UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- - ----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT
- - ----- OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-28596
THE NORTH FACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3204082
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2013 Farallon Drive, San Leandro, California 94577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 618-3500
Former name, former address and former fiscal year,
if changed since last report: N/A
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -----
The number of shares of Common Stock, $0.0025 par value per share, outstanding
on May 12, 1998, was 11,560,761.
<PAGE>
THE NORTH FACE, INC.
MARCH 31, 1998
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1 - Financial Statements (unaudited)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 9
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE NORTH FACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
March 31 December 31 March 31,
1998 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $4,867 $4,511 $1,618
Trade accounts receivable, net.................... 39,924 52,255 24,134
Other receivables................................. 7,181 6,112 2,928
Income tax receivable............................. 3,672 3,465 2,585
Advances to suppliers............................. 929 744 628
Inventories....................................... 49,678 44,697 35,889
Deferred taxes.................................... 2,781 2,779 2,483
Other current assets.............................. 8,913 4,390 2,800
------------ ------------ ------------
Total current assets............................ 117,945 118,953 73,065
Property and equipment, net....................... 22,957 22,955 13,998
Trademarks and intangibles, net................... 28,610 29,066 29,655
Other assets...................................... 3,174 3,306 2,279
------------ ------------ ------------
Total assets.................................... $172,686 $174,280 $118,997
============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, accrued expenses, and other
current liabilities............................. 33,856 34,102 20,515
Short term borrowings and current portion of
long-term debt and capital lease obligations.... 23,256 25,734 3,821
------------ ------------ ------------
Total current liabilities....................... 57,112 59,836 24,336
Long-term debt and obligations under capital
leases.......................................... 4,953 5,177 477
Other long-term liabilities....................... 6,025 5,974 6,461
------------ ------------ ------------
Total liabilities............................... 68,090 70,987 31,274
------------ ------------ ------------
Stockholders' equity:
Common Stock, $.0025 par value -shares authorized
50,000,000; issued and outstanding ; 11,554,000
at March 31, 1998; 11,502,000 at December 31, 1997;
and 11,205,000 at March 31, 1997................. 29 29 29
Additional paid-in capital........................ 82,504 81,727 77,256
Subscriptions receivable.......................... 0 -- (62)
Retained earnings................................. 21,681 21,220 10,348
Accumulated other comprehensive income -
Translation adjustment.......................... 382 317 152
------------ ------------ ------------
Total stockholders' equity...................... 104,596 103,293 87,723
------------ ------------ ------------
Total liabilities and stockholders' equity...... $172,686 $174,280 $118,997
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
THE NORTH FACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------
1998 1997
---------- ----------
<S> <C> <C>
Net Sales.......................... $47,809 $39,342
Cost of Sales...................... 26,817 22,127
---------- ----------
Gross Profit....................... 20,992 17,215
Operating Expenses................. 19,911 16,773
---------- ----------
Operating Income................... 1,081 442
Interest Expense................... (674) (119)
Other Income (Expense), net........ 353 62
---------- ----------
Income Before Provision for
Income Taxes .................... 760 385
Provision for Income Taxes......... 300 150
---------- ----------
Net Income......................... $460 $235
========== ==========
Earnings Per Share:
Basic......................... $0.04 $0.02
Diluted....................... $0.04 $0.02
Weighted Average Shares Outstanding:
Basic......................... 11,539 11,206
Diluted....................... 11,872 11,643
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
THE NORTH FACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME............................................ $460 $235
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization....................... 1,461 1,004
Deferred income taxes............................... (2) 7
Provision for doubtful accounts..................... (211) 554
Tax benefit of exercise of stock options............ 12 1,055
Effect of changes in:
Accounts receivable................................. 12,543 (3,283)
Inventories......................................... (4,981) (4,414)
Income tax receivable............................... (207) (1,291)
Other assets........................................ (5,434) (3,687)
Accounts payable and accrued liabilities............ (197) 1,830
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES... 3,444 (7,990)
---------- ----------
INVESTING ACTIVITIES:
Purchase of fixed assets.............................. (1,218) (2,709)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES................. (1,218) (2,709)
---------- ----------
FINANCING ACTIVITIES:
Borrowings on long term debt.......................... 0 380
Long term debt repayments............................. (312) (9)
Proceeds (repayment) from revolver, net............... (2,388) 3,697
Proceeds from issuance of stock....................... 765 104
---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES... (1,935) 4,172
---------- ----------
Effect of foreign currency fluctuations on cash....... 65 (170)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... 356 (6,697)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........ 4,511 8,315
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............. $4,867 $1,618
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE NORTH FACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of The
North Face, Inc. and its subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Operating results for the three month period ended March 31,
1998 are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 1998. Accordingly, the interim unaudited
financial statements should be read in conjunction with the financial
statements included in the Form 10-K.
These financial statements have been prepared by the Company in a manner
consistent with that used in the preparation of the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (the "Form 10-K"). Certain items
contained in these statements are based on estimates. In the opinion of
management, the accompanying financial statements reflect all adjustments,
consisting of only normal and recurring adjustments, necessary for a fair
presentation of the financial position and results of operations and cash
flows for the periods presented. All significant intercompany accounts and
transactions have been eliminated. Certain reclassifications have been made
to prior year amounts to conform with current year presentation.
The financial statements included herein are unaudited. The Condensed
Consolidated Balance Sheet as of December 31, 1997, has been derived from
the Consolidated Balance Sheet as of December 31, 1997 included in the Form
10-K.
NOTE 2. RECENTLY ISSUED ACCOUNTING STANDARDS
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"
which established standards for reporting and displaying comprehensive income
and its components in financial statements. Comprehensive income is defined
as net income and all nonowner changes in shareholders' equity. Accumulated
other comprehensive income consists entirely of foreign currency translation
adjustments. Total comprehensive income for the quarters ending March 31,
1998 and 1997 was $525,000 and $65,000, respectively.
NOTE 3. SUBSEQUENT EVENTS
In the Second Quarter of 1998, the Company is taking a one-time charge
of approximately $1.5 million, or $.08 per share, related to the closing of
an out-dated manufacturing facility in Scotland and the integration of its
Canadian subsidiary into a combined North American business operation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview - Factors That May Affect Future Results
When used below in connection with matters that may occur in the future, the
words "anticipate," "estimate," "expect" or similar words identify forward
looking statements within the meaning of federal securities laws. Forward
looking statements below are based on the Company's current expectations of
future events. The matters described in the forward looking statements are
subject to risks and uncertainties. The actual results of these matters may
differ substantially from the results anticipated by the Company. The
Company cannot assure that future results will meet its current expectations.
Risks and uncertainties relating to forward looking statements and to the
Company's business include, but are not limited to, those described below,
under "Factors That May Affect Our Business", in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 and in other
documents that may be subsequently filed with the Commission.
Results of Operations
The following tables set forth, for the periods indicated, certain items in
the Company's consolidated statements of operations as a percentage of net
sales (except for income taxes, which are shown as a percentage of pretax
income). The results of operations for the three month periods ended March
31, 1998 and 1997 are not necessarily indicative of future results to be
expected for the full year.
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------
1998 1997
---------- ----------
<S> <C> <C>
Net Sales.......................... 100.0% 100.0%
Gross Profit....................... 43.9% 43.8%
Operating Expenses................. 41.6% 42.6%
Operating Income................... 2.3% 1.1%
Interest Expense................... -1.4% -0.3%
Income Before Provision for
Income Taxes .................... 1.6% 1.0%
Provision for Income Taxes......... 0.6% 0.4%
Net Income......................... 1.0% 0.6%
</TABLE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Net Sales. Net sales increased by 21.5% to $47.8 million from $39.3 million
for the three months ended March 31, 1998 (the "First Quarter 1998") over the
three months ended March 31, 1997 (the "First Quarter 1997").
Net sales to wholesale customers increased by 27.4% to $39.9 million from
$31.3 million for the First Quarter 1998 compared to the First Quarter 1997.
This increase was primarily a result of increased unit sales to the Company's
existing wholesale customers resulting from (i) continued sales in recently
introduced products, including Tekware? and Ascentials; (ii) continued strong
sales of sales of existing products, and (iii) increased sales through the
Summit Shop program.
Retail sales in the US and Canada were $7.9 million compared to approximately
$8.0 million in the prior year. On a comparable store basis, retail sales
were lower by 4.8% (approximately 4.0% lower for retail stores and
approximately 6.7% lower for outlets). The decline was primarily in January
and early February due to inadequate inventory levels related to the
allocation of retail product to the wholesale division during the Fourth
Quarter 1997. March results improved with a better retail inventory position,
favorable weather conditions and a sale held at the outlets.
Gross Profit. Gross profit as a percentage of net sales for the First Quarter
1998 was 43.9% compared to 43.8% for the First Quarter 1997. The higher
gross margin was primarily attributable to improved pricing in production.
Operating Expenses. Operating expenses, which include selling, marketing, and
general administrative expenses, increased by 18.7% to $19.9 million from
$16.8 million for the First Quarter 1998 compared to the First Quarter 1997,
primarily as a result of increases in variable and fixed costs to support the
growth of the Company's business. However, operating expenses as a
percentage of net sales declined from 42.6% to 41.6%, reflecting the
Company's improved operating expense leverage.
Interest Expense. Interest expense for the First Quarter 1998 increased to
$0.7 million from $0.1 million for the First Quarter 1997. The low level of
interest in the First Quarter 1997 was primarily as a result of the
application of the proceeds from the Company's initial public offering in July
1996 and secondary offering in November 1996, which were used to repay debt.
Provision for Income Taxes. Income tax expense as a percent of pretax income
was approximately 39.5% for the First Quarter 1998 compared to 39.0% for the
First Quarter 1997. This increase relates to the estimated mix of the
Company's pretax earnings between the U.S. and the United Kingdom, which have
different tax rates.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's ability to maintain adequate levels of inventory
was constrained by its capital resources. As a result of increases in its
credit facility, as well as the Company's public offerings in 1996, the
Company has increased its levels of inventory in order to better enable it to
meet demand for its key products. The Company anticipates that inventory
levels will continue to increase as the Company expands its business and
implements its core inventory replenishment program. Such inventory increases
are expected to be financed by borrowings under the Company's credit
facility. The Company's credit facility provides for borrowings up to $60.0
million under its revolving line of credit with actual borrowings limited to
the lesser of $60.0 million or available collateral (approximately $58.0
million of gross availability as of March 31, 1998) and for borrowings of up
to $5.0 million under a term note for capital expenditures which was fully
utilized as of March 31, 1998. The credit facility also provides a sub- limit
for letters of credit of up to $25.0 million to finance the Company's
purchases of merchandise inventories from foreign suppliers. As of March 31,
1998, the Company had approximately $19.3 million of letters of credit
outstanding under the credit facility. The credit facility contains certain
financial covenants that the Company was in compliance with as of March 31,
1998.
The Company estimates that its capital expenditures in 1998 will be
approximately $17.0 to $20.0 million. This amount is expected to be used
principally for investment in Summit Shops, the upgrade of management
information systems, the expansion of the Company's administration and
distribution facilities, the expansion of its European sales and marketing
operations and the remodeling of existing retail stores.
The Company anticipates that cash generated from operations, cash available
under the Company's credit facility and through increased bank financing,
will be sufficient to satisfy its cash requirements for at least the next 12
months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
FACTORS THAT MAY AFFECT OUR BUSINESS
Certain statements set forth herein which refer to future financial items,
economic performance or operations are forward looking, and actual results
may differ materially from the result expected by the Company. The Company's
future growth and operating results may be adversely effected by a number of
factors, including those set forth below and elsewhere herein. There may also
be important, unforeseen risks not described herein.
Consumer Preferences. Consumer demand for the Company's products may be
adversely affected if consumer interest in outdoor activities declines or
does not grow. If the Company is unable to respond successfully to changes
in consumer preferences, or if consumer preferences shift toward competing
products or away from the Company's product categories altogether, the
Company's business would be adversely effected. The Company cannot assure
future growth or consumer demand for its products.
Managing Growth. If the Company's business grows, the Company may have
increased difficulties in managing product design, hiring, marketing,
distribution, management information and other resources, and in obtaining
and effectively managing supplies, manufacturing services and working capital.
The Company's future profitability will be critically dependent on its
ability to achieve and manage potential future growth effectively.
Wholesale Strategy. The Company's wholesale customers consist almost
exclusively of specialty outdoor product retailers. The Company cannot
assure that its existing customers will increase their purchases of the
Company's products, that future preseason wholesale orders will increase, or
that the Company will be able to fill reorders during each season. Because
the Company expects its wholesale business to constitute an increasing
percentage of total sales going forward, overall gross margins may decline in
the future. The Company's wholesale strategy also depends on its ability to
achieve increased sales through its Summit Shop program. Risks of this
program include sourcing and managing higher inventory levels, funding all or
most of the cost of the Summit Shop fixtures without assurance of additional
sales and profits, and the need to supply products that maintain consumer
demand on a year round basis. There can be no assurance that additional
Summit Shops will be opened in a timely manner or that their cost or
performance will meet the Company's expectations. If the Summit Shop program
is unsuccessful, the Company risks write-offs of inventory and fixtures that
could have a material adverse effect on the Company's business. The Company
believes that the success of its Summit Shop program will be highly dependent
on market acceptance of its recently introduced TekwareTM line of products,
which was introduced in 1996.
Dependence on New Products. To continue its growth, the Company must
successfully introduce new products and improvements to existing products on
an ongoing basis. Risks of new product introductions include targeting new
markets involving more casual outdoor uses, offering products in wider price
ranges, product obsolescence, increased costs and competition, possible
consumer rejection of new products or styles and possible dilution of the
Company's product image. In 1996, the Company introduced Tekware?, a line of
synthetic outdoor apparel. The Company's limited experience in marketing
casual apparel, limited distribution channels, and possible consumer
resistance to synthetic fabrics could result in slow sales of Tekware?. In
May 1998, the Company announced its intention to design and contract for the
manufacturing of a line of outdoor performance footwear, scheduled to launch
in Spring 1999. There can be no assurance that this new effort by the
Company will be successful.
Reliance on Unaffiliated Manufacturers. The Company currently relies on
approximately 50 unaffiliated manufacturers to produce nearly all of its
products, with 10 of the manufacturers producing approximately 75% of the
Company's products in 1997 and early 1998. The Company has no long-term
contracts with its manufacturing sources, and it competes with other
companies for production facilities and import quota capacity. Any
disruption in the Company's ability to obtain manufacturing services could
have a material adverse effect on the Company's business. None of the
manufacturers used by the Company produces the Company's products
exclusively. The Company has occasionally received, and may in the future
receive, shipments of products from manufacturers that fail to conform to the
Company's quality control standards. The Company established its core
inventory replenishment program to facilitate reorders of core products, and
cannot assure that this program will meet reorder requirements or avoid excess
inventory.
The Company requires its independent manufacturers to operate in compliance
with applicable laws and regulations. Although the Company's internal and
vendor operating guidelines promote ethical business practices and the
Company's sourcing personnel periodically visit and monitor the operations of
its independent manufacturers, the Company does not control these vendors or
their labor practices. The violation of labor or other laws by an
independent manufacturer of the Company, or the divergence of an independent
manufacturer's labor practices from those generally accepted as ethical in the
United States, could result in adverse publicity for the Company and could
have a material adverse effect on the Company.
Key Suppliers. Certain important material used in the Company's products are
only available from one or a limited number of independent suppliers. The
Company's future success may depend upon the Company's continued ability to
purchase supplies of technically advanced textiles developed by third parties.
The Company cannot assure that it will be able to obtain in the future
adequate supplies of technically advanced materials or that desired purchase
terms or other benefits of past purchases, such as a supplier's funding of
development costs and co-op advertising arrangements, will continue.
Fluctuation in Sales. Sales of the Company's products historically have
fluctuated due to external conditions such as weather and economic recessions
or other conditions which reduce consumer spending, which are beyond the
Company's control.
International Operations. The Company's business is subject to the risks
generally associated with doing business abroad. The Company imports more
than 60% of its merchandise from contract manufacturers located outside of
the United States, primarily in the Far East. A significant portion of the
Company's products is produced in China. From time to time, the U.S.
government has considered imposing punitive tariffs on apparel and other
exports from China. The imposition of any such tariff could disrupt the
supply or substantially increase the cost of the Company's products, either
of which could have a material adverse effect on the Company's results of
operations.
Competition and Trademarks. The Company faces intense competition from major
brand name apparel companies, other large companies, and smaller businesses
specializing in outdoor products. The Company owns and uses a number of
trademarks, some of which may be important in maintaining or creating a
competitive advantage and consumer demand. Certain competitors in the United
States and abroad have copied and may in the future copy certain of the
Company's trademarks and designs. The Company is also aware of certain
counterfeiting of the Company's products. Without authorization from the
Company, a third party has filed an application in China to register as a
trademark the Chinese characters for "North Face" and a copy of the Company's
"N" design, and, unless successfully opposed, this application could result
in material adverse consequences to the Company's business. There is no
assurance that the Company's efforts to stop or reduce the copying or
counterfeiting of its trademarks or products will be successful, that the
Company's trademarks will not violate the proprietary rights of others, or
that the Company will be able to avoid or successfully defend challenges to
its trademarks or other intellectual property in the United States or abroad.
Key Personnel. The Company's future success will depend, in part, upon the
continued efforts of its key executive officers and other key personnel and
upon the Company's ability to successfully retain current personnel and
recruit and retain new personnel. There can be no assurance that any of such
persons will remain executive officers or employees of the Company in the
future. The unanticipated loss of one or more current senior executives or
key employees, or the failure to adequately replace any departed executive or
key employee on a timely basis, could have a significant adverse effect on the
Company's business. James P. Reilly has recently joined the Company as its
Chief Operating Officer. There can be no assurance that any newly-hired
executive or key employee can successfully manage the Company's operations.
Product and Warranty Liability. The Company's products are used often in
severe weather conditions. In 1997 the Company began selling portaledges
used as sleeping platforms in big wall rock climbing. There is no assurance
that insurance maintained by the Company will cover possible future losses
from product liability claims. The Company maintains a warranty reserve for
the lifetime warranty offered on its products, but cannot assure that future
claims will not exceed this reserve. Further, in the event that the Company
experiences problems with product quality or reliability, its reputation as a
provider of high quality products could suffer, which could have a material
adverse effect on the Company's business.
Stock Market Risks. The trading price of the Company's Common Stock has
fluctuated significantly since the Company's initial public offering in July
1996, and may fluctuate in the future as a result of many factors, including
the Company's operating results, new products introduced by the Company or its
competitors, market conditions for the Company's products, changes in
earnings estimates by analysts, results reported by the Company which are
more or less than estimates by analysts, and speculation in the trade or
business press. The trading price may also be effected by retail industry,
stock market, or economic factors unrelated to the Company's performance.
Future sales of substantial amounts of Common Stock by existing stockholders
may also adversely effect prevailing market prices for the Common Stock and
could impair the Company's ability to raise equity capital in the future.
Year 2000 Compliance. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field.
These date code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, in less than two
years, computer systems and software used by many companies may need to be
upgraded to comply with such "Year 2000" requirements. Although the Company
has conducted an internal review of such matters and believes that its
products and internal systems will be Year 2000 compliant, the Company
believes that the purchasing patterns of customers and potential customers
may be affected by Year 2000 issues as companies expend significant resources
to upgrade their current software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase products such
as those offered by the Company, which could have a material adverse effect
on the Company's business, operating results, and financial condition.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were approved at the Company's annual meeting of
stockholders on March 31, 1998:
(a) The following class II Directors were elected:
Name For Withheld
James Fifield 10,746,749 18,021
William Simon 10,746,955 17,815
(b) The ratification of an amendment to the Company's 1996 Stock Incentive
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder by 600,000 shares to a total of 1,283,950.
For Against Abstain
5,036,653 3,310,404 11,612
(c) The ratification of the selection of Deloitte & Touche LLP as independent
auditors of the Company for its fiscal year ending December 31, 1998.
For Against Abstain
10,751,568 6,449 6,753
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11.1) Computation of Per Share Earnings
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
three-month period ended March 31, 1998.
<PAGE>
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 thereunto duly authorized.
THE NORTH FACE, INC.
(REGISTRANT)
Dated: May 15, 1998 By: /s/ William N. Simon
--------------------------------
William N. Simon
Chief Executive Officer
Dated: May 15, 1998 By: /s/ Christopher F. Crawford
--------------------------------
Christopher F. Crawford
Chief Financial Officer
(Principal Financial and Accounting
Officer of the Registrant)
<PAGE>
INDEX OF EXHIBITS
The following exhibits are included herein:
11.1 Computation of Net Income Per Share
27.1 Financial Data Schedule
EXHIBIT 11.1
THE NORTH FACE, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Weighted average shares outstanding
during the period:
Weighted Average Shares Outstanding. 11,539 11,206
Incremental shares from assumed
exercise of stock options......... 332 437
--------- ---------
Weighted average common and common
equivalent shares outstanding..... 11,871 11,643
========= =========
Net Income.......................... $460 $235
========= =========
Earnings Per Share
Basic.......................... $0.04 $0.02
Diluted........................ $0.04 $0.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONDENSED STATEMENT OF OPERATIONS, THE
CONDENSED BALANCE SHEET AND THE ACCOMPANYING NOTES TO THE
CONDENSED FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 4,867 1,618
<SECURITIES> 0 0
<RECEIVABLES> 47,105 <F1> 27,062 <F1>
<ALLOWANCES> 0 0
<INVENTORY> 49,678 35,889
<CURRENT-ASSETS> 117,945 73,065
<PP&E> 22,957 <F1> 13,998 <F1>
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 172,686 118,997
<CURRENT-LIABILITIES> 57,112 24,336
<BONDS> 0 0
0 0
0 0
<COMMON> 29 29
<OTHER-SE> 104,567 87,694
<TOTAL-LIABILITY-AND-EQUITY> 172,686 118,997
<SALES> 47,809 39,342
<TOTAL-REVENUES> 47,809 39,342
<CGS> 26,817 22,127
<TOTAL-COSTS> 26,817 22,127
<OTHER-EXPENSES> 19,911 16,773
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 674 119
<INCOME-PRETAX> 760 385
<INCOME-TAX> 300 150
<INCOME-CONTINUING> 460 235
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 460 235
<EPS-PRIMARY> $0.04 $0.02
<EPS-DILUTED> $0.04 $0.02
<FN>
<F1>REPRESENTS NET AMOUNT
</FN>
</TABLE>
