Saucony, Inc. announced net income for the third quarter ended October 3, 2003 increased 37% to $2.2 million from $1.6 million in the comparable period of 2002, and diluted earnings per share increased 32% to $0.34, compared to diluted earnings per share of $0.26 for the comparable period in 2002. Net sales for the third quarter were $32.0 million, compared to $33.7 million in the third quarter of 2002.
For the nine months ended October 3, 2003, net income increased
58% to $7.0 million from $4.4 million in the comparable period of
2002, and diluted earnings per share increased 54% to $1.11, compared
to diluted earnings per share of $0.72 for the comparable period in
2002. Net sales for both periods were $105.0 million.
Net income for the nine months ended October 3, 2003, includes a
pre-tax benefit of $566,000 recorded in general and administrative
expenses as a result of a litigation settlement agreement between the
Company and the trustee appointed to oversee the liquidation of assets
of a former customer.
John H. Fisher, President and Chief Executive Officer, commented,
“These results represent our 8th consecutive quarter of meeting or
exceeding our expectations and were due, in large part, to our
dedicated team driving further improvements in our business processes
and effectively executing our long-term strategy. We were particularly
pleased with our domestic technical running footwear backlog, as our
strategic initiatives have begun to significantly improve our open
order backlog trends and position us for future growth.”
Our backlog of open orders at October 3, 2003 scheduled for
delivery within the next five months (October 4, 2003 – February 27,
2004) increased 12% to $43.5 million, compared to $39.0 million at the
end of the third quarter of 2002.
At October 3, 2003, the open order backlog for delivery in the
next 12 months increased 6% to $58.8 million, compared to the October
4, 2002 backlog of $55.4 million. On a constant dollar basis, our open
order backlog for delivery in the next 12 months increased 4%.
Mr. Fisher continued, “The growing momentum within our domestic
technical footwear business has significantly contributed to our
double-digit increase in open orders scheduled for delivery over the
next five months.”
Mr. Fisher remarked, “Our inventory management execution has
continued to be exceptional during these challenging times. We believe
our quarter ending inventories are high in quality and position us
well to take advantage of any increases in the demand for our core
products in the fourth quarter of 2003.”
Net sales for the third quarter of 2003 were $32.0 million,
compared to $33.7 million in the third quarter of 2002. On a constant
dollar basis, net sales were $31.2 million for the third quarter of
2003. Domestic net sales were $22.6 million in the third quarter of
2003, compared to $26.1 million in the third quarter of 2002.
International net sales increased 24% to $9.4 million in the third
quarter of 2003 compared to $7.6 million in the third quarter of 2002.
Saucony brand footwear accounted for approximately 78% of total third
quarter 2003 net sales, while a combination of Hind apparel and
factory outlet stores net sales accounted for the balance.
Net sales for the nine months ended October 3, 2003 remained
constant at $105.0 million compared to the comparable period in 2002.
On a constant dollar basis, net sales for the first nine months of
2003 were $103.2 million. Domestic net sales were $79.3 million,
compared to $81.5 million in the comparable period of 2002.
International net sales increased 11.8% to $26.2 million, compared to
$23.5 million in the comparable period of 2002. Saucony brand footwear
accounted for approximately 83% of total sales during the first nine
months of 2003, while a combination of Hind apparel and factory outlet
stores net sales accounted for the balance.
The Company's gross margin in the third quarter of 2003 increased
490 basis points to 40.6% compared to 35.7% in the third quarter of
2002, due primarily to improved margins on Hind brand apparel,
reflecting increased sales of first quality product at higher margins
and lower inventory reserve provisions taken in 2003, favorable
currency exchange due to the impact of a weaker U.S. dollar against
European and Canadian currencies, lower Saucony footwear product costs
and improved margins at our factory outlet stores.
For the first nine months of 2003, gross margin increased 480
basis points to 39.4% versus to 34.6% in the comparable period of 2002
due primarily to lower Saucony footwear product costs, favorable
currency exchange due to the impact of a weaker U.S. dollar against
European and Canadian currencies, improved margins on Hind brand
apparel, reflecting increased sales of first quality product at higher
margins and lower inventory reserve provisions taken in 2003, improved
margins at our factory outlet stores and proportionately lower sales
of closeout footwear.
Selling, general and administrative expenses as a percentage of
net sales increased to 29.9% in the third quarter of 2003 compared to
27.9% in the third quarter of 2002. In absolute dollars, selling,
general and administrative expenses increased 2%, due primarily to
increased administrative and selling payroll, increased insurance
costs, increased depreciation and increased print media advertising,
partially offset by reduced account specific advertising and
promotion, reduced incentive compensation, lower employee healthcare
costs and reduced variable selling expenses. Selling expenses as a
percentage of net sales in the third quarter of 2003 were 13.7%
compared to 13.4% in the 2002 period, while general and administrative
expenses were 16.2% of net sales compared to 14.5% in the third
quarter of 2002.
For the nine months ended October 3, 2003, selling, general and
administrative expenses as a percentage of net sales increased to
28.8% compared to 27.5% in the comparable period of 2002. In absolute
dollars, selling, general and administrative expenses increased 5%,
due primarily to increased administrative and selling payroll,
increased incentive compensation, increased employee healthcare costs,
increased insurance costs, higher professional fees and increased
print media advertising, partially offset by lower provisions for bad
debt expense, due to the litigation settlement and, to a lesser
extent, decreased account specific advertising and promotion, lower
depreciation expense and reduced variable selling expenses. Selling
expenses as a percentage of net sales in the first nine months of 2003
were 13.5% compared to 13.9% in the comparable period of 2002, while
general and administrative expenses were 15.3% of net sales compared
to 13.6% in the first nine months of 2002.
Net income for the third quarter of 2003 was $2.2 million, or
$0.34 per share on a diluted basis, compared to $1.6 million, or $0.26
per share on a diluted basis, in the third quarter of 2002.
For the nine months ended October 3, 2003, net income was $7.0
million, or $1.11 per share on a diluted basis, compared to $4.4
million, or $0.72 per share on a diluted basis for the first nine
months of 2002.
Mr. Fisher concluded, “We are very pleased with our positive
momentum and look forward to a solid fiscal 2003 performance. Over the
past several months we have made significant progress, both
financially and operationally, and we now move ahead with a firm
foundation for growth. We remain committed to further capitalizing on
our position in the marketplace.”
Fourth Quarter and Fiscal Year 2003
- The Company expects fully diluted earnings per share to range from
$0.08 to $0.10 for the fourth quarter of 2003 and to range from $1.19
to $1.21 for the year. - The Company expects fourth quarter net sales to be approximately
$30 million. The Company expects net sales for the year to range from
$135 million to $136 million. - The Company expects gross margins of approximately 37% for the
fourth quarter and approximately 39% for the year. - The Company expects selling, general and administration expenses
of approximately 33% of net sales for the fourth quarter and to be
approximately 30% of net sales for the year.
SAUCONY, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the quarter and nine-months ended
October 3, 2003 and October 4, 2002
(Unaudited)
(Amounts in thousands, except per share data)
Quarter Quarter Nine-Months Nine-Months
Ended Ended Ended Ended
October 3, October 4, October 3, October 4,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net sales $ 31,978 $ 33,745 $ 105,518 $ 104,985
Other revenue 94 105 257 202
----------- ----------- ----------- -----------
Total revenue 32,072 33,850 105,775 105,187
----------- ----------- ----------- -----------
Costs and expenses
Cost of sales 18,983 21,683 63,899 68,617
Selling
expenses 4,396 4,520 14,266 14,587
General and
administrative
expenses 5,172 4,900 16,127 14,293
Plant closing
and other
credits -- -- -- (59)
----------- ----------- ----------- -----------
Total costs
and expenses 28,551 31,103 94,292 97,438
----------- ----------- ----------- -----------
Operating income 3,521 2,747 11,483 7,749
Non-operating income
(expense)
Interest income 49 94 176 249
Interest expense -- (1) (5) (4)
Foreign currency gains
(losses) (41) (18) 17 (62)
Other 38 (78) 55 (34)
----------- ----------- ----------- -----------
Income before
income taxes and
minority interest 3,567 2,744 11,726 7,898
Provision for
income taxes 1,359 1,099 4,577 3,282
Minority interest
in income of
consolidated
subsidiaries 29 58 135 179
----------- ----------- ----------- -----------
Net income $ 2,179 $ 1,587 $ 7,014 $ 4,437
=========== =========== =========== ===========
Earnings per
common share:
Basic $ 0.36 $ 0.26 $ 1.15 $ 0.73
=========== =========== =========== ===========
Diluted $ 0.34 $ 0.26 $ 1.11 $ 0.72
