Stride Rite Reports Increased First Quarter Sales and Solid Financial Results; Results Include Saucony Acquisition Related Charges and Expenses Related to the Adoption of SFAS No. 123R for Share Based Compensation.LEXINGTON, Mass. -- The Stride Rite Corporation The Stride Rite Corporation (NYSE: SRR) is an American shoe manufacturer based in Lexington, Massachusetts. The company owns many popular brands of shoes including Keds, Saucony, Sperry Top-Sider, and Spot-Bilt. (NYSE NYSE See: New York Stock Exchange : SRR SRR Short-Range Radar SRR System Requirements Review SRR Shaped Round Robin (queuing protocol for Cisco routers) SRR Special Reconnaissance Regiment (British Army) SRR Split Ring Resonator ) today reported record first quarter fiscal 2006 sales of $183.4 million, an increase of 22% compared to the same period in the prior year. Net income for the first quarter totaled $8.3 million or $.22 per 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. share, compared to the net income of $8.2 million or $.22 per diluted share in the first quarter of 2005. The first quarter financial results includes a pre-tax expense of $2.6 million related to the flow through of the write-up of inventory purchased in the Saucony acquisition as required by GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). accounting rules. In addition, the current quarter includes pre-tax acquisition related integration expenses of $1.2 million. Also, during the first quarter, the Company adopted SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123R, "Share-Based Payment", the impact of which increased pre-tax expenses by approximately $700 thousand. Excluding acquisition related integration costs and the flow through of the inventory write-up, net income would have been $10.6 million for the first quarter, while 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 would have been $.28. See the section entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Non-GAAP Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma Financial Measures" and the "Reconciliation of Non-GAAP Measures" provided in this release for additional description of these Non-GAAP Measures. David Chamberlain David Chamberlain, born December 25, 1975, is a cross-country skier from the United States. He was born and raised in Wilton, Maine and was a standout in cross-country skiing in high school. He then attended Bates College, and was an All-American in skiing. , Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Stride Rite, commented that the first quarter of 2006 was a solid start to the year. "The positive impact of Saucony sales and profits was evident in the quarter. We are on schedule with our integration of the Saucony business. On March 20th we moved the Saucony associates into our Lexington, Massachusetts Lexington is a town in Middlesex County, Massachusetts, United States. The population was 30,355 at the 2000 census. The town is famous for being the site of the opening shots of the Battles of Lexington and Concord, the first engagement of the American Revolution. headquarters and Saucony began shipping from our existing warehouse facility in Louisville, Kentucky  “Louisville” redirects here. For other uses, see Louisville (disambiguation). ." "The Children's Group 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 were impacted by the later Easter holiday this year and shifting of the preseason retail store event into the second quarter. Our company-owned retail stores same store growth percentages were down year-over-year as planned. March is off to a good start, and we expect strong second quarter retail store comparative sales to result in positive single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. comparative retail store sales for the half. Our 2006 retail strategy includes the addition of 33 new Stride Rite Children's stores for a total of 302 stores. In addition to the shift in the Easter holiday, our Stride Rite Children's wholesale sales have been impacted by several factors including: the changed strategy and buying patterns of certain department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. , the consolidation of May Company by Federated Connected and treated as one. See federated database and federated directories. Department Stores, a shift in value channel strategy and a decline in the number of smaller accounts. Although the later Easter this year should result in improvement in the second quarter, we expect to continue to be impacted by those same factors and anticipate Stride Rite Children's wholesale sales to be down for the first half. Overall, we remain on strategy to continue growth in our Stride Rite children's business through new stores and positive same store comparative sales. We are projecting to end the half with a combined Stride Rite Children's Group sales Group sales Block sale (of large amounts) of securities to institutional investors. group sales The distribution of a new security issue to institutional clients. increase." "Keds had a challenging first quarter. The moderate retail channel stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. while the premium department store channel fell below last year, due to strong prior year sell-in. The value channel sales were also below last year. We are encouraged that a number of retailers are starting to enjoy solid Keds product movement and good profitability. Our operating profit margins Operating profit margin The ratio of operating profit to net sales. continued to improve nicely in the brand." "Sperry Top-Sider Sperry Top-Sider is a brand of shoe designed in 1935 by Paul Sperry, older brother of author/illustrator Armstrong Sperry. Sperry was an avid boater who, like most boaters, risked injury while walking on the slippery deck of his boat. enjoyed another strong quarter of sales and profits. Our products are strong, and we expect growth across all retail channels with particular success in the women's area. This brand has a great deal of positive momentum that should continue throughout the year." "Saucony domestic sales were in line with expectations as we continue to see strength in technical running and international. We feel positive about Saucony growth opportunities in 2007, including originals and children's product expansion." "International had strong sales and profits, helped in part by sales of Tommy Hilfiger Thomas Jacob Hilfiger (born March 24, 1951 in Elmira, New York) is a world-famous American fashion designer and creator of the eponymous "Tommy Hilfiger" and "Tommy" brands. Biography Hilfiger was born March 24, 1951 and raised in Elmira, New York. products in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. and strong Saucony sales in Europe and Canada." "Our Tommy Hilfiger 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). sales were impacted by the soft business trends in the broader Tommy Hilfiger brand. We are focused on maximizing that business as we look for opportunities to improve profitability." "We had a solid start to 2006, building off the acquisition of Saucony. The addition of Saucony sales to our other brands has provided increased operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. . With sound strategies in place and strong management teams, we anticipate a year of meaningful progress and growth." Mr. Chamberlain Chamberlain may refer to:
NET SALES HIGHLIGHTS: --Net sales for the quarters ended March 3, 2006 and March 4, 2005 are summarized in the table as follows:
The Stride Rite Corporation
Net Sales (in thousands)
First Quarter
-------------
Percent
2006 2005 Change
---------- --------- --------
(Unaudited)
Stride Rite Children's Group - Wholesale $21,156 $25,586 (17)%
Stride Rite Children's Group - Retail 37,924 35,445 7%
---------- --------- --------
Stride Rite Children's Group - Combined 59,080 61,031 (3)%
Keds 41,991 45,799 (8)%
Sperry Top-Sider 23,588 19,444 21%
International (includes Saucony) 22,818 8,810 159%
Saucony Domestic (includes Hind) 24,563 - n/a
---------- --------- --------
Other Wholesale - Combined 112,960 74,053 53%
Tommy Hilfiger Adult 14,933 18,121 (18)%
Intercompany Eliminations (3,557) (2,614) n/a
---------- --------- --------
Total $183,416 $150,591 22%
========== ========= ========
--Stride Rite Children's Group-Wholesale net sales decreased 17% for the quarter as compared to the prior year. This decrease was primarily attributable to the shift in the Easter holiday to second quarter, particularly in department stores and smaller independent retailers. In addition, fewer promotional product sales impacted the sales results. --Net sales of the Stride Rite Children's Group-Retail division increased 7% in the first quarter versus the prior year. Sales at comparable Children's Group retail stores (open 52 weeks in each fiscal year) decreased 3.4% for the first quarter of 2006. In the prior year, benefiting from the earlier Easter holiday and spring promotion, same store comparative sales increased 7.8% versus 2004. At quarter-end, the Stride Rite Children's Group-Retail operated 280 Stride Rite outlets and children's shoe stores. This is a net increase of 26 stores, or 10% from the comparable period last year. In addition, Stride Rite Children's Group-Retail also operated 16 Saucony outlet stores 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. . --Net sales in the Keds division decreased 8%. The strong prior year product sell-in to the premium channels and fewer sales this quarter in the value channel resulted in lower sales comparisons. Sperry Top-Sider net sales increased 21% for the first quarter on strong sales of men's and women's products, particularly in the marine and family shoe retail channels. Saucony net sales were $24.6 million for the first quarter of 2006. Saucony technical running product sales were strong in the quarter. --International net sales increased 159%, mostly due to the addition of Saucony international sales. Also contributing to the increase in international sales were higher sales of Tommy Hilfiger in Canada and Latin America, Keds footwear in Canada, and Sperry Top-Sider in Europe and South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. . --Net sales of Tommy Hilfiger men's and women's products for the first quarter decreased 18%, primarily due to a reductions in department store product sales, promotional product sales and an overall decline in the men's business. Last year's first quarter also had the sales of the Tommy H product line, which has since been discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: . OTHER FINANCIAL HIGHLIGHTS: --Excluding the flow through of the inventory write-up related to the Saucony purchase, the gross profit percentage increased 1.2 percentage points to 41.4% for the quarter. Keds, Tommy Hilfiger, Sperry Top-Sider and International all had strong gross profit percentage improvements versus last year. --Operating expenses increased 24% for the first quarter. As planned, the major operating cost increases were related to Saucony expenses, higher advertising costs and the Stride Rite Children's Group-Retail store expansion. Also contributing to the increase in 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. were integration costs and the impact of adopting SFAS No. 123R, "Share-Based Payment". --Operating income increased 9% on a GAAP basis and was up 38% excluding the acquisition related integration costs ($1.2 million) and the flow through of the inventory write up ($2.6 million). --Accounts receivable increased 34% compared to last year due to the addition of Saucony and higher sales in the last month of the quarter. DSO See CSO. was 56 days, an increase of 4 days versus the same period last year. The DSO increase was due to the addition of Saucony which generally has offered somewhat longer credit terms Credit Terms The conditions under which credit will be extended to a customer. The components of credit terms are: cash discount, credit period, net period. to retailers. --Inventories of $116 million were up 22% versus to the comparable period of 2005. The increase was due primarily to the addition of Saucony. --Cash and cash equivalents were $23 million at the end of the fiscal quarter with $95 million in outstanding debt. The outstanding debt increase versus year end is related to building inventory for spring sales. The Company initially borrowed $85 million in mid-September 2005 to fund the acquisition of Saucony. COMPANY OVERVIEW & CONFERENCE CALL INFORMATION: The Stride Rite Corporation markets the leading brand of high quality children's shoes in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Other footwear products for children and adults are marketed by the Company under well-known brand names, including Keds, Sperry Top-Sider, Tommy Hilfiger, Saucony, Grasshoppers Grasshoppers may refer to one of the following:
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 products are marketed by the Company under the Saucony and Hind brand names. Information about the Company is available on our website - www.strideritecorp.com. The Company will provide a live webcast of its first quarter conference call. The live broadcast of Stride Rite's quarterly conference call will be available on the Company's website and at www.streetevents.com, beginning at 10:00AM ET on March 30, 2006. An on-line replay will follow shortly after the call and will continue through April 5, 2006. Information about the Company's brands and product lines is available at www.striderite.com, www.keds.com, www.sperrytopsider.com and www.saucony.com. SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and OF 1995: This announcement includes 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. which reflect our current views with respect to the future events or financial performance discussed in the release, based on management's beliefs and assumptions and information currently available. When used, the words "believe", "anticipate", "estimate", "project", "should", "expect", "appear" and similar expressions, which do not relate solely to historical matters identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future events or performance, which may be affected by known and unknown risks, trends and uncertainties. Should one or more of these risks or uncertainties materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or should our assumptions prove incorrect, actual results may vary materially from those anticipated, projected or implied. Factors that may cause such a variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality include, among others: the inability to fully realize the anticipated benefits from the acquisition of Saucony; the challenges of achieving the expected synergies with Saucony; the possibility of incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. costs or difficulties related to the integration of the businesses of Stride Rite and Saucony; the possible failure to retain the Tommy Hilfiger footwear license; the opening of new stores may be delayed; the volume of anticipated sales may decline; revenues from new product lines may fall below expectations; the launch of new product lines may be delayed; new retail concepts may not achieve expected results; general retail sales trends may be below expectations; current license agreements may be terminated; consumer fashion trends may shift to footwear styling not currently included in our product lines; our retail customers, including large department stores, may continue to consolidate or restructure operations resulting in unexpected store closings; and additional factors discussed from time to time in our filings with the Securities and Exchange Commission. We expressly disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. any responsibility to update forward-looking statements. NON-GAAP PRO FORMA FINANCIAL MEASURES: This release contains certain non-GAAP financial measures. In particular, Stride Rite provides historic and future anticipated net income and diluted earnings per share excluding certain cash and non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. , which are non-GAAP financial measures. These results are included as a complement to results provided in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP because management believes these non-GAAP financial measures help indicate underlying trends in Stride Adv. 1. in stride - without losing equilibrium; "she took all his criticism in stride" in good spirits Rite's business and provide useful information to both management and investors by excluding certain items that are not indicative of Stride Rite's core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The non-GAAP information provided by Stride Rite may be different from the non-GAAP information provided by other companies.
The Stride Rite Corporation
Summarized Financial Information
for the periods ended March 3, 2006 and March 4, 2005
Statements of Income
(in thousands) First Quarter
----------------------------
2006 2005
------------- ------------
(Unaudited)
Net sales $183,416 $150,591
Cost of sales 110,184 90,059
------------- ------------
Gross profit 73,232 60,532
Selling and administrative expenses 58,910 47,451
------------- ------------
Operating income 14,322 13,081
Other income (expense), net (823) 162
------------- ------------
Income before income taxes 13,499 13,243
Provision for income taxes 5,214 5,082
------------- ------------
Net income $8,285 $8,161
============= ============
Earnings per share:
Diluted $0.22 $0.22
Basic $0.23 $0.23
Weighted average shares outstanding:
Diluted 37,703 36,963
Basic 36,588 36,007
Balance Sheets
2006 2005
------------- ------------
Assets: (Unaudited)
Cash and cash equivalents $23,219 $24,222
Marketable securities - 20,400
Accounts receivable 121,098 90,257
Inventories 115,594 94,785
Deferred income taxes 14,262 12,816
Other current assets 18,074 13,368
------------- ------------
Total current assets 292,247 255,848
Property and equipment, net 51,625 52,708
Goodwill 56,732 908
Trademarks 58,590 1,690
Other assets 19,301 11,197
------------- ------------
Total assets $478,495 $322,351
============= ============
Liabilities and Stockholders' Equity:
Current liabilities 67,765 57,930
Long-term debt 95,000 -
Deferred income taxes and other
liabilities 38,933 11,647
Stockholders' equity 276,797 252,774
------------- ------------
Total liabilities and stockholders'
equity $478,495 $322,351
============= ============
The Stride Rite Corporation
Reconciliation of Non-GAAP Measures
Unaudited Non-GAAP Pro Forma Statements of Income (in thousands)
For the Quarter Ended March 3, 2006
Reported Pro forma
First First
Quarter Pro forma Quarter
2006 Adjustments 2006
---------- ------------ ----------
Net sales $183,416 $183,416
Cost of sales 110,184 ($2,622)(a) 107,562
---------- ------------ ----------
Gross profit 73,232 2,622 75,854
Selling and administrative
expenses 58,910 (1,163)(b) 57,747
---------- ------------ ----------
Operating income 14,322 3,785 18,107
Other income (expense), net (823) (823)
---------- ------------ ----------
Income before income taxes 13,499 3,785 17,284
Provision for income taxes 5,214 1,461 (c) 6,675
---------- ------------ ----------
Net income $8,285 $2,324 $10,609
========== ============ ==========
Non-GAAP earnings per share:
Diluted $0.22 $0.28
Basic $0.23 $0.29
Weighted average shares
outstanding:
Diluted 37,703 37,703
Basic 36,588 36,588
Pro forma adjustments:
(a) Flow through of the inventory write up to fair value (pre-tax)
(b) Saucony integration costs (pre-tax)
(c) Income tax effect at GAAP rate
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