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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________ to _________
Commission file number 1-4404
THE STRIDE RITE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-1399290
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation) Number)
191 Spring Street, P.O. Box 9191, Lexington, Massachusetts 02420-9191
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 824-6000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock $.25 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required 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 report), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
---
/___/ Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the Registrant's Common Stock $.25 par value, held
by non-affiliates of the Registrant as of February 15, 2000, was $252,752,965
based on the closing price on that date on the New York Stock Exchange. As of
February 15, 2000, 43,484,381 shares of the Registrant's Common Stock, $.25 par
value, and the accompanying Preferred Stock Purchase Rights were outstanding.
Documents Incorporated by Reference
Certain portions of the following documents (as more specifically identified
elsewhere in this Annual Report) are incorporated by reference herein:
Part of Form 10-K into
Name of Document which document is incorporated
- ---------------- ------------------------------
Portions of the Registrant's Annual
Report to Stockholders for fiscal year
ended December 3, 1999 Part I and Part II
Portions of the Registrant's Proxy
Statement for 2000 Annual Meeting of
Stockholders Part III
2
PART I
Item 1. Business
General
The Stride Rite Corporation is the leading marketer of high quality
children's footwear in the United States and a major marketer of athletic and
casual footwear for children and adults. All of the Company's products are
manufactured abroad by independent manufacturers in accordance with the
Company's specifications and quality standards. Footwear products are
distributed through independent retail stores, company-owned stores and footwear
departments in department stores. Unless the context otherwise requires,
references to the "Company" and "The Stride Rite Corporation" in this document
are to The Stride Rite Corporation and all of its wholly owned subsidiaries.
Certain Factors Affecting Future Operating Results
This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We caution investors that any forward-looking statements
presented in this report and presented elsewhere by management from time to time
are based on management's beliefs and assumptions made by, and information
currently available to, management. When used, the words "anticipate,"
"estimate," "project," "should," "expect" and similar expressions are intended
to identify forward-looking statements. Such statements are subject to risks,
uncertainties and assumptions and are not guarantees of future performance,
which may be affected by various trends and factors that are beyond our control.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected. Accordingly, past results and trends
should not be used by investors to anticipate future results or trends. Some of
the key factors that may have a direct bearing on our results are as follows:
Mature markets; Competition; Consumer Trends
Our strategy for growth depends upon increasing the acceptance of
our current brands in our major markets, expanding into new markets and
increasing the number of footwear products and brands that we sell. There
can be no assurance that we will be able to successfully develop new
branded products or acquire existing brands from third parties. The bulk
of our sales are in the U.S. and Canada where the market is mature for
many of our products. To grow our business, we must increase our market
share at the expense of our competitors, and there can be no assurance we
will be successful. Our efforts to expand sales outside the U.S. and
Canada may not succeed.
The footwear industry specifically, and the fashion industry in
general, are subject to rapid and substantial shifts in consumer tastes
and preferences. There are many competitors in our markets with
3
substantially greater financial resources, production, marketing and
product development capabilities. Our performance may be hurt by our
competitors' product development, sourcing, pricing, innovation and
marketing strategies. In addition, we expect the footwear industry in the
U.S. to continue to experience substantial foreign competition.
The fashion industry and retail industry is exposed to sudden shifts
in consumer trends and consumer spending, on which our results are, in
part, dependent. Consumer acceptance of our new products may fall below
expectations and the launch of new product lines may be delayed. Our
results are affected by the buying plans of our customers in the wholesale
business, which include large department stores, as well as smaller
retailers. Our wholesale customers may not inform us of changes in their
buying plans until it is too late for us to make the necessary adjustments
to our product lines and marketing strategies. While we believe that
purchasing decisions in many cases are made independently by individual
stores or store chains, we are exposed to a decision by the controlling
owner of a store chain, to decrease the amount of footwear products
purchased from us. Moreover, the retail industry periodically experiences
consolidation. We face a risk that our wholesale customers may
consolidate, restructure, reorganize or realign in ways which could
decrease the number of stores, or the amount of shelf space, that carry
our products. The impact that electronic commerce will have in the future
on the retail industry is uncertain, but there is no assurance that any
such impact will not adversely affect our business.
Inventory Obsolescence
The fashion-oriented nature of our industry, the rapid changes in
customer preferences and the extended product development and sourcing
lead times also leave us vulnerable to an increased risk of inventory
obsolescence. While we have successfully managed this risk in the past,
and believe we can successfully manage it in the future, if we are unable
to do so our revenue and operating margins will suffer.
Retention of Major Brand License
We have derived significant revenues and earnings in the past from
our exclusive licensing arrangement with Tommy Hilfiger Licensing, Inc. to
produce and sell Hilfiger branded footwear. Our Hilfiger license expires
December 31, 2001 and we have one option to renew the license for an
additional three-year term. Whether our license with Hilfiger will remain
in effect depends on our achieving certain minimum sales levels for the
licensed products. We believe that our relationship with Hilfiger is good
and that we will be able to renew the license at the end of the current
term; however, there can be no assurance that we will be able to do so. If
we lose the Hilfiger license, our business could be materially and
adversely affected.
4
Overseas Production and Raw Material Procurement
We purchase substantially all of our product lines and raw materials
overseas and expect to do so for the foreseeable future. Our international
sourcing subjects us to the risks of doing business abroad. Such risks
include expropriation, acts of war, political disturbances, political
instability and similar events, including trade sanctions, loss of
normalized trade relations status, export duties, import controls, quotas,
and other trading restrictions, as well as fluctuations in currency
values. Moreover, we rely heavily on independent third-party manufacturing
facilities, primarily located in China, to produce our products. If trade
relations between the U.S. and China, or other countries in which we
manufacture our products, deteriorate or are threatened by instability,
our business may be adversely impacted. We cannot predict the effect that
changes in the economic and political conditions in China could have on
the economics of doing business with Chinese manufacturers. Although we
believe that we could find alternative manufacturing sources for our
products with independent third-party manufacturing facilities in other
countries, the loss of a substantial portion of our Chinese manufacturing
capacity could have a material adverse effect on our business. Also, if we
were required to relocate a substantial portion of our manufacturing
outside of China, there can be no assurance that we could obtain as
favorable economic terms, which could adversely affect our performance.
Dependence on Logistical Systems
Our business operations are dependent on our logistical systems,
which include our order management system and our computerized warehouse
network, enabling us to procure our footwear products from overseas
manufacturers, transport it to our distribution facilities, store it and
deliver it to our customers on time, in the correct sizes and styles. A
disruption to the logistical systems could adversely impact our business.
In addition, to improve overall efficiency, we are in the process of
implementing new computer software systems that control our order
management systems. We expect that the implementation of the new software
systems will go smoothly. However, if we experience problems with such
implementation, we could experience disruptions to our business that could
have an adverse effect on our business.
Intellectual Property Risk
We believe that our patents and trademarks are important to our
business and are generally sufficient to permit us to carry on our
business as presently conducted. We cannot, however, know whether we will
be able to secure patents or trademark protection for our intellectual
property in the future or that protection will be adequate for future
products. Further, we face the risk of ineffective protection of
intellectual property rights in the countries where we source and
distribute our products. Finally, we cannot be sure that our
5
activities will not infringe on the proprietary rights of others. If we
are compelled to prosecute infringing parties, defend our intellectual
property, or defend ourselves from intellectual property claims made by
others, we may face significant expenses and liability.
Products
The Stride Rite Children's Group designs and markets children's footwear,
primarily for consumers between the ages of six months and ten years, including
dress and recreational shoes, boots, sandals and sneakers, in traditional and
contemporary styles. Those products are marketed under the Company's STRIDE
RITE(R), MUNCHKIN(R), SPERRY(R), SPERRY TOP-SIDER(R) and STREET HOT(R)
trademarks in medium to high price ranges. The Company also markets a line of
casual and dress footwear, which is targeted at six to ten year old girls, using
the NINE WEST KIDS(R) trademark under a licensing agreement with Nine West
Group, a subsidiary of Jones Apparel Group, Inc.
The Keds group designs and markets sneakers and casual footwear for adults
and children under the KEDS(R) and PRO-KEDS(R) trademarks and casual footwear
for women under the GRASSHOPPERS(R) label.
The Sperry group designs and markets marine footwear and outdoor
recreational, hand-sewn, dress and casual footwear for adults and children under
the Company's SPERRY TOP-SIDER(R) and SPERRY(R) trademarks. Products sold under
the SPERRY TOP-SIDER(R) label also include sneakers and sandals for men and
women.
In 1997, the Company began marketing a line of dress casual, sport casual
and athletic footwear for men and boys using the TOMMY HILFIGER(R) brand name
under a license agreement with Tommy Hilfiger Licensing, Inc. A women's footwear
product line was launched in August 1998 using the TOMMY HILFIGER(R) brand name.
The Company is currently planning to begin shipments of a girls' footwear
product line during the third quarter of 2000.
Sales and Distribution
The Company sells its products nationwide to customers operating retail
outlets, including premier department stores, value retailers and specialty
stores, as well as to Stride Rite children's shoe stores and other shoe stores
operated by independent retailers. In addition, the Company sells footwear
products to consumers through company-owned stores, including children's shoe
stores, manufacturers' outlet stores and the children's footwear departments of
certain department stores. The Company also sells a small amount of product
directly to consumers through its e-commerce site, Keds.com. The Company's
largest single customer accounted for approximately 8% of consolidated net sales
for the fiscal year ended December 3, 1999.
The Company provides assistance to a limited number of qualified specialty
retailers to enable them to operate independent Stride Rite children's shoe
stores. Such assistance sometimes includes the sublease of a desirable retail
site by the Company to an independent dealer. There are approximately 15
independent dealers who currently sublease store locations from the Company.
6
The Company owns two distribution centers, one located in Louisville,
Kentucky with 520,000 square feet of space and the other in Huntington, Indiana
with 263,000 square feet of space. Due to the growth of the Tommy Hilfiger
footwear business in fiscal 1999 and the related warehouse capacity constraints,
the Company began outsourcing the warehousing and facility distribution
functions for one of its brands through a third-party facility in Chicago,
Illinois.
The Company maintains an in-stock inventory of certain styles of its
various branded footwear in a wide range of sizes and widths for shipment to its
wholesale customers. In accordance with practices in the footwear industry, the
Company encourages early acceptance of merchandise by shipping some products to
customers in advance of their seasonal requirements and permitting payment for
such merchandise at specified later dates.
Generally, the Company uses independent distributors and licensees to
market its various product lines outside of North America. International
revenues, including sales of the Company's Canadian subsidiary, represented 4.4%
of consolidated net sales for the fiscal year ended December 3, 1999.
The Company is also a party to foreign license agreements in which
independent companies operate Stride Rite retail stores outside the United
States. An aggregate of 10 stores are currently operating in Canada, Costa Rica,
El Salvador, Honduras, Mexico and Peru pursuant to such agreements.
The Company also distributes SPERRY TOP-SIDER(R), STRIDE RITE(R), KEDS(R),
GRASSHOPPERS(R), TOMMY HILFIGER(R) and NINE WEST KIDS(R) products in Canada
through its Canadian subsidiary.
International Sourcing
Having closed all of its manufacturing facilities in the United States and
the Caribbean over the years, the Company purchases substantially all of its
products from foreign sources. It maintains a staff of approximately 100
professional and technical personnel in Taiwan, Thailand, Indonesia and China,
to supervise a substantial portion of its canvas and leather footwear
production. It is anticipated that overseas resources will continue to be
utilized in the future. The Company also purchases certain raw materials
(particularly leather) from overseas resources. The Company is a party to a
joint venture agreement with a foreign footwear manufacturer which operates a
manufacturing facility in Thailand. The Company has a 49.5% interest in the Thai
corporation operating this facility, which manufactures vulcanized canvas and
leather footwear. During fiscal 1999, approximately 3% of the Company's total
footwear production requirements were fulfilled by the Thai facility. In
addition, the Company uses the services of buying agents to source merchandise.
Approximately 83% of the Company's footwear products are manufactured by
independently owned footwear manufacturers in China. Historically, instability
in China's political and economic environment has not had a
7
material adverse effect on the Company's financial condition or results of
operations. The Company cannot predict, however, the effect that future changes
in economic or political conditions in China could have on the economics of
doing business with its Chinese manufacturers.
Retail Operations
As of December 3, 1999, the Company operated 117 Stride Rite children's
shoe stores, 46 leased children's shoe departments in leading department stores,
and 29 manufacturers' outlet stores under the name STRIDE RITE FAMILY FOOTWEAR
which sell primarily prior season goods for all of the Company's owned and
licensed brands. The product and merchandising formats of the Stride Rite
children's shoe stores are utilized in the 46 leased children's shoe departments
which the Company operates in certain divisions of Federated Department Stores,
including Macy's, Rich's and Lazarus department stores. The Stride Rite
children's shoe stores carry a significant portion of the lines of the Company's
STRIDE RITE(R) and SPERRY (R) children's footwear and a portion of the KEDS(R)
children's product line, the TOMMY HILFIGER(R) boys' line and the NINE WEST
KIDS(R) girls' styles. The Company's stores are located primarily in larger
regional shopping centers, clustered generally in the major marketing areas of
the United States. Most of the Company's manufacturers' outlet stores are
located in shopping centers consisting only of outlet stores.
During the 1999 fiscal year, the Company opened 10 Stride Rite booteries
and 6 manufacturers' outlet stores. During 1999, the Company closed 23 retail
stores, including 14 low volume leased departments in November 1999, in an
effort to improve the profitability of its Retail operations. The Company
currently plans to open approximately 10 to 15 retail stores in fiscal 2000. The
Company will also continue its efforts to close or sell underperforming retail
locations in fiscal 2000, and expects to cease operations in 5 to 10 stores
during the year.
Sales through the Company's retail operations accounted for approximately
17% of consolidated net sales for the fiscal year ended December 3, 1999.
Apparel and Accessory Licensing Activities
License royalties accounted for approximately 1% of the Company's sales in
fiscal year 1999. The Company has license agreements with a number of third
parties pursuant to which apparel and accessories are designed, manufactured and
sold under the KEDS(R), PRO-KEDS(R), STRIDE RITE (R) and SPERRY TOP-SIDER(R)
trademarks. The Company is actively evaluating its current license structure and
is continually pursuing new licensees.
Backlog
At December 3, 1999 and November 27, 1998, the Company had a backlog of
orders amounting to approximately $148,700,000 and $170,800,000, respectively.
To a significant extent, the backlog at the end of each fiscal year represents
orders for the Company's Spring footwear styles, and traditionally
8
substantially all of such orders are delivered or canceled during the first two
quarters of the next fiscal year.
In all of the Company's wholesale businesses, reorders from retail
customers are an important source of revenue to supplement the orders taken in
advance of the season. Over the years, the importance of reorder activity to a
season's success has grown as customers, especially larger retailers, have
placed increased reliance on orders during the season which are transmitted via
electronic data interchange (EDI) programs.
Competition
The Company competes with a number of suppliers of children's footwear, a
few of which are divisions of companies which have substantially greater net
worth and/or sales revenue than the Company. Management believes, however, that
on the basis of sales, the Company is the largest supplier of nationally branded
children's footwear in the United States.
In the highly fragmented sneaker, casual and recreational footwear
industry, numerous domestic and foreign competitors, some of which have
substantially greater net worth and/or sales revenue than the Company, produce
and/or market goods which are comparable to, and compete with, the Company's
products in terms of price and general level of quality.
Management believes that the creation of attractive styles, together with
specialized engineering for fit, durability and quality and high service
standards are significant factors in competing successfully in the marketing of
all types of footwear. Management believes that the Company is competitive in
all such respects.
In operating its own retail outlets, the Company competes in the
children's retail shoe industry with numerous businesses, ranging from large
retail chains to single store operators.
Employees
As of December 3, 1999, the Company employed approximately 2,300 full-time
and part-time employees. One collective bargaining unit represents a small
number of these employees. Management believes that its relations with its
employees are good.
Environmental Matters
Compliance with federal, state, local and foreign regulations with respect
to the environment have had, and are expected to have, no material effect on the
capital expenditures, earnings or competitive position of the Company.
Patents, Trademarks and Licenses
The Company has an existing trademark license agreement with Tommy
Hilfiger Licensing, Inc. pursuant to which it designs, markets and sells
9
footwear to men, women and boys. In connection with this agreement, the Company
expects to introduce a TOMMY HILFIGER(R) girls' line for the Fall season in
fiscal 2000. The Company also has a trademark license agreement with Nine West
Group, Inc. to design, manufacture and sell NINE WEST KIDS(R) branded children's
footwear.
The Company believes that its patents and trademarks are important to its
business and are generally sufficient to permit the Company to carry on its
business as presently conducted.
Research and Development
The Company depends principally upon its design, engineering and marketing
skills and the quality of its products for its ability to compete successfully.
The Company conducts research and development for footwear products; however,
the level of expenditures with respect to such activity is not material.
Executive Officers of the Registrant
The information with respect to the executive officers of the Company listed
below is as of February 15, 2000.
Name Position with Company Age
David M. Chamberlain Chairman of the Board of Directors and Chief 56
Executive Officer of the Company since
joining the Company in November 1999. Prior
to joining the Company, Mr. Chamberlain was
Chairman of the Board of Genesco, Inc., a
footwear company, from 1994 to 1999 and
President and Chief Executive Officer of
Genesco, Inc. from 1994 to 1996.
Diane M. Sullivan President and Chief Operating Officer since 44
July 1999. Previous to this position, Ms.
Sullivan was Group President of the Company
since October 1997 and President, Wholesale
division, Stride Rite Children's Group,
Inc., since joining the Company in April
1995. Prior to joining the Company, Ms.
Sullivan was Vice President, Marketing, of
The Rockport Company, Inc., a footwear
company wholly owned by Reebok International
Ltd., from May 1993 to April 1995.
10
Executive Officers of the Registrant
Name Position with Company Age
Peter J. Charles Senior Vice President and General Manager, 35
Stride Rite Sourcing International, since
August 1999. Previously, Mr. Charles was
Senior Vice President, Sourcing, since he
joined the Company in December 1996. Prior
to joining the Company, Mr. Charles was
employed by Clarks International, an
international footwear manufacturer, from
1986 to 1996, as General Manager, Resourced
Production, Regional Resourcing Manager,
South East Asia and served in various other
management level positions.
Janet M. DePiero Vice President of Human Resources of the 38
Company since March 1997. Previously, Ms.
DePiero was Director of Compensation and
Benefits of the Company from October 1995 to
February 1997 and Manager of Compensation
and Benefits at the Company from December
1991 to September 1995.
Daniel R. Friedman President of The Keds Corporation since 39
joining the Company in November 1999.
Previously, Mr. Friedman was President of
Aerosoles, Inc., a women's footwear
manufacturer, from December 1998 to November
1999, and was with the Nine West Group, a
marketer of women's footwear, in various
senior management positions from 1994 to
1998, including President of its Evan Picone
division.
Sandra A. Hayakawa President, Tommy Hilfiger Footwear, Inc. 38
since July 1999. Previously, Ms. Hayakawa
was Vice President and General Manager,
Sales and Marketing, for Tommy Hilfiger
Footwear since joining the Company in May
1998. Prior to Stride Rite, Ms. Hayakawa
was Vice President, Sales and Marketing for
Donna Karan Footwear, a division of the
Donna Karan Corporation, a women's apparel
manufacturer, from 1992 to 1997.
John M. Kelliher Chief Financial Officer of the Company since 48
February 1998 and Vice President, Finance
and Treasurer of the Company since February
1993. Mr. Kelliher was Corporate Controller
of the Company from March 1982 to January
1998.
11
Executive Officers of the Registrant
Name Position with Company Age
Thomas L. Nelson President, Sperry Top-Sider, Inc. since 45
joining the Company in May 1998. Prior to
joining the Company, Mr. Nelson was Senior
Vice President for North American Sales for
Converse, Inc., an athletic footwear
company, from March 1995 to May 1998 and
Senior Vice President of Global Sales for
The Rockport Company, Inc., a footwear
company wholly owned by Reebok
International, Ltd., from September 1992 to
January 1995.
Charles W. Redepenning, Jr. General Counsel, Clerk and Secretary of the 43
Company since March 1998. Prior to joining
the Company, Mr. Redepenning was Senior Vice
President, General Counsel and Secretary of
Daka International, Inc., a multi-national
food service and restaurant corporation,
from 1989 to 1998.
Gerrald B. Silverman President, Stride Rite Children's Group, 41
Inc., since September 1999. Previous to
this position, Mr. Silverman was Senior Vice
President of The Keds Corporation from
January 1996 to September 1999 and President
of Stride Rite International Corp. since
joining the Company in April 1994.
Robert H. White, Jr. Senior Vice President, Information 44
Technology, since joining the Company in May
1998. Prior to joining the Company, Mr.
White was the Director of Information
Technology from August 1995 through May 1998
and Information Technology Manager from
September 1989 through July 1995 at the
Timex Corporation.
These executive officers are generally elected at the Board of Directors'
meeting held in conjunction with the Company's Annual Meeting and serve at the
pleasure of the Board.
12
Item 2. Properties
The Company owns an automated distribution center located in Louisville,
Kentucky with 520,000 square feet of space and a distribution center located in
Huntington, Indiana with 263,000 square feet of space. The Company leases
approximately 18,000 square feet of space in Wilmington, Massachusetts for
product sample distribution and customer returns processing. The Company's
Canadian subsidiary leases approximately 30,000 square feet for administrative
offices and warehousing in Mississauga, Ontario.
The Company leases approximately 163,000 square feet for its headquarters
and administrative offices in Lexington, Massachusetts in a single tenant office
building. The Company also leases 24,000 square feet of space in Richmond,
Indiana for its customer service, order processing and telemarketing functions,
and 25,000 square feet of space for its liaison offices in Mainland China and
Taiwan. In addition, the Company leases smaller facilities for local sales
offices and showrooms in various locations in the United States.
At December 3, 1999, the Company operated 146 retail stores throughout the
country on leased premises which, in the aggregate, covered approximately
223,300 square feet of space. The Company also operates 46 children's footwear
departments in certain divisions of Federated Department Stores. In addition,
the Company is the lessee of 15 retail locations with a total of approximately
17,640 square feet which are subleased to independent Stride Rite dealers and
other tenants.
For further information concerning the Company's lease obligations, see
Note 8 to the Company's consolidated financial statements, which are contained
in the Annual Report to Stockholders and are incorporated by reference herein.
Management believes that all properties and facilities of the Company are
suitable, adequate and fit for their intended purposes.
Item 3. Legal Proceedings
The Company is a party to various litigations arising in the normal course
of business. Management of the Company does not believe the ultimate resolution
of such litigations will have a material adverse effect on the Company's
financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
None
13
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information required by this item is included in the Registrant's 1999
Annual Report to Stockholders on pages 1, 18, 31, 34 through 37, 40 and 44
and is incorporated herein by reference.
Item 6. Selected Financial Data
The information required by this item is included in the Registrant's 1999
Annual Report to Stockholders on page 18 and is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this item is included in the Registrant's 1999
Annual Report to Stockholders on pages 19 through 23 and is incorporated
herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The information required by this item is included in the Registrant's 1999
Annual Report to Stockholders on pages 24 through 42 and is incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
14
PART III
Item 10. Directors and Executive Officers of the Registrant
Reference is made to the information set forth under the caption
"Executive Officers of the Registrant" in Item 1 of Part I of this report and to
information under the captions "Information as to Directors and Nominees for
Director" and "Meetings of the Board of Directors and Committees" in the
Registrant's definitive proxy statement relating to its 2000 Annual Meeting of
Stockholders, which will be filed with the Commission within 120 days after the
close of the Registrant's fiscal year ended December 3, 1999, all of which
information is incorporated herein by reference.
Item 11. Executive Compensation
Reference is made to the information set forth in the Registrant's
definitive proxy statement relating to its 2000 Annual Meeting of Stockholders
under the caption "Executive Compensation", which will be filed with the
Commission within 120 days after the close of the Registrant's fiscal year ended
December 3, 1999, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the information set forth under the caption
"Ownership of Equity Securities" in the Registrant's definitive proxy statement
relating to its 2000 Annual Meeting of Stockholders, which will be filed with
the Commission within 120 days after the close of the Registrant's fiscal year
ended December 3, 1999, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
15
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) Financial Statements. The following financial statements
and financial statement schedules are contained herein or are incorporated
herein by reference:
Page in
Form 10-K
Consolidated Balance Sheets as of December 3, 1999 and
November 27, 1998 *
Consolidated Statements of Income for the fiscal years ended
December 3, 1999, November 27, 1998 and November 28, 1997 *
Consolidated Statements of Cash Flows for the fiscal years ended
December 3, 1999, November 27, 1998 and November 28, 1997 *
Consolidated Statements of Changes in Stockholders' Equity for
the fiscal years ended December 3, 1999, November 27, 1998
and November 28, 1997 *
Notes to Consolidated Financial Statements *
Report of Independent Accountants *
Report of Independent Accountants on Financial Statement Schedule F-1
Financial Statement Schedule for the fiscal years ended
December 3, 1999, November 27, 1998 and November 28, 1997:
Schedule II - Valuation and Qualifying Accounts F-2
Schedules other than those listed above are omitted because they are either not
required or the information is otherwise included.
* Incorporated herein by reference. See Part II, Item 8 on page 14 of this
Annual Report on Form 10-K.
16
Exhibits. The following exhibits are contained herein or are incorporated
herein by reference:
Exhibit No. Description of Exhibit
3 (i) Restated Articles of Organization of the Registrant with
amendments thereto through November 28, 1986, incorporated by
reference from Exhibit 4(i) to the Registrant's Form S-8
filed on October 25, 1996.
(ii) Articles of Amendment dated April 7, 1987 to Restated Articles
of Organization, incorporated by reference from Exhibit 4(i)
to the Registrant's Form S-8 filed on October 25, 1996.
(iii) Articles of Amendment dated December 16, 1987 to Restated
Articles of Organization of the Registrant, incorporated by
reference from Exhibit 4(i) to the Registrant's Form S-8 filed
on October 25, 1996.
(iv) Articles of Amendment dated December 3, 1991 to the Restated
Articles of Organization of the Registrant, incorporated by
reference from Exhibit 4(i) to the Registrant's Form S-8 filed
on October 25, 1996.
(v) Certificate of Vote of Directors establishing a series of a
Class of Stock dated as of June 18, 1997.
(vi) By-laws of the Registrant, as amended. This document was filed
as Exhibit 3 of the Registrant's Form 10-Q for the fiscal
period ended June 1, 1990 and is incorporated herein by
reference.
4 (i) Reference is made to Exhibits 3(i), (ii), (iii) and (iv)
referred to above, which are expressly incorporated herein by
reference.
(ii) Rights Agreement dated June 18, 1997 between the Registrant
and BankBoston, N.A. This document was filed as Exhibit 1 to
the Registrant's Form 8-A dated July 1, 1997 and is
incorporated herein by reference.
17
Exhibits. The following exhibits are contained herein or are incorporated
herein by reference:
Exhibit No. Description of Exhibit
10 (i)* 1975 Executive Incentive Stock Purchase Plan of the
Registrant. This document was filed as Appendix A to the
Registrant's Prospectus relating to such Plan, dated April
18, 1986, which was filed with the Commission pursuant to
Rule 424(b) promulgated under the Securities Act of 1933, as
amended, and is incorporated herein by reference.
(ii)* 1995 Long-Term Growth Incentive Plan of the Registrant. This
document was filed as Exhibit 10(vi) to the Registrant's Form
10-K for the year ended December 2, 1994 and is incorporated
herein by reference.
(iii)* Form of executive termination agreement dated as of February
12, 1998. This document was filed as Exhibit 10(iii) to the
Registrant's Form 10-K for the year ended November 28, 1997
and is incorporated herein by reference.
(iv)* Form of executive termination agreement dated as of February
12, 1998. This document was filed as Exhibit 10(iv) to the
Registrant's Form 10-K for the year ended November 28, 1997
and is incorporated herein by reference.
(v)* Form of severance agreement dated February 22, 1995. This
document was filed as Exhibit 10(vi) to the Registrant's Form
10-K for the year ended November 28, 1997 and is incorporated
herein by reference.
(vi)* Annual Incentive Compensation Plan amended and restated as of
December 11, 1997. This document was filed as Exhibit
10(viii) to the Registrant's Form 10-K for the year ended
November 28, 1997 and is incorporated herein by reference.
(vii)* 1998 Stock Option Plan of the Registrant (as amended). This
document was filed as Exhibit 10(xi) to the Registrant's Form
10-K for the year ended November 27, 1998 and is incorporated
herein by reference.
(viii)* 1998 Non-Employee Director Stock Ownership Plan of the
Registrant (as amended). This document was filed as Exhibit
10(xii) to the Registrant's Form 10-K for the year ended
November 27, 1998 and is incorporated herein by reference.
*Denotes a management contract or compensatory plan or arrangement.
18
Exhibit No. Description of Exhibit
10 (ix)* Senior Executive Annual Incentive Compensation Plan of
the Registrant. This document was filed as Exhibit 10(xi) to
the Registrant's Form 10-K for the year ended November 28,
1997 and is incorporated herein by reference.
(x)* 1999 Executive Long Term Bonus Plan of the Registrant. This
document was filed as Exhibit 10(xiv) to the Registrant's
Form 10-K for the year ended November 27, 1998 and is
incorporated herein by reference.
(xi)* Employment Agreement between the Registrant and David M.
Chamberlain dated November 4, 1999.
(xii) Revolving Credit Agreement between the Registrant and
BankBoston, N.A., Bank of America, N.A., Bank One, NA,
SunTrust Bank, The Bank of New York, and BankBoston, N.A.
with BancBoston Robertson Stephens Inc., dated as of
January 19, 2000.
(xiii) Amended and Restated License Agreement between Registrant
and Tommy Hilfiger Licensing, Inc.
13 Portions of Registrant's 1999 Annual Report to Stockholders
incorporated by reference into this Annual Report on Form
10-K.
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 3, 1999.
*Denotes a management contract or compensatory plan or arrangement.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 STRIDE RITE CORPORATION THE STRIDE RITE CORPORATION
/s/ John M. Kelliher /s/ David M. Chamberlain
- --- ---------------- --- --------------------
By: John M. Kelliher, Chief By: David M. Chamberlain,
Financial Officer Chairman of the Board of
(Principal Accounting Officer) Directors and Chief Executive
Officer
Date: February 18, 2000 Date: February 18, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ David M. Chamberlain /s/ Warren Flick
-------------------- ------------
David M. Chamberlain, Chairman Warren Flick, Director
of the Board of Directors and
Chief Executive Officer
Date: February 18, 2000 Date: February 18, 2000
/s/ Donald R. Gant
- --- -------------- ------------------
Donald R. Gant, Director Joanna M. Jacobson, Director
Date: February 18, 2000 Date: February 18, 2000
/s/ Frank R. Mori /s/ Robert L. Seelert
- --- ------------- --- -----------------
Frank R. Mori, Director Robert L. Seelert, Director
Date: February 18, 2000 Date: February 18, 2000
/s/ Myles J. Slosberg /s/ Diane M. Sullivan
- --- ----------------- --- -----------------
Myles J. Slosberg, Director Diane M. Sullivan, Director
Date: February 18, 2000 Date: February 18, 2000
/s/ W. Paul Tippett, Jr. /s/ Bruce Van Saun
- --- -------------------- --------------
W. Paul Tippett, Jr., Director Bruce Van Saun, Director
Date: February 18, 2000 Date: February 18, 2000
20
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Directors of
The Stride Rite Corporation:
Our audits of the consolidated financial statements referred to in our report
dated January 6, 2000 appearing on page 42 of the 1999 Annual Report to
Stockholders and Directors of The Stride Rite Corporation (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the financial statement schedule
listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
/s/ PricewaterhouseCoopers LLP
------------------------------
PRICEWATERHOUSECOOPERS LLP
January 6, 2000
F-1
THE STRIDE RITE CORPORATION
Schedule II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Additions
Balance Charged to Balance at
at Costs and End of
Description Beginning Expenses Deductions Period
- ----------- Period
--------- ---------- ---------- ----------
Fiscal year ended November 28, 1997:
Deducted from assets:
Allowance for doubtful
accounts $3,448 $1,140 $846 (a) $3,742
Allowance for sales
discounts 3,724 3,294 1,754 (b) 5,264
--------- --------- -------- --------
$7,172 $4,434 $2,600 $9,006
========= ========= ======== ========
Fiscal year ended November 27, 1998:
Deducted from assets:
Allowance for doubtful
accounts 3,742 1,402 1,246 (a) 3,898
Allowance for sales
discounts 5,264 2,329 1,920 (b) 5,673
--------- --------- -------- --------
$9,006 $3,731 $3,166 $9,571
========= ========= ======== ========
Fiscal year ended December 3, 1999:
Deducted from assets:
Allowance for doubtful
accounts 3,898 1,125 1,336 (a) 3,687
Allowance for sales
discounts 5,673 2,490 1,899 (b) 6,264
--------- --------- -------- --------
$9,571 $3,615 $3,235 $9,951
========= ========= ======== ========
(a) Amounts written off as uncollectible.
(b) Amounts charged against the reserve.
F-2
THE STRIDE RITE CORPORATION
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 3, 1999
Index to Exhibits
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
10 (xi)* Employment Agreement between the Registrant and 24
David M. Chamberlain dated November 4, 1999.
(xii) Revolving Credit Agreement between the Registrant 39
and BankBoston, N.A., Bank of America, N.A., Bank
One, NA, SunTrust Bank, The Bank of New York, and
BankBoston, N.A. with BancBoston Robertson Stephens
Inc., dated as of January 19, 2000.
(xiii) Amended and Restated License Agreement between 166
Registrant and Tommy Hilfiger Licensing, Inc.
13 Portions of Registrant's 1999 Annual Report to 246
Stockholders incorporated by reference into this
Annual Report on Form 10-K.
21 Subsidiaries of the Registrant 279
23 Consent of Independent Accountants 280
27 Financial Data Schedules 281
*Denotes a management contract or compensatory plan or arrangement.
23