Vans, Inc. reported that net sales for its base business for the fiscal third quarter (excluding skateparks expected to be closed) increased 10.0% to $86.3 million, compared to $78.4 million for the third quarter of fiscal 2003. Net income for the base business was $7.2 million for the third quarter, versus a net loss of ($3.7) million in the same period last year, and the Company had diluted earnings per share for the base business of $0.39 for the quarter versus a diluted loss per share of ($0.21) in the prior year period.
Gary H. Schoenfeld, President and Chief Executive Officer, stated, “Following an excellent holiday season, all three channels of our business, U.S. Wholesale, Retail and International exceeded our revised plans both in terms of revenues and gross margins, resulting in total sales and earnings well above expectations.”
Net sales for the base business for the first nine months of fiscal 2004 increased 7.8% to $276.3 million, compared to $256.2 million for the corresponding period a year ago. Net income for the base business was $17.0 million compared to a net loss of ($0.9) million in the same period last year, and diluted earnings per share for the base business was $0.93 versus a diluted loss per share of ($0.05) in the prior year period.
On a GAAP basis (including skateparks expected to be closed), the Company reported net sales for the quarter of $88.6 million, compared to $80.8 million for the third quarter of fiscal 2003, net income from continuing operations of $7.1 million versus a net loss of ($7.2) million, and diluted earnings per share from continuing operations of $0.39, versus a diluted loss per share from continuing operations of ($0.40) a year ago. Net sales for the first nine months of fiscal 2004 on a GAAP basis were $282.4 million, compared to $263.3 million for the same period last year, net income from continuing operations was $12.1 million versus a net loss of ($5.0) million a year ago, and diluted earnings per share from continuing operations for the period were $0.66 versus a diluted loss per share from continuing operations of ($0.28).
“As evidenced by these results, the VANS brand continues to strengthen as a leader in action sports and youth lifestyle,” Mr. Schoenfeld said. “The focus and creativity given to each segment of our product line is helping further drive the aspiration and affinity towards our brand and the growth of our overall business.”
For the base business, total U.S. sales for the third quarter including sales through Vans' U.S. retail stores, were $54.7 million versus $48.6 million for the same period a year ago. U.S. national sales in the third quarter were $25.8 million versus $22.6 million a year ago. Comp store sales for retail were up 14.4% for the third quarter. With eight less stores compared to a year ago, total U.S. retail sales for the base business increased 11.0% to $28.9 million in the third quarter of fiscal 2004 from $26.0 million in the same period a year ago. Total international sales were $31.6 million versus $29.8 million a year ago. On a constant dollar basis international sales would have been $27.8 million compared to last year.
On a GAAP basis, total U.S. sales for the third quarter were $57.0 million versus $50.9 million in the same period a year ago. Similarly on a GAAP basis, total sales through the Company's U.S. retail stores increased 9.8% to $31.2 million.
Gross margins for the quarter increased 520 basis points to 52.5% vs. 47.3% a year ago. Inventory decreased $4.9 million to $45.2 million compared to $50.1 million a year ago and the Company's balance sheet remains strong with $64.5 million in cash and cash equivalents.
Mr. Schoenfeld said, “We are very pleased with the overall strengthening of our business and in particular both wholesale and retail in the U.S. The channel segmentation of our products is helping fuel growth with core shops, our larger customers and our own retail stores resulting in a solid year for fiscal 2004 and a substantial increase in bookings for Back to School FY '05.* With the skatepark terminations having been resolved, we continue to make important progress operationally in several other areas including inventory management, leveraging of expenses and at-once deliveries.”
The Company stated that it has revised upward its guidance for fiscal year 2004. The Company now expects diluted earnings per share for the base business and on a GAAP basis to range from $0.80 to $0.82 and $0.62 to $0.64, respectively, for fiscal 2004.* For the fourth quarter, the Company now expects a diluted loss per share from continuing operations for the base business and on a GAAP basis to range between ($0.11) to ($0.13) and ($0.14) to ($0.16), respectively.* More detailed guidance is set forth in Table 4 following the text of this release.
For fiscal year 2005, based upon current bookings and market trends, the Company's guidance is for total revenues of $360-370 million and approximately $0.95 to $1.00 of earnings per share on a GAAP basis.* The Company does not currently expect to differentiate its FY '05 results between GAAP and base business.
Mr. Schoenfeld concluded, “Over the past 12-18 months, we have enacted a number of initiatives to improve our business and enhance our operating platform for growth. To this point we have achieved four consecutive quarters of comp store gains of 9% or above and have significantly expanded our gross and operating margins resulting in an increase in earnings for our base business to $17.0 million compared to a net loss of ($0.9) million one year ago. Our momentum remains strong, our balance sheet is solid and we look forward to further leveraging our unique heritage and global recognition as a leading youth market brand.”
Table 1
Vans, Inc.
Unaudited Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
Three months ended Nine months ended
----------------- -----------------
Feb 28, Mar 1, Feb 28, Mar 1,
2004 2003 2004 2003
-------- -------- -------- --------
Retail sales $31,160 $28,371 $91,638 $84,645
National sales 25,790 22,566 103,553 97,378
International sales 31,622 29,832 87,251 81,280
-------- -------- -------- --------
Net sales 88,572 80,769 282,442 263,303
Cost of sales 42,073 42,581 145,732 145,881
-------- -------- -------- --------
Gross profit 46,499 38,188 136,710 117,422
Gross profit percentage 52.5% 47.3% 48.4% 44.6%
Operating expenses
Retail 15,507 16,136 47,585 48,180
Marketing, advertising and
promotion 6,351 6,265 22,046 22,630
Selling, distribution and
administrative 16,585 14,825 46,464 40,714
Impairment charges 0 12,509 0 12,509
Lease termination costs 0 0 3,892 0
Amortization of intangible assets 92 203 350 568
-------- -------- -------- --------
Total operating expenses 38,535 49,938 120,337 124,601
Operating income (loss) 7,964 (11,750) 16,373 (7,179)
Operating income percentage 9.0% -14.5% 5.8% -2.7%
Other expense, net (a) 142 775 518 1,035
Interest income, net (275) (254) (460) (679)
-------- -------- -------- --------
Other (income) expense, net (133) 521 58 356
Income (loss) from continuing
operations before income taxes and
minority interest 8,097 (12,271) 16,315 (7,535)
Income tax (benefit) expense 778 (4,658) 2,486 (3,152)
Minority interest 226 (368) 1,709 597
-------- -------- -------- --------
Income (loss) from continuing
operations 7,093 (7,245) 12,120 (4,980)
Loss from discontinued operations,
net of tax - (1,961) (5,088) (2,471)
Net income (loss) $7,093 $(9,206) $7,032 $(7,451)
======== ======== ======== ========
Earnings (loss) per share:
Basic weighted average shares
outstanding 17,874 17,920 17,851 17,999
Income (loss) from continuing
operations $0.40 $(0.40) $0.68 $(0.28)
Loss from discontinued operations - (0.11) (0.29) (0.13)
-------- -------- -------- --------
Net income (loss) $0.40 $(0.51) $0.39 $(0.41)
Vans, Inc.
Reconciliation of Base Business to Unaudited Condensed Consolidated
Statements of Operations
(Amounts in thousands, except per share amounts)
Three months ended
February 28, 2004
---------------------------
Total Skatepark Base
Reported Operations Business
Per GAAP (A) (B)
-------- --------- ---------
Retail sales $31,160 $2,283 $28,877
National sales 25,790 - 25,790
International sales 31,622 - 31,622
-------- --------- --------
Net sales $88,572 $2,283 $86,289
Gross profit $46,499 $1,672 $44,827
Gross profit percentage 52% 73% 52%
Asset impairment $- $- $-
Lease terminations $- $- $-
Income (loss) from continuing
operations before income taxes
and minority interest $8,097 $(151) $8,248
Income (loss) from continuing
operations $7,093 $(151) $7,244
Loss from discontinued operations,
net of tax $- $- $-
Net income (loss) $7,093 $(151) $7,244
Diluted shares outstanding 18,393 18,393 18,393
Diluted earnings (loss) per share
Continuing operations $0.39 $- $0.39
Discontinued operations $- $- $-
-------- --------- --------
Net income (loss) $0.39 $- $0.39
