Reebok International Ltd. (NYSE:RBK) today reported
improved earnings for the second quarter ended June 30, 2003. Net income was $26 million, or
$.41 per diluted share, as compared to net income of $25 million, or $.39 per diluted share in the
second quarter of 2002, an earnings per share increase of 5%. The second quarter 2002 results
contain a one-time earnings benefit of $.07 per share from the favorable resolution of certain
outstanding prior years' international Customs issues. Excluding the 2002 effect of this one-time
favorable settlement, 2003 earnings per share increased 28%.
Net sales for the 2003 second quarter were $803 million, an increase of 12% from 2002
sales of $717 million. Foreign currency exchange rate fluctuations favorably impacted sales
comparisons. On a constant dollar basis, second quarter sales increased approximately 7% over the
prior year's second quarter sales. For the Reebok Brand, worldwide sales in the 2003 second
quarter increased 15% to $671 million.
In the U.S., sales for the Reebok Brand increased 14% in the second quarter of 2003 as
compared with 2002's second quarter. Reebok's U.S. footwear sales in the second quarter of
2003 were $272 million, an increase of 9% when compared with 2002's second quarter U.S.
footwear sales of $249 million. The Company's international sales of Reebok branded products
amounted to $290 million in the quarter, an increase of 16% over 2002's second quarter sales.
Sales for the Company's Rockport subsidiary were $88 million in the second quarter of
2003 compared with 2002's second quarter sales of $95 million. Sales for the Company's other
brands; Ralph Lauren Footwear and The Greg Norman Collection, were $43 million in the second
quarter of 2003, an increase of 16% from the prior year's second quarter.
The Company reported that its total worldwide backlog of open customer orders scheduled
for delivery from July 2003 through December 2003 for the Reebok Brand increased 14% from the
prior year's comparable amount. On a constant dollar basis, overall backlog for the Reebok Brand
Paul Fireman, the Company's Chairman and Chief Executive Officer said, #'I am pleased
with our overall results for the quarter. Our sales and earnings performance reflected healthy
increases despite generally weak economic conditions worldwide. Our management team is
succeeding in executing our strategies which are designed to grow quality market share while
increasing shareholder value.''
#'I am particularly pleased with the progress our Reebok Brand has made in the all important
U.S. market. Our overall sales growth in this market exceeded our backlog trends at the beginning
of the quarter and this is a positive sign. And, the quality of our U.S. footwear business matches our
strategic intent to gain market share in the critical athletic specialty and sporting goods channels of
distribution. For the quarter, U.S. footwear sales to these important channels of distribution
increased by 29% as compared with the prior year's quarter. This growth is being fueled by a strong
consumer response to our new Rbk marketing and product initiatives'' Fireman
#'U.S. apparel sales were $109 million in the quarter, an increase of 29% from 2002's
second quarter sales of $85 million,'' Fireman noted. #'The sales increase came from both Reebok
branded and sports licensed apparel. During the quarter, retailers continued to experience strong
sell-throughs of our licensed apparel offerings,'' Fireman said. #'In particular, our new NBA licensed
products performed well and we are pleased with the progress we've made in this first year of our
long-term relationship with the NBA. We are continuing to work with our partners at both the NBA
and the NFL to launch exciting new initiatives to expand their businesses,'' Fireman added.
#'Looking forward to the second half of the year, I am pleased with the growth in our open
backlog position. Our U.S. footwear backlog increased 13%. This is the first double- digit increase
in U.S. footwear backlog that we have reported in over 5 years. On a category basis the backlog
for performance products increased 28% in the U.S. with healthy increases in basketball, men's
training and running. In addition, our Classic products in the U.S. generated strong increases in open
orders. We believe that the strength of our open backlog in these categories is a result of the fully
integrated marketing and product initiatives that we began over a year ago,'' Fireman noted.
The Company reported that its gross margin for the second quarter of 2003 was 37.5%
compared with the gross margin of 39.3% in the second quarter of 2002. ''During the second
quarter of 2002 we had the positive settlement of certain outstanding international related Customs
matters which accounted for approximately 93 basis points of the reported margin. The balance of
the margin decline in 2003 can be attributed to Reebok's U.S. branded apparel business. We view
the U.S. branded apparel market as very difficult at this time, and many other companies are
experiencing this as well. As a result of the sluggish retail environment for this category we made the
decision to actively closeout slow moving products and reduce inventories,'' Fireman noted.
Worldwide inventories at June 30, 2003 totaled $476 million compared to $408 million at
June 30, 2002. #'The inventory increase is primarily related to the effects of currency and to our
growing sports licensing business. Excluding the impact of currency, inventories increased
approximately $50 million,'' Fireman said.
#'I am pleased that we are on plan to achieve our sales and earnings goals for the year. Our
results during the first half of 2003 are especially noteworthy in light of the difficult political and
economic conditions that have impacted retail performance. When we entered 2003, we had
anticipated a general improvement in these conditions, especially during the second half of the year.
While there are some signs that conditions are improving, there is general uncertainty regarding the
economic outlook for the near-term. However, our strategies remain sound and I am confident that
our management team will remain focused on executing these strategies in an effective way for the
balance of the year,'' Fireman concluded.
Reebok International Ltd. (NYSE:RBK) today reported