Exhibit 99.1
Fossil, Inc. Reports Record Fourth Quarter and Year-End Results
-- Fourth Quarter Diluted EPS rises 22.9% to $0.59, Exceeding First
Call Consensus of $0.55
-- Fourth Quarter Net Sales Increases 22.0% to $259.2 million
-- Company Introduces Fiscal 2004 Guidance Range of $1.67 - $1.71
RICHARDSON, Texas, Feb. 24 /PRNewswire-FirstCall/ -- Fossil, Inc.
(Nasdaq: FOSL) today reported fourth quarter net sales and earnings for the
thirteen-week period ("Fourth Quarter") and fiscal year ended January 3, 2004.
Fourth Quarter Results:
-- Net sales increased 22.0% to $259.2 million compared to
$212.4 million in the fourth quarter of 2002;
-- Gross profit grew 25.0% to $136.9 million, or 52.8% of net sales,
compared to $109.5 million, or 51.6% of net sales, in the fourth
quarter of 2002;
-- Operating income rose 24.1% to $46.3 million, or 17.9% of net sales
compared to $37.3 million, or 17.6% of net sales in the fourth
quarter of 2002;
-- Net income increased 24.7% to $29.0 million compared to
$23.3 million in the fourth quarter of 2002; and
-- Diluted earnings per share rose 22.9% to $0.59, on 48,994,000
weighted average shares outstanding compared to $0.48, on 48,432,000
weighted average shares outstanding in the fourth quarter of 2002.
"Fiscal 2003 marked a period of significant accomplishments for our
Company," began Mike Kovar, Senior Vice President and Chief Financial Officer.
"Financially, we reported a record year with many of our businesses and brands
reporting double-digit sales gains. Our ongoing success can be attributed to
our unique approach to the fashion watch business that encompasses multiple
channels of distribution, reaches consumers of all ages and backgrounds and
offers some of the most prestigious brands in the world. Operationally, we
consolidated North American distribution into a new warehouse in Dallas,
opened a new distribution center in Germany and transitioned onto a new
systems platform for our domestic operations. As we look ahead, we believe we
are well positioned to capitalize on our positive global momentum and continue
to expand sales and operating margins in the near and long-term."
For the Fiscal Year Ended January 3, 2004:
-- Net sales rose 17.8% to $781.2 million compared to $663.3 million in
2002;
-- Gross profit grew 20.1% to $401.4 million, or 51.4% of net sales
compared to $334.1 million, or 50.4% of net sales in 2002;
-- Operating income increased 14.4% to $109.7 million compared to
operating income of $95.9 million in 2002;
-- Net income rose 16.0% to $68.3 million compared to $58.9 million in
2002;
-- Diluted earnings per share increased 14.8% to $1.40 compared to
$1.22 in 2002.
Worldwide net sales rose 22.0% (15.1% excluding currency gains) during the
Fourth Quarter with particular strength in FOSSIL, DIESEL(R),
EMPORIO ARMANI(R) and DKNY(R) watches, company-owned stores and FOSSIL
jewelry. Global sales of new product initiatives contributed approximately
$8.6 million to net sales in the quarter. Businesses acquired after the
fourth quarter of 2002 contributed approximately $1.3 million in sales during
the quarter. Total international wholesale sales rose 34.8% (18.8% excluding
currency gains). Sales in Europe increased 32.5% (14.4% excluding currency
gains), primarily as a result of increased sales of FOSSIL and licensed brand
watches and FOSSIL jewelry. Fourth Quarter sales of the Company's domestic
watch business rose by 11.9% with FOSSIL watch sales increasing by 19.7%. The
FOSSIL increase reflects strong wholesale sell-in during the Fourth Quarter as
well as the continued strength of the brand at retail. This increase in
FOSSIL watches was partially offset by the discontinuance of the EDDIE
BAUER(R) private label watch product line and a decline in sales of RELIC
watches. Domestic sales of the Company's accessory and sunglass businesses
rose 2.2% compared to the prior year quarter with particular strength in
FOSSIL eyewear and EMPORIO ARMANI jewelry. In total, domestic wholesale sales
rose by 8.7%. Company-owned retail store sales increased 26.6% as a result of
a 13.6% increase in the average number of stores opened during the quarter and
comp-store sales gains of 14.9%. The Fourth Quarter represented the third
consecutive quarter of double-digit comp-store sales increases for the
Company's retail store segment. Worldwide net sales for fiscal 2003 increased
17.8% (11.7% excluding currency gains). Management currently estimates sales
growth for 2004 in the 15% to 18% range, assuming the Euro remains at or
slightly below current levels. Management does not expect any single
quarter's growth in 2004 to be significantly above or below this range.
Gross profit margin expanded by 120 basis points to 52.8% in the Fourth
Quarter compared to 51.6% in the prior year period. The increase in gross
profit margin is mainly attributable to the growth in the Company's
international sales as a percentage of total sales. International sales
generally produce higher gross profit margins than the Company's historical
consolidated gross profit margin. Additionally, gross profit margin benefited
from stronger foreign currencies, primarily the Euro, improved gross margins
in Company-owned stores and a higher sales mix of licensed watch sales that
generally produce higher gross profit margins than the Company's historical
consolidated gross profit margin. For the year, gross profit margin increased
by 100 basis points to 51.4% compared to 50.4% in the prior year. Management
expects full year 2004 gross profit margin to exceed 2003 levels by
approximately 50 to 75 basis points, assuming foreign currency rates,
primarily the Euro, British Pound and Japanese Yen, remain equal to or
slightly lower than current levels.
Operating expenses, as a percentage of net sales, increased to 34.9% in
the Fourth Quarter compared to 34.0% in the comparable prior year period.
Included in Fourth Quarter operating expenses is approximately $4.5 million in
additional costs related to the translation impact of stronger foreign
currencies into U.S. dollars. Excluding this impact operating expense
increases were mainly driven by increased personnel and other costs associated
with new business initiatives and higher depreciation and amortization
expense. Increases in personnel and other costs associated with new
initiatives primarily relate to the Company's Swiss watch, EMPORIO ARMANI
jewelry and tech watch businesses for which there were minimal revenue
contributions in 2003. Depreciation and amortization expense increased during
the Fourth Quarter due to completion of the first phase of the Company's SAP
global software implementation in July 2003 as well as other capital additions
made during 2003. Advertising expense increased approximately $2.5 million
compared to the prior year quarter, but decreased from 9.4% of net sales in
the prior year quarter to 8.6% during the current quarter. This reduction is
primarily due to net sales exceeding the Company's projections as well as
anniversarying certain new product launch costs that occurred in the fourth
quarter of 2002. For the year, advertising expenses as a percentage of sales
increased to 7.1% compared to 6.7% in 2002. For the year, operating expenses
as a percentage of net sales increased to 37.3% compared to 35.9% in the
comparable prior year period and included approximately $12.6 million in
additional costs related to the translation impact of stronger foreign
currencies into U.S. dollars. Management anticipates full year 2004 operating
expenses, as a percentage of net sales, to decrease slightly from the levels
experienced in 2003. Since the Company's sales are more heavily weighted
toward the second half of the year, management expects operating expenses as a
percentage of sales to be equal to or slightly greater than the prior year
during the first six months of 2004 and slightly less than the prior year in
the second six months of the year.
Improved gross profit margin offset increases in operating expenses
enabling the Company's Fourth Quarter operating profit margin to increase by
30 basis points to 17.9% of net sales from 17.6% of net sales in 2002.
Operating income for the Fourth Quarter included approximately $8.5 million of
additional income as a result of the effects of stronger foreign currencies.
For the year, operating profit margin was 14.0% of net sales compared to 14.5%
of net sales in 2002. Management believes operating margin for the full year
2004 could expand by 50 to 100 basis points. Operating margins during the
first half of 2004 could be slightly below the lower end of the full year
range, while operating margin in the second half of the year could approach,
or slightly exceed, the high end of the full year range.
The Company's effective income tax rate decreased to 37.0% and 37.6%
during the Fourth Quarter and full year, respectively, compared to 38.0% and
38.6%, respectively, in the prior year comparable periods. The Company
believes that its effective income tax rate for fiscal year 2004 could be
equal to or slightly less than 37%.
The Company's balance sheet remained strong and included $164.1 million in
cash and no long-term debt. At year-end, cash increased by $46.2 million from
$117.9 million at January 4, 2003. Inventory at year-end was current and on-
plan at $126.8 million, an increase of 4.1% compared to prior year inventory
of $121.8 million, and well below the rate of the Company's net sales growth.
Accounts receivable increased to $121.9 million at year-end compared to $86.4
million at January 4, 2003. Day's sales outstanding increased to 43 days for
the Fourth Quarter compared to 37 days in the prior year period. The majority
of this increase was attributable to an increase in the Company's collection
cycle and currency translation effects. The collection cycle has increased as
a result of a larger percentage of international sales, which historically
have longer collection periods than those experienced in the US. Working
capital rose to $313.6 million, an increase of $72.4 million over working
capital of $241.2 million at January 4, 2003.
Since the announcement of its stock repurchase program in May 2003, the
Company has purchased all of the approximate 627,000 shares of stock
authorized at a cost of approximately $16.1 million. The Company anticipates
continuing this program in 2004. The purpose of this share repurchase plan is
to mitigate the dilutive impact of stock option grants during the course of
the year under the Company's 1993 Long-Term Incentive Plan.
The Company currently estimates first quarter 2004 diluted earnings per
share in the range of $0.29 to $0.31 compared to diluted earnings per share of
$0.25 in the first quarter of 2003. For fiscal 2004, the Company currently
estimates diluted earnings per share in a range of $1.67 to $1.71 representing
growth of 20.7% at the mid point of the range compared to fiscal 2003 diluted
earnings per share of $1.40. The current First Call Consensus Estimate
earnings per share for fiscal 2004 is $1.63.
Certain statements contained herein that are not historical facts
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and involve a number of risks and
uncertainties. The actual results of the future events described in such
forward-looking statements could differ materially from those stated in such
forward-looking statements. Among the factors that could cause actual results
to differ materially are: general economic conditions, competition, acts of
terrorism or acts of war, government regulation, changes in foreign currency
valuations in relation to the United States Dollar and possible future
litigation, as well as the risks and uncertainties set forth on the Company's
Current Report on Form 8-K dated June 25, 2003.
Fossil is a design, development, marketing and distribution company that
specializes in consumer products predicated on fashion and value. The
Company's principle offerings include an extensive line of watches sold under
the Company's propriety brands FOSSIL, RELIC and ZODIAC as well as licensed
brands for some of the most prestigious companies in the world including
EMPORIO ARMANI, BURBERRY, DKNY and DIESEL. The Company also offers
complementary lines of small leather goods, belts, handbags, sunglasses under
the FOSSIL and RELIC brands, jewelry under the FOSSIL and EMPORIO ARMANI
brands and FOSSIL apparel. The Company's products are sold in department
stores and specialty retail stores in over 90 countries around the world, in
addition to the Company's e-commerce website at www.fossil.com. Additionally,
certain product, press release and SEC filing information concerning the
Company is available on the website.
Consolidated Income For the 13 For the 13 For the 52 For the 52
Statement Data Weeks Ended Weeks Ended Weeks Ended Weeks Ended
(in 000's):
January 3, January 4, January 3, January 4,
2004 2003 2004 2003
Net sales $259,199 $212,377 $781,175 $663,338
Cost of sales 122,282 102,838 379,798 329,253
Gross profit 136,917 109,539 401,377 334,085
Selling expenses 72,735 58,543 227,098 186,634
Administrative exp. 17,836 13,658 64,529 51,521
Operating income 46,346 37,338 109,750 95,930
Interest expense 36 4 62 107
Other (exp) inc. - net (313) 204 (217) 156
Tax provision 16,994 14,281 41,136 37,072
Net income $ 29,003 $ 23,257 $ 68,335 $ 58,907
Basic earnings per share $ 0.62 $ 0.50 $ 1.47 $ 1.28
Diluted earnings per share $ 0.59 $ 0.48 $ 1.40 $ 1.22
Weighted average shares
Outstanding :
Basic 46,584 46,315 46,545 45,993
Diluted 48,994 48,432 48,788 48,238
Consolidated Balance Sheet Data January 3, January 4,
(in 000's): 2004 2003
Working capital $313,561 $241,177
Cash, cash equivalents and short-term 164,053 117,925
investments
Accounts receivable 121,908 86,351
Inventories 126,789 121,823
Total assets 587,541 482,526
Notes payable - current 2,805 2,505
Deferred taxes 32,861 23,599
Stockholders' equity 423,426 340,541
SOURCE Fossil, Inc.
-0- 02/24/2004
/CONTACT: Mike Kovar, Chief Financial Officer of Fossil, Inc.,
+1-972-699-2229; or Investor Relations: Allison Malkin, Integrated Corporate
Relations, +1-203-222-9013, for Fossil, Inc./
/Web site: http://www.fossil.com /
(FOSL)
CO: Fossil, Inc.
ST: Texas
IN: REA FAS
SU: ERN CCA