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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2002
( ) 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) (I.R.S. Employer Identified No.)
191 Spring Street, Lexington, Massachusetts 02421
(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:
Name of each exchange
Title of each class on which registered
- -------------------------------- ---------------------
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 ( )
-
As of July 10, 2002, 41,724,689 shares of the registrant's common stock,
$.25 par value, and the accompanying Preferred Stock Purchase Rights were
outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
THE STRIDE RITE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
May 31 June 1,
2002 November 30, 2001
(Unaudited) 2001 (Unaudited)
-------------- -------------- --------------
Assets
Current Assets:
Cash and cash equivalents $ 67,378 $ 81,159 $ 19,608
Accounts and notes
receivable, net 80,749 44,739 89,567
Inventories 77,226 112,481 94,666
Deferred income taxes 24,245 24,245 25,494
Other assets 4,184 5,344 3,184
-------- -------- --------
Total current assets 253,782 267,968 232,519
Property and equipment, net 70,974 72,244 74,621
Other assets 10,286 9,608 21,600
-------- -------- --------
Total assets $335,042 $349,820 $328,740
======== ======== ========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
2
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in Thousands)
May 31, June 1,
2002 November 30, 2001
(Unaudited) 2001 (Unaudited)
--------------- -------------- --------------
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt - $ 26,000 -
Accounts payable $14,326 23,000 $ 17,608
Income taxes payable 16,239 11,682 20,953
Accrued expenses and other
liabilities 21,174 22,041 20,370
------------- ----------- ---------
Total current liabilities 51,739 82,723 58,931
Deferred income taxes 4,858 4,858 5,929
Stockholders' Equity:
Preferred stock,
$1 par value
Shares authorized -
1,000,000
Shares issued - None - - -
Common stock, $.25 par
value
Shares authorized -
135,000,000
Shares issued -
56,946,544 14,237 14,237 14,237
Capital in excess of par
value 18,007 19,209 19,875
Retained earnings 397,369 382,460 385,521
Less cost of 14,911,079
shares of common stock
held in treasury
(15,087,646 on November
30, 2001 and 15,258,760
on June 1, 2001) (151,168) (153,667) (155,753)
---------- ---------- ---------
Total stockholders' equity 278,445 262,239 263,880
---------- ---------- ---------
Total liabilities and
stockholders' equity $ 335,042 $ 349,820 $ 328,740
========= ========= =========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the periods ended May 31, 2002 and June 1, 2001
(In Thousands Except Per Share Data)
Three Months Ended Six Months Ended
------------------ ----------------
May 31, June 1, May 31, June 1,
2002 2001 2002 2001
---------- ---------- ----------- ----------
Net sales $ 156,480 $ 153,660 $297,213 $304,753
Cost of sales 98,041 94,860 187,008 191,029
Selling and
administrative expenses 41,006 43,072 81,090 86,279
--------- --------- -------- --------
Operating income 17,433 15,728 29,115 27,445
Other income(expense):
Investment income 399 408 726 1,968
Interest expense (233) (486) (536) (1,075)
Other, net (83) (85) (253) (553)
---------- ---------- --------- ---------
83 (163) (63) 340
--------- ---------- --------- --------
Income before income
taxes 17,516 15,565 29,052 27,785
Provision for income
taxes 5,944 5,516 9,941 9,918
--------- --------- -------- --------
Net income $ 11,572 $ 10,049 $ 19,111 $ 17,867
========= ========= ======== ========
Net income per common share:
Diluted $ .27 $ .24 $ .45 $ .43
========= ========= ======== ========
Basic $ .28 $ .24 $ .46 $ .43
========= ========= ======== ========
Dividends per common
share $ .05 $ .05 $ .10 $ .10
========= ========= ======== ========
Average common shares
used in per share
computations:
Diluted 42,566 42,060 42,376 42,003
========= ========= ======== ========
Basic 42,024 41,687 41,965 41,668
========= ========= ======== ========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the six months ended May 31, 2002 and June 1, 2001
(Dollars in Thousands)
2002 2001
------------- -----------
Cash was provided from (used for):
Operations:
Net income $ 19,111 $ 17,867
Adjustments to reconcile to net cash provided
from (used for) operations:
Depreciation and amortization 7,543 7,345
Compensation expense related to executive
stock plans 120 115
Gain related to long-term investments - (451)
Loss on disposal of property and
equipment 606 58
Changes in:
Accounts and notes receivable (36,010) (35,192)
Inventories 35,255 11,251
Other current assets 1,160 3,181
Accounts payable, income taxes, accrued
expenses and other current liabilities (4,962) (13,879)
----------- ---------
Net cash provided from(used for)operations 22,823 (9,705)
---------- ---------
Investments:
Additions to property and equipment (6,742) (5,667)
Distribution from long-term investments - 451
Net sales of marketable securities 250 316
Increase in other assets (1,064) (952)
----------- ---------
Net cash used for investments (7,556) (5,852)
----------- ---------
Financing:
Short-term debt repayments (26,000) (24,000)
Proceeds from sale of stock under stock plans 1,561 352
Cash dividends paid (4,190) (4,163)
Repurchase of common stock (419) -
----------- --------
Net cash used for financing (29,048) (27,811)
----------- ---------
Net decrease in cash and cash equivalents (13,781) (43,368)
Cash and cash equivalents at beginning of the
period 81,159 62,976
---------- --------
Cash and cash equivalents at end of the period $ 67,378 $ 19,608
========== ========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The financial information included in this Form 10-Q of The Stride Rite
Corporation (the "Company") for the periods ended May 31, 2002 and June 1, 2001
is unaudited and subject to year-end adjustments. However, such information
includes all adjustments (including all normal recurring adjustments) which, in
the opinion of management, are considered necessary for a fair presentation of
the consolidated results for those periods. The results of operations for the
periods ended May 31, 2002 and June 1, 2001 are not necessarily indicative of
the results of operations that may be expected for the complete fiscal year. The
year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles. The Company filed audited consolidated financial
statements for the year ended November 30, 2001 on Form 10-K which included all
information and footnotes necessary for such presentation.
The Company's preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. The most significant estimates included in these financial statements
include valuation allowances and reserves for accounts receivable, inventory and
income taxes. Actual results could differ from those estimates.
6
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2
Basic earnings per share excludes dilution and is computed by dividing net
earnings available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if options to issue common stock were
exercised.
The following is a reconciliation of the number of shares used in the basic
and diluted earnings per share computations (shares in thousands):
Three Months Ended Six Months Ended
------------------ ----------------
May 31, June 1, May 31, June 1,
2002 2001 2002 2001
------- -------- -------- ---------
Net income applicable to common
shares $11,572 $10,049 $19,111 $17,867
Calculation of shares:
Weighted average number of
common shares outstanding
(basic) 42,024 41,687 41,965 41,668
Common shares attributable to
assumed exercise of dilutive
stock options and stock
purchase rights using the
treasury stock method 542 373 411 335
------- ------- ------- -------
Average common shares and common
equivalents outstanding during
the period (diluted) 42,566 42,060 42,376 42,003
======= ======= ======= =======
Net income per common share (basic) $ .28 $ .24 $ .46 $ .43
======= ======= ======= =======
Net income per common share
(diluted) $ .27 $ .24 $ .45 $ .43
======= ======= ======= =======
The following options were not included in the computation of diluted net
income per common share because the options' exercise price was greater than the
average market price of the common shares:
Second Quarter First Six Months
---------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ----------
Options to purchase shares of
common stock (in thousands) 959 1,998 1,466 2,068
7
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3
In the fourth quarter of fiscal 2001, the Company recorded pre-tax
nonrecurring charges of $3,059,000 related to a restructuring of its
administrative staff, the exit of its leased department store business and
retail system asset impairment costs. The Company expects to fully utilize this
accrual before the end of the 2002 fiscal year's fourth quarter. The following
table summarizes activity during the first six months of fiscal 2002:
Second Six
(In thousands) Quarter Months
- -------------- ------------- -------------
Balance at beginning of period $1,276 $2,262
Amounts charged against accrual for severance (293) (1,248)
Amounts charged against accrual for employee
benefit costs - (12)
Amounts charged against accrual for other costs (210) (229)
------------- -------------
Balance at May 31, 2002 $773 $773
============= =============
8
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This form 10-Q 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 presented in
the Company's Form 10-K for the fiscal year ended November 30, 2001, which was
filed with the Securities and Exchange Commission.
Results of Operations
The following table summarizes the Company's performance for the second
quarter and first six months of fiscal 2002 as compared to the results for the
same periods in fiscal 2001:
Increase (Decrease) Percent vs. 2001 results:
- ---------------------------------------------
Second Quarter Six Months
-------------- ----------
Net sales 1.8% (2.5)%
Gross profit (0.6)% (3.1)%
Selling and administrative expenses (4.8)% (6.0)%
Operating income 10.8% 6.1%
Income before income taxes 12.5% 4.6%
Net income 15.2% 7.0%
Operating Ratios as a Percent to Net Sales:
- -------------------------------------------
Second Quarter Six Months
-------------- ----------
2002 2001 2002 2001
------ ------ ------ ------
Gross profit 37.3% 38.3% 37.1% 37.3%
Selling and administrative expenses 26.2% 28.0% 27.3% 28.3%
Operating income 11.1% 10.2% 9.8% 9.0%
Income before income taxes 11.2% 10.1% 9.8% 9.1%
Net income 7.4% 6.5% 6.4% 5.9%
9
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Net Sales
Net sales in the second quarter of fiscal 2002 increased $2.8 million or
1.8% above the net sales level for the same period of fiscal 2001. In the second
quarter of 2002, wholesale brand revenues increased 1%, while retail sales
increased 9% from the same period in 2001. Over the first six months of 2002,
consolidated net sales decreased by $7.5 million, 2.5% below the net sales for
the comparable period of 2001. Revenues related to the Company's wholesale
brands declined 5% during the first half of 2002, while retail sales increased
10%. Unit shipments of current line merchandise for the wholesale brands during
the first half of 2002 were below the comparable period in 2001 by 3.8%. The
Company's average selling price was also lower in the first half of 2002,
decreasing 3% from last year. Sales of discontinued products increased $5.8
million in the first half of 2002 as compared to the same period in 2001.
Sales of the Stride Rite Children's Group decreased 4% in the second
quarter of fiscal 2002, the result of a 7% increase in retail sales and a 20%
decrease in sales to wholesale accounts, as compared to the same period in
fiscal 2001. During the second quarter of 2002, sales at comparable,
company-owned Children's Group retail stores decreased 4.4% from the same period
of 2001. For the first six months of 2002, sales of the Stride Rite Children's
Group decreased 1% from the same period in 2001, with the retail portion
increasing 9% and the wholesale portion decreasing 12%. Sales at comparable,
company-owned retail stores decreased 1.7% during the first half of 2002. The
increase in retail sales for the second quarter and six months is attributable
to stores that have opened during the most recent twelve months. A weak Easter
selling period, combined with an unseasonably cool Spring, adversely impacted
the sales of the Stride Rite Children's Group for both the second quarter and
six months. Additionally, sales of the Munchkin product line were below the
levels recorded in the same period for the prior year. At the end of the second
quarter of 2002, the Children's Group operated 208 stores, up 2% from the 203
stores open at the end of the second quarter in 2001. The Company opened 35 new
stores and closed 1 underperforming location in the first six months of 2002.
Historically, it has taken 12 to 15 months for new stores to reach their normal
operating performance. We expect that to be the case with the new stores opening
in fiscal 2002. Also, as previously disclosed, the Stride Rite Children's Group
exited the 46 leased department stores during the second quarter of fiscal 2002.
The sales reduction resulting from the exit of the leased department stores is
expected to be mostly offset by sales from the approximately 50 new stores
scheduled to open during fiscal 2002.
In the second quarter of fiscal 2002, sales of the Keds brand were 2%
higher than the comparable period of fiscal 2001. This increase was largely
driven by increased sales of promotional products during the quarter which were
up $1.3 million. Also contributing to this increase was a 10% growth in the sale
of Grasshoppers' products for the quarter as compared to the same period in
2001. Offsetting much of these increases, women's first quality sales for the
quarter decreased 4% versus the prior year and sales of children's products were
down 12% for the quarter as compared to the prior
10
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
year. For the first six months of 2002, Keds' net sales declined 5%
compared to the same period of 2001. A 26% increase in sales of Grasshoppers'
products coupled with a 36% increase in sales of discontinued products were
unable to offset the 18% decrease in sales of Keds' women's products during the
first half of 2002 as compared to the same period in 2001. The decrease in
women's products was principally the result of the first half introduction in
2001 of the updated Keds Champion style.
Sales of Tommy Hilfiger footwear products in the second quarter of fiscal
2002 increased 16% as compared to the same period in fiscal 2001. This increase
was primarily driven by increased retail distribution both in first quality and
promotional product as compared to the prior year's second quarter. Sales
increases in both the men's and boys' product categories, with first quality
sales up 21% and 33%, respectively, versus the prior year were partially offset
by a 2% decrease in the women's and girls' product lines. For the first six
months of 2002, sales of Tommy Hilfiger footwear decreased 5% as compared to the
same period in 2001. Competitive pricing pressure in the women's product
category contributed to a 10% decrease in women's first half 2002 sales as
compared to the same period last year. This decrease in Tommy Hilfiger's largest
product category could not be offset by the 9% increase in men's first quality
sales and the 14% increase in sales of discontinued items during the first six
months of fiscal 2002 compared to the 2001 year's first half.
Sales of the Sperry Top-Sider brand increased 7% in the second quarter of
fiscal 2002, bringing the first half sales increase to 7% above the comparable
period of fiscal 2001. Sperry's second quarter and six months sales increases
were largely the result of increased women's products sales.
International revenues in the second quarter of 2002 were 5% above the
comparable period of 2001. For the first six months of 2002, International
revenues increased 6% from the comparable period of 2001.
Gross Profit
During the first six months of fiscal 2002, gross profit decreased $3.5
million or 3.1% below the same period in fiscal 2001. This decrease compares
unfavorably to the net sales decrease of 2.5% as compared to the same period
last year. The consolidated gross profit percent in the first half of 2002
decreased 0.2 percentage points, finishing at 37.1% in 2002 compared to 37.3% in
2001. Gross profit performance also decreased in the second quarter of 2002,
compared to the same period in 2001, 37.3% in 2002 compared to 38.3% in the 2001
second quarter. Increased closeout sales and promotional activity, supporting
sales initiatives principally in the Keds and Tommy Hilfiger brands, negatively
impacted their gross profit comparisons to the prior year's six-month results.
The benefit of greater retail store sales, which have a higher gross profit
percentage, was unable to fully compensate for the effect of the closeout and
promotional activity. The Company's LIFO provision had a favorable impact on
gross profit comparisons for the first six months of 2002, with LIFO increasing
gross profit by $0.2 million (less than 0.1% of net sales) in 2002 compared to a
reduction of $1.2 million (0.4% of net sales) in 2001.
11
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Operating Costs
Selling and administrative expenses in the first half of fiscal 2002
decreased $5.2 million or 6.0% from the spending level in the first half of
fiscal 2001. Operating costs as a percentage of sales in the first half
decreased 1.0 percentage point from the same period of 2001 (27.3% in 2002
compared to 28.3% in 2001). The expense level in the first half of fiscal 2002
compared favorably to the same period in fiscal 2001 primarily due to the impact
in the prior year of executive termination charges, which totaled $1.8 million,
along with lower operating expenses in fiscal 2002 resulting from the corporate
restructuring initiated in the fourth quarter of fiscal 2001.
Advertising expenses for the first six months of fiscal 2002 represented
4.7% of net sales, which was below the 5.9% spending rate in the comparable
period of fiscal 2001. The reduction in advertising expense was primarily due to
reductions in Keds spending. In the prior year, additional Keds advertising
spending was used to support the launch of the updated Champion style.
Distribution expenses represented 3.4% of net sales in the first six months of
fiscal 2002, which was favorable to the 3.6% rate during the comparable period
of fiscal 2001. Retail store expenses were higher for the first six months of
fiscal year 2002 due to the 36 new stores opened as part of our retail
expansion, 35 by Stride Rite Children's Group and 1 by Keds. During the second
quarter of fiscal 2002 the Company successfully exited the 46 leased department
stores. The costs of exiting this business were included as part of the
restructuring charge recorded during the fourth quarter of fiscal 2001. The
associated reduction in expense from the exiting of this business is not
expected to fully offset the higher new store expenses. Newly opened stores
typically have higher expense levels due to start up and operational costs until
they establish their normal financial operating performance. Operating expenses
for non-comparable retail stores increased $3.6 million for the second quarter
and $5.8 million for the six months as compared to the same period in the prior
fiscal year.
Other Income and Taxes
Other income (expense) decreased pre-tax income by $0.1 million in the
first six months of fiscal 2002 compared to an increase of $0.3 million in the
similar period of fiscal 2001. Investment income for the first six months of
2002 was $0.7 million, down from the $2.0 million for the first half of 2001.
The $1.3 million decrease in investment income is the result of significantly
lower average interest rates on investments during the current fiscal year as
well as the realization of a gain in fiscal 2001 on a long-term investment.
Interest expense in the first six months of 2002 decreased to $0.5 million
compared to $1.1 million in 2001. The average interest rate on borrowed funds
was 2.7% during the first six months, significantly lower than the 6.4% rate
during the comparable period last year. Average short-term borrowings in the
first six months of 2002 were $29.3 million, 2% higher than the average
borrowings of $28.7 million in the comparable period of 2001.
Our effective income tax rate was 34.2% for the first six months of fiscal
2002 versus 35.7% for the same period in the prior fiscal year. The lower tax
rate is based on the year-end projected tax rate. 12
PART I - FINANCIAL INFORMATION (Continued)
THE STRIDE RITE CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Net Income
Net income for the first six months of fiscal 2002 increased $1.2 million,
up 7.0% from the income earned in the same period of fiscal 2001. Lower
operating expenses and a lower effective income tax rate were sufficient to
offset the impact of lower sales and gross profits. Prior year operating
expenses included the $1.2 million after-tax cost of the executive termination
charges. As a result, the Company's return on net sales of 6.4% in the first six
months of 2002 was improved over the 5.9% in the first half of 2001.
Liquidity and Capital Resources
At May 31, 2002, the Company's balance sheet reflects a current ratio of
4.9 to 1 with no long-term debt. The Company's cash and cash equivalents totaled
$67.4 million at the end of the latest quarter, well above the prior year's cash
and cash equivalents total of $19.6 million. When combined with
intermediate-term fixed income investments, which are included in other assets,
total available cash and investments amounted to $67.7 million at May 31, 2002
compared to $31.5 million in 2001. The Company uses its $75 million revolving
credit facility to fund seasonal working capital needs. No borrowings under this
line of credit were outstanding as of May 31, 2002, or June 1, 2001.
During the first six months of fiscal 2002, $22.8 million of cash was
provided from operations. This positive cash flow amount was well above the $9.7
million of cash used by operations during the same period in fiscal 2001. At May
31, 2002, accounts receivable and inventory levels totaled $158.0 million, a
decrease of $26.2 million or 14% below the $184.2 million asset amount at the
end of the second quarter of 2001. Accounts receivable at the end of the second
quarter of 2002 decreased $8.8 million or 10% compared to the prior year. This
compares favorably to the 1% increase in wholesale sales in the second quarter
of fiscal 2002 versus the same period last year. Days sales outstanding at the
end of the second quarter were 45 days, a reduction of 6 days from the same
quarter in the prior year. Much of this improvement is the result of
aggressively pursuing past due receivables. Inventories were also lower at the
end of the second quarter of 2002, down $17.4 million or 18% from the 2001
level. This improvement was primarily the result of increasing inventory turn,
by carefully monitoring sell-through performance of our larger retail customers
to better forecast product demand. Also, shortened lead times have allowed
reductions in certain inventory quantities.
Additions to property and equipment totaled $6.7 million in the first half
of fiscal 2002 was above the $5.7 million for the same period in fiscal 2001.
The greater capital expenditures were the result of higher spending on new
retail stores somewhat offset by lower spending for information technology.
During the first half of 2002, the Company repurchased 110,000 shares of its
common stock. At May 31, 2002, the Company had 1.9 million shares remaining on
the repurchase authorization approved by the Board of Directors in December
1999.
13
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Company's shareholders was held on April 11,
2002. The two directors nominated by management were elected by the vote set
forth below:
Votes
------------------------
Name of Director For Withheld
----------------- ------------------------
Frank R. Mori 36,715,039 1,189,790
Bruce Van Saun 36,713,184 1,191,645
The Company's other directors, whose term of office continues after the
2002 stockholders' meeting, are as follows:
David M. Chamberlain
Christine M. Cournoyer
Donald R. Gant
Myles J. Slosberg
The Company's shareholders also ratified the Company's selection of
PricewaterhouseCoopers LLP as auditors of the Company for the 2002 fiscal year
by the vote set forth below:
Votes
---------------------------------------------------
For Against Abstentions
--- ------- -----------
37,651,411 198,103 55,315
The shareholders voted in favor of a proposal requesting that the directors
consider and act upon to approve and adopt The Stride Rite Corporation Amended
and Restated Employee Stock Purchase Plan, by the vote set forth below:
Votes
---------------------------------------------------
For Against Abstentions
--- ------- -----------
34,479,890 3,229,069 195,870
The shareholders voted against a proposal regarding global human rights
standards, by the vote set forth below:
Votes
---------------------------------------------------
Broker
For Against Abstentions Non-Vote
--- ------- ----------- --------
2,953,293 19,201,964 6,947,580 8,801,992
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are contained in this
--------
report:
None
(b) Reports on Form 8-K
-------------------
There were no reports filed on Form 8-K during the most recent
quarterly period.
15
THE STRIDE RITE CORPORATION
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 duly authorized. THE STRIDE RITE CORPORATION (Registrant)
Date: July 12, 2002 By: /S/ Frank A. Caruso
--------------------------
Frank A. Caruso
Chief Financial Officer
16