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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)
May 21, 1999
THE NORTH FACE, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or other jurisdiction of incorporation)
0-28596 94-3204082
(Commission File No.) (IRS Employer Identification Number)
407 Merrill Avenue
Carbondale, Colorado 81623
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(Address of Principal Executive Offices)
(970) 704-2300
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(Registrant's Telephone Number, Including Area Code)
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Item 5. Other Events
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On May 21, 1999, The North Face, Inc. issued a press release reporting
financial results for the first quarter ended March 31, 1999.
(a) Exhibits:
99.1 Press Release dated May 21, 1999
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SIGNATURE
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.
THE NORTH FACE, INC.
Dated: June 1, 1999 By: /s/ James G. Fifield
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James G. Fifield
President and Chief Executive
Officer
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INDEX TO EXHIBITS
Exhibit No. Description
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99.1 Press Release dated May 21, 1999.
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Exhibit 99.1
THE NORTH FACE REPORTS 12% INCREASE IN SALES
FOR THE FIRST QUARTER OF 1999
CARBONDALE, Colo., May 21 /PRNewswire/ -- The North Face, Inc. (Nasdaq: TNFI)
today reported financial results for the first quarter ended March 31, 1999.
For the first quarter ended March 31, 1999, sales increased 12.1% to $51.3
million compared to $45.7 million for the first quarter of 1998. The net loss
for the quarter, excluding non-recurring charges relating to relocation,
realignment, tender offer and other costs of $1.8 million, after tax, or $0.14
per share, was $3.7 million or $0.29 per share compared to a net loss of $0.8
million or $0.07 per share for the first quarter of 1998.(A)
James Fifield, President and Chief Executive Officer, commented, "Our first
quarter results reflect a rate of growth in sales which is lower than we expect
over the balance of the year as we come out of the difficult winter of 1998/1999
and continue to introduce an expanded product line into broader distribution. In
addition, gross margin improved by 190 basis points for the quarter but was
offset by increased expenses in media spending, footwear introduction expenses,
product development, infrastructure and system improvements. Typically, the
first quarter for The North Face is a slow quarter and this is no exception, but
I am very positive about our prospects for the fall season as well as the
overall 1999 year. We remain optimistic about achieving our previously announced
1999 sales and earnings objectives of 20% growth in sales and earnings per share
of $1.00, excluding non-recurring charges."
"For the quarter, wholesale revenue grew by 7.3% over last year, reflecting a
slowdown which can be attributed to the tough weather-related market conditions
that many of our dealers faced over the last few months, as well as the timing
of shipments. Despite the challenging market conditions, our retail stores
performed exceptionally well, as retail sales increased 39.7%, attesting to the
continued strength of the North Face brand."
Highlights of the quarter included:
. The Company's top performing product categories for the quarter included
Outerwear and Ascentials. Fleece products showed the largest sales growth,
with the Denali jacket as the most popular product. The Ascentials
accessories line has been very successful, as have the line of daypacks and
adventure travel products.
. The North Face's new rugged footwear line has been well received by
customers and consumers. Sell-through at dealers has met our expectations
with several accounts reporting that our footwear is among the top selling
line within their footwear offerings.
. Wholesale advance orders for the Fall 1999 season continue to track 25%
ahead of advance orders for the same period in 1998 for both North America
and Europe. The top performing products include our newly redesigned
Mountain Light jacket and the revolutionary new Pac-Lite outerwear series,
developed in collaboration with W. L. Gore.
. Comparative store growth in our retail stores was exceptionally strong
during the first quarter, with growth of 11.2% in our full-priced retail
stores, 27.8% in our outlet stores and a combined comparative growth rate
of 16.3%, over the same quarter last year.
. A new retail outlet store was opened during the first quarter in Wrentham,
Massachusetts, just outside of Boston. In the next few months, we have
planned openings in San Jose, California, Toronto, Ontario, San Marcos,
Texas and Dawsonville, Georgia.
. The North Face plans to begin outsourcing its U.S. distribution of products
beginning in July 1999. The new distribution center will be located in
Lenexa, Kansas.
. The North Face Summit Shop program, its shop-within-a-shop program,
continued to expand with 12 new shops being opened in the quarter. This
brings the total number of Summit Shops to 406 through March 1999.
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The North Face, Inc. designs and distributes technically sophisticated
outerwear, snowsports gear, functional sportswear, tents, sleeping bags,
backpacks, daypacks, accessories and rugged footwear under The North Face(R)
name. Through its subsidiary La Sportiva USA, and its affiliate La Sportiva
S.p.A., the Company designs, manufactures and distributes rock climbing shoes,
mountaineering boots and other rugged footwear under the La Sportiva name. The
Company sells its products to select specialty retailers throughout the United
States, Europe and Canada.
This press release contains certain forward-looking statements reflecting the
Company's current expectations including statements regarding prospects for Fall
and for 1999, overall growth expectations, operating efficiencies, planned store
openings, outsourcing of U.S. distribution and product expansion, including
opportunities in the footwear business, retail expansion, openings of Summit
Shops and future sales and profitability initiatives. Actual results may vary
significantly from those estimated. Factors that could cause future performance
to vary from current expectations include, but are not limited to, the company's
ability to: improve operating efficiency; effectively design and manufacture
products, including footwear; attract, supply and retain Summit Shops;
effectively manage growth in its markets; maintain and improve service levels;
maintain existing customer relationships; effectively manage inventory;
successfully outsource and relocate its distribution center for the United
States and other general economic conditions affecting consumer spending and
other factors. Further information on potential factors that could affect the
financial results of The North Face are included in the Company's Report on Form
10-K for the year ended December 31, 1998 which is on file with the SEC. Other
factors that could cause future performance to vary from current expectations
include those set forth in other filings made by the Company with the SEC.
(A) For the first quarter of 1999, pre-tax non-recurring charges include $1.6
million for facility closure charges of the Vacaville distribution center
associated with the outsourcing of the company's distribution of products in the
U.S., corporate relocation and realignment costs and $1.4 million in tender
offer expenses and other non-recurring costs.
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THE NORTH FACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
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1999 1998 % CHANGE
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<S> <C> <C> <C>
Net Sales $51,256 $45,704 12%
Cost of Sales 27,909 25,779 8%
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Gross Profit 23,347 19,925 17%
Gross Profit Percent 45.5% 43.6%
Operating Expenses 27,697 20,325
Relocation and Realignment Expenses 1,603 --
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Operating Loss (5,943) (400)
Interest Expense, net (1,321) (674)
Tender Offer and Other Non-Recurring Expenses (1,357) --
Other Expense, net (370) (297)
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Loss Before Income Taxes (9,001) (1,371)
Income Tax Benefit (3,510) (528)
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Net Loss Including Tender Offer, Relocation,
Realignment and Other Non-Recurring Expenses (5,491) (843)
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Net Loss Excluding Tender Offer, Relocation,
Realignment and Other Non-Recurring Expenses (3,685) (843)
====== ======
Weighted Average Shares Outstanding--Diluted 12,687 11,539
Net Loss Per Share:
Including Tender Offer, Relocation, Realignment and
Other Non-Recurring Expenses (0.43) (0.07)
Excluding Tender Offer, Relocation,
Realignment and Other
Non-Recurring Expenses $ (0.29) $(0.07)
</TABLE>
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SELECTED BALANCE SHEET DATA
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
March 31,
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1999 1998
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<S> <C> <C>
Cash and cash equivalents $ 5,955 $ 4,857
Trade accounts receivable, net 54,824 39,924
Inventories 59,621 52,779
Working Capital 61,883 61,204
Total Assets 218,131 169,354
Accounts payable, accrued expenses, and other current liabilities 34,268 34,789
Current portion of long-term debt and obligations under capital leases 50,884 23,256
Long-term debt and obligations under capital leases 5,426 4,953
Total stockholders' equity $119,849 $100,140
</TABLE>
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