Exhibit 99.1
Company Contact: Michael Umana
Saucony, Inc.
Chief Financial Officer,
Chief Operating Officer/Treasurer
(978) 532-9000
(800) 625-8080
For Immediate Release
Investor Relations: Chad A. Jacobs/Brendon Frey
Integrated Corporate Relations
(203) 222-9013
cjacobs@icr-online.com
SAUCONY, INC. REPORTS FIRST QUARTER FISCAL 2005 RESULTS
Peabody, Massachusetts - May 5, 2005 -- Saucony, Inc. (NASDAQ: SCNYA and SCNYB)
today announced financial results for the quarter ended April 1, 2005.
Net income decreased to $3.2 million in the first quarter of 2005, compared to
$4.2 million in the first quarter of 2004. Diluted earnings per share decreased
to $0.41 per Class A share and $0.46 per Class B share in the first quarter of
2005, compared to diluted earnings per share of $0.58 per Class A share and
$0.64 per Class B share for the comparable period in 2004. Net sales for the
first quarter decreased 11%, to $41.9 million, compared to $47.0 million in the
first quarter of 2004.
John H. Fisher, President and Chief Executive Officer, commented, "As
anticipated, our first quarter results were primarily impacted by challenges
with our crossover and Originals footwear business in the mall-based retail
channel. That said, our domestic technical footwear business, which is at the
heart of who we are, remains very strong and we are encouraged about our
prospects to further expand our position in the core running market. We continue
to focus on product creation and we are excited about our new offerings which
will debut over the upcoming months of this year."
John H. Fisher, President and Chief Executive Officer, commented, "We were
pleased with our ability to generate better than expected bottom-line results
during the quarter predominantly driven by gross margin expansion. Our gross
margin improvement reflects the favorable impact of foreign currency on our
international margins and our ongoing efforts to manage our inventory and reduce
our product costs."
Order Backlog
- -------------
Our backlog of open orders at April 1, 2005 scheduled for delivery within the
next five months (April 2, 2005 - August 26, 2005) decreased 5% to $50.2
million, compared to $53.0 million at April 2, 2004.
At April 1, 2005, the open order backlog for delivery in the next 12 months
decreased 4% to $60.2 million, from $62.8 million at April 2, 2004.
Mr. Fisher continued, "Our quarter ending open order comparisons included double
digit gains on our domestic technical running footwear category. Offsetting
these increases in open orders were decreases in our domestic mid-priced
crossover and Originals footwear categories at April 1, 2005, compared to at
April 2, 2004."
Cash, Inventory and Working Capital
- -----------------------------------
Our cash and cash equivalents and short-term investments decreased approximately
$4.0 million in the quarter ended April 1, 2005 from our fiscal 2004 year end
balances, due to the use of cash to finance our seasonal working capital needs.
Our days' sales in accounts receivable, defined as the number of average daily
net sales in our accounts receivable as of the period end date and calculated by
dividing the end of period accounts receivable by the average daily net sales
for the period, decreased to 60 days at April 1, 2005, compared to 62 days at
April 2, 2004. The number of days' sales in inventory, defined as the number of
average daily cost of sales in our inventory as of the period end date and
calculated by dividing the end of period inventory by the average daily cost of
sales for the period, increased to 85 days at April 1, 2005, compared to 73 days
at April 2, 2004."
Mr. Fisher remarked, "While our first quarter efforts were successful in
decreasing our days' sales in inventory from 95 days at our fiscal 2004 year
end, we continue to pursue further reductions."
Net Sales
- ---------
Net sales for the first quarter of 2005 decreased 11% to $41.9 million, compared
to $47.0 million in the first quarter of 2004. Domestic net sales decreased 14%
to $31.1 million in the first quarter of 2005, compared to $36.0 million in the
first quarter of 2004. Our domestic sales decrease in the first quarter of 2005
was due primarily to a 17% decrease in footwear unit volumes, partially offset
by a 21% increase in Hind apparel sales. Sales at our factory outlet stores
deceased 2% in the first quarter of 2005 compared to the first quarter of 2004.
International net sales decreased 2%, to $10.8 million in the first quarter of
2005, compared to $11.0 million in the first quarter of 2004. Our international
sales decrease in the first quarter of 2005 was due primarily to lower average
wholesale per pair footwear selling prices and, to a lesser extent, lower sales
of Saucony and Hind brand apparel, partially offset by favorable changes in
foreign exchange rates as compared to the first quarter of 2004 and a 5%
increase in footwear unit volumes. Saucony brand footwear and apparel accounted
for approximately 85% of first quarter 2005 net sales, compared to 88% of the
first quarter 2004 net sales, with a combination of Hind apparel and factory
outlet stores net sales accounting for the balance in each period.
Gross Margin
- ------------
The Company's gross margin in the first quarter of fiscal 2005 increased 140
basis points to 42.0% compared to 40.6% in the first quarter of 2004, due
primarily to favorable currency exchange due to the impact of a weaker U.S.
dollar against European and Canadian currencies and, to a lesser extent,
improved margin in our Saucony domestic footwear and Hind brand apparel
businesses due to product costs reductions and improved margin at our factory
outlet division. Our Saucony domestic footwear margin increase was mitigated by
a change in sales mix to increased footwear unit volume of special makeup and
closeout footwear in the first quarter of fiscal 2005. Both of these footwear
categories carry lower margins than our first quality technical footwear.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses as a percentage of net sales
increased to 30.2% in the first quarter of 2005 compared to 25.8% in the first
quarter of 2004. In absolute dollars, selling, general and administrative
expenses increased 4%, due primarily to increased professional fees, travel
related expenses, depreciation and increased operating expenses associated with
the factory outlet division expansion, partially offset by decreased print media
advertising, account specific advertising and promotion and variable selling
expenses. Selling expenses as a percentage of net sales in the first quarter of
2005 were 13.7% compared to 12.9% in the comparable 2004 period, while general
and administrative expenses were 16.5% of net sales compared to 12.9% in the
first quarter of 2004.
Non-Operating Income (Expense)
- ------------------------------
Non-operating income increased in the first quarter of 2005 to $278,000,
compared to an expense of $72,000 in the first quarter of 2004. The increase was
primarily due to an $88,000 increase in interest income and a $244,000 increase
in foreign currency income in the first quarter of 2005, compared to the first
quarter of 2004. Interest income increased to $157,000 in the first quarter of
2005, compared to $69,000 in the first quarter of 2004, due to higher interest
rates on invested cash balances and short-term investments. Foreign currency
income increased to $100,000 in the first quarter of 2005, compared to foreign
currency losses of $144,000 in the first quarter of 2004, due primarily to the
impact of currency fluctuations on forward foreign currency contracts.
Net Income
- ----------
Net income for the first quarter of 2005 was $3.2 million, or $0.41 per Class A
share and $0.46 per Class B share on a diluted basis, compared to $4.2 million,
or $0.58 per Class A share and $0.64 per Class B share on a diluted basis, in
the first quarter of 2004. We used weighted average common shares and common
stock equivalents of 7,219,000 and 6,844,000 to calculate diluted earnings per
share for the first quarter of 2005 and 2004, respectively.
Net income available to the Company's common stockholders is allocated among our
two classes of common stock, Class A Common Stock and Class B Common Stock. The
allocation among each class is based upon the two-class method. Under the
two-class method, earnings per share for each class of common stock is
presented. The two-class presentation method is required as a result of the
Company having two classes of common stock with different participation rights
in undistributed earnings.
Mr. Fisher concluded, "Our strategically important domestic technical running
footwear continues to build momentum, reflecting our ongoing commitment to
innovation and performance and our status as one of the authentic brands in the
marketplace. At the same time, we recognize the importance of returning our
mid-priced crossover and Originals categories to desired growth levels and we
are working diligently to achieve these objectives. We remain dedicated to
further improving our platform for long-term growth and increased
profitability."
Business Outlook
- ----------------
The Company is providing certain forward-looking information in this press
release. These statements are based on the Company's current information and
expectations, and actual results may differ materially. The Company undertakes
no obligation to update this information. Please see the further disclaimer in
the last paragraph of this release. The following information replaces our
previous guidance.
Second Quarter and Fiscal Year 2005
- -----------------------------------
The Company expects fully diluted earnings per share to range from $0.24 to
$0.26 for Class A shares and to range from $0.26 to $0.28 for Class B shares for
the second quarter of 2005 and to range from $1.25 to $1.31 for Class A shares
and to range from $1.38 to $1.44 for Class B shares for the year.
The Company expects second quarter net sales to range from $41 million to $42
million. The Company expects net sales for the year to range from $163 million
to $165 million.
The Company expects gross margins of approximately 41% for the second quarter
and the year.
The Company expects selling, general and administration expenses of
approximately 33% of sales for the second quarter and of approximately 31% of
sales for the year.
Investor Conference Call
- ------------------------
The Company will provide a web simulcast and rebroadcast of its first quarter
earnings release conference call. The live broadcast of the Company's quarterly
conference call is scheduled for May 6, 2005, beginning at 8:30 a.m. Eastern
Time and will be accessible online at www.companyboardroom.com and under the
"Investor Relations" section at www.sauconyinc.com. The online replay will be
available shortly after the conference call and will continue to be available
through May 6, 2006.
_ _ _ _ _ _ _ _ _ _
Saucony, Inc. designs, develops, and markets (i) a broad line of
performance-oriented athletic shoes for adults under the Saucony(R) brand name,
(ii) athletic apparel under the Hind(R) brand name and (iii) athletic and
workplace shoes under the Spot-bilt(R) 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," "estimates," and similar expressions are intended to
identify forward-looking statements, and all of our statements under "Business
Outlook" above are 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 Other Factors that May Affect Future
Results" ("Certain Factors") filed by Saucony, Inc. with the Securities and
Exchange Commission on March 16, 2005, which Certain Factors discussion is
incorporated herein by this reference. In particular, there can be no assurance
as to the level of earnings per share, net sales, gross margins, selling,
general and administrative expenses, weighted average fully diluted common
shares and other operating results, including without limitation, environmental
charges, that will be achieved by the Company in any period because such items
are materially dependent upon the condition of the domestic and world economies,
the impact of foreign regulation and the performance of foreign suppliers,
competition from third parties, consumer preferences, the inherent uncertainties
in estimating conditions in the environment and the costs of addressing such
conditions and the Company's assessment and the implementation of its strategic
alternatives. All forward-looking statements are made only as of the date of
this press release. The Company makes no undertaking to update any of these
statements.
SAUCONY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(Unaudited)
(in thousands, except per share amounts)
ASSETS
April 1, December 31,
2005 2004
---- ----
Current assets:
Cash and cash equivalents.....................................$ 28,437 $ 12,042
Short-term investments........................................ 300 20,694
Accounts receivable........................................... 27,517 22,485
Inventories................................................... 22,600 25,645
Deferred taxes................................................ 2,554 2,455
Prepaid expenses and other current assets..................... 1,466 1,316
----- -----
Total current assets........................................ 82,874 84,637
------ ------
Property, plant and equipment, net............................... 9,341 9,570
----- -----
Other assets:
Goodwill...................................................... 912 912
Deferred charges, net......................................... 80 91
Other......................................................... 1,029 1,047
----- -----
Total other assets.......................................... 2,021 2,050
----- -----
Total assets.....................................................$ 94,236 $ 96,257
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of capitalized lease obligations...........$ 64 $ 63
Accounts payable.............................................. 7,246 10,484
Accrued expenses and other current liabilities............... 9,164 11,249
Environmental accrual......................................... 2,220 2,275
----- -----
Total current liabilities................................... 18,694 24,071
------ ------
Long-term obligations:
Capitalized lease obligations, net of current portion......... 123 138
Other long-term obligations................................... 963 932
Deferred income taxes......................................... 1,931 1,964
----- -----
Total long-term obligations................................. 3,017 3,034
----- -----
Minority interest in consolidated subsidiary..................... 505 461
--- ---
Stockholders' equity:
Common stock, $.33 1/3 par value.............................. 2,232 2,205
Additional paid in capital.................................... 18,829 18,049
Retained earnings............................................. 49,528 46,693
Accumulated other comprehensive income........................ 1,431 1,744
----- -----
Total....................................................... 72,020 68,691
------ ------
Total liabilities and stockholders' equity.......................$ 94,236 $ 96,257
========= =========
SAUCONY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
For the quarter ended April 1, 2005 and April 2, 2004
(Unaudited)
(in thousands, except per share amounts)
Quarter Quarter
Ended Ended
April 1, April 2,
2005 2004
---- ----
Net sales...................................................$ 41,851 $ 46,969
Other revenue .............................................. 96 179
-- ---
Total revenue .............................................. 41,947 47,148
------ ------
Costs and expenses
Cost of sales............................................ 24,257 27,912
Selling expenses............................................ 5,751 6,058
General and administrative expenses......................... 6,894 6,078
----- -----
Total costs and expenses.................................... 36,902 40,048
------ ------
Operating income............................................ 5,045 7,101
Non-operating income (expense)
Interest income.......................................... 157 69
Interest expense............................................ (3) --
Foreign currency losses .................................... 100 (144)
Other....................................................... 24 3
-- -
Income before income taxes and minority interest............ 5,323 7,028
Provision for income taxes.................................. 2,083 2,759
Minority interest in income of consolidated subsidiaries.... 50 38
-- --
Net income..................................................$ 3,190 $ 4,231
========== ==========
Per share amounts:
Earnings per share:
Basic:
Class A common stock.................................$ 0.45 $ 0.63
========== ==========
Class B common stock.................................$ 0.50 $ 0.69
========== ==========
Diluted:
Class A common stock.................................$ 0.41 $ 0.58
========== ==========
Class B common stock.................................$ 0.46 $ 0.64
========== ==========
Weighted average common shares and equivalents outstanding:
Basic:
Class A common stock................................. 2,521 2,521
Class B common stock................................. 4,137 3,801
----- -----
Total............................................... 6,658 6,322
===== =====
Diluted:
Class A common stock................................. 2,521 2,521
Class B common stock........................................ 4,698 4,323
----- -----
Total............................................... 7,219 6,844
===== =====
Cash dividends per share of common stock:
Class A common stock.................................$ 0.050 $ 4.050
========== ==========
Class B common stock.................................$ 0.055 $ 4.055
========== ==========