Record 4Q and annual eps (beating street est. by 20%)!!!
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The North Face Reports Record Fourth Quarter and Annual Results
January 22, 1998 05:06 PM
SAN LEANDRO, Calif., Jan. 22 /PRNewswire/ -- The North Face, Inc. TNFI today reported record financial results for its fourth quarter and for the twelve-month period ended December 31, 1997.
For the fourth quarter ended December 31, 1997, sales for the quarter increased 39% to $51.0 million, net income for the quarter increased 64% to $2.1 million, and earnings per share (EPS) increased 50% to $0.18.
For the year ended December 31, 1997, sales increased 32% to $208.4 million. Income and EPS for the year increased 96% to $11.1 million and 55% to $0.96 per share, respectively.
William N. Simon, president and chief executive officer, said, "We are extremely pleased with our fourth quarter and full year 1997 results. Sales, margins and earnings were up significantly. Importantly, wholesale sales, now approximately 83% of our total sales, increased 55% in the fourth quarter and 39% in the year."
Highlights of the quarter included:
* The Company's Expedition System(R) Outerwear, including Gore-Tex(R) shells, goose down jackets and vests and technical fleece jackets were in strong demand throughout the quarter. In addition, the Company's synthetic sportswear line, Tekware(R), and its Ascentials(R) line of accessories performed particularly well during the period.
* For the year, Tekware(R) sales increased 140% over 1996 and represented 12% of sales compared to 7% in 1996.
* During the quarter, gross margins improved to 49.3% from 47.9% and operating margins expanded to 9.7% from 7.9%.
* The Company's Summit Shops, its shop-within-a-shop program, continued to perform well. A total of 202 Summit Shops were in place at year-end.
* Reorders increased 54% in the quarter over the same period in 1996. This was attributed to an improved inventory replenishment capability, enabling the Company to capture a higher percentage of reorder demand.
* The quality of trade receivables was excellent. Both aging and bad debt improved over a year ago.
"The gain in margins during the fourth quarter," said Simon, "is attributable to increased wholesale gross margins and the positive impact of operating leverage as the Company grows. We expect to benefit from further leverage during the coming years. An increase in trade receivables over last year reflects a previously announced change in our dating program for Fall 1997 to accommodate our dealers' busy holiday season. We are very pleased with the results of this program as indicated by the 55% growth in wholesale sales and we have already collected $18.0 million of the year-end receivable balance.
"Looking ahead to 1998," Simon stated, "we are enthusiastic about the reception our new product lines are receiving. Preseason orders for the first half are up 25% over the same period in 1997 and early orders for the second half are very encouraging. Initiatives for 1998 include the following:
* doubling expenditures in the area of product research and design with an emphasis on developing major breakthroughs in performance technology;
* construction of a one-of-a-kind Technology Center, scheduled for completion in July, 1998, featuring state-of-the-art laboratory equipment for testing materials and finished products;
* significant increases in marketing expenditures, including a comprehensive campaign to explain the technical advantages of Tekware(R) and the launch of television ads in test markets;
* expansion of the Summit Shop program with 173 new shops planned for the year bringing the total to 375 by the end of 1998; and
* significant increases in sales and marketing resources to support an accelerated growth plan in Europe."
The North Face, Inc. designs and distributes technically sophisticated outerwear, skiwear, functional sportswear, tents, sleeping bags, backpacks and daypacks under The North Face(R) name. The Company sells its products to select specialty retailers throughout the United States, Europe and Canada.
This press release contains certain forward-looking statements reflecting the Company's current expectations including statements regarding expected openings of Summit Shops, Spring and Fall 1998 preseason orders, the potential impact of operating leverage, the ability to develop breakthroughs in technology and European growth plans. Actual results may vary significantly from those estimated. Factors that could cause future performance to vary from current expectations include, but are not limited to, the Company's ability to attract, supply and retain Summit Shops, the Company's ability to retain existing and obtain additional preseason orders, the Company's ability to negotiate better pricing and terms if it grows, the Company's ability to achieve technological advances, and the ability of the Company to grow in European markets and other general economic conditions affecting consumer spending and other factors. Further information on potential factors that could affect the financial results of The North Face are included in the Company's Report on Form 1OK for the year ended December 31, 1996 and the Report on Form 10Q for the period ended September 30, 1997, each of which is on file with the SEC. Other factors that could cause future performance to vary from current expectations include those set forth in the filings made by the Company with the Securities and Exchange Commission.
The North Face, Inc.
Consolidated Statements of Operations
(in thousands except per share data)
(unaudited)
Fourth Quarter Ended Twelve Months Ended
December 31 December 31
1997 1996 % 1997 1996 %
Change Change
Net Sales $50,967 $36,597 39% $208,403 $158,226 32%
Cost of Sales 25,848 19,076 113,339 88,195
Gross Profit 25,119 17,521 95,064 70,031
Gross Profit % 49.3% 47.9% 45.6% 44.3%
Operating Expenses 20,170 14,635 73,720 56,487
Operating Income 4,949 2,886 71% 21,344 13,544 58%
Interest Expense (908) (791) (2,238) (4,625)
Other Income
(Expense), net (599) 69 (749) 356
Income Before
Provision for
Income Taxes 3,442 2,164 18,357 9,275
Provision for
Income Taxes 1,330 873 7,250 3,611
Income 2,112 1,291 64% 11,107 5,664 96%
Extraordinary
Charge(a) 0 0 0 (863)
Net Income $ 2,112 $ 1,291 64% $ 11,107 $ 4,801 131%
Diluted Earnings per
Share (before
Extraordinary
Charge)(a) $ 0.18 $ 0.12 50% $ 0.96 $ 0.62 55%
Weighted Average
Shares Outstanding
- Diluted 11,694 11,121 11,575 9,183
(a) Represents a non-cash charge of $863 related to debt extinguishment in the quarter ended September 30, 1996, as a result of restructuring the Company's credit facility and subordinated debt in connection with the Company's initial public offering in July 1996.
Selected Consolidated Balance Sheet Data
(in thousands)
(unaudited)
December 31
1997 1996
Cash and cash equivalents $ 4,511 $ 8,315
Trade accounts receivable, net 52,255 21,405
Inventories 44,697 31,475
Working Capital 58,948 50,438
Total Assets 174,200 111,948
Accounts payable, accrued expenses,
and other current liabilities 34,113 18,775
Revolver and current portion of long-term debt 25,892 95
Long-term debt 4,928 135
Total stockholders' equity 103,293 86,499
SOURCE The North Face, Inc. |
