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| FINL > SEC Filings for FINL > Form 10-Q on 5-Jan-2004 | All Recent SEC Filings |
5-Jan-2004
Quarterly Report
The following table and subsequent discussion sets forth operating data of the Company as a percentage of net sales for the periods indicated below. The following discussion and analysis should be read in conjunction with the unaudited Financial Statements included elsewhere herein.
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------------- -----------------------------------
November 29, November 30, November 29, November 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including occupancy costs) 73.2 75.9 70.4 72.3
------------ -- ------------ -- ------------ -- ------------ --
Gross profit 26.8 24.1 29.6 27.7
Selling, general and administrative expenses 25.7 27.6 23.6 25.1
Repositioning charge reversal - - - (.2 )
Insurance income-tornado (.6 ) - (.2 ) -
------------ -- ------------ -- ------------ -- ------------ --
Operating income (loss) 1.7 (3.5 ) 6.2 2.8
Interest income-net .1 .1 .1 .1
------------ -- ------------ -- ------------ -- ------------ --
Income (loss) before income taxes 1.8 (3.4 ) 6.3 2.9
Provision (benefit) for income taxes .7 (1.3 ) 2.4 1.1
------------ -- ------------ -- ------------ -- ------------ --
Net income (loss) 1.1 % (2.1 )% 3.9 % 1.8 %
------------ -- ------------ -- ------------ -- ------------ --
Thirteen Weeks Ended November 29, 2003 Compared to Thirteen Weeks Ended November 30, 2002
Net sales increased 36.6% to $202.0 million for the thirteen weeks ended November 29, 2003 from $147.9 million for the thirteen weeks ended November 30, 2002. This increase in net sales was primarily attributable to a 24.8% increase in comparable store sales for the period along with an increase in net sales from new stores. As of November 29, 2003, the number of stores in operation increased 10.6% to 532 from 481 at November 30, 2002. Comparable footwear net sales for the thirteen weeks ended November 29, 2003 increased approximately 23.2% versus the thirteen weeks ended November 30, 2002. Comparable activewear and accessories net sales increased approximately 29.9% for the comparable period. Net sales per square foot increased to $65 from $52 for the same thirteen week period of the prior year.
Gross profit for the thirteen weeks ended November 29, 2003 was $54.1 million, an increase of $18.5 million over the thirteen weeks ended November 30, 2002. During this same period, gross profit increased to 26.8% of net sales versus 24.1% for the prior year. This 2.7% increase was due to a 2.6% decrease in occupancy costs as a percentage of net sales (primarily caused by the increase in net sales during the period) and a .1% increase in margin for merchandise sold.
Selling, general and administrative expenses increased $11.2 million (27.5%) to $52.0 million (25.7% of net sales) for the thirteen weeks ended November 29, 2003 from $40.8 million (27.6% of net sales) for the thirteen weeks ended November 30, 2002. This dollar increase was primarily attributable to the operating costs related to operating 51 additional stores at November 29, 2003 versus November 30, 2002. The decrease as a percentage of net sales was primarily a result of the 24.8% comparable store sales gain recorded for the thirteen weeks ended November 29, 2003.
On September 20, 2002 the Company's corporate office and distribution center located in Indianapolis, Indiana were damaged by a tornado. The Company maintains comprehensive property insurance to cover physical damage to the facility (at replacement value) and its contents, including coverage for inventory at retail selling value. In November 2003 the Company recorded income of $1.2 million related to the settlement of the building portion of the insurance claim.
Net interest income was $143,000 (0.1% of net sales) for the thirteen weeks ended November 29, 2003, compared to net interest income of $137,000 (0.1% of net sales) for the thirteen weeks ended November 30, 2002.
The Company had a provision for income taxes of $1.3 million for the thirteen weeks ended November 29, 2003, as compared to a benefit for income taxes of $1.9 million for the thirteen weeks ended November 30, 2002. The increase is due to the increased level of income before income taxes for the thirteen weeks ended November 29, 2003, and an increase in the effective tax rate to 38.0% for the thirteen weeks ended November 29, 2003 from 37.0% for the thirteen weeks ended November 30, 2002, primarily the result of increases in state taxes.
Net income was $2.2 million for the thirteen weeks ended November 29, 2003 compared to a net loss of $3.2 million for the thirteen weeks ended November 30, 2002. Diluted net income per share was $.09 for the thirteen weeks ended November 29, 2003 compared to diluted net loss per share of $(.13) for the thirteen weeks ended November 30, 2002. Diluted weighted average shares outstanding were 24,313,000 and 23,659,000 for the thirteen weeks ended November 29, 2003 and November 30, 2002, respectively. The increase in weighted average shares outstanding was the result of shares issued upon exercise of Company stock options partially offset by the Company's repurchase of shares of Class A Common Stock under its stock repurchase plan.
Thirty-Nine Weeks Ended November 29, 2003 Compared to Thirty-Nine Weeks Ended November 30, 2002
Net sales increased 30.2% ($157.9 million) to $680.6 million for the thirty-nine weeks ended November 29, 2003 from $522.7 million for the thirty-nine weeks ended November 30, 2002. Of this increase, $22.2 million was attributable to a 10.6% increase in the number of stores open (58 stores opened less 7 stores closed) during the period from 481 at November 30, 2002 to 532 at November 29, 2003. The balance of the increase was attributable to a $31.7 million increase in net sales from the existing stores open
only part of the first thirty-nine weeks of last year along with a comparable store net sales increase of 20.0% for the thirty-nine weeks ended November 29, 2003. Comparable footwear net sales for the thirty-nine weeks ended November 29, 2003, increased approximately 16.5%. Comparable activewear and accessories net sales increased approximately 35.0% for the comparable period. Net sales per square foot increased to $227 from $189 for the same period of the prior year.
Gross profit for the thirty-nine weeks ended November 29, 2003 was $201.2 million, an increase of $56.4 million over the thirty-nine weeks ended November 29, 2002. During this same period gross profit increased to 29.6% of net sales versus 27.7% for the prior year. The increase was due to a 1.9% decrease in occupancy costs as a percentage of net sales primarily caused by the increase in net sales during the period.
Selling, general and administrative expenses increased $29.2 million (22.3%) to $160.6 million (23.6% of net sales) for the thirty-nine weeks ended November 29, 2003 from $131.4 million (25.1% of net sales) for the thirty-nine weeks ended November 30, 2002. This dollar increase was primarily attributable to the operating costs related to operating 51 additional stores at November 29, 2003 versus November 30, 2002. The decrease as a percentage of net sales was primarily a result of the 20.0% comparable store sales gain recorded for the thirty-nine weeks ended November 29, 2003.
On September 20, 2002 the Company's corporate office and distribution center located in Indianapolis, Indiana were damaged by a tornado. The Company maintains comprehensive property insurance to cover physical damage to the facility (at replacement value) and its contents, including coverage for inventory at retail selling value. In November 2003 the Company recorded income of $1.2 million related to the settlement of the building portion of the insurance claim.
Net interest income was $473,000 (.1% of net sales) for the thirty-nine weeks ended November 29, 2003, compared to net interest income of $674,000 (.1% of net sales) for the thirty-nine weeks ended November 30, 2002, a decrease of $201,000. This decrease was the result of decreased interest rates for the invested cash balances for the comparable periods.
The Company's provision for federal and state income taxes was $16.1 million for the thirty-nine weeks ended November 29, 2003 compared to $5.7 million for the thirty-nine weeks ended November 30, 2002. The $10.4 million increase in the provision is due to the increased level in income before income taxes for the thirty-nine weeks ended November 29, 2003, along with an increase in the effective tax rate to 38.0% for the thirty-nine weeks ended November 29, 2003 from 37.0% for the thirty-nine weeks ended November 30, 2002, primarily the result of increases in state taxes.
Net income increased 172.5% to $26.2 million for the thirty-nine weeks ended November 29, 2003 compared to $9.6 million for the thirty-nine weeks ended November 30, 2002. Diluted net income per share increased 179.5% to $1.09 for the thirty-nine weeks ended November 29, 2003 compared to diluted net income per share of $.39 for the thirty-nine weeks ended November 30, 2002. Diluted weighted average shares outstanding were 24,009,000 and 24,514,000 for the periods ended November 29, 2003 and November 30, 2002, respectively. The decrease in weighted average shares outstanding was the result of the Company repurchasing shares of its Class A Common Stock under the stock repurchase plan, which was partially offset by the exercise of Company stock options.
Liquidity and Capital Resources
The Company had net cash of $5.4 million provided by its operating activities during the thirty-nine weeks ended November 29, 2003 as compared to a net use of cash from its operating activities of $11.0 million during the thirty-nine weeks ended November 30, 2002. This increase was primarily the result of improved earnings.
The Company had a net use of cash from its investing activities of $37.2 million and $16.7 million for the thirty-nine week periods ended November 29, 2003 and November 30, 2002, respectively. Of the $37.2 million used in fiscal 2004, $37.7 million was used for new store construction, remodeling of existing stores and the expansion of the corporate office and distribution center. This amount was partially offset by $501,000 in net maturities and proceeds from marketable securities.
The Company had working capital of $180.5 million at November 29, 2003, an increase of $14.9 million from the working capital of $165.6 million at March 1, 2003.
Merchandise inventories were $230.0 million at November 29, 2003 compared to $158.8 million at March 1, 2003 and $180.9 million at November 30, 2002. As a result of planned early holiday receipts, merchandise inventories on a per square foot basis at November 29, 2003 increased approximately 17.8% compared to November 30, 2002.
At November 29, 2003 the Company had cash equivalents of $51.5 million and no interest bearing debt. Cash equivalents are primarily invested in tax exempt instruments with maturities of one to twenty-eight days.
Thus far in fiscal 2004, the Company has opened a total of 58 stores, remodeled 25 existing stores and closed 3 stores. The Company does not plan to open any additional new stores for the remainder of fiscal 2004. In fiscal 2005, the Company currently plans to open a total of 60 new stores, while remodeling 25 existing stores and closing 5 to 7 existing stores. In addition, the Company has made significant progress on the expansion of the existing corporate office and distribution center in Indianapolis with an addition of 375,000 square feet. This project is estimated to cost $20-21 million with completion in fiscal 2005. The Company now expects capital expenditures for fiscal 2004 to approximate an aggregate of $50-51 million. Management believes that cash and marketable securities on hand, operating cash flow and the Company's existing $50,000,000 bank facility, which expires on September 20, 2005, will provide sufficient capital to complete the Company's fiscal 2005 store expansion program and to satisfy the Company's other capital requirements through fiscal 2005.
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