Saucony, Inc. reported that net sales for the second quarter decreased 8.8% to $40.1 million, compared to $44.0 million in the second quarter of 2004. Net income decreased 44.4% to $1.7 million in the second quarter of 2005, compared to $3.0 million in the second quarter of 2004, primarily because of lower revenues and the transaction costs referred to above. Diluted earnings per share decreased to 22 cents per Class A share and 24 cents per Class B share in the second quarter of 2005, compared to diluted earnings per share of 41 cents per Class A share and 45 cents per Class B share for the comparable period in 2004.
The company's gross margin in the second quarter of fiscal 2005 decreased to 40.4% compared to 41.1% in the second quarter of 2004. Selling, general and administrative expenses as a percentage of net sales increased to 33.4% in the second quarter of 2005 compared to 29.2% in the second quarter of 2004. In absolute dollars, selling, general and administrative expenses increased 4.5%, due primarily to $802,000 in transaction costs related to the evaluation of strategic alternatives and the sale of the company and $150,000 in costs related to the settlement of a patent infringement lawsuit, offset in part by lower incentive compensation. The company does not receive any tax benefit from the transaction costs as they are not deductible for tax purposes.
For the six months ended July 1, 2005, net sales decreased 9.9%, to $82.0 million, compared to $90.9 million in the comparable period of 2004. The company's gross margin in the first six months of fiscal 2005 increased to 41.2% compared to 40.8% in the six months ended July 2, 2004. Selling, general and administrative expenses as a percentage of net sales increased to 31.8% for the six months ended July 1, 2005 compared to 27.4% in the six months ended July 2, 2004. In absolute dollars, selling, general and administrative expenses increased 4.4%, due primarily to $922,000 in transaction costs related to the evaluation of our strategic alternatives and the sale of the company and $150,000 in costs related to the settlement of a patent infringement lawsuit. The company does not receive any tax benefit from the transaction costs as they are not deductible for tax purposes. Net income for the six months ended July 1, 2005 decreased 32.9% to $4.9 million, compared to $7.3 million in the comparable period of 2004, primarily because of lower revenues and the transaction costs referred to above. Diluted earnings per share decreased to 64 cents per Class A share and 70 cents per Class B share for the six months ended July 1, 2005, compared to diluted earnings per share of 98 cents per Class A share and $1.08 per Class B share for the six months ended July 2, 2004.
The following table provides details of net sales for the quarter and six months ended July 1, 2005 in comparison to the quarter and six months ended July 2, 2004.
Net Sales
(dollars in thousands)
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
July 1, July 2, July 1, July 2,
2005 2004 2005 2004
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Saucony
Domestic $25,794 $30,146 $50,850 $60,689
International 9,141 8,215 19,610 18,771
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34,935 38,361 70,460 79,460
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Other Products
Domestic 4,912 5,313 10,891 10,738
International 254 305 601 750
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5,166 5,618 11,492 11,488
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Total $40,101 $43,979 $81,952 $90,948
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Backlog of open orders at July 1, 2005 scheduled for delivery within the next five months (July 1, 2005 – November 25, 2005) decreased 8.9% to $40.9 million, compared to $44.9 million at July 2, 2004. At July 1, 2005, the open order backlog for delivery in the next 12 months decreased 9.7% to $44.2 million, from $49.0 million at July 2, 2004.
SAUCONY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
For the quarter and the six months ended July 1, 2005 and July 2, 2004
(Unaudited)
(in thousands, except per share amounts)
Six Six
Quarter Quarter Months Months
Ended Ended Ended Ended
July July July July
1, 2, 1, 2,
2005 2004 2005 2004
---- ---- ---- ----
Net sales $40,101 $43,979 $81,952 $90,948
Other revenue 65 103 161 282
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Total revenue 40,166 44,082 82,113 91,230
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Costs and expenses
Cost of sales 23,899 25,908 48,156 53,820
Selling expenses 5,871 6,311 11,622 12,369
General and administrative
expenses 7,532 6,512 14,426 12,590
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Total costs and expenses 37,302 38,731 74,204 78,779
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Operating income 2,864 5,351 7,909 12,451
Non-operating income (expense)
Interest income 166 57 323 126
Interest expense (1) -- (4) --
Foreign currency 212 (217) 312 (361)
Other 5 9 29 12
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Income before income taxes and
minority interest 3,246 5,200 8,569 12,228
Provision for income taxes 1,513 2,129 3,596 4,888
Minority interest in income of
consolidated subsidiary 39 26 89 64
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Net income $ 1,694 $ 3,045 $ 4,884 $ 7,276
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Per share amounts:
Earnings per share:
Basic:
Class A common stock $ 0.24 $ 0.44 $ 0.69 $ 1.07
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Class B common stock $ 0.26 $ 0.49 $ 0.76 $ 1.18
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Diluted:
Class A common stock $ 0.22 $ 0.41 $ 0.64 $ 0.98
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Class B common stock $ 0.24 $ 0.45 $ 0.70 $ 1.08
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