Happy Kids Inc. Reports Record Third QuarterEPS of $0.33, Up 57.1% From Pro Forma 1997 EPS
Company's Operating Profit Margin Grows to 13.4%
Highlights:
* Net sales up 24.4% to $47 million
* Gross Profit Margin rises to 26.1%, from 24.9%
* Operating profit margin rises to 13.4%, from 10.6%
* Net income grows 103% to $3.4 million from pro forma net income of
1.7 million
* Earnings per share increase to $0.33, compared to pro forma earnings per
share of $0.21 for the third quarter a year earlier
NEW YORK, Oct. 22 /PRNewswire/ -- Happy Kids Inc. (Nasdaq: HKID), a
designer and marketer of custom-designed, licensed and branded children's
apparel, today announced record results for the third quarter and nine months
ended September 30, 1998.
3 Month Results
Net sales increased to $47 million for the 1998 third quarter, up
24.4% from $37.8 million for the same quarter a year earlier. Net income
increased 103% to $3.4 million, or $0.33 per share for the 1998 third quarter,
from pro forma net income of $1.7 million, or $0.21 per share in the same
quarter of 1997. Third quarter 1998 earnings per share figures reflect a
32.7% increase in shares outstanding, the result of the Company's
April, 1998 IPO.
Jack M. Benun, Chairman, President and Chief Executive Officer of
Happy Kids, said, "Our improved net sales were driven by the continued success
in both our licensed products and private label programs. Concerning our
licensed products, we have seen a deepening penetration with retailers and a
heightened popularity with consumers. Our strategy of continually expanding
our diverse portfolio of established, well recognized properties substantially
reduces Happy Kids' fashion risk and positions us well in multiple tiers of
retail distribution.
"In addition to our sales momentum, the Company's significantly increased
profitability also reflects Happy Kids' improved margins. For the quarter
ended September 30, 1998 our gross profit margin was 26.1%, compared to 24.9%
for the same period in 1997. This increase is in a large part the result of
the Company's favorable sales mix. As a percentage of net sales, our
operating profit margin was 13.4% in the 1998 third quarter compared to 10.6%
in the year ago third quarter. This substantial improvement reflects our
ability to leverage our infrastructure of in-house design teams, customer
service personnel and sales and marketing staff," said Mr. Benun.
Nine Month Results
For the first nine months of 1998, the Company reported net sales of
$114.7 million, up 48% from $77.3 million for the comparable nine months in
1997. Pro forma net income for the nine month period ended September
30, 1998 increased to $6.4 million, a 262% increase from pro forma net income
of $1.8 million in the first nine months of 1997. Pro forma earnings per
share for the nine months ended September 30, 1998 increased to $0.68 per
share versus pro forma earnings per share of $0.23 in the 1997 period, up
196%. Pro forma earnings per share figures in the 1998 nine-month period
reflect a 21.5% increase in shares outstanding, the result of the Company's
April, 1998 IPO.
Outlook/Business Strategy
Mr. Benun continues, "Our pre-sell sales strategy continues to provide us
with good visibility regarding our future prospects. Based on orders received
as of September 30, 1998, our backlog grew to $105.9 million, which we expect
to fill over the following six to nine months, compared to $85.8 million at
the same time in 1997, up 23.4%. Accordingly, we believe that Happy Kids is
well positioned to continue experiencing strong growth and profitability in
the fourth quarter of 1998 and the first quarter of 1999. In particular,
during this period, we believe that the Company can sustain sales growth in
the range of 20% to 25% and maintain gross margins at their historical levels
of 25%.
"The Company's strong financial position is enabling us to expand our
channels of distribution which include multiple tiers such as mass market
retailers, mid-tier distributors, department stores and specialty retailers
and to aggressively acquire new licenses, including our two newest licenses,
World Wrestling Federation (WWF) and Arthur, the title character of a leading
children's book published by Random House. To date, Arthur books have sold
more than 24 million copies, 10 million in this year alone, and the Arthur
television show is presently the highest rated preschool program on
television, with over 16 million weekly viewers in the U.S. It's worthy to
note that our WWF license was launched during the third quarter and we are
seeing strong sell throughs at all tiers of distribution. With respect to
Arthur, we expect to launch this property through a major retailer in Fall,
1999," stated Mr. Benun.
"In summary, our long-term relationships with leading retailers over
multiple distribution channels and our growing portfolio of popular licenses
and brands put the Company in a unique and very strong competitive position
moving forward," concluded Mr. Benun.
Happy Kids Inc. is a New York-based designer and marketer of
custom-designed, licensed and branded children's apparel. Among the Company's
major licensed and branded apparel programs are AND 1, B.U.M. Equipment,
Nickelodeon's Rugrats and Sesame Street for KMart.
This press release contains forward-looking statements. Actual results
may differ materially from those projected in the forward-looking statements.
Important factors that could result in such differences include: general
economic conditions, dependence on license arrangements, dependence on private
label relationships, reliance on key customers, competition, seasonality of
sales, cyclicality and trends in the apparel industry and other factors
identified in the Company's prospectus dated April 2, 1998.
HAPPY KIDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
Net sales $46,993 $37,771 $114,721 $77,328
Cost of goods sold 34,750 28,359 85,302 57,908
Gross profit 12,243 9,412 29,419 19,420
Operating expenses:
Selling, design
and shipping 3,648 2,832 9,653 7,552
General and
administrative 2,310 2,570 6,886 6,281
Total operating
expenses 5,958 5,402 16,539 13,833
Operating earnings 6,285 4,010 12,880 5,587
Interest expense, net 472 1,154 1,790 2,522
Income before income
taxes 5,813 2,856 11,090 3,065
Provision for income taxes:
Income taxes
(benefit) 2,442 372 3,838 393
Deferred tax benefit -- -- (1,024) --
Total income taxes 2,442 372 2,814 393
Net income $3,371 $2,484 $8,276 $2,672
Basic income per
common share $0.33 $0.32 $0.88 $0.34
Weighted average
common shares
outstanding 10,280 7,750 9,406 7,750
Diluted income
per common share $0.33 $0.32 $0.88 $0.34
Weighted average common
shared outstanding 10,284 7,750 9,419 7,750
Pro forma data (unaudited):
Historical income before
provision for
income taxes $5,813 $2,856 $11,090 $3,065
Income taxes (benefit) 2,442 1,199 4,658 1,287
Net income $3,371 $1,657 $6,432 $1,778
Pro forma basic
income per share $0.33 $0.21 $0.68 $0.23
Pro forma weighted
average common
shares outstanding 10,280 7,750 9,406 7,750
Pro forma diluted
income per share $0.33 $0.21 $0.68 $0.23
Pro forma weighted
average common
shares outstanding 10,284 7,750 9,419 7,750
HAPPY KIDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
September 30, December 31,
1998 1997
ASSETS (unaudited)
CURRENT ASSETS
Cash $357 $374
Due from factor 25,111 24,232
Accounts receivable - trade (net of
allowance of $513 at September 30, 1998
and December 31, 1997) 636 316
Inventories 21,331 16,316
Due from shareholders -- 347
Other current assets 4,352 1,139
Total current assets 51,787 42,724
FIXED ASSETS - NET 1,501 1,476
OTHER ASSETS 547 752
Total Assets $53,835 $44,952
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Due to bank $8,315 $24,863
Current portion - capital lease obligations 37 49
Accounts payable and accrued liabilities 10,067 11,393
Due to shareholders 314 --
Total current liabilities 18,733 36,305
DEFERRED RENT PAYABLE 524 584
CAPITAL LEASE OBLIGATIONS -- 19
DUE TO SHAREHOLDERS 5,405 1,400
COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred stock - 5,000 shares
authorized, $.01 par value; no shares
issued and outstanding -- --
Common stock - 30,000 shares authorized,
.01 par value; 10,280 and 7,750 shares issued
and outstanding at September 30, 1998
and December 31, 1997, respectively 103 78
Additional paid-in capital 23,263 1,119
Retained earnings 5,807 5,447
Total shareholders' equity 29,173 6,644
Total liabilities and
shareholders' equity $53,835 $44,952
SOURCE Happy Kids Inc.
CO: Happy Kids, Inc.
ST: New York
IN: HOU
SU: ERN
10/22/98 11:09 EDT prnewswire.com |
