|
- Same-store sales increase of 3.0 percent
- Gross margin of 32.8 percent versus 30.4 percent last year
- Operating profit increase of 55.8 percent
TOPEKA, Kan., Nov. 17 /PRNewswire-FirstCall/ -- Payless ShoeSource, Inc.
(NYSE: PSS) today reported that for the third quarter of fiscal 2005, which
ended October 29, 2005, diluted earnings per share were $0.32, compared with
$0.10 during the third quarter of fiscal 2004. The company recorded net
earnings of $21.9 million during the third quarter 2005 compared with
$6.6 million during the third quarter 2004.
Third quarter 2005 results include pre-tax restructuring charges of
approximately $1.2 million. Third quarter 2004 results included pre-tax
restructuring charges of $3.9 million relating to continuing operations, and a
loss from discontinued operations, net of income taxes and minority interest,
of $5.9 million.
During the first nine months of 2005, net earnings were $72.0 million and
diluted earnings per share were $1.06. This compares with net earnings of
$24.5 million and diluted earnings per share of $0.36 in the first nine months
of 2004.
Chief Executive Officers Comments
"We are pleased with our third quarter 2005 results, which reflect
continuing progress towards our goal of achieving more consistent sales and
earnings performance," said Matt Rubel, Chief Executive Officer and President
of Payless ShoeSource, Inc. "Our earnings improvement reflects the
combination of solid sales performance and a meaningful improvement in gross
margin.
"Through execution of our merchandise strategy, Payless is focused on
bringing fashion and fun to the consumer. We intend to build a stronger
emotional connection with our customers through enticing product, powerful
brand communications and a compelling point of sale experience. We want to
make fashion available to a broad spectrum of customers at a compelling
value."
The company remains committed to its goal of achieving low single-digit
positive same-store sales growth.
Results From Continuing Operations
Sales during the third quarter 2005 totaled $666.9 million, a 0.8 percent
increase from $661.4 million during the third quarter 2004. Same-store sales
increased 3.0 percent during the third quarter 2005. Average footwear unit
retail increased by 3.8 percent and footwear unit sales decreased by
1.4 percent relative to the same period last year. The decrease in footwear
unit sales reflects the lower store count, offset by an increase in unit sales
per store.
Sales during the first nine months of 2005 totaled $2.06 billion, a
0.3 percent increase over the first nine months of 2004. During the first
nine months of 2005, same-store sales increased 2.4 percent.
Gross margin was 32.8 percent of sales in the third quarter 2005 versus
30.4 percent in the third quarter 2004. The improvement resulted primarily
from favorable initial mark-on relative to last year. During the first nine
months of 2005, gross margin was 33.9 percent of sales versus 31.1 percent in
the first nine months of 2004.
Selling, general and administrative expenses were 27.6 percent of sales in
the third quarter 2005 versus 26.6 percent in the third quarter 2004. The
increase is primarily due to increased costs for employee incentive programs,
supplies and professional services. These increases were partially offset by
a reduction in payroll which reflects the reduced store count and other
restructuring actions. During the first nine months of 2005, selling, general
and administrative expenses were 28.3 percent of sales versus 26.6 percent in
the first nine months of 2004.
Operating profit from continuing operations increased during the third
quarter 2005 to $33.5 million from $21.5 million during the third quarter
2004. The third quarters of 2005 and 2004 included pre-tax restructuring
charges of $1.2 million and $3.9 million, respectively. Operating profit for
the first nine months of 2005 was $114.7 million, compared with $74.2 million
in the same period last year.
The companys effective income tax rate on continuing operations was
29.1 percent during the third quarter 2005, including the discrete benefit of
released tax reserves relating to favorable settlements of income tax audits
and an adjustment to reflect a cumulative effective income tax rate of
29.6 percent for the first nine months of 2005, including discrete events.
The third quarter 2004 effective income tax rate was 28.5 percent. For the
fourth quarter of fiscal year 2005, the effective income tax rate is expected
to be approximately 34 percent, excluding the effect of any discrete items.
Net earnings from continuing operations were $21.9 million in the third
quarter 2005, compared with net earnings from continuing operations of
$12.5 million in the third quarter 2004. Diluted earnings per share from
continuing operations increased during the third quarter 2005 to $0.32 from
$0.19 during the third quarter 2004.
During the first nine months of 2005, net earnings from continuing
operations were $75.4 million compared with net earnings from continuing
operations of $50.2 million in the first nine months of 2004. Diluted
earnings per share from continuing operations increased during the first nine
months of 2005 to $1.11 from $0.74 during the first nine months of 2004.
Discontinued Operations
Discontinued operations included Parade, Peru, Chile and 26 Payless stores
in North America. There were no losses from discontinued operations during
the third quarter 2005. The loss of $5.9 million or $0.09 per diluted share
from discontinued operations in the third quarter 2004 reflects the
performance of these operations during the quarter as well as disposal costs
related to exiting these operations.
Losses from discontinued operations were $3.4 million or $0.05 per diluted
share in the first nine months of 2005 and $25.7 million or $0.38 per diluted
share in the first nine months of 2004.
Balance Sheet
The company ended the third quarter 2005 with cash of $405 million, an
increase of $44 million during the third quarter. Total inventories at the
end of the third quarter 2005 were $343 million compared to $362 million at
the end of third quarter 2004, a decrease of 1.6 percent on a per-store basis.
Capital Expenditures
Cash used for capital expenditures totaled $14.3 million during the third
quarter 2005, and $49.6 million in the first nine months of 2005. For the
full fiscal year 2005, Payless intends for cash used for capital expenditures
to be approximately $70 million.
Store Count
In the third quarter 2005, the company opened 38 new stores and closed 37,
for a net increase of one store. This included the relocation of 17 stores.
In the first nine months of 2005, the company opened 110 new stores and closed
124 for a net reduction of 14 stores. This included the relocation of
67 stores. During the full fiscal year 2005, the company intends to have a
net reduction of approximately 30-40 stores. As of the end of the third
quarter 2004, the store count for continuing operations was 4,804.
The store count as of the end of the third quarter 2005 was 4,626, which
included 60 stores not open for operations due to Hurricanes Katrina, Rita and
Wilma. The company believes that the impact from these storms is not material
to its financial condition or statement of operations for the third quarter
and the first nine months of 2005, due to coverage under its property and
business interruption insurance policies.
Share Repurchase
During the third quarter of 2005, the company repurchased $14.3 million
(832 thousand shares) of common stock under its stock repurchase program.
During the first nine months of fiscal year 2005, the company repurchased
$16.2 million (957 thousand shares) of common stock under its stock repurchase
program. Under the indenture governing the companys 8.25% Senior
Subordinated Notes, the company may repurchase approximately an additional
$51 million of common stock. This limit will continue to adjust quarterly
based on the companys net earnings.
Fiscal 2005 Outlook
Payless ShoeSource remains committed to its long-standing goal to achieve
low single-digit positive same-store sales on a consistent basis, through
successful execution of its merchandise strategy. The company does not
provide guidance for sales, earnings or margins. However, certain financial
metrics for fiscal 2005 are expected to include:
-- Depreciation and amortization of approximately $90 - $95 million
dollars;
-- Cash used for capital expenditures are planned at $70 million; and,
-- Working capital should be approximately neutral, subject to normal
seasonal fluctuations.
Payless ShoeSource, Inc. is the largest specialty family footwear retailer
in the Western Hemisphere. As of the end of fiscal October 2005, the Company
operated a total of 4,626 stores, which included 60 stores not open for
operations due to Hurricanes Katrina, Rita and Wilma. Payless stores offer
quality family footwear and accessories at affordable prices. In addition,
customers can buy shoes over the Internet through Payless.com(R), at
http://www.payless.com .
This release contains forward-looking statements relating to such matters
as anticipated financial performance, international expansion opportunities,
consumer spending patterns, capital expenditure plans, business prospects,
products, future store openings and closings, possible strategic initiatives
and similar matters. Forward looking statements are identified by words such
as "expects," "anticipates," "intends," "plans," "believes," "seeks," or
variations of such words. A variety of known and unknown risks and
uncertainties and other factors could cause actual results and expectations to
differ materially from the anticipated results or expectations which include,
but are not limited to: changes in consumer spending patterns; changes in
consumer preferences and overall economic conditions; the impact of
competition and pricing; changes in weather patterns; the financial condition
of the Companys suppliers and manufacturers; changes in existing or potential
duties, tariffs or quotas; changes in relationships between the United States
and foreign countries, changes in relationships between Canada and foreign
countries; economic and political instability in foreign countries, or
restrictive actions by the governments of foreign countries in which suppliers
and manufacturers from whom the Company sources are located or in which the
Company has retail locations or otherwise does business; changes in trade,
intellectual property, customs and/or tax laws; fluctuations in currency
exchange rates; availability of suitable store locations on acceptable terms;
the ability to terminate leases on acceptable terms; the ability to hire and
retain associates; performance of other parties in strategic alliances;
general economic, business and social conditions in the countries from which
we source products, supplies or have or intend to open stores, performance of
partners in joint ventures; the ability to comply with local laws in foreign
countries; threats or acts of terrorism; strikes, work stoppages and/or slow
downs by unions that play a significant role in the manufacture; distribution
or sale of product; congestion at major ocean ports; changes in the value of
the dollar relative to the Chinese Yuan and other currencies. Please refer to
the Companys 2004 Annual Report on Form 10-K for the fiscal year ended
January 29, 2005 for more information on these and other risk factors that
could cause actual results to differ. The Company does not undertake any
obligation to release publicly any revisions to such forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
[Unaudited Condensed Consolidated Statements of Earnings, Balance Sheets
and Statements of Cash Flows Attached]
NOTE REGARDING ATTACHMENTS:
-- The unaudited condensed consolidated statements of earnings, balance
sheets and statements of cash flows have been prepared in accordance
with the companys accounting policies as described in the companys
2004 Form 10-K, on file with the Securities and Exchange Commission,
are subject to reclassification, and should be read in conjunction
with the 2004 Annual Report to Shareowners. In the opinion of
management, this information is fairly presented, and all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
statement of the results for the interim periods have been included.
PAYLESS SHOESOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(Millions, except per share data)
13 Weeks Ended 39 Weeks Ended
October October October October
29, 30, 29, 30,
2005 2004 2005 2004
Net sales $666.9 $661.4 $2,056.0 $2,049.3
Cost of sales 448.4 460.3 1,358.0 1,411.9
Gross margin 218.5 201.1 698.0 637.4
Selling, general and administrative
expenses 183.8 175.7 581.4 545.6
Restructuring charges 1.2 3.9 1.9 17.6
Operating profit from continuing
operations 33.5 21.5 114.7 74.2
Interest expense, net 1.5 4.3 7.1 13.2
Earnings from continuing operations
before income taxes and
minority interest 32.0 17.2 107.6 61.0
Provision for income taxes 9.3 4.9 31.9 15.1
Earnings from continuing operations
before minority interest 22.7 12.3 75.7 45.9
Minority interest, net of income taxes (0.8) 0.2 (0.3) 4.3
Net earnings from continuing
operations 21.9 12.5 75.4 50.2
Loss from discontinued operations, net
of income taxes and minority interest - (5.9) (3.4) (25.7)
Net earnings $21.9 $6.6 $72.0 $24.5
Diluted earnings per share:
Earnings from continuing
operations $0.32 $0.19 $1.11 $0.74
Loss from discontinued operations - (0.09) (0.05) (0.38)
Diluted earnings per share $0.32 $0.10 $1.06 $0.36
Basic earnings per share:
Earnings from continuing
operations $0.32 $0.19 $1.12 $0.74
Loss from discontinued operations - (0.09) (0.05) (0.38)
Basic earnings per share $0.32 $0.10 $1.07 $0.36
Diluted weighted average shares
outstanding 68.1 68.0 67.6 68.0
Basic weighted average shares
outstanding 67.7 68.0 67.4 68.0
PAYLESS SHOESOURCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
OCTOBER 29, OCTOBER 30, JANUARY 29,
(dollars in millions) 2005 2004 2005
ASSETS:
Current assets:
Cash and cash equivalents $405.4 $216.2 $289.6
Marketable securities, available
for sale - 9.0 5.0
Restricted cash 2.0 18.5 3.0
Inventories 342.7 361.7 345.3
Current deferred income taxes 18.2 26.8 21.9
Other current assets 63.5 66.8 56.6
Current assets of discontinued
operations 2.4 17.9 8.5
Total current assets 834.2 716.9 729.9
Property and Equipment:
Land 7.7 8.0 8.0
Property, buildings and equipment 1,192.8 1,216.9 1,186.9
Accumulated depreciation and
amortization (811.4) (802.4) (772.6)
Property and equipment, net 389.1 422.5 422.3
Favorable leases, net 19.0 22.7 21.7
Deferred income taxes 24.0 35.2 36.4
Goodwill, net 5.9 5.9 5.9
Other assets 21.0 25.7 23.5
Noncurrent assets of discontinued
operations - 8.1 0.1
TOTAL ASSETS $1,293.2 $1,237.0 $1,239.8
LIABILITIES AND EQUITY:
Current liabilities:
Current maturities of debt $1.6 $3.5 $0.3
Notes payable 2.0 18.5 3.0
Accounts payable 140.2 106.0 160.3
Accrued expenses 160.8 164.6 159.7
Current liabilities of
discontinued operations 5.0 5.9 15.0
Total current liabilities 309.6 298.5 338.3
Long-term debt 204.2 202.1 204.3
Other liabilities 99.5 87.4 93.6
Noncurrent liabilities of
discontinued operations - 8.5 -
Minority interest 9.5 7.5 8.6
Commitments and contingencies - - -
Equity 670.4 633.0 595.0
TOTAL LIABILITIES AND EQUITY $1,293.2 $1,237.0 $1,239.8
PAYLESS SHOESOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Year-to-date Year ended
October 29, October 30, January 29,
(dollars in millions) 2005 2004 2005
OPERATING ACTIVITIES:
Net earnings (loss) $72.0 $24.5 $(2.0)
Loss from discontinued operations,
net of income taxes and minority
interest (3.4) (25.7) (37.1)
Net earnings from continuing
operations 75.4 50.2 35.1
Adjustments for non-cash items
included in net earnings from
continuing operations:
Non-cash component of
restructuring charges - 12.0 10.8
Loss on impairment and
disposal of assets 6.8 6.6 7.0
Depreciation and amortization 68.3 71.2 94.6
Amortization of deferred
financing costs 0.9 0.9 0.9
Amortization of unearned
restricted stock 0.8 0.5 0.7
Deferred income taxes 16.4 (12.9) (6.4)
Minority interest, net of
income taxes 0.3 (4.3) (3.6)
Income tax benefit of stock
option exercises 1.2 - -
Changes in working capital:
Inventories 3.3 15.7 31.0
Other current assets (5.5) (5.1) 8.4
Accounts payable (17.5) (24.1) 30.0
Accrued expenses 8.3 40.9 34.1
Other assets and liabilities, net 7.4 5.6 6.1
Net cash provided by (used in)
discontinued operations (7.2) 0.5 6.6
Cash flow provided by operating
activities 158.9 157.7 255.3
INVESTING ACTIVITIES:
Payments for capital expenditures (49.6) (81.5) (103.0)
Dispositions of property and
equipment 0.8 - 3.0
Restricted cash 1.0 15.0 30.5
Purchases of marketable securities - (13.0) (13.0)
Sales of marketable securities 5.0 14.0 18.0
Cash flow used in investing
activities (42.8) (65.5) (64.5)
FINANCING ACTIVITIES:
Repayment of notes payable (1.0) (15.0) (30.5)
Issuance of debt 1.2 2.4 2.4
Payment of deferred financing
costs - (0.2) (0.2)
Repayment of debt (0.2) (0.7) (1.5)
Issuances of common stock 14.6 1.5 1.6
Purchases of common stock (16.8) (2.3) (11.4)
Contributions by minority owners 0.9 1.9 3.7
Cash flow used in financing
activities (1.3) (12.4) (35.9)
Effect of exchange rate changes on
cash 1.0 (0.3) (2.0)
Increase in cash and cash
equivalents 115.8 79.5 152.9
Cash and cash equivalents,
beginning of period 289.6 136.7 136.7
Cash and cash equivalents, end of
period $405.4 $216.2 $289.6
|
|
