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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) October 22, 1998
FOOTSTAR, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-11681 22-3439443
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
933 MacArthur Boulevard
Mahwah, New Jersey 07430
(Address of principal executive offices)
(201) 934-2000
(Registrant's telephone number, including area code)
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<PAGE>
Item 5. Other events.
On October 22, 1998, Footstar, Inc. (the "Company") announced third
quarter results and that it expects, if sales trends continue, that 1998 fourth
quarter earings could range from $1.00 to $1.05 per diluted share. Net income
from continuing operations for the quarter ended October 3, 1998 amounted to
$18.4 million versus net income of $18.8 million, for the 1997 third quarter.
The net increase in diluted earnings per share of 12.1% for the period included
a 15.2% accretion factor due to share buy backs, partially offset by a net
income reduction of 2.1%. For the nine months ended October 3, 1998, Footstar
posted net income from continuing operations of $41.1 million, or $1.60 per
diluted share, compared to $38.9 million, or $1.30 per diluted share, for 1997.
This represented a 23.1% increase in diluted earnings per share versus the
year-ago period, and included a 16.9% accretion factor due to the shares
repurchased by the Company.
The Company also announced that its Board of Directors had authorized
the repurchase of up to 2,450,000 or 10% of the outstanding shares of the
Company's Common Stock, from time to time, in the open market.
Except for the historical information contained herein, the matters
discussed in this Current Report are forward looking statements including those
regarding the Company's sales trends and earnings expectations for the fourth
quarter. These statements involve a number of risks and uncertainties that may
cause actual results to differ from those expressed in any of the forward
looking statements. Such risks and uncertainties include, but are not limited
to, uncertainties during the remainder of the quarter related to consumer demand
for footwear, warmer than expected weather, consumer acceptance of our
merchandise mix and retail locations, the effect of competitive products and
pricing, the availability of products and carriers of products, and the other
risks detailed in the Company's Securities and Exchange Commission filings. The
Company undertakes no obligation to update forward looking statements to reflect
events and circumstances after the date made.
A copy of the Company's press release dated October 22, 1998 is
attached hereto as Exhibit 99.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99 Press Release of Footstar, Inc. dated October 22, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registration has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
FOOTSTAR, INC.
Dated: October 23, 1998 By: CARLOS E. ALBERINI
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Name: Carlos E. Alberini
Title: Sr. Vice President and
Chief Financial Officer
Investor Contact: Carlos Alberini Media Contact: Wendi Kopsick
Sr. Vice President & CFO Jim Fingeroth
Footstar, Inc. Kekst and Company
(201) 760-4008 (212) 521-4800
FOR IMMEDIATE RELEASE
FOOTSTAR REPORTS 1998 THIRD QUARTER RESULTS
AND ANNOUNCES NEW 10% STOCK REPURCHASE PROGRAM
-Diluted EPS Reached $0.74 in the 1998
Third Quarter, a 12.1% Increase Over Diluted
EPS of $0.66 for 1997 Quarter-
-Lowering Earnings Expectations for the 1998 Fourth Quarter
to a Range of $1.00 to $1.05-
MAHWAH, NEW JERSEY, October 22, 1998 - Footstar, Inc. (NYSE:FTS) today announced
its financial results for the third quarter ended October 3, 1998 and the
authorization of a new share repurchase program for up to 2,450,000 shares of
its common stock. The Company also said, if trends continue, it currently
believes 1998 fourth quarter earnings could fall below analysts' estimates.
Third Quarter Results
Net income for the third quarter reached $18.4 million, or $0.74 per diluted
share, from net income of $18.8 million, or $0.66 per diluted share, in the
third quarter of 1997, a 12.1% increase in diluted earnings per share.
Operating profit for the third quarter of 1998 amounted to $38.8 million, an
increase of 3.5% over operating profit of $37.5 million for the third quarter of
1997.
Net sales for the third quarter increased 1.9% to $472.6 million from $464.0
million for the comparable quarter last year. The Company's same stores sales
for the quarter increased 0.4%. Footaction's same store sales increased 2.7%
during the quarter, while Meldisco's same store sales decreased 0.8%.
Mickey Robinson, Chairman and Chief Executive Officer, commented, "We are very
pleased with Footstar's results for the third quarter and nine-month period.
During the quarter, we managed our two businesses effectively in a very
competitive environment, especially in the athletic footwear and apparel sector.
We controlled expenses tightly and increased operating margins in spite of gross
margin pressures at our Footaction division, resulting from higher occupancy
expenses and increased promotional activity."
<PAGE>
Year-to-Date Results
Net income for the nine months ended October 3, 1998 reached $41.1 million, or
$1.60 per diluted share, from net income of $38.9 million, or $1.30 per diluted
share, in the comparable period of 1997, a 23.1% increase in diluted earnings
per share.
Operating profit for the first nine months of 1998 amounted to $93.8 million, an
increase of 11.0% from operating profit of $84.5 million for the first nine
months of 1997.
Net sales for the nine-month period increased 5.5% to $1,336.1 million from
$1,266.9 million for the comparable period last year. The Company's same store
sales for the nine-month period rose 1.3%. Footaction's same store sales
increased 4.0%, while Meldisco posted a same store sales decline of 0.1%.
Outlook
While it is still early in the quarter, based on current sales trends and
continued margin pressures at Footaction due to the highly competitive athletic
footwear and apparel sector, the Company believes it is prudent to lower
earnings estimates for the 1998 fourth quarter to a range of $1.00 to $1.05 per
diluted share, versus a First Call analysts' consensus of $1.16 for that period.
The estimated range assumes a marginal increase in the Company's same store
sales for the quarter. In the fourth quarter of 1997, the Company reported net
income from continuing operations, before restructuring charges, of $1.04 per
diluted share.
Mr. Robinson commented, "Should there be a positive shift in current trends, we
believe, based on our product offering and inventory levels, we would be in a
strong position to benefit and potentially generate results above the $1.00 to
$1.05 range. However, we are proceeding cautiously and plan to manage our
inventories in line with current sales trends while strictly controlling costs.
This approach has enabled us to achieve improved results in every period this
year in a very challenging retail environment and to keep inventories very clean
with relatively high turnover rates. In fact, total inventories at the end of
the quarter were 4% lower than a year ago, in spite of substantial square
footage expansion at our Footaction division."
Share Repurchase Program
The Company announced that its Board of Directors has authorized it to
repurchase up to 2,450,000 shares of its common stock from time to time in open
market transactions. Mr. Robinson commented, "The new stock repurchase program
reflects Footstar's strong financial position, our Board's continued confidence
in the Company's long-term growth prospects and our commitment to the creation
of value for our shareholders."
As of October 3, 1998, Footstar operated 563 Footaction stores and 2,489
Meldisco leased footwear departments.
Except for the historical information contained herein, the matters discussed in
this release are forward looking statements including those regarding the
Company's sales trends and earnings expectations for the fourth quarter. These
statements involve a number of risks and uncertainties that may cause actual
results to differ from those expressed in any of the forward looking statements.
Such risks and uncertainties include, but are not limited to, uncertainties
during the remainder of the quarter related to consumer demand for footwear,
warmer than expected weather, consumer acceptance of our merchandise mix and
retail locations, the effect of competitive products and pricing, the
availability of products and carriers of product, and the other risks detailed
in the Company's Securities and Exchange Commission filings. The Company
undertakes no obligation to update forward looking statements to reflect events
and circumstances after the date made.
- ATTACHMENTS FOLLOW -
# # #
<PAGE>
<TABLE>
<CAPTION>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in millions, except for per share data)
Third Quarter Ended Nine Months Ended
October 3, % of September 27, % of October 3, % of September 27, % of
1998 Sales 1997 Sales 1998 Sales 1997 Sales
---------- ------- ---------- ------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 472.6 100.0% $ 464.0 100.0% $ 1,336.1 100.0% $ 1,266.9 100.0%
Cost of sales 326.7 69.1% 321.9 69.4% 925.8 69.3% 881.8 69.5%
---------- ------- ------- ------ --------- ------ --------- ------
Gross profit 145.9 30.9% 142.1 30.6% 410.3 30.7% 385.1 30.4%
Store operating, selling, general and
administrative expenses 97.9 20.7% 96.5 20.8% 290.7 21.8% 277.1 21.9%
Depreciation and amortization 9.2 1.9% 8.1 1.7% 25.8 1.9% 23.5 1.9%
---------- ------ ----- ----- ----- ----- ----- ----
Operating profit 38.8 8.2% 37.5 8.1% 93.8 7.0% 84.5 6.7%
Interest income (expense), net (0.4) -0.1% (0.2) 0.0% (0.2) 0.0% 1.4 0.1%
----------- ----- ------ ----- ------ ---- ----- -----
Income before income taxes and
minority interests 38.4 8.1% 37.3 8.0% 93.6 7.0% 85.9 6.8%
Provision for income taxes 12.2 2.6% 12.3 2.7% 29.9 2.2% 28.3 2.2%
---------- ----- ---- ----- ---- ---- ----- ----
Income before minority interests 26.2 5.5% 25.0 5.4% 63.7 4.8% 57.6 4.5%
Minority interests in net income 7.8 1.7% 6.2 1.3% 22.6 1.7% 18.7 1.5%
---------- ----- ---- ---- ---- ---- ----- -----
Net income $ 18.4 3.9% $ 18.8 4.1% $ 41.1 3.1% $ 38.9 3.1%
========== ==== ====== ===== ====== ==== ======= =====
Weighted average shares outstanding:
Basic 24.5 28.4 25.3 29.8
========== ========= ======== ======
========== ========= ======== ======
Diluted 24.8 28.5 25.6 29.8
========== ========= ======== ======
Earnings per share:
Basic $ 0.75 $ 0.66 $ 1.63 $ 1.31
=========== ========== ========= ======
=========== ========== ========= ======
Diluted $ 0.74 $ 0.66 $ 1.60 $ 1.30
=========== ========== ========= ======
</TABLE>
Note: 1 - Percentages may not foot due to rounding
2 - The Company reports monthly sales using the NRF calendar which
differed from the fiscal calendar on which the Company reported
financial results for the third quarter and the nine months ended
September 27, 1997.
<PAGE>
<TABLE>
<CAPTION>
FOOTSTAR, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
October 3, January 3, September 27,
1998 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9.3 $ 152.2 $ 36.9
Accounts receivable, net 44.8 43.9 48.7
Inventories 339.3 284.5 353.9
Prepaid expenses and other current assets 53.3 48.4 51.9
------------------ ----------------- -----------------
Total current assets 446.7 529.0 491.4
Property and equipment, net 226.7 201.9 218.8
Other non-current assets 36.9 40.1 41.7
================== ================== ==================
Total assets $ 710.3 $ 771.0 $ 751.9
================== ================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 89.5 $ 95.4 $ 93.2
Accrued expenses 127.3 126.6 165.7
Income taxes payable 20.8 21.9 23.2
Notes Payable 41.7 0.0 0.0
------------------ ------------------ ------------------
Total current liabilities 279.3 243.9 282.1
Other long-term liabilities 46.4 59.5 48.4
Minority interests in subsidiaries 51.4 65.1 47.9
Shareholders' equity 333.2 402.5 373.5
================== ================== ==================
Total liabilities and shareholders' equity $ 710.3 $ 771.0 $ 751.9
================== ================== ==================
</TABLE>
Note: 1 - Certain reclassifications have been made to the September 27, 1997
balances to conform to the 1998 presentation.
<PAGE>
<TABLE>
<CAPTION>
FOOTSTAR, INC.
Segment Information
(in millions)
1st Quarter 2nd Quarter 3rd Quarter YTD
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Meldisco
Sales
1998 $236.3 $316.6 $288.3 $841.2
1997 $239.2 $301.7 $293.2 $834.1
Operating profit
1998 $1.8 $40.7 $23.3 $65.8
1997 $1.6 $33.3 $21.3 $56.2
Footaction
Sales
1998 $164.6 $146.0 $184.3 $494.9
1997 $137.7 $124.3 $170.8 $432.8
Operating profit
1998 $8.9 $8.0 $17.5 $34.4
1997 $8.1 $8.3 $18.2 $34.6
General Corporate Expenses
Operating (loss)
1998 ($2.5) ($1.9) ($2.0) ($6.4)
1997 ($2.3) ($2.0) ($2.0) ($6.3)
Footstar
Sales
1998 $400.9 $462.6 $472.6 $1,336.1
1997 $376.9 $426.0 $464.0 $1,266.9
Operating profit
1998 $8.2 $46.8 $38.8 $93.8
1997 $7.4 $39.6 $37.5 $84.5
</TABLE>
