SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 17, 1997
CONVERSE INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-13430 43-1419731
(State or other jurisdiction (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
ONE FORDHAM ROAD
NORTH READING, MASSACHUSETTS 01864
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 664-1100
ITEM 5. OTHER EVENTS
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The Registrant issued the following press release on April 17, 1997:
North Reading, Mass., April 18, 1997 -- Converse Inc. (NYSE:CVE) today
announced significant improvement in financial results for the first quarter
ended March 29, 1997.
Net sales for the first quarter were $136.0 million compared to $86.6 million
in the first quarter of 1996, an increase of 57%. Earnings from operations were
$12.3 million compared to $0.2 million in the first quarter of 1996. Net income
for the first quarter of 1997, excluding a one-time gain, was $4.7 million or
$0.26 per share, compared to a net loss of $3.3 million, or a $0.20 loss per
share, in the first quarter of 1996. During the first quarter of 1997, the
Company concluded substantially all of its outstanding litigation relating to
Apex One, Inc. resulting in a one-time pretax gain of $13.0 million and a net
after-tax gain of $8.0 million. Net income for the quarter including this one-
time gain was $12.7 million or $0.71 per share.
United States net sales increased 105% and international net sales increased
8% in the first quarter of 1997 compared to the first quarter of 1996. The
Company recorded substantial sales increases in each of its four product
categories of basketball, athleisure, children's and cross training during the
period of approximately 105%, 26%, 66% and 61%, respectively.
The Company's first quarter 1997 gross profit margin increased to $42.2
million or 31% of net sales compared to $21.6 million or 25% of net sales in the
first quarter of 1996. Selling, general and administrative expenses increased
by $10.5 million in the first quarter of 1997 compared to the 1996 period, but
decreased as a percentage of net sales to 27% versus 30% in the first quarter of
1996. Royalty income for the first quarter of 1997 increased by 31% to $6.4
million compared to $4.9 million in the first quarter of 1996.
Converse's global backlog increased to $220.1 million at March 29, 1997 from
$149.3 million at March 30, 1996, a 47% increase. The backlog increases were
approximately 32%, 83%, 40% and 14%, respectively, in the Company's categories
of basketball, athleisure, children's and cross training.
Glenn Rupp, Converse's Chairman and Chief Executive Officer, commented, "We
are pleased with the Company's first quarter operating results, particularly
with the substantial increases in sales in all four product categories, the
improvement of our gross profit margin percentage, and improved operating
profitability. We are also encouraged by the continued momentum of the Converse
brand as reflected by the strong backlog at the end of the quarter."
Converse Inc. is a leading global designer, manufacturer and marketer of high
quality athletic footwear for men, women and children. The Company is also a
global licensor of sports apparel, accessories and selected footwear. The
Company's products are distributed worldwide in over 90 countries through
specialty athletic, sporting goods, department and shoe stores.
Any statements set forth above which are not historical facts are forward
looking statements that involve certain risks and uncertainties that could cause
actual results to differ materially from those in the forward looking
statements. Potential risks and uncertainties include such factors as the
financial strength of the Company, the competitive pricing environment of the
footwear and apparel industries, product demand, market acceptance of the
Company's products, and the success of planned advertising, marketing and
promotional campaigns and other risks identified in documents filed by the
Company with the Securities and Exchange Commission.
CONVERSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
-----------------------------------
MARCH 30, 1996 MARCH 29, 1997
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Net Sales $ 86,551 $ 135,969
Cost of sales 64,934 93,809
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Gross profit 21,617 42,160
Selling, general and administrative
expenses 26,306 36,764
Royalty income 4,928 6,377
Restructuring expense (credit) --- (563)
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Earnings from operations 239 12,336
(Credit) loss on investment in
unconsolidated subsidiary --- (13,051)
Interest expense, net 3,837 2,679
Other (income) expense, net 877 2,090
-------- ---------
Earnings (loss) before income taxes (4,475) 20,618
Income tax expense (benefit) (1,215) 7,938
-------- ---------
Net earnings (loss) $( 3,260) $ 12,680 *
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Net earnings (loss) per share $ (0.20) $ 0.71 *
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Weighted average number of common shares 16,692 17,862
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* Net earnings for the first quarter of 1997 included a gain of $8.0 million,
net of taxes, pertaining to the settlement of outstanding litigation relating
to Apex One, Inc. Earnings per share for the first quarter of 1997 of $0.71
includes $0.45 pertaining to these litigation settlements.
CONVERSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
DECEMBER 28, 1996 MARCH 29, 1997
----------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,908 $ 3,913
Restricted cash 1,354 ---
Receivables, less allowances of $1,994
and $ 2,357 respectively 61,546 114,419
Inventories 86,799 78,290
Refundable income taxes 582 582
Prepaid expenses and other current
assets 20,383 13,529
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Total current assets 176,572 210,733
Net property, plant and equipment 17,849 17,746
Other assets 28,182 27,355
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$222,603 $255,834
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LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Short-term debt $ 13,421 $ 16,366
Current maturities of long-term debt 117,765 154,777
Accounts payable 49,503 52,758
Accrued expenses 25,124 15,319
Income taxes payable 3,407 3,836
-------- --------
Total current liabilities 209,220 243,056
Long-term debt 9,644 ---
Current assets in excess of
re-organization value 32,376 31,857
Deferred post-retirement benefits other
than pensions 10,231 10,207
Stockholders' equity (deficiency)
Common stock, $1.00 stated value,
50,000,000 shares authorized,
17,213,157 and 17,250,056 shares
issued and outstanding at December 28,
1996 and March 29, 1997 respectively 17,213 17,250
Preferred stock, no par value,
10,000,000 shares authorized, none
issued and outstanding --- ---
Additional paid-in capital 5,392 2,049
Retained earnings (deficit) (60,265) (47,585)
Foreign currency translation adjustment (1,208) (1,000)
-------- --------
Total stockholders' equity
(deficiency) (38,868) (29,286)
-------- --------
$222,603 $255,834
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized, in North Reading, Massachusetts on April
17, 1997.
CONVERSE INC.
By: /s/ Donald J. Camacho
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Donald J. Camacho
Senior Vice President and
Chief Financial Officer