Converse announces second quarter results.

NORTH READING, Mass.--(BUSINESS WIRE)--August 5, 1996--Converse Inc. (NYSE:CVE) today announced financial results for the second quarter and six months ended June 29, 1996.

Revenues for the second quarter were $79.9 million compared to $89.3 million in the second quarter of 1995. Income from operations was $2.3 million versus a loss from operations of $9.4 million for the same period last year. Income from operations for the second quarter of 1996 included a restructuring credit of $2.2 million as the sale of an idle asset generated proceeds in excess of the Company estimates. The net loss was $3.7 million or $0.22 per share compared to a net loss of $32.4 million or $1.94 per share for the second quarter of 1995.

For the six month period, revenues were $166.5 million versus $220.5 million for the same period last year. Income from operations was $2.5 million compared to income from operations of $7.7 million for the six months ended July 1, 1995. The net loss for the six month period was $7.0 million or $0.42 per share, versus a net loss of $23.8 million, or $1.43 per share for the same period last year.

The Company stated that second quarter financial results reflect declines of 8.5% in U.S. sales and 13.4% in international sales. The Company's basketball and athleisure categories experienced sales declines which were partially offset by increased sales of children's products.

During the six months ended June 29, 1996, the Company achieved significant reductions in its selling, general and administrative expenses as a result of its restructuring plan announced in November of 1995. For the six month period, selling, general and administrative expenses were $55.4 million, a net reduction of $19.1 million or 25.7%. Royalty income for the six month period increased 45.1% to $11.2 million.

Converse's backlog of firm orders was $126 million as of June 29, 1996 versus $139 million as of July 1, 1995.

Glenn Rupp, Chairman and Chief Executive Officer, stated, "While we are not pleased with our six month results, they were not unexpected given our order backlog position at December 1995. Measures taken to strictly control our operating expenses have enabled us to achieve operating earnings at lower sales levels as we position ourselves for further growth. The continued growth in royalty income enhances the Company's brand strength worldwide."

Mr. Rupp continued, "Since my arrival in April 1996, I have identified several strategic objectives which we believe will result in improved results, both short and long term. First among these is the development of innovative products which emphasize our 79 year heritage. The All Star 2000 performance basketball shoe, introduced to stores in July, has received a very positive response, both from retail customers and consumers. We are also enthusiastic about the initial reaction to our Spring 1997 line which was introduced at a recent industry show in Chicago. In addition, the Company has signed a memorandum of understanding with Lucasfilm Ltd. and BBC International, Ltd. to produce the Star Wars Collection by Converse, ranging from sneakers with interactive sound technology to sport sandals to themed Chuck Taylor All Star styles. This collection's release will coincide with the release of the Star Wars Trilogy Special Edition in theaters around the world in 1997."

"Operationally, we are reviewing our international strategies and are updating our internal systems to improve asset management worldwide. We remain committed to improved customer service through enhanced manufacturing capabilities, more rapid order response to retail customers and development of marketing campaigns to facilitate stronger performance of our products at retail," concluded Mr. Rupp.

Converse Inc., the largest U.S. manufacturer of athletic shoes, is a leading designer, manufacturer and marketer of high quality athletic and leisure footwear and is a licensor of sports apparel and accessories that are distributed worldwide through over 9,000 athletic specialty, sporting goods, department and shoe stores.

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 and competitive pricing environment of the footwear and apparel industry, product demand, market acceptance, 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 STATEMENTS OF OPERATIONS
                 (Dollars in thousands, except per share amounts)
                                    (Unaudited)

                           Three Months Ended       Six Months Ended
                     June 29, 1996 July 1, 1995 June 29, 1996 July 1, 1995

Net sales               $79,907    $89,324        $166,458    $220,520
Cost of sales            57,020     59,509         121,954     145,037
Gross profit             22,887     29,815          44,504      75,483
Selling, general and
 administrative expenses 29,129     42,673          55,435      74,560
Royalty income            6,317      4,448          11,245       7,751
Restructuring
 expense (credit)        (2,209)     1,000          (2,209)      1,000
Earnings (loss)
 from operations          2,284     (9,410)          2,523       7,674
Loss on investment in
 unconsolidated subsidiary  515     41,599             515      41,599
Interest expense          4,256      3,042           8,093       5,993
Other (income) expense, net 621     (1,584)          1,497      (1,517)
Earnings (loss) before
 income tax              (3,108)    (52,467)        (7,582)    (38,401)
Income tax
 expense (benefit)          635     (20,114)          (580)    (14,558)
Net earnings (loss)    $ (3,743)   $(32,353)      $ (7,002)   $(23,843)
Net earnings (loss)
 per share             $  (0.22)   $   (1.94)     $  (0.42)   $   (1.43)
Weighted average number
 of common shares        16,692       16,692        16,692       16,692

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

                                                June 29,    December 30,
                                                 1996            1995

Assets
Current assets:
  Cash and cash equivalents                   $   4,031      $   2,738
  Restricted cash                                   889            443
  Receivables, less allowances of
   $1,715 and $2,237 respectively                73,485         61,688
  Inventories                                    97,209         81,903
  Refundable income taxes                         --            11,377
  Prepaid expenses and other current assets      22,647         21,059
  Total current assets                          198,261        179,208
Asset held for sale                               --             3,066
Net property, plant and equipment                17,058         15,521
Other assets                                     24,884         26,712
                                               $240,203       $224,507

Liabilities and Stockholders' Equity (Deficiency)
Current liabilities:
  Short-term debt                                19,721         13,906
  Current maturities of long-term debt            5,987          6,324
  Accounts payable                               50,027         34,208
  Accrued expenses                               27,251         33,295
  Income taxes payable                            2,237          1,795
     Total current liabilities                  105,223         89,528
Long-term debt, less current maturities         121,088        112,824
Current assets in excess of reorganization value 33,415         34,454
Deferred postretirement benefits
 other than pensions                             10,284         10,386
Stockholders' equity (deficiency):
  Common stock $1.00 stated value, 50,000,000 shares
   authorized, 16,692,156 shares issued
   and outstanding                               16,692        16,692
Preferred stock, no par value, authorized
   10,000,000 shares
   none issued and outstanding                      --             --
  Additional paid in capital                      3,528          3,528
  Retained earnings (deficit)                  (48,833)       (41,830)
  Foreign currency translation adjustment       (1,194)        (1,075)
Total stockholders' equity (deficiency)        (29,807)       (22,685)
                                               $240,203       $224,507

CONTACT: Converse Inc.

Investor Contact: Donald J. Camacho 

508/664-1100

Media Contact: Ellen Pulda, 508/664-1100

or

Morgen-Walke Associates

Christine DiSanto/Caroline Babbitt, 212/850-5600

Stacy Berns, 212/850-5600