SCNYA...up 1 1/4 on positive earnings report (news)...
SCNYB trading @ a dollar discount...to "a" shares
Company Press Release
Saucony, Inc. Announces Record Quarterly Earnings and Revenues
-- First quarter earnings per diluted share of $0.52, or 225% higher than comparable Q1 1998 results.
PEABODY--(BUSINESS WIRE)--May 5, 1999-- -- Revenues increased 43% to $42.4 million.
-- Order backlog up 90% to $67.1 million as of April 2, 1999.
-- Projected fiscal 1999 earnings per diluted share revised up to $1.20-$1.30; projected second quarter outlook of $0.25-$0.30 per diluted share.
Saucony, Inc. (NASDAQ:SCNYA - news; NASDAQ:SCNYB - news) announced today record revenues, gross profit and earnings per share for the quarter ended April 2, 1999. Net income was $3.3 million, or 52 cents per share on a diluted basis, representing an earnings per share increase of 225% over the 16 cents per share earned in the same period last year.
''We are very pleased with Saucony's record quarterly performance in the first quarter and with the continued business momentum,'' remarked John H. Fisher, President and Chief Executive Officer. ''Moreover, we believe that our strong performance in the first quarter squarely positions us for a year full of record-setting achievements.''
Net sales from continuing operations for the first quarter of fiscal 1999 increased 43% to $42.4 million compared with $29.6 million in the comparable 1998 period. In commenting on the growth in net sales, Mr. Fisher noted, ''Volume increases in the U.S. market were recorded in both the Company's retro Jazz Original product line and Saucony's core technical running shoe models. Since the introduction of the Jazz Originals in March 1998, the product has grown from East Coast cities to nationwide distribution. Today, the Jazz Original is in demand in both urban and suburban markets. The Company plans to offer consumers additional choices in retro shoes through the introduction of the Shadow Original which began shipping in the first quarter. We have additional retro models planned for introduction in Spring 2000. In our core technical running shoe line, we also began initial shipments toward the end of the first quarter of our most advanced model to date, the 4D Grid Cyclone. This is only the first of several new technically advanced product introductions currently planned for 1999.''
Gross profit increased 55% for the first quarter of 1999 to $15.4 million due to higher domestic unit volumes and, to a lesser extent, higher international margins. The Company's gross margin increased to 36.4% in the first quarter of 1999 compared to 33.7% in the first quarter of 1998. Margins improved due to lower levels of product returns and markdowns.
Selling, general and administrative expenses as a percentage of net sales improved to 23.0% in the first quarter of 1999 compared to 26.7% in the first quarter of 1998. Total SG&A expenses were $9.7 million and $7.9 million in the first quarter of 1999 and 1998, respectively. General and administrative expense levels showed modest increases while selling and advertising expense levels trailed the rate of increase in revenues. Mr. Fisher noted that significant productivity increases throughout the Company favorably impacted the level of SG&A expenses.
Mr. Fisher continued: ''The first quarter results for our international division were encouraging. Profitability returned to this segment in all key markets. In January, the Company completed its transition to a single continental Europe distribution location in the Netherlands. This is expected to reduce the cost of servicing the European customer base.'' Sales to independent foreign distributors declined in the first quarter of 1999 while sales by the Company's foreign subsidiaries increased. Total international division net sales from continuing operations were $5.5 million for the first quarter of 1998, representing a 3% increase over the first quarter of 1998.
Mr. Fisher further added, ''The apparel division under the Hind name more than doubled sales in the first quarter compared to the same period last year and is expected to grow more than 50% in 1999 over the 1998 level. Since acquiring this brand in December 1996, Hind management has made strong progress in rebuilding this business.''
''Revenues at the bicycle division increased almost 30% compared to first quarter 1998. The Company expects higher growth in this division for the second quarter of 1999 and the full year.''
''Looking forward, we project the Company's second quarter 1999 earnings per diluted share to be in the range of $0.25-$0.30. Our open order backlog of $67.1 million at the end of the first quarter is another all-time high for the Company which we believe positions us well for continued revenues and earnings growth for the rest of the year. In addition, due to continued strong performance, the Company is raising its earnings per diluted share forecast for 1999 to $1.20-$1.30 from previous estimates of $0.80-$0.90. Attainment of these goals will depend on the Company's successfully executing a number of operational challenges posed by the higher volumes, but we are presently comfortable with this outlook.''
Saucony, Inc. designs, develops, manufactures and markets (i) a broad line of performance-oriented athletic shoes for adults under the Saucony® brand name, (ii) high-quality bicycles, frames and components under the Quintana Roo®, Merlin® and Real Design® names, (iii) athletic apparel under the Hind® brand name and (iv) shoes for coaches and officials under the Spot-bilt® name.
This press release contains forward-looking statements that involve a number of risks and uncertainties. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words ''believes,'' ''anticipates,'' ''plans,'' ''expects,'' ''intends'' and similar expressions are intended to identify forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in the Company's Annual Report on Form 10-K under ''Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Certain Factors that May Affect Future Results'' (''Certain Factors'') filed by Saucony Inc. with the Securities and Exchange Commission on April 1, 1998, which Certain Factors discussion is incorporated herein by this reference. Without limiting the foregoing, there can be no assurance as to the level of revenues or net income that will be achieved by the Company because such revenues and net income are materially dependent upon the condition of the domestic and world economies, competition from third parties, and consumer preferences.
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SAUCONY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Amounts in thousands)
ASSETS
April 2, January 1,
1999 1999
Current assets:
Cash and cash equivalents $ 1,598 $ 5,495
Marketable securities 187 179
Accounts receivable 33,585 19,473
Inventories 28,319 31,072
Prepaid expenses and other current assets 3,540 2,923
Total current assets 67,229 59,142
Property, plant and equipment, net 8,162 8,123
Other assets 2,445 2,614
Total assets $ 77,836 $ 69,879
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 11,678 $ 7,568
Current maturities of long term debt 360 324
Accounts payable 3,983 6,244
Accrued expenses and other current
liabilities 7,670 4,704
Total current liabilities 23,691 18,840
Long-term obligations:
Long-term debt 516 559
Deferred income taxes 1,813 1,851
Other long-term obligations 161 157
Total long-term obligations 2,490 2,567
Minority interest in consolidated subsidiaries 255 222
Stockholders' equity:
Common stock, $.33 1/3 par value 2,178 2,178
Additional paid in capital 15,923 15,921
Retained earnings 35,693 32,360
Accumulated translation (714) (528)
Total 53,080 49,931
Less: Common stock held in treasury, at cost (1,665) (1,665)
Unearned compensation (15) (16)
51,400 48,250
Total liabilities and stockholders' equity $ 77,836 $ 69,879
SAUCONY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share data)
Thirteen weeks Thirteen weeks
ended ended
April 2, 1999 April 3, 1998
Net sales $ 42,406 $ 29,624
Other revenue 208 42
Total revenue 42,614 29,666
Costs and expenses
Cost of sales 26,985 19,651
Selling expenses 5,433 4,423
General and administrative expenses 4,308 3,510
Total costs and expenses 36,726 27,584
Operating income 5,888 2,082
Non-operating income (expense)
Interest, net (146) (210)
Foreign currency 26 (11)
Other 24 34
Income before income taxes and
minority interest 5,792 1,895
Provision for income taxes 2,430 898
Minority interest in income of
consolidated subsidiaries 29 23
Net income $ 3,333 $ 974
Per share amounts:
Earnings per common share - basic $ 0.54 $ 0.16
Earnings per common share - diluted $ 0.52 $ 0.16
Weighted average common shares and
equivalents outstanding 6,363 6,293
Net Sales
(Unaudited)
(Dollars in thousands)
First Quarter 1999 vs. First Quarter 1998
Q1 1999 Q1 1998
$ % $ %
Saucony $37,675 88.8% $25,851 87.3%
Other 4,731 11.2% 3,773 12.7%
Total $42,406 100.0% $29,624 100.0%
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