Saucony, Inc. Reports Fourth Quarter and Fiscal Year 2001 Results.Business Editors PEABODY Peabody (pē`bədē, –bädē), city (1990 pop. 47,039), Essex co., NE Mass., a suburb of Boston, on the Danvers River; settled c.1633, inc. as South Danvers 1855, name changed 1868. , Mass.--(BUSINESS WIRE)--Feb. 15, 2002 Saucony, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : SCNYA and SCNYB) today announced financial results for the fourth quarter and fiscal year 2001. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the fourth quarter were $21.6 million compared to $31.7 million in the fourth quarter of 2000. The Company reported a net loss of $2.8 million or $0.46 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, compared to net income of $600,000, or $0.09 per share on a diluted basis, for the same period in 2000. In the fourth quarter the Company incurred non-recurring charges of $2.1 million, $1.3 million after tax, or $0.21 per diluted share related to the closing of its Bangor, Maine For other places with the same name, see Bangor. Bangor is a city in and the county seat of Penobscot County, MaineGR6, United States. It is the major commercial center for eastern and northern Maine. For U.S. manufacturing facility, the early termination and exit of a retail store lease, the closure of its Taiwan Taiwan (tī`wän`), Portuguese Formosa, officially Republic of China, island nation (2005 est. pop. 22,894,000), 13,885 sq mi (35,961 sq km), in the Pacific Ocean, separated from the mainland of S China by the 100-mi-wide (161-km) Taiwan office and other reorganization related expenses. On an operational basis, excluding the effects of the non-recurring charges, the Company reported a fourth quarter net loss of $1.5 million, or $0.25 per share on a diluted basis. For the fiscal year ended January January: see month. 4, 2002, net sales were $132.3 million compared to $167.8 million in 2000. The net loss was $900,000, or $0.15 per share on a diluted basis, compared to net income of $9.0 million, or $1.41 per share on a diluted basis, for the same period last year. The Company's fiscal year results in 2001 results included the non-recurring charges discussed above with respect to the fourth quarter. On an operational basis, excluding the effects of the non-recurring fourth quarter 2001 charges, the Company reported net income of $400,000, or $0.06 per share on a diluted basis, for the year ended January 4, 2002. John H. Fisher, President and Chief Executive Officer, commented, "Our ability to exceed our fourth quarter guidance on an operational basis was driven primarily by the performance of our Saucony domestic division. While we are disappointed with our fiscal 2001 results, we significantly strengthened our business platform during the year and ended the year with over $22 million in cash and no bank debt. Much has been accomplished during the past twelve months and our improvement efforts continue as we navigate (1) "Surfing the Web." To move from page to page on the Web. (2) To move through the menu structure in a software application. through what remains a challenging environment." "At the beginning of fiscal 2001, we made a conscious decision to re-dedicate ourselves to our core business, where we have a strong foothold foot·hold n. 1. A place providing support for the foot in climbing or standing. 2. A firm or secure position that provides a base for further advancement. foothold Noun 1. , a long heritage and considerable consumer loyalty," Mr. Fisher continued. "Over the past year, we implemented a number of strategic initiatives aimed at furthering Saucony's leadership status in the $3 billion technical running market and better positioning the Company for the future. From an operational standpoint The Standpoint is a newspaper published in the British Virgin Islands. It was originally published under the name Pennysaver, largely as a shopping-coupon promotional newspaper, but since emerged as one of the most influential sources of journalism in the , we re-sized our domestic footwear Footwear consists of garments worn on the feet. It is worn for a variety of reasons, including protection against the environment, hygiene and adornment. Usually, socks and other hosiery are worn between the feet and the footwear, except for sandals and flip flops (thongs). business expense levels, which resulted in a more efficient cost structure, shut down our footwear manufacturing plant in Maine Maine, ship Maine, U.S. battleship destroyed (Feb. 15, 1898) in Havana harbor by an explosion that killed 260 men. The incident helped precipitate the Spanish-American War (Apr., 1898). Commanded by Capt. Charles Sigsbee, the ship had been sent (Jan. , thereby fully exiting the manufacturing business and we closed an under-performing retail store. We also completed the closure of our Taiwan office and opened a new sourcing and development facility in close proximity to our key footwear suppliers in China. With regard to personnel, we made a series of executive level changes that greatly enhanced our development and sourcing capabilities, we reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. our management team to streamline operations and better align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. our marketing, product development and new business functions and we significantly upgraded our entire retail store management team. Additionally, we decided to phase out our Hyde Hyde, town (1991 pop. 33,657), Tameside metropolitan district, NW England, in the Greater Manchester metropolitan area. It has iron foundries and factories that produce cotton, machinery, rubber, paper, and hats. Authentics AUTHENTICS, civ. law. This is the name given to a collection of the Novels of Justinian, made by an anonymous author. It is called authentic on account of its authority. 2. There is also another collection which bears the name of authentics. lifestyle footwear business over the next few months. Finally, from a product standpoint, we introduced our new proprietary footwear technology, Custom Ride Management, in our core technical footwear distribution channel. We now believe we have the strategies and infrastructure in place to take this company to the next level and look forward to capitalizing on the opportunities we have created." Order Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. John Fisher
Saint John Fisher also John Cardinal Fisher (c. 1469 – 1535), was an English Catholic bishop, cardinal and martyr. continued, "Our backlog of open orders at January 4, 2002 scheduled for delivery within the next five months (January 4, 2002 - May 31, 2002) totaled approximately $40.4 million, compared to five month backlog of $61.2 million at the end of the fiscal year 2000. At January 4, 2002, our open order backlog scheduled for delivery in the next 12 months was $42.5 million, compared to the January 5, 2001 12-month backlog of $66.4 million. Mr. Fisher continued, "The decline in Originals order backlog continues to drive our unfavorable results in comparison with fiscal 2000. We believe that decline rate in Originals will significantly lessen less·en v. less·ened, less·en·ing, less·ens v.tr. 1. To make less; reduce. 2. Archaic To make little of; belittle. v.intr. To become less; decrease. . While our technical order backlog has also declined, it is primarily due to a shift to more fashion oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. product selling in athletic mall accounts. We remain cautiously optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op regarding our technical product business as we enter fiscal 2002." Inventory Mr. Fisher remarked, "Our supply chain initiatives have continued to yield positive results as we have significantly reduced our inventory levels in the face of continuing order cancellations. At year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. , we continued to sell inventory from prior period order cancellations at reduced prices. While we experienced order cancellations in the fourth quarter, they were again at a reduced volume from the past few quarters. We expect to continue to sell the resulting inventory on a discounted basis." Net Sales Net sales for the fourth quarter of 2001 were $21.6 million compared to $31.7 million in the fourth quarter of 2000 due primarily to decreased domestic Saucony footwear sales. Domestic net sales decreased 38% to $16.8 million compared to $27.1 million in the fourth quarter of 2000 due primarily to decreased domestic Saucony footwear unit volume. International sales increased 4% to $4.8 million from $4.6 million in the fourth quarter of 2000 due primarily to increased Saucony distributor footwear unit volume. Saucony brand footwear accounted for approximately 74% of Company fourth quarter 2001 sales, while a combination of Hind hind 1. emanating from or pertaining to hindlimb. 2. adult female deer, especially red and other large species. blue hind a hind which has not borne young. apparel, factory outlet store An outlet store or factory outlet is a retail store in which manufacturers sell their stock directly to the public through their own branded stores. The stores can be can be brick and mortar or online. and Authentics revenues accounted for the balance. For fiscal year 2001, net sales decreased to $132.3 million compared to $167.8 million in the prior year due primarily to decreased domestic Saucony footwear sales. Domestic net sales decreased 27% to $106.5 million from $145.8 million in 2000 due to decreased domestic Saucony footwear unit volume. International sales in 2001 increased 17% to $25.8 million from $22.0 million in 2000 due primarily to increased Saucony footwear unit volume. Saucony brand footwear accounted for approximately 83% of sales during 2000, while a combination of Hind apparel, factory outlet store and Authentics revenues accounted for the balance. Gross Margin The Company's gross margin in the fourth quarter of 2001 decreased to 29.1% compared to 33.4% in the fourth quarter of 2000, due primarily to the significant decline in Saucony domestic sales levels of first quality footwear products at full margin. Other factors contributing to the margin decrease were proportionately pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. higher sales of closeout closeout, closure the finalization of a feeding program in a feedlot. The cattle are sold and a balance sheet is struck which includes the costs of feeding and housing or confining them. footwear, manufacturing inefficiencies and changes in the geographic mix of sales. For the fiscal year ended January 4, 2002, gross margins decreased to 31.9% compared to 37.1% in the fiscal year ended January 5, 2001, due primarily to the decline in Saucony domestic sales levels of first quality footwear products at full margin, the decision to reduce inventories which resulted in increased domestic sales of closeout footwear, increased sales of special make-up Make-up The amount of deficiency when a cash flow or capital item is deficient. For example, an interest make-up relates to the interest amount above a ceiling percentage. footwear, and to a lesser extent, manufacturing inefficiencies, domestic pricing pressures, changes in the geographic mix of sales and the negative impact of the U.S. dollar on European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. margins. Selling, General and Administrative Expenses Selling, general and administrative expenses as a percentage of net sales were 37.3% in the fourth quarter of 2001 compared to 30.4% in the fourth quarter of 2000. In absolute dollars, selling, general and administrative expenses decreased 16% due to decreased print media, decreased account specific advertising and promotion, reduced variable selling expenses and decreased payroll, offset somewhat by increased operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. associated with the factory outlet expansion. Selling expenses as a percentage of net sales in the fourth quarter of 2001 increased to 17.1% from 15.8% in the 2000 period, while general and administrative expenses increased to 20.2% of net sales compared to 14.6% in the fourth quarter of 2000. For the fiscal year ended January 4, 2002, selling, general and administrative expenses as a percentage of net sales were 30.6% compared to 25.9% in 2000. In absolute dollars, selling, general and administrative expenses decreased 7% due primarily to reduced operating expenses associated with the cycling division divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). , decreased media spending and, to a lesser extent, deceased deceased 1) adj. dead. 2) n. the person who has died, as used in the handling of his/her estate, probate of will and other proceedings after death, or in reference to the victim of a homicide (as: "The deceased had been shot three times. account-specific advertising and promotion, reduced variable selling expenses and incentive compensation, offset in part by higher provisions for doubtful accounts and increased operating expenses associated with the factory outlet expansion. Selling expenses as a percentage of net sales in 2001 increased to 16.6% from 15.2% in 2000, while general and administrative expenses increased to 14.0% of net sales compared to 10.7% in 2000. Net Income The net loss for the fourth quarter of 2001 was $2.8 million, or $0.46 per share on a diluted basis, compared to net income of $600,000, or $0.09 per share on a diluted basis, in the fourth quarter of 2000. For the fiscal year ended January 4, 2002, the net loss was $900,000, or $0.15 per share on a diluted basis, compared to net income of $9.0 million, or $1.41 per share on a diluted basis, in the comparable 2000 period. Stock Repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. Program During fiscal 2001, the Company repurchased 19,000 shares of its Common Stock for a total expenditure of $133,000. Under the stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. program approved by the Board of Directors in May 1998, the Company has purchased a total of 467,000 shares of its Common Stock for a total expenditure of $4.364 million. Business Outlook The Company is providing guidance in this press release as to its anticipated results of operations for future periods. This guidance is based on the Company's current information and expectations, and actual results may differ materially. The Company undertakes no obligation to update this information. Please see the further disclaimer (networking) disclaimer - Statement ritually appended to many Usenet postings (sometimes automatically, by the posting software) reiterating the fact (which should be obvious, but is easily forgotten) that the article reflects its author's opinions and not necessarily those of the in the last paragraph of this release. This guidance is updated from that previously issued. The following information replaces our previous guidance. First Quarter and Fiscal Year 2002 The Company expects fully diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of to range from $0.15 to $0.18 for the first quarter of 2002 and to range from $0.35 to $0.45 for the year. The Company expects first quarter net sales to range from $31 million to $32 million. The Company expects net sales for the year to range from $110 million to $117 million. The Company expects gross margins to be approximately 36% for the first quarter and approximately 35% for the year. The Company expects selling, general and administration expenses to be approximately 30% of sales for the first quarter and approximately 31% for the year. Mr. Fisher concluded, "Our entire company has rallied around a common goal, which is to reassert reassert Verb 1. to state or declare again 2. reassert oneself to become significant or noticeable again: reality had reasserted itself Verb 1. Saucony as a global leader in the technical running market. Fiscal 2001 was a very difficult and sobering so·ber adj. so·ber·er, so·ber·est 1. Habitually abstemious in the use of alcoholic liquors or drugs; temperate. 2. Not intoxicated or affected by the use of drugs. 3. year. It taught us important lessons. We have reacted aggressively against the areas which needed immediate attention and improvement. We have created a much improved platform for growth and we are committed to executing on a strategy that will result in long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth and increased shareholder value." Prior Year Statement Reclassifications As a result of new accounting rules addressing shipping and handling fees and costs, certain items in the prior years' financial statements have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the new rules. Investor Conference Call The Company will provide a web simulcast Simulcast is a portmanteau of "simultaneous broadcast", and refers to programs or events broadcast across more than one medium, or more than one service on the same medium, at the same time. and rebroadcast of its fourth quarter earnings release conference call. The live broadcast of the Company's quarterly conference call is scheduled for February February: see month. 15, 2002, beginning at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy and will be accessible online at www.streetevents.com and www.sauconyinc.com. The online replay will be available shortly after the conference call and will continue to be available through March 1, 2002. Saucony, Inc. designs, develops, manufactures and markets (i) a broad line of performance-oriented athletic shoes An athletic shoe is a generic name for a shoe designed for sporting and physical activities, and is different in style and build than a dress shoe. Originally known as sporting apparel, today they are known as casual footwear. for adults under the Saucony(R) brand name, (ii) athletic apparel under the Hind(R) brand name, (iii) athletic and workplace shoes under the Spot-bilt(R) name and (iv) casual footwear under the Hyde(R) name. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve a number of risks and uncertainties. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "intends," "estimates," and similar expressions are intended to identify forward-looking statements, and all of our statements under "Business Outlook" above are forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. under "Item 7 - Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations - Certain Other Factors that May Affect Future Results" ("Certain Factors") filed by Saucony, Inc. with the Securities and Exchange Commission on April 4, 2001, which Certain Factors discussion is incorporated herein by this reference. In particular, there can be no assurance as to the level of revenues, net income, gross margins, selling, general and administrative expenses, income tax provisions and other operating results that will be achieved by the Company because such items are materially dependent upon the condition of the domestic and world economies, the impact of foreign regulation and the performance of foreign suppliers, competition from third parties and consumer preferences. All forward-looking statements are made only as of the date of this press release. The Company makes no undertaking to update any of these statements.
SAUCONY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
(in thousands)
ASSETS
January 4, January 5,
2002 2001
---- ----
Current assets:
Cash and cash equivalents $ 22,227 $ 4,738
Accounts receivable 14,742 26,706
Inventories 28,404 38,404
Prepaid expenses and other
current assets 4,165 3,683
--------- ---------
Total current assets 69,538 73,531
--------- ---------
Property, plant and equipment, net 6,989 7,581
--------- ---------
Other assets 1,573 2,173
--------- ---------
Total assets $ 78,100 $ 83,285
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 0 $ 2,596
Current maturities of long term debt 88 204
Accounts payable 6,635 6,654
Accrued expenses and other current
liabilities 5,602 6,465
--------- ---------
Total current liabilities 12,325 15,919
--------- ---------
Long-term obligations:
Long-term debt 0 34
Deferred income taxes 1,949 2,140
Other long-term obligations 204 187
--------- ---------
Total long-term obligations 2,153 2,361
--------- ---------
Minority interest in consolidated
subsidiaries 460 385
--------- ---------
Stockholders' equity:
Common stock, $.33 1/3 par value 2,250 2,244
Additional paid in capital 17,398 17,112
Retained earnings 50,702 51,642
Accumulated other comprehensive
income (1,301) (792)
---------- ----------
Total 69,049 70,206
Less:
Common stock held in treasury, at cost (5,417) (5,285)
Notes receivable (303) (296)
Unearned compensation (167) (5)
---------- ----------
Total stockholders' equity 63,162 64,620
--------- ---------
Total liabilities and stockholders'
equity $ 78,100 $ 83,285
========= =========
SAUCONY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
For the Thirteen Weeks and Fifty-Two Weeks Ended
January 4, 2002 and January 5, 2001
(Unaudited)
(Amounts in thousands, except per share data)
Thirteen Thirteen Fifty-Two Fifty-Two
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
January 4, January 5, January 4, January 5,
2002 2001 2002 2001
---- ---- ---- ----
Net sales $ 21,589 $ 31,701 $ 132,261 $ 167,797
Other revenue 35 (15) 103 123
-------- ---------- ---------- ---------
Total revenue 21,624 31,686 132,364 167,920
-------- --------- ---------- ---------
Costs and expenses
Cost of sales 15,305 21,098 90,118 105,595
Selling expenses 3,694 5,016 21,910 25,503
General and administrative
expenses 4,363 4,625 18,497 18,038
Plant closing and other
non-recurring charges 2,108 0 2,108 0
Loss on disposition of
cycling division 0 (282) 0 2,661
-------- ---------- ---------- ---------
Total costs and expenses 25,470 30,457 132,633 151,797
-------- --------- ---------- ---------
Operating income (loss) (3,846) 1,229 (269) 16,123
Non-operating income (expense)
Interest, net (35) (63) (153) (626)
Foreign currency (234) (37) (46) (28)
Other 138 (21) 104 44
-------- ---------- ---------- ---------
Income (loss) before income
taxes and minority interest (3,977) 1,108 (364) 15,513
Provision (benefit) for income
taxes (1,153) 490 475 6,461
Minority interest in income of
consolidated subsidiary 0 16 101 89
-------- --------- ---------- --------
Net income (loss) $ (2,824) $ 602 $ (940)$ 8,963
========= ========= ========== ========
Per share amounts:
Earnings per common share
- basic $ (0.46) $ 0.09 $ (0.15)$ 1.45
========= ======== ========== ========
Earnings per common share
- diluted $ (0.46) $ 0.09 $ (0.15)$ 1.41
========= ======== ========== ========
Weighted average common shares
and equivalents outstanding 6,083 6,573 6,080 6,341
======== ========= ========== ========
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