Converse Announces Third Quarter 2000 Results.

Business Editors

NORTH READING, Mass.--(BUSINESS WIRE)--Nov. 14, 2000

Converse Inc. (OTCBB:CVEO) today announced financial results for its third quarter ended September 30, 2000.

Third Quarter 2000 Results

Net revenue for the third quarter of fiscal 2000 was $53.6 million, down 13.1% from last year's third quarter of $61.7 million. Excluding $4.6 million of net revenue in the third quarter of 1999 relating to the conversion of wholly-owned foreign operations into licensing arrangements, net revenue declined 6.1% for the third quarter of 2000. Net revenue in the U.S. increased 12.0% to $41.2 million in the third quarter of 2000 compared to $36.8 million for the third quarter of 1999. International net revenue decreased 50.2% to $12.4 million for third quarter of 2000 from $24.9 million for the third quarter of 1999.

The company recorded earnings from operations of $0.8 million in the third quarter of 2000 compared to a loss from operations of $0.5 million in the third quarter of 1999. The company's reported net loss for the third quarter of 2000 was $6.3 million compared to a net loss of $8.6 million in the third quarter of 1999.

Nine Months 2000 Results

For the nine month period ended September 30, 2000, net revenue was $162.5 million compared to $191.0 million for the nine months ended October 2, 1999, a decrease of 14.9%. Excluding $14.6 million of net revenue recorded for the nine months of 1999 relating to the conversion of wholly-owned foreign operations into licensing arrangements, net revenue declined 7.9% for the nine months of 2000. Net revenue in the U.S. increased 8.8% to $115.1 million for the nine months of 2000 compared to $105.8 million for the nine months of 1999. International net revenue declined 44.4% to $47.4 million for the nine months of 2000 from $85.2 million for the nine months of 1999.

The Company recorded earnings from operations for the nine months of 2000 of $4.1 million compared to $2.2 million for the nine months of 1999. The Company's reported net loss was $16.1 million for the nine months of 2000 compared to a net loss of $17.4 million for the nine months of 1999.

Backlog 

At the end of the third quarter of 2000, the Company's global order backlog was $88.1 million compared to $85.5 million at the end of the third quarter of 1999, an increase of 3.0%. The U.S. backlog at the end of the third quarter of 2000 was $56.9 million, or 3.5% ahead of last year while the international backlog was $31.2 million, or 2.3% ahead of last year.

General

There are a number of defaults under the Company's senior secured credit facility, 15% senior secured notes and subordinated unsecured convertible debt. The outstanding principal amount of all such indebtedness at September 30, 2000 was approximately $168 million. To address the defaults under the credit facility, the Company entered into a Forbearance Agreement, dated as of October 27, 2000, with the lenders and the agent. To address defaults under the secured notes, the Company has entered into a Fourth Supplement to Note Purchase Agreements and Standstill Agreement, dated as of October 27, 2000, with the holders of the secured notes. The forbearance periods under these agreements will continue until January 31, 2001 unless terminated earlier upon the occurrence of certain events, as described therein.

Any statements set forth above which are not historical facts are forward looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Potential risks and uncertainties include such factors as the financial strength of the company, the competitive pricing environment and inventory levels within the footwear and apparel industries, consumer demand for athletic footwear, market acceptance of the company's products, the availability and cost of working capital financing, the strength of the U.S. dollar and the success of planned advertising, marketing and promotional campaigns and other risks identified in documents filed by the company with the Securities and Exchange Commission.

                    CONVERSE INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
           (Dollars in thousands, except per share amounts)
                              (Unaudited)

                           Three Months Ended     Nine Months Ended
                           Sept. 30,   Oct. 2,   Sept. 30,   Oct. 2,
                              2000      1999       2000       1999

Net revenue                 $53,552    $61,651   $162,471   $190,969
Cost of sales                42,857     46,815    127,983    142,340

Gross profit                 10,695     14,836     34,488     48,629
Selling, general and
 administrative expenses     13,933     20,598     43,026     60,963
Royalty income                4,040      5,251     12,258     15,033
Restructuring and other
 unusual charges (credits)       --         --       (387)       543
Earnings from operations        802       (511)     4,107      2,156
Interest (loss)
 expense, net                 5,060      5,683     16,041     16,205
Other expense, net            1,370      1,321      2,105        419

Loss before income tax       (5,628)    (7,515)   (14,039)   (14,468)
Income tax expense              670      1,061      2,036      2,927

Net loss                    $(6,298)   $(8,576)  $(16,075)  $(17,395)

Net basic and diluted
 loss per share              $(0.36)    $(0.49)    $(0.92)    $(1.00)

Weighted average number
 of common shares
 outstanding                 17,521     17,451     17,509     17,392



                    CONVERSE INC. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEET
           (Dollars in thousands, except per share amounts)
                              (Unaudited)


                                           September 30,  October 2,
                                                2000         1999
ASSETS
Current assets:
 Cash and cash equivalents                  $   2,047    $   1,708
 Receivables, less allowances
  of $2,179 and $2,086, respectively           35,934       47,599
 Inventories                                   60,310       72,479
 Prepaid expenses and other current assets      2,018        7,555

   Total current assets                       100,309      129,341

Net property, plant and equipment              15,288       19,438
Other assets                                   11,122       31,549
                                            $ 126,719    $ 180,328

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
 Short-term debt                            $   1,519    $   7,180
 Credit facility                               64,887       81,829
 Current portion of long-term debt            102,908           --
 Accounts payable                              38,636       33,667
 Accrued expenses                              16,704       11,832
 Income taxes payable                           6,578        3,587
   Total current liabilities                  231,232      138,095
Long-term debt                                     --      102,339
Current assets in excess of
 reorganization value                          24,585       26,663

Stockholders' equity (deficiency):
 Common stock, $1.00 stated value,
  50,000,000 shares authorized,
  17,535,555 and 17,479,025, shares
  issued and outstanding at
  September 30, 2000 and October 2, 1999,
  respectively                                 17,536       17,479
 Preferred stock, no par value,
  10,000,000 shares authorized,
  none issued and outstanding                      --           --
 Additional paid-in capital                     4,463        4,817
 Unearned compensation                           (386)      (1,271)
 Retained deficit                            (147,812)    (105,524)
 Accumulated other
  comprehensive income                         (2,899)      (2,270)

       Total stockholders'
        equity (deficiency)                  (129,098)     (86,769)

                                            $ 126,719    $ 180,328