Saucony, Inc. announced net sales for the fourth quarter of 2002 increased 31% to $28.2 million, compared to $21.6 million in the fourth quarter of 2001. Net income increased to $806,000, or $0.13 per share on a diluted basis, compared to a loss of $2.8 million, or $0.46 per share on a diluted basis, for the comparable period in 2001.
For the full year ended January 3, 2003, net sales increased 1% to $133.2 million, compared to $132.3 million in the comparable period of 2001. Net income increased to $5.2 million, or $0.85 per share on a diluted basis, compared to a loss of $940,000, or $0.15 per share on a diluted basis, for the fiscal year 2001.
John H. Fisher, Saucony’s President and Chief Executive Officer stated, “Our better than expected fourth quarter performance was primarily fueled by ongoing strength in our domestic technical business. We are particularly pleased with these results as they represent a great ending to what amounted to be a very strong year for our company, both strategically and financially. Over the past 24 months we have taken a number of steps to improve our business and enhance our operating platform, and it is gratifying to see our team’s hard work has begun to pay off. As we head into fiscal 2003, we remain focused and committed to capitalizing on the many opportunities that lie ahead.”
Our backlog of open orders at January 3, 2003 scheduled for delivery within the next five months (January 3, 2003 – May 30, 2003) increased by 14% to $46.1 million, from $40.4 million at January 4, 2002.
At January 3, 2003, the open order backlog for delivery in the next 12 months increased by 23% to $52.4 million, from $42.5 million at January 4, 2002.
Mr. Fisher continued, “We are very pleased with the favorable backlog comparison versus the prior period. The increased backlog is due in large part to our strength in the domestic technical footwear category. We are cautiously optimistic about our ability to convert these order backlog gains to net sales in light of the current significant economic challenges at retail.”
Mr. Fisher continued, “Equally satisfying is our quarter ending cash position of $34.5 million. Proactive management of our working capital has yielded significant results over the past several months. We plan to continue to achieve greater efficiencies in this critical area.”
Net sales for the fourth quarter of 2002 increased 31% to $28.2 million, compared to $21.6 million in the fourth quarter of 2001. Domestic net sales increased 30% to $21.8 million, compared to $16.8 million in the fourth quarter of 2001. International net sales in the period increased 34% to $6.4 million, compared to $4.8 million in the fourth quarter of 2001. Saucony brand footwear accounted for approximately 80% of total fourth quarter 2002 net sales, while a combination of Hind apparel and factory outlet stores net sales accounted for the balance.
Net sales for the year ended January 3, 2003 increased 1% to $133.2 million, compared to $132.3 million in the comparable period of 2001. Domestic net sales decreased 3% to $103.4 million, compared to $106.5 million in the comparable period of 2001, primarily due to reduced sales of closeout and Originals products, partially offset by increased technical product volumes and higher average sell prices. International net sales increased 16% to $29.8 million, compared to $25.8 million in the comparable period of 2001. Saucony brand footwear accounted for approximately 83% of total sales during fiscal 2002, while a combination of Hind apparel and factory outlet stores net sales accounted for the balance.
The Company’s gross margin in the fourth quarter of 2002 increased to 33.6% compared to 29.1% in the fourth quarter of 2001, due primarily to increased Saucony domestic sales of first quality technical footwear products at full margin. Other factors contributing to the margin increase were proportionately lower sales of closeout footwear, reduced costs resulting from the closing of our Bangor, Maine manufacturing operations and improved margins on certain domestic footwear products, partially offset by increased Hind apparel inventory reserves and increased footwear mold costs.
For the full year of 2002, gross margin increased to 34.4% versus to 31.9% in the comparable 2001 period, primarily due to increased Saucony domestic sales of first quality technical footwear products at full margin. Other factors contributing to the margin increase were proportionately lower sales of closeout footwear, reduced costs resulting from the closing of our Bangor, Maine manufacturing operations and improved margins on certain domestic footwear products, partially offset by increased Hind apparel inventory reserves and increased footwear mold costs.
Selling, general and administrative expenses as a percentage of net sales decreased to 29.8% in the fourth quarter of 2002 compared to 37.3% in the fourth quarter of 2001. In absolute dollars, selling, general and administrative expenses increased 4%, due primarily to increased incentive compensation and, to a lesser extent, increased administrative payroll, higher insurance costs and increased variable selling expenses, partially offset by decreased account specific advertising, decreased promotional spending and lower professional fees. Selling expenses as a percentage of net sales in the fourth quarter of 2002 were 11.4% compared to 17.1% in the 2001 period, while general and administrative expenses were 18.4% of net sales compared to 20.2% in the fourth quarter of 2001.
For the year ended January 3, 2003, selling, general and administrative expenses as a percentage of net sales decreased to 28.0% compared to 30.6% in the comparable period of 2001. In absolute dollars, selling, general and administrative expenses decreased 8%, due primarily to decreased print media advertising, lower provisions for bad debts and, to a lesser extent, decreased promotional spending, decreased account specific advertising, decreased professional fees and lower selling payroll, partially offset by increased incentive compensation, increased administrative payroll and increased insurance costs. Selling expenses as a percentage of net sales for 2002 were 13.4% compared to 16.6% in the comparable period of 2001, while general and administrative expenses were 14.6% of net sales compared to 14.0% in 2001.
For the three months ended January 3, 2003, the Company recorded a pre-tax net benefit of $13,000, $6,000 after-tax, or $0.00 per fully diluted share to reduce expenses accrued in the fourth quarter of fiscal 2001 associated with the closing of our Bangor, Maine manufacturing facility. For the year ended January 3, 2003 the Company recorded a pre-tax benefit of $214,000, $127,000 after-tax, or $0.02 per fully diluted share to reduce expenses accrued in the fourth quarter of fiscal 2001, associated with the closing of our Bangor, Maine manufacturing facility, partially offset by a pre-tax charge of $142,000, $93,000 after-tax, or $0.02 per fully diluted share, incurred to close one underperforming retail store. Expenses associated with the store closings included lease termination and other contractual costs of $47,000 and $95,000 to write-off leasehold improvements.
For the three months and year ended January 4, 2002, the Company recorded a pre-tax charge of $2.1 million, $1.3 million after tax, or $0.21 per fully diluted share to close our Bangor, Maine manufacturing facility, our Taiwan office and an underperforming retail store.
Net income for the fourth quarter of 2002 was $806,000, or $0.13 per share on a diluted basis, compared to a loss of $2.8 million, or $0.46 per share on a diluted basis, in the fourth quarter of 2001.
For the year ended January 3, 2003, net income was $5.2 million, or $0.85 per share on a diluted basis, compared to a loss of $940,000, or $0.15 per share on a diluted basis for 2001.
Mr. Fisher concluded, “I am proud of what our team accomplished in fiscal 2002, but more importantly, I am excited and encouraged about our prospects for fiscal 2003 and beyond.”
During the quarter and the year ended January 3, 2003, the Company repurchased approximately 95,000 shares of common stock at a cost of $880,000. The Company has repurchased approximately 562,000 shares of common stock at a cost of $5.2 million under the stock buyback program approved by the Company’s Board of Directors in May 1998.
The Company expects fully diluted earnings per share to range from $0.26 to $0.28 for the first quarter of 2003 and to range from $0.93 to $1.00 for the year.
The Company expects first quarter net sales to range from $36 million to $37 million. The Company expects net sales for the year to range from $139 million to $142 million.
The Company expects gross margins of approximately 36% for both the first quarter and the year.
The Company expects selling, general and administration expenses of approximately 29% of sales for both the first quarter and the year.
SAUCONY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
For the quarter and year ended
January 3, 2003 and January 4, 2002
(Unaudited)
(Amounts in thousands, except per share data)
Quarter Quarter Year Year
Ended Ended Ended Ended
January 3, January 4, January 3, January 4,
2003 2002 2003 2002
---- ---- ---- ----
Net sales $ 28,211 $ 21,589 $ 133,196 $ 132,261
Other revenue 101 35 303 103
--------- -------- ---------- ---------
Total revenue 28,312 21,624 133,499 132,364
--------- -------- ---------- ---------
Costs and expenses
Cost of sales 18,733 15,305 87,350 90,118
Selling expenses 3,203 3,694 17,790 21,910
General and
administrative
expenses 5,195 4,363 19,488 18,497
Plant closing
(credit) charge
and other charges (13) 2,108 (72) 2,108
---------- -------- ----------- ---------
Total costs and
expenses 27,118 25,470 124,556 132,633
--------- -------- ---------- ---------
Operating income (loss) 1,194 (3,846) 8,943 (269)
Non-operating income
(expense)
Interest, net 4 (35) 53 (153)
Foreign currency 82 (234) 20 (46)
Other 103 138 265 104
--------- -------- ---------- ---------
Income (loss) before
income taxes
and minority interest 1,383 (3,977) 9,281 (364)
Provision (benefit) for
income taxes 583 (1,153) 3,865 475
Minority interest
in income of
consolidated
subsidiaries (6) -- 173 101
---------- -------- ---------- ---------
Net income (loss) $ 806 $ (2,824) $ 5,243 $ (940)
