacement of its revolving commitment. The company had $15.3 million of letters of credit outstanding at October 31, 2004 which reduces the amount available under the revolving commitment by a corresponding amount. The company invests its excess cash in a money market fund.

Total debt outstanding decreased $43.4 million to $207.2 million during fiscal 2004. This decrease was due to $28.9 million in prepayments made on the company’s long-term debt, along with scheduled principal payments made during the period. The company’s outstanding debt was comprised of bank borrowings of $107.8 million and senior subordinated 12.5% notes (“12.5% notes”) of $100.0 million, excluding the unamortized issue discount of $0.6 million.

The company completed a transaction to sell and leaseback four of its facilities located in Irvine, California during July 2004. The transaction resulted in net proceeds of approximately $19.8 million, which were used to prepay a portion of the company’s outstanding bank debt. The company recorded a deferred gain of approximately $3.5 million related to the transaction. The company signed lease agreements on each of the four facilities expiring in 2019. The initial annual lease payments under the new leases total approximately $1.7 million.

The company’s primary ongoing cash expenditures are for debt service and the purchase of property and equipment. The company’s debt service requirements consist primarily of principal and interest payments on bank borrowings and interest on the senior subordinated notes. The company believes it will be able to finance its debt service and capital investment requirements with internally generated funds and availability under the revolving credit facility through at least fiscal 2005. Beyond fiscal 2005, the company will have a significant increase in the principal payments required on its bank borrowings

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resulting from the maturity of its senior credit facilities. As a result, the company will probably need to raise additional capital or refinance such debt in order to satisfy its obligations. The company is currently negotiating with potential lenders to refinance its long-term debt. The company expects the refinancing to be completed during the first half of fiscal 2005.

The table below summarizes the payments due for specific known contractual obligations as of October 31, 2004:

In addition to the obligations above, during its normal course of business, the company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include those given to various lessors in connection with facility leases for certain claims arising from such facility or lease. The company has also issued guarantees, in the form of letters of credit, to cover contractual commitments, including merchandise purchases from foreign vendors and to secure the payment for potential future workers’ compensation claims. The company had $15.3 million of letters of credit outstanding at October 31, 2004. Of this total, $13.8 million is related to potential future workers’ compensation claims. The company will be required to issue additional letters of credit totaling approximately $3.6 million during fiscal 2005 for potential future workers’ compensation claims. The company has accrued a liability for the estimated claims, both reported and incurred but not yet reported. The duration of these indemnities, commitments and guarantees varies and in certain cases is indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments the company could be obligated to make. The company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets other than as noted.

In addition to the fiscal 2005 payments included in the table above, the company anticipates purchasing property and equipment of approximately $14.7 million during fiscal 2005 but is not contractually committed to do so. The estimated $14.7 million will be used principally for (i) the implementation of a new computer system for the retail division, (ii) the construction of St. John shops within the company’s major wholesale customer locations, (iii) upgrades to the company’s computer systems and (iv) upgrades to the company’s production facilities, including the purchase of electronic knitting machines.

Under certain conditions, the company may be required to repurchase a portion of the common stock beneficially owned by Bob, Marie or Kelly Gray, not to exceed $5.0 million in any 12 month period. Any such repurchases would be limited by the restrictions of the agreements under the credit facilities and senior subordinated notes. See Notes 9 and 10 of “Notes to Consolidated Financial Statements,” included herein.

SJKI must rely on distributions, loans and other intercompany cash flows from its subsidiaries to generate the funds necessary to satisfy the repayment of its outstanding loans. Except for restrictions under applicable law, there are no material restrictions on distributions to the company from the company’s wholly owned subsidiaries that have guaranteed the company’s payment obligations under its 12.5% notes. See Note 18 of “Notes to Consolidated Financial Statements,” included herein.

SJKI did not make any payment of dividends during fiscal years 2004, 2003 and 2002, and does not anticipate the payment of any cash dividends on its common stock in the future.

The company’s debt covenant EBITDA (“EBITDA” which is defined in the company’s credit agreement for its senior secured credit facilities as net income, excluding the effects of interest expense, income taxes, depreciation and a majority of the

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items included in other income and expense) was $64.3 million and $67.8 million for fiscal 2004 and 2003, respectively. EBITDA as defined by the company may not be consistent with similarly titled measures of other companies. EBITDA is not a defined term under generally accepted accounting principles (“GAAP”) and is not an alternative to operating income or cash flow from operations as determined under GAAP. EBITDA is used to calculate certain covenants under the company’s credit agreement, including a maximum leverage ratio and minimum fixed charge and interest expense coverage ratios. The company believes that EBITDA provides additional information for determining its ability to meet future debt service requirements; however, EBITDA should not be construed as an indication of the company’s operating performance or as a measure of liquidity.

The table below shows the reconciliation from net income to EBITDA (as defined in the terms of the credit agreement) for fiscal years 2004 and 2003:

Off-Balance-Sheet Arrangements

The company does not have any off-balance sheet arrangements within the meaning of Securities and Exchange Commission regulation S-K Item 303(a)(4).

Credit Facilities

The company is a party to a credit agreement with a syndicate of banks, which initially provided for an aggregate principal amount of loans totaling $215.0 million. The credit agreement consisted of three facilities: (i) tranche A facility totaling $75.0 million, maturing July 31, 2005, (ii) tranche B facility totaling $115.0 million, maturing July 31, 2007 and (iii) the revolving credit facility totaling $25.0 million, maturing July 31, 2005.

Borrowings under the tranche A facility and the revolving credit facility bear interest at a floating rate, which is based upon the leverage ratio of the company, but cannot exceed the bank’s borrowing rate plus 1.75% or LIBOR plus 2.75%. Borrowings under the tranche B facility bear interest at a floating rate, which is also based upon the leverage ratio of the company, but cannot exceed the bank’s borrowing rate plus 2.75% or LIBOR plus 3.75%. In addition, the company is required to pay a commitment fee on the unused portion of the revolving credit facility of up to 0.5% per year.

Borrowings under the tranche A facility began to mature quarterly on November 2, 1999, while borrowings under the tranche B facility began to mature quarterly on November 2, 2000. The credit agreement permits the company to prepay loans and to permanently reduce revolving credit commitments, in whole or in part, at any time. In addition, the company is required to make mandatory prepayments of the tranche A and B facilities, subject to certain exceptions, in amounts equal to (i) 75% of excess cash flow (as defined in the company’s credit agreement); (ii) 75% of the net cash proceeds of a permitted asset sale (as defined in the company’s credit agreement) and (iii) 100% of the net cash proceeds of certain dispositions of assets or issuances of debt or equity of the company or any of its subsidiaries (in each case, subject to certain exceptions and subject to a reduction to zero based upon the company’s financial performance). In July, the tranche A facility was retired as a result of the prepayments discussed above.

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The obligations of the company under the credit agreement are guaranteed by each domestic subsidiary of the company, and to the extent no adverse tax consequences would result from such guarantees, each foreign subsidiary of the company. The credit agreement and the related guarantees are secured by (i) a pledge of 100% of the capital stock of each domestic subsidiary of the company and 65% of each foreign subsidiary of the company and (ii) a security interest in, and mortgage on, substantially all the assets of the company and each domestic subsidiary of the company and to the extent no adverse tax consequences would result therefrom, each foreign subsidiary of the company.

The credit agreement requires the company to comply with specified financial ratios, including a minimum interest coverage ratio, a maximum leverage ratio and a minimum fixed charge coverage ratio. Each ratio is calculated using EBITDA as defined in the credit agreement. In the event of non-compliance with any of these ratios, the company would be in default under the credit agreement. The credit agreement also contains additional covenants that, among other things, restrict the ability of the company to dispose of assets, incur additional indebtedness, pay dividends, create liens on assets, make investments, loans or advances and engage in mergers or consolidations. The credit agreement prohibits the company from declaring or paying any dividends or making any payments with respect to the company’s 12.5% notes if it fails to perform its obligations under, or fails to meet the conditions of, the credit agreement or if such payment creates a default under the credit agreement. The credit agreement contains customary events of default. In the event of default, the total amount of the outstanding debt plus any accrued interest would become immediately due and payable. At October 31, 2004, the company was in compliance with all covenants.

Senior Subordinated 12.5% Notes

In addition to the credit facilities described above, the company has outstanding $100 million of senior subordinated notes (the “notes”). The notes are unsecured and mature on July 1, 2009. The notes bear interest at a rate of 12.5% per year and were issued at 98.616% of the actual face value. Interest on the notes is payable semiannually to the holders of record. The notes are subject to redemption by the company beginning July 1, 2004. The indenture governing the notes limits, among other things, the payment of dividends, the incurrence of additional indebtedness and other restricted payments. The indenture contains customary events of default.

Redeemable Common Stock

SJKI is a party to a stockholders’ agreement with St. John, Vestar/Gray Investors, Vestar and the Grays, which states, among other things, that prior to a public offering of SJKI common stock, if Bob Gray ceases to serve as Chairman or Chief Executive Officer of St. John or SJKI or if the employment with SJKI of Marie Gray or Kelly Gray ceases for any reason, then he or she will have the right to require SJKI to purchase the shares of SJKI common stock beneficially owned by them, up to a maximum of $5.0 million of such common stock for all the Grays during any 12-month period. If any of the Grays are terminated without “cause” or resigns for “good reason,” as these terms are defined in their employment agreements with the company, then he or she will have the right to require SJKI to purchase the shares of SJKI common stock beneficially owned by them, up to a maximum of 25% of the total shares held by such terminated or resigning Gray employee during any 12-month period. This agreement may be limited by the terms of the agreements related to the credit facilities and the 12.5% notes.

At the end of fiscal 2002, Bob Gray retired from his position as Chairman of the Board and Chief Executive Officer of the company. In November 2002, as provided in the stockholders’ agreement, pursuant to Mr. Gray’s request, the company redeemed at fair market value, as determined by the board of directors, 89,621 shares of SJKI’s common stock beneficially owned by him at a total cost of $5.0 million, or $55.79 per share. In May 2004, in accordance with the terms of the stockholders’ agreement, the company redeemed at fair market value, 166,666 shares of SJKI’s common stock beneficially owned by Mr. Gray at a total cost of $5.0 million, or $30.00 per share.

The value of the company’s redeemable common stock, as reported on the company’s consolidated balance sheets, remained constant at $26.4 million at October 31, 2004 and November 3, 2003. The company purchased shares from Mr. Gray as discussed above, which was offset by an increase in the fair market value of the company’s common stock.

Critical Accounting Policies

The company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. As such, the company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expense during the reporting periods. Actual results could significantly differ from such estimates.

The company believes that the following accounting policies are among the most critical because they involve significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions.

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Inventories

Inventories are stated at the lower of the cost to purchase and/or manufacture the inventory or the current estimated market value (lower of cost or market). The company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on the company’s estimated forecast of product demand and production requirements. Any significant change in the anticipated demand for the company’s products could cause the company to revise its estimate of excess and obsolete inventory, which could affect the company’s reported results.

Revenue Recognition

Sales to the company’s wholesale customers are recognized when the goods are shipped and title passes. Sales are recognized upon purchase by customers at the company’s retail store locations at the point of sale. The company has recorded reserves to estimate sales returns by customers based on historical sales return results. Actual return rates have historically been within management’s expectations and the reserves established. However, in the unlikely event that the actual rate of sales returns by customers changes significantly, the company’s reported results could be affected.

Wholesale Markdowns

The company has arrangements with some of its major wholesale customers which may result in the company reimbursing them for markdowns. The company records an estimate of its liability under these arrangements at the time of sale, based upon historical experience. These estimates are based in part on projected sales and markdowns for these customers. While historical experience has been within management’s expectations, any significant variation from the projected sales or markdowns could cause the company to change its estimates. Any such change in the company’s estimates could affect the company’s reported results.

Long-lived Assets

During the normal course of business, the company acquires tangible long-lived assets. The company periodically evaluates the recoverability of the carrying amount of these assets. An impairment is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount. Impairments are recognized in operating income as they are realized. The company uses its best judgment, based upon the most current facts and circumstances surrounding the specific assets, when applying these impairment rules. Changes in the assumptions used could have a significant impact on the company’s assessments of the recoverability. Many factors, including changes to the company’s business and the global economy, could significantly impact management’s decision to retain or dispose of certain of its long-lived assets.

Foreign Currency Translation

The company sells its products to wholesale customers located in various parts of Europe in the customers’ local currencies, Euros and British Pounds. The company also purchases its shoes, leather goods and various other raw material items from vendors located in Europe in Euros. Fluctuations in the exchange rates can have an effect on the sales revenues and expenses recorded in connection with such transactions. For fiscal years 2004 and 2003, the company made the decision to allow its sales and purchases to act as a natural hedge. This decision was based upon the fact that the sales and purchases made in the foreign currencies were similar in amounts over each of the fiscal years. The company has made a decision to hedge its sales made in Euros and Pounds for the first six months of fiscal 2005 through the purchase of forward contracts. The forward contracts were purchased based upon a percentage of the estimated sales for the period. The company has not hedged any of its purchases to be made in Euros. Future changes in the exchange rates will continue to affect the company’s reported results.

Accounts Receivable

The company performs ongoing credit evaluations of its wholesale customers and adjusts credit limits based upon payment history and the customer’s current financial status. The company continuously monitors its customer payments and maintains a provision for estimated credit losses based upon the company’s historical experience and any specific customer collection issues that have been identified. The company’s accounts receivable are concentrated in the apparel industry, primarily with its three major wholesale customers. The risk of collection is concentrated within this industry and with these specific customers. As a result of this concentration, a change in the creditworthiness of the companies within the apparel industry could cause the company to revise its estimate of credit losses, which could affect the company’s reported results.

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Insurance Program

The company is partially self-insured for its workers’ compensation insurance coverage. Under this insurance program the company is liable for a deductible of $500,000 for each individual claim. The company records a liability for the estimated cost of claims both reported and incurred but not reported based upon its historical experience. The estimated costs include the estimated future cost of all open claims. The company will continue to adjust the estimates as the actual experience dictates. A significant change in the number or dollar amount of claims could cause the company to revise its estimate of potential losses and affect its reported results.

New Accounting Pronouncements

See Note 2(p) “New Accounting Pronouncements” included under the caption “Notes to Consolidated Financial Statements” included elsewhere in this document.

Forward Looking Statements

This Annual Report on Form 10-K contains certain statements, which describe the company’s beliefs concerning future business conditions and the outlook for the company based on currently available information. Wherever possible, the company has identified these “forward looking” statements (as defined in Section 21E of the Securities Exchange Act of 1934) by words such as “anticipates,” “believes,” “estimates,” “expects” and other similar expressions. The forward looking statements and associated risks set forth herein may include or relate to, among other things: (i) the company’s anticipated purchases of property and equipment during fiscal 2005, (ii) the company’s belief that it will be able to fund its working capital and capital expenditure requirements with internally generated funds and borrowings under the revolving credit facility through fiscal 2005, (iii) the company’s anticipation that it will not pay cash dividends on its common stock in the future and (iv) the company’s expectations regarding its ability to refinance its long-term debt during the first half of fiscal 2005.

These forward looking statements are subject to risks, uncertainties and other factors which could cause the company’s actual results, performance or achievements to differ materially from those expressed in, or implied by, these statements. See “Business-Risk Factors.” In addition to the factors that may be described in this report, changes to the following factors could cause actual results to differ from those expressed in any forward looking statements made by the company: (i) the financial strength of the retail industry and the level of consumer spending for apparel and accessories, (ii) the financial health of the company’s principal customers, (iii) the company’s ability to develop, market and sell its products, (iv) competition from other manufacturers and retailers of women’s clothing and accessories, (v) general economic conditions and (vi) the ability of the company to meet the financial covenants under its credit facilities and indenture. The company undertakes no obligation to review or update publicly any forward looking statements.

The company has exposure to fluctuations in foreign currency exchange rates for the revenues derived from sales to its foreign customers denominated in foreign currency. In order to reduce the effects of such fluctuations, under established risk management practices, the company may enter into foreign exchange forward contracts. These contractual arrangements are typically entered into with a major financial institution. The company does not hold derivative financial instruments for speculative trading. The primary business objective of this program is to secure the anticipated profit on sales denominated in foreign currencies. The company’s primary exposure to foreign exchange fluctuation is on the Euro and British Pound. At October 31, 2004, the company held contracts maturing from December 31, 2004 to May 31, 2005 to sell 2.0 million Euros and 600,000 Pounds at an average exchange rate of 1.21 U.S. dollars to the Euro and 1.78 U.S. dollars to the Pound. The total tax effected fair value at October 31, 2004 was a loss of $106,000, which was recorded as a component of stockholders’ equity and comprehensive income.

The company also purchases its shoes and leather goods, as well as various other raw materials, from companies located in Europe. The purchase of these items is completed in Euros. In order to reduce the effect of the fluctuation in the exchange rate between the Euro and the U.S. dollar, the company may enter into forward contracts. The company did not hold any forward contracts to purchase Euros at October 31, 2004.

The company made a decision to use its sales made in Euros as a natural hedge for the purchases of inventory items made in Euros for each of fiscal years 2004 and 2003.

The company is also exposed to market risks related to fluctuations in interest rates on its bank borrowings under the credit agreement. The company also holds fixed rate subordinated notes. For fixed rate debt, changes in interest rates generally affect the fair market value, but not earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not influence fair market value, but do affect future earnings and cash flows. The company has managed its exposure to

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changes in interest rates by issuing part of its debt with a fixed interest rate. Assuming that the balance of variable rate debt remains constant, a one percentage point increase in the interest rate from the first day of the year would result in an annual increase in interest expense of approximately $1.1 million.

The table below details the principal amounts due and the average nominal interest rates for the debt in each category based on the expected maturity dates and applicable amortization schedules. The carrying value of the variable rate debt approximates fair value as the interest rate is adjusted to market periodically. The 12.5% notes are publicly traded and the fair value is based upon the quoted market value at October 31, 2004.

The company does not believe that the future market rate risks related to the above securities will have a material impact on the company or the results of its operations.

See “Item 15. Exhibits and Financial Statement Schedules - Index to Consolidated Financial Statements” for a listing of the consolidated financial statements and supplementary data filed with this report.

Not applicable.

The company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the company’s management, including the company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The company carried out an evaluation under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of October 31, 2004, the end of the period covered by this report. Based on that evaluation, the company’s Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures were effective at the reasonable assurance level as of October 31, 2004.

There have been no changes in the company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended October 31, 2004 that materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Not Applicable.

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PART III

The following sets forth certain information concerning the directors and executive officers of SJKI:

Biographical Information

James Kelley, a director of the company since July 1999, was appointed as Chairman of the Board in November 2002. Mr. Kelley is President of Vestar Capital and was a founding partner of Vestar Capital at its inception in 1988. Mr. Kelley is a director of Consolidated Container Holdings, LLC.

Richard Cohen, a director of the company since September 2004, has served as Chief Executive Officer of the company since August 2004. Prior to joining the company, Mr. Cohen was the Chief Executive Officer of Ermenegildo Zegna North America, a wholesale and retail apparel company, from 1987 to August 2004.

Kelly Gray, a director of the company since October 1994, has served as Creative Director since June 1991. She also served as Co-Chief Executive Officer of the company from November 2002 to August 2004 and as President of the company from April 1996 until November 2002. In addition, she has been the company’s Signature Model since 1982. Prior to becoming Creative Director, Ms. Gray headed the company’s advertising department from 1988 to June 1991 and held various other administrative positions with the company. Ms. Gray is the daughter of Bob Gray and Marie Gray.

Bruce Fetter, a director of the company since November 2002, has served as Chief Operating Officer of the company since October 2001. He also served as Co-Chief Executive Officer of the company from November 2002 to August 2004, as Co-President and Chief Operating Officer of the company from October 2001 until November 2002 and as Executive Vice President and Chief Operating Officer of the company from June 1999 until October 2001. Prior to that he served as Senior Vice President and Chief Operating Officer of the company from November 1997 to June 1999. He joined the company in January 1997 as Vice President­Distribution and in April 1997 was appointed Senior Vice President­Operations. From August 1994 to December 1996 he held the position of Vice President­Logistics for Bob’s Stores, a division of the Melville Corporation.

Marie Gray, Vice Chairman of the Board since May 2003 and a director since inception, is a co-founder of St. John and has served as Chief Designer of the company since its inception in 1962. Ms. Gray served as Secretary of the company from March 1993 to November 2002. Prior to forming St. John, Ms. Gray was a fashion model, served as hostess of the Queen For a Day television show and was a fit model for some of the leading designers in the Los Angeles area. Ms. Gray is the wife of Bob Gray and the mother of Kelly Gray.

Roger Ruppert was appointed Executive Vice President-Finance and Chief Financial Officer of the company in October 2002. He served as Senior Vice President­Finance and Chief Financial Officer of the company from October 1986 to October 2002. Prior to joining the company, Mr. Ruppert was Vice President­Finance and Chief Financial Officer of Cardis Corporation, a publicly traded auto parts distributor, from October 1985 to October 1986. Mr. Ruppert is a certified public accountant.

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Robert Green was appointed Executive Vice President – Sales & Marketing of the company in January 2005. Prior to joining the company, Mr. Green was President and Chief Executive Officer of Vestimenta, an apparel company, from November 2003 to December 2004. From 1994 to November 2003, Mr. Green was employed by Ermenegildo Zegna, most recently serving as Executive Vice President, Sales & Marketing.

Max Weinstein was appointed Executive Vice President – Operations of the company in January 2005. Prior to joining the company, Mr. Weinstein had managed worldwide operations functions, including product development, production, distribution, information technology and facilities management for Calvin Klein since 1999, most recently serving as Corporate Senior Vice President, Global Operations. Mr. Weinstein has over 30 years experience in the apparel industry.

Bob Gray retired from his position as Chairman of the Board and Chief Executive Officer effective November 2002. He is a co-founder of St. John and served as Chairman of the Board of the company since its inception in 1962. Mr. Gray remains a director of the company and Honorary Chairman of the Board. He also served as Chief Executive Officer of the company from its inception until February 2001 and was re-appointed Chief Executive Officer in October 2001. Prior to forming St. John, Mr. Gray held various sales and production positions with Cannady Creations, a small sportswear company, from 1952 to 1962, his last position being General Manager. Mr. Gray is the husband of Marie Gray and the father of Kelly Gray.

Daniel O’Connell, a director of the company since July 1999, is the Chief Executive Officer and founder of Vestar Capital. Mr. O’Connell is a director of Birds Eye Foods, Inc., FL Selenia S.p.A., Solo Cup company and Sunrise Medical Inc.

Sander Levy, a director of the company since July 1999, is a Managing Director of Vestar Capital and was a founding partner of Vestar Capital at its inception in 1988. Mr. Levy is a director of Symetra Financial Corporation, Wilton Re Holdings Limited and Gleason Corporation.

Christopher Henderson, a director of the company since June 2001, is a Managing Director of Vestar Capital and has been a member of the firm since 1993. Mr. Henderson is a director of Gold Toe Corp.

Philip Miller, a director of the company since January 9, 2003, is the President of Philip B. Miller Associates, a consulting firm which he founded in July 2001. Prior to starting his own company, he served as Chairman and CEO of Saks Fifth Avenue, from 1993 to February 2000 and as Chairman from 1993 to July 2001. Prior to that, he held other positions with Saks Fifth Avenue as well as serving as Chairman and CEO of Marshall Field’s. Mr. Miller is a director of Kenneth Cole.

CODE OF ETHICS FOR SENIOR EXECUTIVE AND FINANCIAL OFFICERS

The company’s Board of Directors has adopted a Code of Ethics for Senior Executive and Financial Officers. A copy of the Code of Ethics is available, free of charge, upon written request sent to the legal department at the company’s corporate offices located at 17622 Armstrong Avenue, Irvine, California 92614.

AUDIT COMMITTEE FINANCIAL EXPERT

The company’s Board of Directors has determined that James Kelley and Sander Levy, directors and members of the audit committee, are Audit Committee Financial Experts. Messrs. Kelley and Levy are not independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

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Summary Compensation Table

The following table sets forth the compensation earned by the named executive officers of the company (collectively, the “Named Executive Officers”) for services in all capacities to SJKI and its subsidiaries for the fiscal years indicated:

Employment Agreements

The company is a party to employment agreements with each of Richard Cohen, Kelly Gray and Marie Gray. Mr. Cohen’s employment agreement with the company expires August 9, 2009, subject to automatic one-year extensions if neither the company nor Mr. Cohen notifies the other at least 90 days prior to August 9, 2009 or the end of any applicable extension period that the term shall not be extended. Pursuant to the agreement, Mr. Cohen received a $300,000 signing bonus, subject to repayment in the event Mr. Cohen is terminated by the company for “cause” or he terminates his employment without “good reason” prior to December 31, 2005. The agreement also provides that Mr. Cohen will receive an annual base salary of $1,200,000 and that he is eligible to receive an annual bonus with respect to each fiscal year during the term of the agreement of up to 50% of his base salary in fiscal 2004 and 2005 (but no less than $68,000 in 2004 and $350,000 in 2005) and up to 100% of

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his base salary during the remainder of the term, based on the achievement of performance goals set by the company’s Board of Directors. In addition, the company is also required to (i) pay premiums on a $1,000,000 whole life policy and a $2,000,000 term life policy on the life of Mr. Cohen along with premiums on an individual and a group disability policy, (ii) pay premiums of, or if an insurance policy is not available, reimburse him for, up to $470,000 annually for dependent medical care, (iii) pay relocation costs for his move from New York to California, and (iv) unless prohibited by law, if requested by Mr. Cohen, loan him up to $500,000 to apply towards his purchase of a primary residence in Southern California, at the lowest rate not resulting in income to Mr. Cohen, repayable upon the sale of his New York residence.

In the event of termination of Mr. Cohen’s employment by the company with “cause,” or by him without “good reason,” the employment agreement provides that he will receive salary and benefits earned through the date of termination (“Accrued Rights”) and continuation of the dependent care coverage until the earlier of the second anniversary of his termination or the date on which be becomes employed elsewhere. If Mr. Cohen is terminated due to death or disability, he will receive his Accrued Rights, continuation of the dependent care coverage until the later of one year following such termination or the expiration of the term of the employment agreement assuming he had not died or been disabled, and a lump sum payment equal to a pro rata portion of the annual bonus that he would have actually earned in the fiscal year in which termination occurred if he had remained employed (the “Pro Rata Bonus”). In the event of termination of employment by the company without “cause,” or by Mr. Cohen with “good reason,” he will receive (i) the Pro Rata Bonus, (ii) continued base salary payments for two years (the “Severance Period”), (iii) an amount equal to approximately two times his historical average annual bonus payable in installments over the Severance Period, (iv) continuation of health insurance coverage for the Severance Period, (v) continuation of the dependent care coverage until the later of expiration of the Severance Period or expiration of the term as if such termination had not occurred, and (vi) his Accrued Rights. In addition, if the company elects not to extend the term of the agreement at the end of the initial term or any renewal period, then, he will be entitled to continued payment of his base salary, health insurance coverage and dependent care coverage for one year, and an amount equal to his historical average annual bonus payable over one year.

Pursuant to the terms of the employment agreement, Mr. Cohen also agreed to acquire 1,667 shares of the company’s common stock at a purchase price of $30.00 per share and received a grant of stock options to purchase (i) 50,000 shares at $30.00 per share, (ii) 50,000 shares at $40.00 per share, (iii) 50,000 shares at $50.00 per share and (iv) 50,000 shares at $60.00 per share under the company’s stock option plan.

Kelly Gray’s employment agreement expires December 31, 2007, subject to automatic one-year extensions if neither the company nor Ms. Gray notifies the other at least 90 days prior to the original expiration date, or the end of any applicable extension period, that the term shall not be extended. The agreement provides that Ms. Gray will receive an annual base salary of $650,000 in calendar 2005 and $750,000 in calendar 2006 and 2007. For any extensions of the term beyond the third year, her base salary will be determined by the Chief Executive Officer and approved by the Board of Directors. However, at no time will her base salary be less than that of the highest paid designer of the company, other than Marie Gray.

She is also eligible to receive an annual bonus with respect to each year during the term of the agreement of up to $200,000 in calendar 2005 and up to 30% of her base salary in each calendar year thereafter, based on achievement of company and individual performance goals approved by the Board of Directors. The agreement also entitles her to receive an automobile allowance of $2,000 per month and to participate in the company’s clothing allotment program, and its other employee plans and benefits. In addition, in calendar 2005, Ms. Gray will receive a modeling fee of $250,000.

In the event of termination of Kelly Gray’s employment by the company with “cause,” by her without “good reason,” or due to her death or disability, the employment agreement provides that she will receive her Accrued Rights. In the event of termination of employment by the company without “cause,” or by Ms. Gray with “good reason,” she will receive (i) a lump sum payment, within 60 days of the beginning of the following year, equal to a pro rata portion of the annual bonus that she would have earned in the year in which termination occurred if she had remained employed, (ii) continuation of base salary payments for eighteen months, (iii) continuation of health insurance coverage, at the company’s cost, for eighteen months, (iv) any unpaid portion of the $250,000 modeling fee for 2005 and (v) her Accrued Rights. In addition, if the company elects not to extend the term of the agreement at the end of the initial term or any renewal period, then she will be entitled to receive the same benefits as if she were terminated by the company without cause, except that the continuation of base salary and health insurance coverage shall be reduced to nine months.

Marie Gray’s employment agreement with the company expires December 31, 2005 and provides for an annual base salary of $750,000. In the event of termination of Marie Gray’s employment by the company with “cause,” or by her without “good reason,” the employment agreement provides that she will receive her Accrued Rights. In the event of termination of employment by the company without “cause,” or by Ms. Gray with “good reason,” she will receive continued salary payments for one year and health benefits for the longer of the remainder of the term of the agreement or six months. In addition, her employment agreement provides that the company will pay severance payments in the form of salary and health benefits

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continuation for a period equal to one month for each year of service, up to a maximum of eighteen months, if her employment is terminated by reason of a disability. Finally, in the event Marie Gray’s employment agreement is terminated for “good reason” due to the fact that a successor company did not assume the agreement, she would also receive a lump sum payment of $1,500,000.

Option Grants in Last Fiscal Year

The following table sets forth information with respect to the Named Executive Officers concerning the number of stock options granted during the fiscal year ended October 31, 2004:

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth information with respect to the Named Executive Officers concerning the exercise of options during the fiscal year ended October 31, 2004 and unexercised options held by each such officer as of October 31, 2004: