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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 28, 1997
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 Number)
incorporation)
191 Spring Street, P.O. Box 9191, Lexington, Massachusetts 02173
(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 17, 1998, was $548,152,705
based on the closing price on that date on the New York Stock Exchange. As of
February 17, 1998, 47,213,742 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 November 28, 1997
Part I and Part II
Portions of the Registrant's Proxy Statement for 1998
Annual Meeting of Stockholders
Part III
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. A significant portion of its products
are manufactured abroad by independent manufacturers to the Company's
specifications. 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) 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.
In Spring 1997, the Company introduced dress casual, sport casual,
dress and athletic footwear for men using the TOMMY HILFIGER(R) brand name under
a license agreement with Tommy Hilfiger Licensing, Inc. A boys' product line was
also launched in 1997 in time for back-to-school selling.
During fiscal 1997, the Company solicited and won three new licensed
footwear opportunities, LEVI'S(R), NINE WEST KIDS(TM) and the extension of the
TOMMY HILFIGER(R) brand to women's and girls' footwear. The Company intends to
introduce product lines for these three new opportunities in the second half of
fiscal 1998.
Sales and Distribution
During the 1997 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, a Keds concept store, Great Feet(R) concept
stores, and children's footwear departments in department stores. The Company's
largest single customer accounted for less than 6% of consolidated net sales for
the fiscal year ended November 28, 1997.
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 31 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
closed the Boston facility in December of 1997 after transferring the
distribution function for the Stride Rite brand to a 263,000 square foot
facility which has been leased in Huntington, Indiana. The Boston facility and
adjoining real estate are presently being offered for sale by the Company.
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 1997, 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 the Company's French
subsidiary which was closed in the first quarter of fiscal 1998 after licensing
the distribution rights to a third party. KEDS(R) brand products were
distributed through third parties in Australia, Brazil, Chile, Cyprus, Denmark,
Egypt, Greece, Hong Kong, Indonesia, Israel, Japan, New Zealand, the
Philippines, 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. During 1997 the Company entered
into new licensing agreements covering the sale of KEDS(R) footwear in the
Antilles Islands, Aruba, Bahamas, Belize, Bonaire, Cayman Islands, Costa Rica,
Curacao, the Dominican Republic, El Salvador, Guatemala, Haiti, Italy, Honduras,
Jamaica, Nicaragua, Panama, Tobago, Trinidad and Venezuela.
In fiscal 1997, in addition to the United States, the Company sold
SPERRY TOP-SIDER(R) products in Belgium, France, Germany, Ireland, the
Netherlands and the United Kingdom through its French subsidiary which was
closed in the first quarter of fiscal 1998 after licensing the distribution
rights to a third party. The Company distributed its SPERRY TOP-SIDER(R) brand
products in Australia, Greece, Indonesia, Italy, Japan, New Zealand, Portugal,
Singapore and Sweden, as well as other countries in the Middle East, Central and
South America, Asia and Africa through local distributors. In 1997 the Company
entered into licensing agreements covering the sale of SPERRY TOP-SIDER(R)
footwear in Argentina, Italy, Paraguay and Uruguay.
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) products in Canada through its Canadian
subsidiary.
International Sourcing
The Company purchases substantially all of its product line overseas.
It maintains a staff of approximately 87 professional and technical personnel in
Mexico, 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 1997, approximately 2% 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 for which it contracts with independent offshore suppliers to
approximately 96% in 1997. In February 1997, the Company announced the closing
of its two remaining domestic manufacturing facilities in Missouri. The
manufacturing activities at these facilities ceased during the third quarter of
fiscal 1997 (see "Properties"). The footwear produced at these facilities, which
were primarily STRIDE RITE(R) branded children's products, are being sourced
through independent suppliers in Mexico and the Far East. In December 1997, the
Company closed its manufacturing facility in the Dominican Republic which
produced a portion of its Sperry Top-Sider product line. 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.
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. During
1997, the currencies of certain countries in the Far East weakened as compared
to the U.S. dollar. The Company does not expect these conditions to have a
significant effect, favorable or unfavorable, on the future costs of its
production.
Retail Operations
As of November 28, 1997, the Company operated 119 Stride Rite Bootery
stores, 58 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(R) and 19 manufacturers' outlet stores for STRIDE RITE(R),
KEDS(R), SPERRY TOP-SIDER(R) and TOMMY HILFIGER(R) brand products. The product
and merchandising formats of the Stride Rite Bootery stores are utilized in the
58 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 was sold in these stores beginning in the Fall 1997
season. The Keds store carries a complete line of KEDS(R) products. The GREAT
FEET(R) stores carry a full line of products for children aged 6 months to 12
years, including STRIDE RITE(R), KEDS(R), SPERRY TOP-SIDER(R) and STREET HOT(R)
brand products. Beginning in July 1997, TOMMY HILFIGER(R) boys' footwear
products were also sold in the GREAT FEET(R) 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 1997 fiscal year, the Company opened one leased department
and two manufacturers' outlet stores. In addition during fiscal 1997, the
Company commenced operating one Stride Rite bootery, which was purchased from an
independent dealer. During 1997, the Company also closed 16 retail stores in an
effort to improve the profitability of the Retail division. The Company
currently plans to open approximately five to ten retail stores in fiscal 1998.
In fiscal 1998, 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.
Sales through the Company's retail operations accounted for
approximately 17% of consolidated net sales for the fiscal year ended November
28, 1997.
Apparel Licensing Activities
License royalties accounted for approximately 1% of the Company's sales
in fiscal year 1997. 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. Hosiery for children is also
marketed under the STRIDE RITE(R) trademark in the United States, the Benelux
Region, Canada, England, France, Germany, Israel, Italy, Mexico, Portugal and
Spain under another license agreement. The Company 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 and a license agreement under which infant's, children's and
ladies' tights and pantyhose are marketed under the KEDS(R) trademark for
distribution in the United States, Canada, Europe and Latin America. The Company
has a license agreement under which girls' and boys' playwear, activewear and
windwear are marketed under the KEDS(R) trademark for distribution in the United
States, Canada, Europe and Latin America. The Company has a license agreement
under which sunglasses and optical frames are marketed using the SPERRY
TOP-SIDER(R) trademark for distribution in the United States, Canada and Mexico
and a license agreement under which outerwear for men and women are marketed
under the SPERRY TOP-SIDER(R) trademark for distribution in the United States
and Canada. It has license agreements under which apparel, using the KEDS(R),
PRO-KEDS(R) and SPERRY TOP-SIDER(R) trademarks, is marketed in Japan. The
Company continually evaluates new licensees, for both footwear and non-footwear
products.
Backlog
At November 28, 1997 and November 29, 1996, the Company had a backlog
of orders amounting to approximately $161,100,000 and $168,600,000,
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 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. 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.
Employees
As of November 28, 1997, the Company employed approximately 2,900
full-time and part-time employees, approximately 82 of whom were represented by
collective bargaining units. 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; Research and Development
The Company has an existing trademark license agreement with Tommy
Hilfiger Licensing, Inc. pursuant to which it manufactures and sells footwear to
men and boys. In August 1997 the Company entered into a license to design,
manufacture and sell TOMMY HILFIGER(R) branded footwear for women and girls with
the product launch planned for Fall, 1998. In July 1997, the Company also
entered into a trademark license agreement with Nine West Group Inc. to design,
manufacture and sell NINE WEST KIDS(TM) branded children's footwear with the
product launch planned for Fall, 1998. In April 1997 the Company entered into a
trademark license agreement with Levi Strauss & Co. to design, manufacture and
sell LEVI'S(R) branded men's women's and children's footwear. The introduction
of the men's and boys' LEVI'S(R) product line is planned for Fall, 1998. The
Company expects to introduce LEVI'S(R) footwear for women and girls in fiscal
1999.
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 17, 1998.
Executive Officers of the Registrant
Name Position with Company Age
Robert C. Siegel Chairman of the Board of Directors, President 61
and Chief xecutive 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.
John R. Ranelli Executive Vice President of the Company since 51
joining the Company in September 1996. Prior
to joining the Company, Mr. Ranelli was the
Chief Operating Officer of Deckers Outdoor
Corporation, a footwear company, from January
1995 to September 1995, Executive Vice
President and Chief Financial Officer of TLC
Beatrice, a marketer of food products, from
June 1994 to December 1994, and General
Manager - International and Europe of The
Timberland Company, a footwear company, from
May 1991 to May 1994.
Diane M. Sullivan Group President, Licensed Brands. Previous 42
to this position, Ms. Sullivan was 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
Co., a division of Reebok International 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.
Executive Officers of the Registrant
Name Position with Company Age
Joanna M. Jacobson President, The Keds Corporation since 37
joining the Company in April 1996. Prior
to joining the Company, Ms. Jacobson was a
partner of Core Strategy Group, a consulting
firm, from January 1995 to April 1996 and
prior to that was Senior Vice President of
Marketing of Converse Inc., a footwear
company, 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.
Howard B. Collins, Jr. President, Stride Rite Sourcing International, 51
Inc., since joining the Company in September
1996. Prior to joining the Company, Mr.
Collins was Vice President of Sourcing for
The Timberland Company, a footwear company,
from July 1991 to September 1996.
Robert B. Moore, Jr. President, Sperry Top-Sider, Inc. since 47
joining the Company in October 1992 and
President of LS Footwear, Inc. since the
subsidiary's incorporation in May 1997.
From October 1987 until he joined the
Company, Mr. Moore was President of
Bostonian Shoe Co., a division of
C & J Clark, Inc., a footwear company.
Dennis Garro President, Stride Rite International Corp. 50
Previous to this position, Mr. Garro was
the President, Retail division, Stride
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., a department
store retailer, from May 1992 to
September 1993 and as Senior Vice President
and General Merchandise Manager DFS
Group, Ltd., a specialty store retailer,
from November 1989 to April 1992.
Executive Officers of the Registrant
Name Position with Company Age
C. Madison Riley III President, Stride Rite Children's Group, 39
Inc. since October 1997. Previous to
this position, Mr. Riley served as President,
Stride Rite International Corp. from May
1997 to October 1997, and Vice President
and General Manager, Stride Rite
International Corp., from January 1996
to May, 1997. 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., a subsidiary
of the Company, 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.
Patrick J. Hogan President, Tommy Hilfiger(R) Footwear, Inc., 39
since May 1997. Previous to this position,
Mr. Hogan was Vice President and General
Manager of Tommy Hilfiger Footwear, Inc.,
from August 1995 to May 1997. Prior to
joining the Company, Mr. Hogan was employed
as Director of National Accounts from 1986
to August 1995 at The Rockport Co., a
division of Reebok International Ltd., a
footwear company.
John M. Kelliher Chief Financial Officer of the Company 46
since February 1998, Vice President,
Finance and Treasurer of the Company
since February 1993. Mr. Kelliher had
been Corporate Controller of the Company
from March 1982 to January 1998, having
joined the Company in June 1981.
Executive Officers of the Registrant
Name Position with Company Age
Joseph T. Barrell Senior Vice President, Operations since 46
April 1997. Previous to this position,
Mr. Barrell served as Vice President
of Global Logistics since joining the
Company in January 1995. Prior to joining
the Company, Mr. Barrell was 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, Sales, The Keds 37
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.,
an apparel manufacturer and distributor,
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 Planning, 38
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, a consulting firm, from 1991 to 1996,
and an associate with Kidder, Peabody & Co.,
Inc., an investment banking firm, from 1987 to 1991.
Karen K. Crider General Counsel of the Company since joining 52
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, an
international airline, from May 1988 to
September 1992.
Janet M. DePiero Vice President of Human Resources since 36
March 1997. Previously, Ms. DePiero was
Director of Compensation and Benefits from
October 1995 to February 1997 and Manager
of Compensation and Benefits from December
1991 to September 1995.
Name Position with Company Age
Frank A. Caruso Vice President and Corporate Controller 44
since January 1998. Mr. Caruso was
previously Vice President and Controller of
Parametric Technology Corporation, a software
company, from June 1997 to December 1997
and Senior Vice President, Finance and
Operations, of The Keds Corporation from
June 1990 to June 1997.
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.
Item 2. Properties
During the first half of fiscal 1997, the Company manufactured
children's footwear at two manufacturing facilities it owns in Missouri, having
closed one leased facility in Fulton, Missouri during February 1996. On February
19, 1997, the Company announced the closure of the two remaining manufacturing
facilities in Missouri. The manufacturing activities at these facilities ceased
during the third quarter of fiscal 1997. The Missouri facilities contained
approximately 62,400 square feet of manufacturing and approximately 31,600
square feet of warehouse space. The Company also manufactured footwear at a
47,000 square foot facility in the Dominican Republic. The manufacturing
activities at that facility ceased during December 1997.
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 provided 565,000 square feet of space and which
ceased operation in December 1997. 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 to the Indiana facility, the
last division remaining in the Company's Boston, Massachusetts facility, took
place during the fourth quarter of fiscal 1997 following the peak back-to-school
shipping season. The Boston facility and the adjoining real estate are presently
being offered for sale by the Company. In addition, the Company owns a facility
with approximately 20,000 square feet of space in Woburn, Massachusetts. 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 leases an aggregate of 6,000 square feet of
space for sales offices and showrooms in New York City, New York; Chicago,
Illinois; Dallas, Texas and St. Louis, Missouri and leases 15,000 square feet of
space in Richmond, Indiana for its customer service, order processing and
telemarketing functions. In addition during 1997, the Company leased 22,300
square feet of space for its liaison offices in Korea, mainland China, Taiwan
and Thailand.
At November 28, 1997, the Company operated 143 retail stores throughout
the country on leased premises which, in the aggregate, covered approximately
207,000 square feet of space. The Company also operates 58 children's footwear
departments in certain divisions of Federated Department Stores. In addition,
the Company is the lessee of 31 retail locations totaling approximately 35,000
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
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.
The Company is a party to various other litigations arising in the
normal course of business. Having considered available facts and opinions of
counsel handling these matters, 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
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 1997
Annual Report to Stockholders on pages 1, 23 and 30 and is incorporated
herein by reference.
Item 6. Selected Financial Data
The information required by this item is included in the Registrant's 1997
Annual Report to Stockholders on page 12 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 1997
Annual Report to Stockholders on pages 13 through 17 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 1997
Annual Report to Stockholders on pages 18 through 28 and is incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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 1998 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 28, 1997, 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 1998 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 28, 1997, 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 1998 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 28, 1997, 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 1998 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 28, 1997, which information is incorporated herein by
reference.
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 28, 1997 and
November 29, 1996 *
Consolidated Statements of Income for the fiscal years ended November 28, 1997,
November 29, 1996 and December 1, 1995 *
Consolidated Statements of Cash Flows for the fiscal years ended November 28,
1997, November 29,
1996 and December 1, 1995 *
Consolidated Statements of Changes in Stockholders'
Equity for the fiscal years ended November 28, 1997,
November 29, 1996 and December 1, 1995 *
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 28, 1997,
November 29, 1996 and December 1, 1995:
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 15 of this
Annual Report on Form 10-K.
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 -- 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 June 18, 1997 between the Registrant
and BankBoston, N.A. - Such document was filed as Exhibit 1 to
the Registrant's Form 8-A dated July 1, 1997 and is
incorporated herein by reference.
Exhibit No. Description of Exhibit
10 (i)* 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.
(ii)* 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.
(iii)* Form of executive termination agreement dated as of February
12, 1998. -- 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(iii) attached hereto.
(iv)* Form of executive termination agreement dated as of February
12, 1998. 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(iv) attached hereto.
(v)* 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.
*Denotes a management contract or compensatory plan or arrangement.
Exhibit No. Description of Exhibit
10 (vi)* 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(vi)
attached hereto.
(vii)* Employment Agreement between the Registrant and Robert C.
Siegel dated November 4, 1997.
(viii)* Annual Incentive Compensation Plan amended and restated
as of December 11, 1997.
(ix)* 1998 Long-Term Growth Incentive Plan of the Registrant.
(x)* 1998 Non-Employee Director Stock Ownership Plan of the
Registrant.
(xi)* Senior Executive Annual Incentive Compensation Plan of the
Registrant.
11 Calculation of Net Income Per Share
13 Portions of Registrant's 1997 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
There were no reports filed on Form 8-K during the
fourth quarter of fiscal 1997.
*Denotes a management contract or compensatory plan or arrangement.
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 of
President, Finance the Board, President and
Treasurer Chief Executive Officer
(Principal Accounting Officer)
Date: February 12, 1998 Date: February 12, 1998
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 Donald R. Gant, Director
the Board of Directors,
President and Chief Executive
Officer Date: February 12, 1998
Date: February 12, 1998
/s/ Margaret A. McKenna /s/ Frank R. Mori
Margaret A. McKenna, Director Frank R. Mori, Director
Date: February 12, 1998 Date: February 12, 1998
/s/ Robert L. Seelert /s/ Myles J. Slosberg
Robert L. Seelert, Director Myles J. Slosberg, Director
Date: February 12, 1998 Date: February 12, 1998
/s/ W. Paul Tippett, Jr.
W. Paul Tippett, Jr., Director
Date: February 12, 1998
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 1997 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 schedule listed
in the index on page 16 of this Annual Report on Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents 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 8, 1998
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 1, 1995:
Deducted from assets:
Allowance for doubtful
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 doubtful
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
========= ========== ========= =========
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
========= ========== ========= ========
(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 NOVEMBER 28, 1997
Index to Exhibits
Exhibit No. Description of Exhibit Page No.
3 (v) Certificate of Vote of Directors establishing 25
a series of a Class of Stock dated as of
June 18, 1997.
10 (iii)* Form of executive termination agreement, 33
dated as of February 12, 1998. 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(iii) attached hereto.
(iv)* Form of executive termination agreement, 50
dated as of February 12, 1998. 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(iv) attached hereto.
(vi)* Form of severance agreement dated February 22, 67
1995. All executive officers with whom the
Registrant entered into such an agreement
are listed on Addendum 10(vi)
attached hereto.
(vii)* Employment Agreement between the Registrant 68
and Robert C. Siegel dated November 4, 1997.
(viii)* Annual Incentive Compensation Plan amended 76
and restated as of December 11, 1997.
(ix)* 1998 Long-Term Growth Incentive Plan 83
of the Registrant.
(x)* 1998 Non-Employee Director Stock Ownership Plan. 92
(xi)* Senior Executive Annual Incentive Compensation 98
Plan.
11 Calculation of Net Income Per Share 104
13 Portions of Registrant's 1997 Annual Report to 105
Stockholders incorporated by reference into
this Annual Report on Form 10-K
21 Subsidiaries of the Registrant 138
23 Consent of Independent Accountants 139
27 Financial Data Schedules 140
*Denotes a management contract or compensatory plan or arrangement.