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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 (FEE REQUIRED)
For the fiscal year ended November 29, 1996
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 (I.R.S. Employer Identification Number)
of incorporation)
191 Spring Street, P.O. Box 9191, Lexington, Massachusetts 02173
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including are 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 25, 1997, was $584,414,460
based on the closing price on that date on the New York Stock Exchange. As of
February 25, 1997, 49,202,513 shares of the registrant's Common Stock, $.25 par
value, were outstanding and 6,150,314 of the registrant's Preferred Stock
Purchase Rights, which trade together with the registrant's common stock, 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 November 29, 1996 Part I and Part II
Portions of the Registrant's Proxy
Statement for 1997 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 athleisure and
casual footwear for children and adults. The Company manufactures products in
its own facilities in the United States and in the Dominican Republic and also
imports a significant portion of its products from abroad. 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.
Products
Children's footwear, designed primarily for consumers between the ages of
six months and 12 years, encompasses a complete line of products, 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 (TM), SPERRY(R) and STREET HOT(R) trademarks in medium to high
price ranges.
Sneakers and casual footwear for adults and children are marketed under the
KEDS(R), AHH...KEDS(R) and PRO-KEDS(R) trademarks and casual footwear for women
under the GRASSHOPPERS(R) label.
Marine footwear and portions of the Company's outdoor recreational,
hand-sewn, dress and casual footwear for adults and children are marketed 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.
Beginning in Spring 1997, dress casual, hand-sewn, sport casual, dress
and athleisure footwear for men and boys will be marketed using the TOMMY
HILFIGER(R) brand name under a license agreement with Tommy Hilfiger Licensing,
Inc. by the Company's wholly owned subsidiary, Tommy Hilfiger Footwear, Inc.
Sales and Distribution
During the 1996 fiscal year, the Company sold its products nationwide to
customers operating retail outlets, including department stores, sporting goods
stores and marinas, as well as Stride Rite Bootery stores and other shoe stores
operated by independent retailers. In addition, the Company sold footwear
products to consumers through Company-owned stores, including bootery stores,
manufacturers' outlet stores, Keds concept stores, concept stores called Great
Feet(TM), and children's footwear departments in department stores. The
Company's largest single customer accounted for less than 7% of consolidated net
sales for the fiscal year ended November 29, 1996.
3
The Company provides assistance to a limited number of qualified specialty
retailers to enable them to operate independent Stride Rite children's bootery
stores. Such assistance sometimes includes the sublease of a desirable retail
site by the Company to a dealer. There are approximately 32 independent dealers
who currently sublease store locations from the Company.
The Company owns an automated distribution center located in Louisville,
Kentucky providing 520,000 square feet of space and a warehouse in Boston,
Massachusetts, providing 565,000 square feet of space. The Company expects to
close the Boston facility in the fourth quarter of 1997 after transferring the
distribution function for the Stride Rite brand to a facility which has been
leased in Huntington, Indiana. Reference is hereby made to the section of the
Company's annual report to stockholders entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations" and Note 2 to the Consolidated Financial Statements for additional
information regarding these facilities.
The Company maintains an in-stock inventory 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.
In fiscal 1996, in addition to the United States, KEDS(R) brand products
were also sold in Austria, Belgium, France, Germany, Ireland and the United
Kingdom through a representative office operated by its French subsidiary.
KEDS(R) brand products were distributed through third parties in Brazil, Chile,
Cyprus, Denmark, Egypt, Greece, Hong Kong, Indonesia, Israel, Japan, Portugal,
Saudi Arabia, Singapore, South Africa, South Korea and Sweden, as well as in
several other countries in Latin America and Asia, using local distributors.
PRO-Keds(R) brand products are sold by a licensee in Japan under a trademark
license agreement. Further, KEDS(R) products are sold in Central America under a
distribution agreement. In 1996 the Company entered into licensing agreements
covering the sale of KEDS(R) footwear in Australia, the Philippines and New
Zealand.
In fiscal 1996, in addition to the United States, the Company sells SPERRY
TOP-SIDER(R) products in Belgium, France, Germany, Ireland, the Netherlands and
the United Kingdom through its French subsidiary. The Company distributed its
SPERRY TOP-SIDER(R) brand products in Greece, Indonesia, Italy, Japan, Portugal,
Singapore and Sweden, as well as other countries in the Middle East, Central and
South America, Asia and Africa through local distributors. In 1996 the Company
entered into licensing agreements covering the sale of SPERRY TOP-SIDER(R)
footwear in Australia and New Zealand.
4
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 16 stores are currently operating in Canada, Costa Rica,
El Salvador, Honduras, Mexico and Peru pursuant to such agreements. In addition,
the Company also distributes STRIDE RITE(R) brand products to several retailers
in the Caribbean, Latin America, Israel and South Korea.
The Company also distributes SPERRY TOP-SIDER(R), STRIDE RITE(R),
KEDS(R) and TOMMY HILFIGER(R) (beginning in Spring 1997) products in Canada
through its Canadian subsidiary.
International Sourcing
The Company purchases a significant portion of its product line overseas.
It maintains a staff of approximately 86 professional and technical personnel in
South Korea, Taiwan, Thailand and mainland China, to supervise a substantial
portion of its canvas and leather footwear production. 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 1996, approximately 12% of the Company's total
production requirements for footwear were fulfilled by the Thai facility. In
addition, the Company uses the services of buying agents to source merchandise.
Having closed several of its manufacturing facilities in the United States
and the Caribbean over the years, the Company has increased the volume of
leather footwear and leather footwear components for which it contracts with
independent offshore suppliers to approximately 95% in 1996. On February 19,
1997, the Company announced the closing of its two remaining domestic
manufacturing facilities in Missouri. The footwear produced at these facilities,
which are primarily STRIDE RITE(R) branded children's products, will be sourced
through independent suppliers in Mexico and the Far East. It is anticipated that
overseas resources will continue to be utilized in the future. The Company
purchases certain raw materials (particularly leather) from overseas resources.
By virtue of its international activities, the Company is subject to the
usual risks of doing business abroad, such as the risks of expropriation, acts
of war, political disturbances and similar events, including trade sanctions,
loss of most favored nation trading status and other trading restrictions.
Management believes that over a period of time, it could arrange adequate
alternative sources of supply for the products obtained from its present foreign
suppliers. However, disruption of such sources of supply could, particularly on
a short-term basis, have a material adverse impact on the Company's operations.
The Company's contracts to procure finished goods and other materials are
primarily denominated in United States dollars, thereby reducing short term
risks attendant to foreign currency fluctuations.
5
Retail Operations
As of November 29, 1996, the Company operated 129 Stride Rite Bootery
stores, 60 leased children's shoe departments in leading department stores, one
retail store for KEDS(R) brand products, four concept stores operated under the
name GREAT FEET(TM) and 19 manufacturers' outlet stores for STRIDE RITE(R),
KEDS(R) and SPERRY TOP-SIDER(R) brand products. The product and merchandising
formats of the Stride Rite Bootery stores are utilized in the 60 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 Bootery stores carry a significant portion of the lines
of the Company's STRIDE RITE(R), SPERRY TOP-SIDER(R) and STREET HOT(R)
children's footwear and a portion of the KEDS(R) children's product line. The
TOMMY HILFIGER(R) boys' line will be sold in these stores beginning in the Fall
1997 season. The Keds store carries a complete line of KEDS(R) products. The
GREAT FEET(TM) stores carry a full line of products for children aged 0 to 12,
including STRIDE RITE(R), KEDS(R), SPERRY TOP-SIDER(R) and STREET HOT(R) brand
products. Beginning in 1997, TOMMY HILFIGER(R) footwear products will also be
sold in the GREAT FEET(TM) stores. The Company's stores are located primarily in
larger regional shopping malls, clustered generally in the major marketing areas
of the United States. Most of the Company's manufacturers' outlet stores are
located in malls consisting only of outlet stores.
During the 1996 fiscal year, the Company opened four leased
departments, one manufacturers' outlet store and one GREAT FEET(TM) store. In
addition during fiscal 1996, the Company commenced operating four Stride Rite
booteries, one of which was purchased from an independent dealer. During 1996,
the Company also closed 51 retail stores in an effort to improve the
profitability of the Retail division. The Company currently plans to open
approximately ten retail stores in fiscal 1997. In 1997, the Company will
continue its efforts to close or sell underperforming retail locations and
expects to cease operations in 10 to 15 stores during the year. For more
information on the proposed closure of such stores, reference is hereby made to
the section of the Company's annual report to stockholders entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations".
Sales through the Company's retail operations accounted for approximately
20% of consolidated net sales for the fiscal year ended November 29, 1996.
Apparel Licensing Activities
The Company has a license agreement under which hosiery for men, women and
children is marketed under the KEDS(R) and PRO-KEDS(R) trademarks for
distribution in the United States and Canada. It has a license agreement under
which underwear, day wear and related sleepwear for women and girls is marketed
under the KEDS(R) and PRO-KEDS(R) trademarks for distribution in the United
States and Canada. It has license agreements under which apparel, using the
KEDS(R) and SPERRY TOP-SIDER(R) trademarks, is marketed in Japan. The Company
terminated, in the first quarter of fiscal 1996, a license agreement under which
handbags for women were marketed under the KEDS(R)
6
trademark in the United States. License royalties accounted for less than 1% of
the Company's sales in fiscal year 1996. The Company continually evaluates new
licensees, for both footwear and non-footwear products.
Raw Materials
The Company purchases its raw materials from a number of domestic and
foreign sources. See "International Sourcing". The Company does not believe
that any particular raw materials supplier is dominant.
Backlog
At November 29, 1996 and December 1, 1995, the Company had a backlog of
orders amounting to approximately $168,600,000 and $150,500,000, 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 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 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 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. In addition, the
domestic shoe industry has experienced substantial foreign competition, which is
expected to continue.
Management believes that 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.
7
Employees
As of November 29, 1996, the Company employed approximately 3,500 full-time
and part-time employees, approximately 370 of whom were represented by
collective bargaining units. Management believes that its relations with its
employees are good.
Environmental Matters
The Company has been named as a potentially responsible party under the
Resource Conservation and Recovery Act of 1976, as amended, with respect to a
hazardous waste site in Saco, Maine. The Company is investigating its potential
responsibility with respect to this site and believes that its liability will be
immaterial (not greater than $100,000) and that it will be accorded de minimus
status. There can be no assurance, however, that this will be the case. The
Company is vigorously defending itself with respect to this action. Except as
specified above, 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; Research and Development
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.
The Company depends principally upon its design, engineering,
manufacturing 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 25, 1997.
Executive Officers of the Registrant
Name Position with Company Age
Robert C. Siegel Chairman of the Board of Directors, 60
President and Chief Executive Officer
of the Company since joining the
Company in December 1993. Previously,
Mr. Siegel was President of the
Dockers division of Levi Strauss
& Co., an apparel manufacturer and
distributor from December 1986 to
December 1993, having been employed by
Levi Strauss & Co. since 1964.
8
Executive Officers of the Registrant
Name Position with Company Age
John R. Ranelli Executive Vice President of the Company 50
since joining the Company in September
1996. Prior to joining the Company,
Mr. Ranelli was the Chief Operating
Officer of Deckers Outdoor Corporation
from January 1995 to September 1995,
Executive Vice President and Chief
Financial Officer of TLC Beatrice
from June 1994 to December 1994, and General
Manager - International and Europe of The
Timberland Company from May 1991 to May 1994.
Joanna M. Jacobson President, The Keds Corporation since 36
joining the Company in April 1996.
Prior to joining the Company, Ms. Jacobson
was a partner of Core Strategy Group from
January 1995 to April 1996 and prior to
that was Senior Vice President of Marketing
of Converse Inc. from November 1991 to
September 1994. Ms. Jacobson was previously
employed by the Company as Vice President of
Marketing of Sperry Top-Sider, Inc. from
October 1990 to June 1991.
Diane M. Sullivan President, Wholesale division, Stride Rite 41
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 Co., a division
of Reebok Ltd., a footwear company from
May 1993 to April 1995; the President of
The Comfort Food Co., a specialty foods
firm from December 1991 to May 1993;
and the Vice President, Marketing and
Operations of Bright Horizons Children's
Centers, Inc., a child care provider,
from April 1989 to December 1991. Ms.
Sullivan was previously employed by the
Company as Vice President, Marketing of
Stride Rite Children's Group, Inc. from
October 1985 to April 1989.
Robert B. Moore, Jr. President, Sperry Top-Sider, Inc. since 46
joining the Company in October 1992.
From October 1987 until he joined the
Company, Mr. Moore was President of
Bostonian Shoe Co., a division of
C & J Clark, Inc.
9
Executive Officers of the Registrant
Name Position with Company Age
Howard B. Collins, Jr. President, Stride Rite Sourcing 50
International, Inc., since joining the
Company in September 1996. Prior to
joining the Company, Mr. Collins was
Vice President of Sourcing for The
Timberland Company from July 1991 to
September 1996.
Dennis Garro President, Retail division, Stride 49
Rite Children's Group, Inc. since joining
the Company in April 1994. Prior to
joining the Company, Mr. Garro served as
Senior Vice President and General
Merchandise Manager for Mervyns division
of Dayton Hudson Corp. from May 1992 to
September 1993 and as Senior Vice
President and General Merchandise Manager
DFS Group, Ltd. from November 1989 to
April 1992.
C. Madison Riley III Vice President and General Manager, 38
Stride Rite International Corp. since
January 1996. Previous to this position,
Mr. Riley served as Vice President of
Stride Rite International Corp. from
November 1995 to January 1996, as Vice
President and General Manager, Boston
Footwear Group, Inc. from November 1994
to November 1995, as Vice President,
Strategic Planning of the Company from
January 1994 to November 1994, as Vice
President, Strategic Planning of The Keds
Corporation from September 1993 to January
1994 and as Director, Strategic Planning of
the Company from June 1993 to September 1993.
Prior to joining the Company, Mr. Riley
served as a partner and regional director
of Kurt Salmon Associates, a consulting firm,
from July 1985 to June 1993.
John M. Kelliher Vice President, Finance, Treasurer and 45
Controller of the Company since
February 1993. Mr. Kelliher has been
Corporate Controller of the Company
since March 1982, having joined the
Company in June 1981.
10
Executive Officers of the Registrant
Name Position with Company Age
Joseph T. Barrell Vice President of Global Logistics since 45
joining the Company in January 1995.
Prior to joining the Company, Mr. Barrell
Vice President, Distribution of The
Timberland Company, a footwear company
from June 1991 to January 1995 and the
Director, Logistics of Thom McAn Shoe Co.,
a footwear retailer, from January 1976
to June 1991.
Gerrald B. Silverman Senior Vice President of Sales, The Keds 38
Corporation since January 1996, and prior
to that President of Stride Rite
International Corp. since joining the
Company in April 1994. Prior to joining
the Company, Mr. Silverman served as the
national sales manager of the Dockers
division of Levi Strauss & Co. from
October 1992 to April 1994, as West Coast
regional manager of the Dockers division
of Levi Strauss & Co. from April 1991 to
October 1992, and as East Coast district
manager of the Dockers division of Levi
Strauss & Co. from May 1990 to April 1991.
Lorie M. Karnath Vice President Licensing, Strategic 37
Planning, Mergers and Acquisitions, and
Corporate Communications since joining
the Company in March 1996. Prior to
joining the Company, Ms. Karnath was a
consultant with E.M.C. Group from 1991
1996, and an associate with Kidder,
Peabody & Co., Inc. from 1987 to 1991.
Karen K. Crider General Counsel of the Company since 51
joining the Company in October 1992,
Clerk of the Company since November 1992
and Secretary of the Company since
April 1994. Ms. Crider was U.S. Counsel
to British Airways, plc, from May 1988
to September 1992.
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.
11
Item 2. Properties
During fiscal 1996, the Company manufactured footwear and footwear
components at two manufacturing and warehouse facilities it owns in Missouri,
having closed one leased facility in Fulton, Missouri during February 1996. The
Missouri facilities contain approximately 62,400 square feet of manufacturing
and approximately 31,600 square feet of warehouse space. On February 19, 1997,
the Company announced the closure of the two remaining manufacturing facilities
in Missouri. Management expects that manufacturing activities at these
facilities will cease during the third quarter of fiscal 1997. The Company also
manufactures footwear and footwear components at a 47,000 square foot facility
in the Dominican Republic. In addition, the Company owns a facility with
approximately 20,000 square feet of space in Woburn, Massachusetts.
Present manufacturing space totals approximately 129,000 square feet.
Approximately 82,000 square feet is owned by the Company and the balance is
leased. Management believes that all leases are at commercially reasonable rates
and terms.
The Company owns an automated distribution center located in Louisville,
Kentucky providing 520,000 square feet of space and a warehouse in Boston,
Massachusetts, which provides 565,000 square feet of space. In January 1997, the
Company entered into a lease for a 263,000 square foot distribution facility in
Huntington, Indiana. The move of the Stride Rite children's business, the last
division remaining in the Company's Boston, Massachusetts facility, is planned
for the fourth quarter of fiscal 1997 following the peak back-to-school shipping
season. Reference is hereby made to the section of the Registrant's annual
report to stockholders entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for additional information
concerning these facilities. The Company's Canadian subsidiary leases
approximately 28,000 square feet for 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, leased office building. The Company leases 5,000 square feet of space
for sales offices and showrooms in New York City, New York; Dallas, Texas and
St. Louis, Missouri and leases 15,000 square feet of space in Richmond, Indiana
for its order processing and telemarketing functions. In addition, the Company
leases approximately 1,700 square feet of office space in Paris, France for its
Stride Rite Europe distribution subsidiary and 22,300 square feet of space for
its liaison offices in Korea, mainland China, Taiwan and Thailand.
At November 29, 1996, the Company operated 129 retail stores throughout
the country on leased premises which, in the aggregate, covered approximately
205,000 square feet of space. The Company also operates 60 children's footwear
departments in certain divisions of Federated Department Stores. In addition,
the Company is the lessee of 32 retail locations totaling approximately 37,000
square feet which are subleased to independent Stride Rite dealers and other
tenants.
12
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, except as stated above, all properties and facilities
of the Company are suitable, adequate and fit for their intended purposes.
Item 3. Legal Proceedings
On September 27, 1993, the Company announced that The Keds Corporation, a
wholly owned subsidiary of the Company, entered into settlement agreements with
the Attorneys General of all 50 states, the Corporation Counsel of the District
of Columbia and the Federal Trade Commission, to resolve various investigations
into Keds' adoption and enforcement of its suggested retail pricing policy. In
entering into these settlements, Keds, without admitting any liability, fully
settled suits brought by the Attorneys General in the United States District
Court for the Southern District of New York, in their parens patriae capacity,
on behalf of all consumers who purchased certain KEDS(R) shoes during the
relevant period. The settlements required Keds to pay $5.7 million to several
charities nationwide, as well as $1.5 million to provide nationwide notice to
potential class members and other administrative expenses. Keds has agreed to
the imposition of certain injunctive relief for a period of five years ending
August 31, 1998. Following preliminary Court approval on September 27, 1993,
Keds paid the administrative costs and part of the settlement amount. Following
final court approval on March 28, 1994, Keds made the remaining payments.
Reference is hereby made to the discussion under Business Environmental
Matters set forth in Item 1 of this Annual Report on Form 10-K.
The Company is a party to various litigations arising in the normal course of
business. Having considered facts which have been ascertained and opinions of
counsel handling these matters, management 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 1996
Annual Report to Stockholders on pages 1, 26 and 33 and is incorporated herein
by reference.
Item 6. Selected Financial Data
The information required by this item is included in the Registrant's 1996
Annual Report to Stockholders on pages 1, 13 and 26 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 1996
Annual Report to Stockholders on pages 2 through 8 and is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
The information required by this item is included in the Registrant's 1996
Annual Report to Stockholders on pages 9 through 26 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", "Meetings of the Board of Directors and Committees" and "Compliance
with Section 16(a) of the Securities and Exchange Act of 1934" in the
Registrant's definitive proxy statement relating to its 1997 Annual Meeting of
Stockholders, which will be filed with the Commission within 120 days after the
close of the Registrant's fiscal year ended November 29, 1996, 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 1997 Annual Meeting of Stockholders
under the caption "Executive Compensation" and continuing through the caption
"Certain Transactions with Management" (excluding the information set forth
under the caption "Compensation Committee Report") which will be filed with the
Commission within 120 days after the close of the Registrant's fiscal year ended
November 29, 1996, 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 1997 Annual Meeting of Stockholders, which will be filed with the Commission
within 120 days after the close of the Registrant's fiscal year ended November
29, 1996, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Reference is made to the information set forth under the caption "Certain
Transactions with Management" in the Registrant's definitive proxy statement
relating to its 1997 Annual Meeting of Stockholders, which will be filed with
the Commission within 120 days after the close of the Registrant's fiscal year
ended November 29, 1996, which information is incorporated herein by reference.
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 November 29, 1996
and December 1, 1995 *
Consolidated Statements of Income for the fiscal years
ended November 29, 1996, December 1, 1995 and
December 2, 1994 *
Consolidated Statements of Cash Flows for the fiscal
years ended November 29, 1996, December 1, 1995 and
December 2, 1994 *
Consolidated Statements of Changes in Stockholders'
Equity for the fiscal years ended November 29, 1996,
December 1, 1995 and December 2, 1994 *
Notes to Consolidated Financial Statements *
Report of Independent Accountants *
Report of Independent Accountants on Financial
Statement Schedules F-1
Financial Statement Schedule for the fiscal years ended November 29, 1996,
December 1, 1995 and December 2, 1994:
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 -- Such document was
filed as Exhibit 3(i) to the Registrant's Form 10-K for the fiscal
year ended November 28, 1986 and is incorporated herein by
reference.
(ii) Articles of Amendment dated April 7, 1987 to Restated Articles of
Organization -- Such document was filed as Exhibit 3 to
Registrant's Form 10-Q for the fiscal period ended February 27,
1987 and is incorporated herein by reference.
(iii) Articles of Amendment dated December 16, 1987 to Restated Articles
of Organization of the Registrant -- Such document was filed as
Exhibit 3(iii) to Registrant's Form 10-K for the fiscal year ended
November 27, 1987 and is incorporated herein by reference.
(iv) Articles of Amendment dated December 3, 1991 to the Restated
Articles of Organization of the Registrant -- Such document was
filed as Exhibit 3(iv) to Registrant's Form 10-K for the fiscal
year ended November 29, 1991 and is incorporated herein by
reference.
(v) Certificate of Vote of Directors establishing a series of a Class
of Stock dated July 2, 1987 -- Such document was filed as Exhibit A
to Exhibit 1 to Registrant's Form 8-K dated July 20, 1987 and is
incorporated herein by reference.
(vi) By-laws of the Registrant, as amended -- Such 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 Exhibit 3(i), (ii), (iii) and (iv)
referred to above, which are expressly incorporated herein by
reference.
(ii) Rights Agreement dated July 2, 1987, as amended on May 1, 1989,
between the Registrant and The First National Bank of Boston --
Such document was filed as an exhibit to Registrant's Form 8 dated
May 4, 1989 and its Form 8-K dated June 27, 1989 and is
incorporated herein by reference.
(iii) Note Purchase Agreement dated September 23, 1977 -- Such document
was filed as Exhibit 4(ii) to the Registrant's Form 10-K for the
fiscal year ended November 28, 1986 and is incorporated herein by
reference.
17
Exhibit No. Description of Exhibit
10 (i)* Supplemental Retirement Income Agreement dated as of January
29, 1988 between the Registrant and Arnold Hiatt -- Such document
was filed as Exhibit 10 (i) to Registrant's Form 10-K for the
fiscal year ended November 27, 1987 and is incorporated herein by
reference.
(ii)* 1975 Executive Incentive Stock Purchase Plan of the Registrant --
Such 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.
(iii)* Employee Stock Purchase Plan of the Registrant -- Such document was
filed as Appendix A to the Registrant's Prospectus relating to such
plan, dated October 25, 1996, 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.
(iv)* 1995 Long-Term Growth Incentive Plan of the Registrant -- Such
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.
(v)* Annual Executive Incentive Compensation Plan (dated as of December
4, 1994) -- Such document was filed as Exhibit 10(vii) to the
Registrant's Form 10-K for the year ended December 2, 1994 and is
incorporated herein by reference.
(vi)* Form of executive termination agreement, as amended and restated on
February 17, 1995. -- Such document was filed as Exhibit 10(viii)
to the Registrant's Form 10-K for the year ended December 2, 1994
and is incorporated herein by reference. All officers with whom the
Registrant entered into such agreement and which are currently in
effect and have not been terminated and the date of each such
agreement are listed on Addendum 10(vi) attached hereto.
*Denotes a management contract or compensatory plan or arrangement.
18
Exhibit No. Description of Exhibit
(vii) 1994 Non-Employee Director Stock Ownership Plan -- Such Plan was
filed as Appendix A to the Registrant's Proxy Statement for its
1994 annual meeting of stockholders, portions of which were filed
with the Commission on March 1, 1994 and is incorporated herein by
reference.
(viii)* Form of severance agreement dated February 22, 1995. All executive
officers with whom the Registrant entered into such an agreement
are listed on Addendum 10(viii) attached hereto.
(ix)* Employment Agreement between the Registrant and Robert C.
Siegel dated as of December 11, 1996.
11 Calculation of Net Income Per Share
13 Selected Portions of Registrant's 1996 Annual Report to
Stockholders
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedules
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the fourth
quarter of fiscal 1996.
*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/ Robert C. Siegel
- ----------------------------------- ---------------------------------
By: John M. Kelliher, Vice By: Robert C. Siegel, Chairman
President, Finance of the Board, President and
Treasurer and Controller Chief Executive Officer
(Principal Accounting Officer)
Date: February 7, 1997 Date: February 7, 1997
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/ Robert C. Siegel /s/ Donald R. Gant
- ----------------------------------- ---------------------------------
Robert C. Siegel, Chairman of the Donald R. Gant, Director
Board of Directors, President and
Chief Executive Officer
Date: February 7, 1997 Date: February 7, 1997
/s/ Margaret A. McKenna /s/ Frank R. Mori
- ----------------------------------- ---------------------------------
Margaret A. McKenna, Director Frank R. Mori, Director
Date: February 7, 1997 Date: February 7, 1997
/s/ Robert L. Seelert /s/ Myles J. Slosberg
- ----------------------------------- ---------------------------------
Robert L. Seelert, Director Myles J. Slosberg, Director
Date: February 7, 1997 Date: February 7, 1997
/s/ W. Paul Tippett, Jr. /s/ Jeanette S. Wagner
- ----------------------------------- ---------------------------------
W. Paul Tippett, Jr., Director Jeanette S. Wagner, Director
Date: February 7, 1997 Date: February 7, 1997
20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors
of The Stride Rite Corporation:
Our report on the consolidated financial statements of The Stride Rite
Corporation has been incorporated by reference in this Annual Report on Form
10-K from the 1996 Annual Report to Stockholders of The Stride Rite Corporation
and appears on page 28 therein. In connection with our audits of such financial
statements, we have also audited the related financial statement schedules
listed in the index on page 16 of this Annual Report on Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 7, 1997
F-1
THE STRIDE RITE CORPORATION
Schedule II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Additions
Balance at Charged to Balance at
Beginning Costs and End of
Description Period Expenses Deductions Period
----------- ---------- ---------- --------
Fiscal year ended December 2, 1994: Deducted from assets:
Allowance for doubt-
ful accounts $3,845 $3,117 $1,101(a) $5,861
Allowance for sales
discounts 1,757 2,579 1,566(b) 2,770
======== ======== ======== ========
$5,602 $5,696 $2,667 $8,631
======== ======== ======== ========
Fiscal year ended December 1, 1995: Deducted from assets:
Allowance for doubt-
ful accounts 5,861 1,899 3,418(a) 4,342
Allowance for sales
discounts 2,770 2,428 2,401(b) 2,797
======== ======== ======== ========
$8,631 $4,327 $5,819 $7,139
======== ======== ======== ========
Fiscal year ended November 29, 1996: Deducted from assets:
Allowance for doubt-
ful accounts 4,342 1,214 2,108(a) 3,448
Allowance for sales
discounts 2,797 2,667 1,740(b) 3,724
======== ======== ======== ========
$7,139 $3,881 $3,848 $7,172
======== ======== ======== ========
(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 1, 1995
Index to Exhibits
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
10 (vi)* Form of executive termination agreement, as 24
amended and restated on February 17, 1995.
Such document was filed as Exhibit 10(viii)
to the Registrant's Form 10-K for the fiscal
year ended December 2, 1994 and is incorporated
herein by reference. All officers with whom
the Registrant entered into such agreement
and which are currently in effect and have
not been terminated and the date of each such
agreement are listed on Addendum 10(vi)
attached hereto.
(viii)* Form of severance agreement dated February 22, 25
1995. All executive officers with whom the
Registrant entered into such an agreement are
listed on Addendum 10(viii) attached hereto.
(ix)* Employment Agreement between the Registrant 26
and Robert C. Siegel, dated as of December 11,
1996
11 Calculation of Net Income Per Share 34
13 Selected portions of Registrant's 1996
Annual Report to Stockholders 35
21 Subsidiaries of the Registrant 68
23 Consent of Independent Accountants 69
27 Financial Data Schedules 70
*Denotes a management contract or compensatory plan or arrangement.