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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 12b-25
NOTIFICATION OF LATE FILING
SEC FILE NUMBER: 0-28596
CUSIP NUMBER: 659317-10-1
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<S> <C> <C> <C>
(Check One): [_] Form 10-K [_] Form 20-F [_] Form 11-K
[X] Form 10-Q [_] Form N-SAR
For Period Ended: March 31, 1999
[_] Transition Report on Form 10-K
[_] Transition Report on Form 20-F
[_] Transition Report on Form 11-K
[_] Transition Report on Form 10-Q
[_] Transition Report on Form N-SAR
For the Transition Period Ended:
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Nothing in this form shall be construed to imply that the Commission has
verified any information contained herein.
If the notification relates to a portion of the filing checked above, identify
the Item(s) to which the notification relates:
N/A
PART I - REGISTRANT INFORMATION
Full Name of Registrant:
The North Face, Inc., a Delaware corporation
Address of Principal Executive Office:
407 Merrill Avenue
Carbondale, Colorado 81623
PART II - RULES 12B-25(B) AND (C)
If the subject report could not be filed without unreasonable effort or expense
and the registrant seeks relief pursuant to Rule 12b-25(b), the following should
be completed. (Check box if appropriate)
[X] (a) The reasons described in reasonable detail in Part III of this form
could not be eliminated without unreasonable effort or expense;
[_] (b) The subject annual report, semi-annual report, transition report on
Form 10-K, Form 20-F, 11-K or Form N-SAR, or portion thereof will
be filed on or before the fifteenth calendar day following the
prescribed due date; or the subject quarterly report or transition
report on Form 10-Q, or portion thereof will be filed on or before
the fifth calendar day following the prescribed due date;
[_] (c) The accountant's statement or other exhibit required by Rule 12b-
25(c) has been attached if applicable hereto.
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PART III - NARRATIVE
The Registrant is unable to complete and file its quarterly report on
Form 10-Q for the quarter ended March 31, 1999 on or before the prescribed due
date because the quarterly financial statements have not been completed. The
Registrant's completion of the quarterly financial statements has been delayed
because the Registrant's independent certified public accountants did not
complete their audit of the Registrant's annual financial statements for the
year ended March 31, 1999 until May 6, 1999. This delay in completion of the
1998 audit has caused the Company to delay the preparation of its quarterly
report on Form 10-Q for the first quarter of 1999.
PART IV - OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification:
James G. Fifield
President and Chief Executive Officer
The North Face, Inc.
407 Merrill Avenue
Carbondale, Colorado 81623
Telephone: (970) 704-2300
with a copy to:
Jeffrey D. Saper, Esq.
Selim Day, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: (650) 493-9300
(2) Have all other periodic reports required under section 13 or 15(d)
of the Securities Exchange Act of 1934 or section 30 of the
Investment Company Act of 1940 during the preceding 12 months or
for such shorter period that the registrant was required to file
such report(s) been filed? If the answer is no, identify
report(s).
[_] Yes [X] No
Annual Report on Form 10-K for the year ended December 31, 1998.
(3) Is it anticipated that any significant change in results of
operations from the corresponding period for the last fiscal year
will be reflected by the earnings statements to be included in the
subject report or portion thereof?
[X] Yes [_] No
If so: attach an explanation of the anticipated change, both narratively
and quantitatively, and, if appropriate, state the reasons why a reasonable
estimate of the results cannot be made.
SEE ANNEX A ATTACHED HERETO.
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The North Face, Inc. has caused this notification to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: May 17, 1999 By: /s/ James G. Fifield
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James G. Fifield
President and Chief Executive Officer
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ANNEX A
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A copy of the Registrant's press release issued on May 7, 1999 is set
forth below:
Contact: John Batelli
Director, Investor Relations
510.618-3631
THE NORTH FACE, INC.
FILES ITS ANNUAL REPORT ON FORM 10-K
CARBONDALE, Colo., May 7, 1999/PRNewsire/ - The North Face, Inc (Nasdaq: TNFI-
E), announced today that it has filed with the Securities and Exchange
Commission its annual report on Form 10-K for the year ended December 31, 1998
which includes the Company's audited financial statements for 1998. The Company
had previously announced that it was experiencing delays in making this filing
because the annual audit by the Company's independent auditors, Deloitte &
Touche, LLP was not complete. In addition, the Company announced that it has
filed an amended 10-K for 1997 which includes restated financial statements for
1997, as well as an amended 10-Q for each of the first three quarters of 1998.
The Company currently expects to file its 10-Q for the first quarter of 1999 by
May 24, 1999.
The Company's 1998 financial statements reflect a reduction in revenue
from $263.3 million to $247.1 million, a reduction in net income from $9.5
million to $3.6 million, and a reduction of earnings per share from $0.76 cents
to $0.29 cents from the results announced in the Company's 1998 earnings release
issued on January 29, 1999. Excluding charges for facility closure, relocation
and realignment, 1998 net income was reduced from $13.8 million to $8.1 million,
and earnings per share was reduced from $1.11 cents to $0.65 cents. The
Company's restated 1997 financial statements reflect a reduction in revenue from
$208.4 million to $203.2 million, a reduction in net income from $11.1 million
to $8.0 million, and a reduction of earnings per share from $0.96 cents to $0.69
cents from the results reported in the Company's 1997 10-K filed with the SEC on
March 6, 1998.
The restatements for each of the periods reflect three primary
categories of adjustments affecting the income statement: (1) the reversal of
revenues previously recognized which were associated with sales to two
distributors because sales accounting was not consistent with certain terms of
those transactions which were designed to avoid distribution into inappropriate
channels and preserve The North Face brand. The reversal of this revenue
lowered pre-tax earnings by $3.1 million in 1997 and $6.0 million in 1998; (2)
the write-off of capitalized and previously incurred costs to expense in order
to more appropriately reflect the future value of those costs. These write-
offs, primarily related to capitalized system implementation costs, lowered pre-
tax earnings by $1.8 million in 1997 and $1.0 million in 1998; and (3) increases
in accrued expenses, which reduced pre-tax earnings in 1997 by $0.3 million and
$2.7 million in 1998. Additional details regarding the amounts of the
restatements are summarized below.
The Company's 1998 results reflect annual sales growth of 21.6% from
the previous year, which includes 20.3% growth in wholesale sales and 27.8%
growth in Company owned retail and outlet stores. Gross margin was 45.3%, a
decrease of 20 basis points compared to 1997. Excluding charges for facility
closure, relocation and realignment, operating cash flow or EBITDA for 1998 was
$25.7 million as compared to $20.4 million for 1997, an increase of 25.8%.
Jim Fifield, President and Chief Executive Officer, commented, "this
has been a difficult period in the Company's history. We know that the
shareholders have been frustrated by the lack of information and by the
inability to trade in the Company's stock. While these restatements are
troubling, we do not believe they diminish the strength of The North Face brand
or our ability to achieve our long range plan of broadening our product line,
expanding our distribution and improving our profit margins and cash flow. The
difficult winter of 1998/1999 and the turmoil surrounding the events of the past
months has negatively impacted the Company in the short term. While we continue
to believe that we have good prospects ahead for the full-year 1999, we will
report a loss for the first quarter of 1999. These results will be
significantly lower than analysts' expectations."
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Mr. Fifield also stated that "the Company has taken steps to improve
sales and profitability over the balance of 1999, and it is our objective to
achieve overall growth of over 20% in sales and over 30% in net income,
excluding non-recurring charges, with a goal of earnings per share of $1.00 for
the year. We are pleased to report that Fall 1999 preseason sales growth is
expected to exceed 25% as the demand for the Company's products continues to
grow. The strength of the brand is further supported by comparative store
growth in our full priced retail stores of 11.2%, outlet stores of 27.8%, and a
combined 16.3% comparative store growth rate through March 1999. In addition,
the introduction of The North Face rugged footwear, which launched in March
1999, has met expectations."
The Company also announced today that its Transaction Agreement with
Leonard Green & Partners, L.P is in full force and effect although Leonard Green
& Partners has informed the Company that they are reevaluating the transactions
contemplated by the Transaction Agreement. The Company previously announced
that it had entered into a Transaction Agreement with Leonard Green & Partners
pursuant to which Leonard Green & Partners would acquire the Company.
Quote for reference ticker symbols: TNFIE
Statements included in this press release which are not historical in
nature, are intended to be, and are hereby identified as, "forward-looking
statements" for purposes of the safe harbor provided by Section 21E of the
Securities Exchange Act of 1934, as amended by Public Law 104-67. Specifically,
the statements relating to the Company's expected 10-Q filing for the first
quarter of 1999, the Company's ability to achieve its long range plan, the
Company's prospects for 1999, the Company's projected results for the first
quarter of 1999, the Fall 1999 preseason sales growth, and improvement of
profitability in 1999 are forward-looking statements. The Company cautions
readers that actual results or events may differ from those indicated in the
forward-looking statements as a result of the Company's inability to prepare the
financial information required to be disclosed in the 1999 first quarter 10-Q on
a timely basis, the decline in demand for the Company's products, material
increases in the Company's costs relative to its revenues, weather that is
warmer than usual, lower than expected margins, or the loss of services of any
key executive or director.
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The North Face, Inc.
Consolidated Statements of Operations
(In thousands except per share amounts)
Restated
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1998 1997
Previously Previously
Reported (a) Restated Reported (b) Restated
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Net Sales $ 263,323 247,096 $ 208,403 203,247
Cost of Sales 143,225 135,134 113,339 110,764
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Gross Profit 120,098 111,962 95,064 92,483
Gross Profit Percent 45.6% 45.3% 45.6% 45.5%
Operating Expenses 92,845 93,897 73,720 76,350
Facility Closure, Relocation - -
and Realignment Expenses 6,954 7,379 - -
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Operating Income 20,299 10,686 21,344 16,133
Interest Expense (5,244) (4,907) (2,238) (2,238)
Other Income (Expense), net 425 64 (749) (749)
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Income Before Provision for Income Taxes 15,480 5,843 18,357 13,146
Provision for Income Taxes (5,960) (2,251) (7,250) (5,191)
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Net Income Including Facility Closure Charges
and Relocation and Realignment Expenses $ 9,520 3,592 $ 11,107 7,955
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Net Income Excluding Facility Closure Charges
and Relocation and Realignment Expenses $ 13,797 8,130 $ 11,107 7,955
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Weighted Average Shares Outstanding - Diluted 12,483 12,485 11,578 11,578
Net Income Per Share - Diluted:
Including Facility Closure Charges
and Relocation and Realignment Expenses $ 0.76 0.29 $ 0.96 0.69
Excluding Facility Closure Charges
and Relocation and Realignment Expenses $ 1.11 0.65 $ 0.96 0.69
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(a) As reported on January 29, 1999, "Fourth Quarter 1998 Earnings Release"
(b) As reported in 1997 Form 10-K filed with the SEC on March 6, 1998
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Selected Balance Sheet Data
(In thousands)
Restated
December 31
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1998 1997
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Cash and cash equivalents $ 13,452 4,511
Trade accounts receivable, net 71,460 48,745
Inventories 57,457 46,682
Working Capital 68,546 61,995
Total Assets 232,644 167,449
Accounts payable, accrued expenses &
other current liabilities 40,463 30,232
Current portion of long-term debt &
obligations under capital leases 55,910 25,734
Long-term debt & obligations under leases 5,360 5,177
Total stockholders equity 123,210 100,141
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The North Face, Inc.
Summary of 1997 and 1998 Audit Adjustments
Changes to Financial Results
(Dollars in millions, except per share amounts)
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1997 1998
Operating Net Operating Net
Revenue Income Income EPS ($) Revenue Income Income EPS ($)
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Reported - including
non-recurring charges $ 208.4 21.3 11.1 0.96 $ 263.3 20.3 9.5 0.76
Reported - excluding
non-recurring charges $ 208.4 21.3 11.1 0.96 $ 263.3 27.3 13.8 1.11
Audit Adjustments
Revenue Reversal
Wholesale distributor - - - - (9.3) (4.1) (2.5) (0.20)
Barter transaction (5.2) (3.1) (1.9) (0.16) (0.9) (1.9) (1.2) (0.10)
Total - revenue reversals (5.2) (3.1) (1.9) (0.16) (10.2) (6.0) (3.7) (0.30)
Write-off of Capitalized Costs
Includes information system
projects, product
development & other - (1.8) (1.1) (0.09) - (1.0) (0.6) (0.05)
Increases in Accrued Expenses
Includes credit memos,
warranty & severance costs - (0.3) (0.1) (0.02) (2.6) (2.7) (1.7) (0.14)
Other Adjustments
La Sportiva de-consolidation - - - - (3.5) - - -
Other - - - - 0.1 0.1 0.1 0.02
Total - - - - (3.4) 0.1 0.1 0.02
Total Adjustments * (5.2) (5.2) (3.1) (0.27) 16.2 (9.6) (5.9) (0.47)
Restated - including
non-recurring charges $ 203.2 16.1 8.0 0.69 $ 247.1 10.7 3.6 0.29
Restated - excluding
non-recurring charges $ 203.2 16.1 8.0 0.69 $ 247.1 18.1 8.1 0.65
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* Includes $0.4 million pre-tax adjustment to non-recurring charges in 1998
