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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-------------------------------
Date of Report: February 26, 2004
STEVEN MADDEN, LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-23702 13-3588231
- ---------------------------- ------------------------ ----------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
52-16 Barnett Avenue, Long Island City, New York 11104
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (718) 446-1800
--------------
Item 7(c). Exhibits.
--------
99.1 Press Release of Steven Madden, Ltd. dated February
26, 2004, reporting financial results for the fourth
quarter of 2003 and for the year ended December 31,
2003.
99.2 Transcript of February 26, 2004, Steven Madden, Ltd.
conference call.
Item 12. Results of Operations and Financial Condition.
---------------------------------------------
On February 26, 2004, Steven Madden, Ltd. issued a press release and held a
conference call announcing its financial results for the fourth quarter of 2003
and for the year ended December 31, 2003. A copy of the press release is
furnished as Exhibit 99.1 to this report and is incorporated herein by
reference. A copy of the transcript of the conference call is furnished as
Exhibit 99.2 to this report and also is incorporated herein by reference.
The information in this report, including exhibits attached hereto, is being
furnished and shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that Section. The information in this report shall not be
incorporated by reference into any registration statement or other document
pursuant to the Securities Act of 1933, except as otherwise expressly stated in
such filing.
-2-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
STEVEN MADDEN, LTD.
By: /s/ ARVIND DHARIA
-------------------------------------
Name: Arvind Dharia
Title: Chief Financial Officer
Date: March 3, 2004
-3-
Company Contact: Richard Olicker
President, Chief Operating Officer
Arvind Dharia
Chief Financial Officer
Steven Madden, Ltd.
(718) 446-1800
Investor Relations/Press: Cara O'Brien/Lila Sharifian
Financial Dynamics
(212) 850-5600
FOR IMMEDIATE RELEASE
- ---------------------
STEVEN MADDEN, LTD. ANNOUNCES FOURTH QUARTER AND 2003 YEAR END RESULTS
LONG ISLAND CITY, N.Y. - February 26, 2004 - Steven Madden, Ltd. (NASDAQ: SHOO),
a leading designer, wholesaler and marketer of fashion footwear for women, men
and children, today announced financial results for the fourth quarter and year
ended December 31, 2003.
In line with previously announced expectations, annual net sales were $324.2
million compared with $326.1 million in 2002. Net income increased 3.1% to $20.5
million, or $1.45 per diluted share, on 14,139,000 diluted weighted average
shares outstanding. In fiscal 2002, net income was $19.8 million, or $1.45 per
diluted share, on 13,710,000 diluted weighted average shares outstanding.
Jamieson Karson, Chief Executive Officer, commented, "Although 2003 was a
challenging year given the competitive retail environment and shifting industry
trends, we are pleased with our overall performance, particularly as it follows
a record breaking 2002. Importantly, we made significant progress in our efforts
to position Steven Madden, Ltd. as a global lifestyle branded company.
Specifically, during the year we diversified and expanded the business by adding
the Candie's and UNIONBAY brands and took steps to broaden our international
reach by extending distribution to Europe. Moreover, we accomplished all this
while protecting the core elements of our business - significant brand equity, a
flexible business model, and a healthy balance sheet."
Fourth quarter net sales were $71.1 million compared with $78.4 million in the
comparable period of 2002. Net income was $2.6 million, or $0.18 per diluted
share, versus $4.2 million, or $0.31 per diluted share, in the fourth quarter
last year.
"Throughout 2003 we carefully controlled costs even while investing in
infrastructure to support the growth in our operations, and this enabled us to
maintain stable SG&A and gross margins for the full year," added Arvind Dharia,
Chief Financial Officer. "Additionally, our financial position remains strong
with $85.7 million in cash, cash equivalents, and investment securities, no
debt, and total stockholders' equity of $159.2 million."
Retail revenues for the fourth quarter increased slightly to $28.9 million from
$28.5 million in the year ago period and same-store sales decreased 3.3%. For
the full year, retail revenues increased 4.0% to $95.5 million from $91.9
million in 2002 and same-store sales declined 3.9%. During 2003 six new
locations were opened, bringing the total number of company-owned retail stores,
including the Internet store, to 83 as of December 31, 2003.
During the fourth quarter, revenues from the wholesale business, comprised of
the Company's seven brands, Steve Madden Womens, Steve Madden Mens, Stevies,
l.e.i., Steven, Candie's, and UNIONBAY, were $42.2 million versus $49.9 million
in the fourth quarter of 2002. For the full year, wholesale revenues were $228.7
million versus $234.3 million last year. As previously announced, the lower than
anticipated sales in the wholesale division resulted from a highly promotional
environment and increasing price competition as well as a sluggish fall selling
season. In response, the Company acted aggressively to liquidate slower moving
inventory and support the initiatives of its wholesale customers to clear
products through the retail channel.
Commenting on the Company's fourth quarter and full year results, Richard
Olicker, President and Chief Operating Officer, stated, "The end of the year
proved to be challenging, particularly at the wholesale level. Not only did
competition in the market intensify but trends in the footwear industry shifted.
Specifically, our core customer changed the focus of her fashion direction from
a traditional casual base into broader categories including dress, tailored and
more at-once trend items. That said, we are proud of the fact that given our
nimble operating model and our commitment to interpreting trends, we were able
to evolve as well - and this enabled us to post stable sales.
"There were also key pockets of strength in the business throughout 2003. For
example, our retail division continued to contribute in multiple ways: as a
highly profitable operating segment, a strong brand building medium, and a very
useful testing venue for new and innovative products. Additionally, we benefited
from increasing success on the licensing front, recording a 19.6% increase in
our other income line, and this bodes well for our plan to enhance efforts to
leverage the Steve Madden brand name going forward."
Outlook for 2004
- ----------------
Following the close of 2003, and taking into account lessons from the fourth
quarter, the Company carefully reevaluated internal projections. With respect to
the full 2004 year, the Company is cautious about its prospects as it continues
to integrate new divisions and transitions into new categories in the fashion
footwear landscape. As part of this evolution, there are a number of factors
that will have an important impact on the current outlook, including greater
pricing pressure and a demanding markdown environment at wholesale, increased
advertising to support our brands, and additional personnel to support existing
and new divisions. Taking all of this into account, the Company anticipates that
2004 net sales will increase in the low-single digits over 2003 and diluted
earnings per share will be in the range of $1.35 to $1.40.
Mr. Karson concluded, "Fiscal 2004 will be the continuation of a positive and
exciting transition for Steven Madden, Ltd. and there are important steps we
need to take to build the business responsibly and profitably. While we are
therefore admittedly somewhat cautious in our near-term outlook, we remain
firmly focused on our task to expand the business through diversifying both our
product offering and distribution channels. Above all else, we are determined to
deliver enhanced shareholder value over the long-term."
Interested shareholders are invited to listen to the fourth quarter and full
year earnings conference call scheduled for today, Thursday, February 26, 2004,
at 10:00 a.m. Eastern Time. The call will be broadcast live over the Internet
and can be accessed by logging on to
http://www.firstcallevents.com/service/ajwz400689366gf12.html. An online archive
will be available shortly after the call and will be accessible until March 11,
2004. Additionally, a replay of the call can be accessed by dialing (888)
274-8337 and will be available through March 1, 2004.
Steven Madden, Ltd. designs and markets fashion-forward footwear for women, men
and children. The shoes are sold through Steve Madden Retail Stores, Department
Stores, Apparel and Footwear Specialty Stores, and on-line at
www.stevemadden.com. The Company has several licenses for the Steve Madden &
Stevies brands -- including eyewear, hosiery, and belts -- owns and operates one
retail store under its Steven brand and is the licensee for l.e.i. Footwear,
Candie's Footwear, and UNIONBAY Men's Footwear.
Statements in this press release that are not statements of historical or
current fact constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other unknown
factors that could cause the actual results of the Company to be materially
different from the historical results or from any future results expressed or
implied by such forward-looking statements. In addition to statements which
explicitly describe such risks and uncertainties readers are urged to consider
statements labeled with the terms "believes", "belief", "expects", "intends",
"anticipates" or "plans" to be uncertain and forward-looking. The forward
looking statements contained herein are also subject generally to other risks
and uncertainties that are described from time to time in the Company's reports
and registration statements filed with the Securities and Exchange Commission.
(Tables Follow)
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three Months Fiscal Year
Ended Ended
December 31, December 31,
------------------------ ------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net Sales $ 71,099 $ 78,396 $ 324,204 $ 326,136
Cost of Sales 43,949 47,493 198,185 199,453
---------- ---------- ---------- ----------
Gross Profit 27,150 30,903 126,019 126,683
Commission and Licensing Fee Income 1,854 1,966 7,894 6,603
Operating Expenses (24,963) (25,968) (100,287) (100,074)
---------- ---------- ---------- ----------
Income from Operations 4,041 6,901 33,626 33,212
Interest and Other Income - Net 475 446 1,693 1,216
---------- ---------- ---------- ----------
Income Before Provision for Income Taxes 4,516 7,347 35,319 34,428
Provision for Income Taxes 1,964 3,129 14,865 14,587
---------- ---------- ---------- ----------
Net Income $ 2,552 $ 4,218 $ 20,454 $ 19,841
========== ========== ========== ==========
Basic Income Per Share $ 0.19 $ 0.33 $ 1.58 $ 1.58
========== ========== ========== ==========
Diluted Income Per Share $ 0.18 $ 0.31 $ 1.45 $ 1.45
========== ========== ========== ==========
Weighted Average Common Shares Outstanding:
Basic 13,148 12,747 12,985 12,595
========== ========== ========== ==========
Diluted 14,370 13,810 14,139 13,710
========== ========== ========== ==========
~ more ~
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(in thousands)
December 31, December 31,
------------ ------------
2003 2002
---- ----
Consolidated Consolidated
------------ ------------
Cash and Cash Equivalents $ 53,073 $ 56,713
Marketable Securities 32,659 22,510
Total Current Assets 121,995 105,354
Total Assets 177,870 150,500
Total Current Liabilities 16,855 18,893
Total Stockholders' Equity 159,187 130,075
###
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 1
STEVEN Madden Limited
4th Quarter Earnings
Moderator: Cara O'Brien
February 26, 2004
9:00 am CT
Operator: Good morning, ladies and gentlemen, and welcome to the
Steven Madden Limited Conference Call sponsored by
Financial Dynamics.
At this time, all participants are on a listen-only mode.
Later we will conduct a question and answer session and
instructions will follow at that time.
Any reproduction of this call in whole or part is not
permitted without prior expressed written authorization of
the company. And as a reminder ladies and gentlemen, this
conference is being recorded.
I would like to introduce you to your host for today's
conference, Ms. Cara O'Brien of Financial Dynamics. Go
ahead.
Cara O'Brien: Thank you, operator.
Good morning everyone and thank you for joining us today
for this discussion of Steven Madden Limited Fourth
Quarter and Yearend Results.
By now you should have received a copy of the press
release. But if you have not, please call my office at
212-850-5600 and we'll fax one to you immediately.
Before we begin, I would like to remind you that
statements in this conference call that are not statements
of historical or current fact constitute "forward-
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 2
looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown
risks, uncertainties and other unknown factors that could
cause the actual results of the Company to be materially
different with the historical results or from any future
results expressed or implied by such forward-looking
statements.
The statements contained herein are also subject generally
to other risks and uncertainties that are described from
time to time in the Company's reports and registration
statements filed with the SEC.
Also, please refer to the earnings release for more
information on risk factors that could cause actual
results to differ.
Finally, please note that any forward-looking statements
used in this call should not be relied upon as current
after today's date.
I'd now like to turn the call over to Jamie Karson, Chief
Executive Officer of Steven Madden Limited. Jamie, go
ahead please.
Jamieson Karson: Thanks, Cara.
Good morning and thank you for joining us to review Steven
Madden Limited's results for the fourth quarter and the
year ended December 31, 2003. With me to discuss the
business are Richard Olicker, our President and Chief
Operating Officer, and Arvind Dharia, our Chief Financial
Officer.
We are pleased with our overall performance during 2003,
particularly as it comes on top of a record breaking 2002.
Despite one of the most challenging
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 3
years in our history, we posted sales that were
essentially flat with the prior year.
To be more specific on this point, our solid performance
was achieved during the period in which our business
evolved significantly from its traditional casual base
into broader categories including dress and tailored.
Additionally, we have responded aggressively to the
customer's demand for (at-once-wear-now) trend product. In
conjunction with this shift in product focus, we
experienced retail promotional pressure, which is
indicated in our press release in January, resulted in
high levels of markdown and allowance activity at
wholesale particularly during the fourth quarter.
Importantly, this shift in direction was taken as a result
of listening to our customers and our reactive operating
model enabled us to quickly move in to fresher categories
that were in demand and continue to evolve today.
Before I turn the call over to Richard, I'd also like to
mention that we remain in excellent financial health. We
ended the year with a solid balance sheet with
approximately $86 million in cash, cash equivalents, and
marketable securities, no long or short-term debt, and
total stockholders equity of 159 million. We believe that
this proves the health and viability of our business as we
have an enormously strong foundation on which to build.
Now I'd like to turn the call over to Richard to review
the 2003 operating results in more detail.
Richard Olicker: Thanks, Jamie.
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 4
Let's review in detail what happened in 2003 for both the
fourth quarter and the year.
In line with our recently updated expectation, net sales
for the fourth quarter ended December 31, 2003, were 71.1
million, compared with 78.4 million in the fourth quarter
of 2002. Net income was 2.6 million versus 4.2 million in
the fourth quarter of 2002.
Diluted earnings per share which came in at the high end
of our projected range was 18 cents, compared with 31
cents per share in the fourth quarter of 2002. Gross
margins for the quarter was 38.2% versus 39.4% last year,
primarily reflecting the liquidation of slower moving
inventory and the support of our wholesale customers'
initiatives to clear products at retail.
During the quarter we continued to make progress in
managing our cost structure and even while integrating two
new wholesale divisions, we were able to reduce our total
operating expenses, resulting in a 3.9% decrease from the
comparable quarter in 2002.
Now let's review what happened in each division during the
quarter. Revenue for the wholesale division, which is
comprised of seven brands -- Steve Madden Women, Steve
Madden Men, lei, Steven, Stevies, Candies and Union Bay --
was 42.2 million versus 49.9 million in the fourth quarter
of 2002.
Taking you through our wholesale brands individually,
fourth quarter sales of Steve Madden Women was 17.8
million versus 21 million in the fourth quarter of 2002.
The decline was a result of slowing in an anticipated
selling at retail, which resulted in sluggish reorder
demand from the middle through the end of the quarter.
This led to heavy and persistent promotional activity and
markdown level to assist in the clearance of product at
retail.
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 5
However, based on success at our own retail stores and our
ability to quickly source and offer (Solpher) line boot
products at the December SHOO show in New York City, we
were able to exploit the shortness of supply in this
important category for at-once and early first quarter
delivery.
Also, positive momentum in pointed-toe boots and dress
shoes continued to build towards the end of the quarter,
and we quickly moved to maximize those opportunity. L.E.I.
footwear sales were 11.3 million versus 13.8 million in
the fourth quarter of 2002, lower than planned due to the
sluggish performance at retail of junior chunky look and
the resulting lack of reorder demand.
Dress shoes and flat casuals helped to support the
divisions business with both round and point-your-toe
characters beginning to gain acceptance. Sales of Stevies,
our children's brand, were 1.5 million versus 2.7 million
in the comparable period. The decrease is largely due to
disappointing performance in boot and slipper
classification.
For the new Steven line, sales increased 46% to 3.8
million from 2.6 million in the fourth quarter of 2002,
maintaining the momentum that began in the third quarter.
It's noteworthy and encouraging that this gain was
achieved without significant door expansion over the third
quarter demonstrating strong demand at existing A-level
locations.
The (successful) classifications included boots and
booties as well as feminine pump, both in the variation of
heel-high and toe-shape.
Sales at Madden Men were 6.8 million compared to 9.7
million in the fourth quarter of 2002. This result
basically reflects the fact that current trend is
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 6
toward dressier looks even for men. And we are
(anniversarating) against large volume in the casual
category last year.
We are in the midst of refining and broadening the product
mix to address that current dressy trend, without
abandoning the core casual and sporty business that
brought us such extraordinary success in 2002.
With respect to UNIONBAY, since reorder business did not
immediately materialize against the initial third quarter
(ten), shipments were modest in the fourth quarter. Based
on our belief that this young men's division required an
infusion of new talent, during the fourth quarter we hired
new management to strengthen and diversify the line. The
refocused product was introduced this month at the WSA
SHOO show for fall shipping.
Rounding out our wholesale revenues, Candies began
shipping for the first time in the fourth quarter and
posted approximately 900,000 in net sales. Of note, the
Kelly Clarkson booth delivered late end-season enjoyed
great retail success.
Additionally, we're pleased with the account distribution
base that the team had built for Spring '04.
Moving to our retail division, retail revenues in the
fourth quarter were 28.9 million versus 28.5 million. We
ended the quarter and the year with 83 stores including
the Internet store. There were 77 locations in the (comp
base) versus 72 on December 31, 2002. And same store sale
during the quarter decreased 3.3%.
We are nevertheless pleased with this performance, given
that we were comping against last year's strong sales in
the women's casual categories and
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 7
in men. Moreover, we were simultaneously taking aggressive
steps to evolve the business to meet new trends,
particularly in dress and seasonal boot items and to
achieve stable sales in light of this transition is
something we are quite pleased with.
Finally, store productivity remained high with sales per
square foot of $644.
During the quarter, the other income line was 1.9 million
versus 2 million in 2002. This includes the commission
income form our private label division, Adesso-Madden, and
earned royalties from our licenses. Private label income
was 1.1 million versus 1.4 million. While there was some
commission erosion versus last year, part of this is
related strictly to timing with Spring 2004 deliveries
shifting from our fourth to our first quarter.
Licensing income increased 45% to 802,000 from 555,000
last year. At the end of the year, we had six licenses,
covering a variety of categories including belts, hosiery
and socks, optics and sunglasses.
Now I'd like to touch on our full year results, which, in
total, we are quite proud of. Revenues for the year were
essentially flat at 324.2 million versus 326.1 million in
2002. It is important to note that 2002 was a year during
which we increased net sales by 34%. Wholesale revenues
were 228.7 million versus 234.3 million in 2002.
Steve Madden Women's was basically flat last year at 109.3
million in revenue. The lei brand increased 8.9% to 60.6
million. Steven increased 11.8% to 12.5 million. Stevies,
the children's brand, decreased to 10.1 million. Men's
decreased to 34.9 million. UNIONBAY totaled 320,000 and
Candies totaled 938,000.
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 8
Our retail division revenue increased 4% to 95.5 million
versus 91.9 million in 2002. We added six stores and
closed three for the twelve-month period and ended the
year with 83 locations including the Internet store versus
80 in 2002. Same store sales decreased 3.9% for the year.
Annual gross margin was 38.9% versus 38.8% last year,
nearly flat year-over-year even while incorporating the
fourth quarter challenges which I've discussed earlier.
The other income line increased 20% to 7.9 million;
licensing income increased 55% to 2.8 million and
Adesso-Madden increased 6% to 5.1 million.
During 2003 we were able to effectively leverage our
infrastructure and manage costs while continuing to
support expansion of the business through the addition of
new brands. This is reflected by our ability to hold the
line on annual expenses, which were nearly flat
year-over-year on both the total dollar basis and as a
percent of sale.
Net income for the year was 20.5 million versus 19.8
million. And diluted earnings per share was $1.45 per
share on 14.139 million diluted weighted average shares
outstanding, compared with $1.45 per diluted share on
13.710 million diluted weighted average shares outstanding
in 2002.
From a marketing perspective, we are of course thrilled
with the recent announcement that we are sponsoring music
and fashion superstar, Beyonce, in the Verizon Ladies
First Tour, which also features Alicia Keys and Missy
Elliot.
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 9
Beyonce, a ten-time Grammy winner, is also arguably the
single hottest teen icon in the world today. As you can
imagine we view this as a tremendous opportunity to be
highly visible at venues that are laser-targeted to our
consumer base.
During the holiday season, we expanded our sponsorship of
the Jingle Ball Concert Series to include Dallas, Miami,
and New York in conjunction with the top pop radio
stations in each of these markets.
Our enter-to-win-tickets store events were enormous
customer draws and they were made even more effective when
tied into special meet-and-greet opportunities such as the
chance we gave customers to meet Nick Lachey and Jessica
Simpson in Dallas.
This was also a particularly strong period for spotting
the celebrity A-list, buying and wearing Steve Madden
shoes. Kid Rock wore a Steve Madden in a recent video,
Christina Aguilera has specially made shoes to wear to the
VMA, Alicia Keys wore our shoes while performing for our
troops in San Antonio and Beyonce Knowles wore
specially-made Steve Madden shoes while performing the
National Anthem at the Super Bowl.
This highlights in addition to our numerous and continuous
retail store promotion events and our distinctive print
and outdoor campaign speak to the strength and focus of
our public relations and marketing team. Based on the
enormous brand recognition they have generated, we intend
to support this initiative even more aggressively in 2004.
Turning now to our debt-free balance sheet. At yearend,
our cash equivalent and marketable securities were 85.7
million. Inventories were 23.9 million, 4.4 million higher
than last year due to the addition of new division, hot
at-
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 10
once items that were in transit in December and early
spring arrival particularly for our retail division.
Our inventory turned 9.2 times during the year. We believe
that wholesale and retail inventories are lean and current
and we continue to cautiously manage our planning,
sourcing, and shipping processes as we move into the new
year.
Factored and accounts receivable was 33 million, working
capital with 105.1 million, total stockholder equity was
159.2 million, (post) value was $12.05 per share based on
the number of shares outstanding as of 12/31/03, up from
$10.19 per share last year. At December 31, 03, cash per
share was $6.49. Total diluted weighted average shares
outstanding totaled 14.1 million during the year.
Thank you and now I'd like to turn the call back over to
Jamie.
Jamieson Karson: Thanks, Richard.
To summarize, 2003 was a year during which we took variety
of important steps to evolve and diversify the business.
During the year, we layered in two new divisions --
UNIONBAY and Candies -- to broaden our product offering
and support overall expansion of the company for the long
term.
Plus, we took steps to widen our reach and broaden the
distribution of our brand even on a global basis. One
important example of this is our entry into additional
international markets with the launch of Steve Madden
footwear in certain countries in Europe through a
distribution agreement with group (Roue).
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 11
However, 2003 was challenging. Not only did competition in
the market intensify but in addition, trends in the
footwear industry shifted making 2003 a transition year of
sorts for Steven Madden, Limited as a whole.
In particular during the year, our core customer changed
the focus of our fashion direction from a traditional
casual base into broader categories including dress.
Additionally, as previously stated, we aggressively
responded to the customers' strong demand for
at-once-wear-now fashion items. That said, we are proud of
the fact that given our nimble operating model and our
commitment to identifying, interpreting demands and
trends, we were able to change with her and this enabled
us to us post solid sales overall.
Simply stated, at the same time as sustaining the lead
position in our core casual space and without divorcing
ourselves from the traditional Steve Madden looks, we
evolved the Steve Madden brand in response to the demands
of our customers.
By introducing updated, more feminine styles, among other
things, we initiated the diversification of our core
business to meet the shifting trends, enhancing our
uniqueness and visibility in the market place.
Our willingness and ability to execute this transition
with edgy and cool product across broad categories is what
we believe differentiates our company and will lead to our
continued success over the long term. However, as our
experience in the fourth quarter illustrates, this
transition did not and will not come without a degree of
sacrifice or growing pains.
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 12
Following the close of our 2003 and taking into account
lessons from the fourth quarter, we carefully reevaluated
our internal projections for the current fiscal year. As
we look ahead to 2004, we are cautious about our prospects
during this ongoing transition time, particularly as we
integrate new divisions and continued to shift into
non-traditional or new categories in the fashion footwear
landscape.
There are three factors that have an important impact on
our current overall outlook for this year - this 2004
year. First, as the fourth quarter showed us while we in
large part successfully testing and reacting to new
trends, the entry into new categories is putting
additional competitive pressure on us to a greater extent
than that which exist in our core casual space.
Not only will we face greater pricing pressure by
competing more directly with certain other players, but we
anticipate the environment and will also remain demanding
from a markdown perspective on the wholesale side as we
cycle into categories and styles.
Second, with the rollout of our new divisions which
provide us with diversification, coupled with our
expanding categories within our core Steve Madden brands,
we expect to incur additional operating expenses such as
increased occupancy expenses.
And in addition, we have dedicated additional resources to
advertising and marketing while we will stay true to our
grassroots approach in support of these initiatives.
Advertising expenses which currently (wind up) below
industry levels as a percentage of sale may increase in
'04, while staying to a disciplined level of approximately
3% or slightly higher.
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 13
Concurrently, in-store hard concept shops have shown
themselves to be effective brand builders and product
investments of top wholesale doors. And we intend to
selectively invest in more of these throughout the year.
Third, as we have stated many times in the past, we have
what we view is the best product people in the industry --
something we're very proud of. To maintain this level of
success, we would be investing in additional personnel in
our existing and our new divisions.
Taking all of this into account, we currently anticipate
that 2004 net sales will increase in low digit - in the
low single digits over 2003 and diluted earnings per share
will be in the range of $1.35 to $1.40.
While 2004 will be the continuation of a positive and
exciting transition for Steven Madden Limited, during the
year we will be continuing to find and execute proactive
ways to further build the business. Specifically, we will
be focused on a few key areas.
First, on the licensing front, we intend to intensify our
efforts in the search for appropriate brand building
opportunities. While protecting the integrity of the brand
as paramount, we are focused on finding ways to leverage
the significant Steve Madden brand equity we have built
and maximize the other income line.
Secondly, we will have a renewed focus on expanding the
retail division of our business. We view the separate as
critical as retail is the highly profitable portion of our
business, is a great brand builder, and we have a greater
degree of control over our destiny in retail compared to
wholesale.
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Moderator: Cara O'Brien
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Page 14
And in addition we can react and respond to customer
demand much more quickly in this channel and this benefits
our results a great deal.
We currently plan to open between eight to twelve stores
during 2004. As we've said before, this will be based on
an expansion model, driven by finding A-level locations
and maintaining the industry leading productivity.
Thirdly, we will explore opportunities to further
diversify our offerings and expand the business, which
could potentially include strategic acquisitions. We are
extremely conservative at our approach of this process and
will only evaluate and/or act on opportunities that would
compliment our existing businesses and be immediately
accretive to the bottom line.
So, in conclusion, while we are admittedly somewhat
cautious as we move forward, we are energized and we
remain firmly focused in our task to build the company
responsively and profitably in an effort to enhance
shareholder value for the long term.
I hope that this call has been informative; we appreciate
your time and your interest. And now we'll turn the call
back to the operator to take your business questions.
Operator: Thank you.
Ladies and gentlemen, at this time if you have a question,
you will need to press the star and 1 on your phone. Your
questions will be taken in the order that they are
received. If you question has already been answered, you
may remove yourself from the queue by pressing the pound
key. Also, if you're using a speakerphone, please pick up
the handset before pressing the buttons.
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
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One moment please while we queue for the first question.
We'll take our first question from (Michael Ryan) with
Sedoti.
(Michael Ryan): Hi, good morning.
Jamieson Karson: Hi, (Michael).
Richard Olicker: Good morning.
(Michael Ryan): I was just wondering if I could get, you know, maybe some
more color on what your assumptions are based on your
earnings stand for '04 for your gross margin and your
SG&A.
Richard Olicker: Okay. (Michael), from a gross margin standpoint, we're
really not - we're not moving dramatically on the gross
margin line. We're moving a little bit down from our
stated projected goal of 40% down to where a more
normalized level that was achieved in 2003.
(Michael Ryan): Okay. So...
Richard Olicker: That's the gross margin. And what was your second
question?
(Michael Ryan): Just as far as SG&A, can you even - like on a dollar
amount, are you expecting increase over about 100 million
this year? I mean if you see a second increase from that
next year.
Richard Olicker: We see it; we see it getting to about a 100 million next
year.
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(Michael Ryan): Okay. And then in regards to your inventory at the
year-end, was there any still - clearance items still on
that inventory number from the end of the year that would,
you know, pressure the gross margin in the first quarter?
Richard Olicker: We felt that it was cleaned up dramatically particularly
at wholesale and it was current and to the extent it was
owned at retail, it was appropriate and current for and
some - there was some early spring in the retail number
but nothing that we were feeling was inappropriate.
(Michael Ryan): Okay. And that's just - well last year first quarter of
your anniversary you had your boot sale. I know you've
been successful with it. Is that something that can make
up for the (high jo) was there, that in combination of
anything? Can you give any quote unto that situation?
Richard Olicker: Yes and even more so, in a certain way, and that is a
little bit more - a little broader. Similar in some
respects in terms of the very item and seasonal...
(Michael Ryan): Uh-huh.
Richard Olicker: ...but I think addressing a larger audience, we've done it
a broader varieties of options and its coming on top of
success in entire direct categories so there are two
pistons firing, as well as an elongated pointy toe boot
season were we got particularly in the northern part of
the country, some good momentum and long momentum in a
pointy toe, heel-boot category for a long winter season.
So the answer is yes, but with a little bit more than what
we consider (high jo) to be last year.
(Michael Ryan): Okay, great.
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 17
I just - finally, did - you mentioned, you know, you're
targeting some acquisition, is there any category that
your focusing on there?
Richard Olicker: Well, we are focused on acquisitions, which would be
accretive and complement our core business and our brands.
So we would take a broad based approach to that.
(Michael Ryan): Okay. Okay, great. Thanks guys.
Richard Olicker: Okay, thanks (Michael).
Operator: We'll take our next question form the site of Scott Krasik
with CL King.
Scott Krasik: Yeah, hi guys. Can you give us an idea what kind of impact
the Sherpa product have on sales on the fourth quarter?
Richard Olicker: In our classification, we'll call faux fur instead of
Sherpa, but it had started to have a good impact in retail
and had a lesser impact at wholesale. What we were doing
is attacking the category, aggressively by getting
ourselves placed from the sourcing standpoint in late
November selling it in at the December shoe show and
delivering most of it really in the first quarter in
January and as much as we could get our hands on frankly
in late December.
But that was the timing opportunity. And I don't want to
comment specifically as they relate to numbers but we were
on it and enjoying it at retail and we were on it and
trying to get as much as we could in ship for both very
late fourth quarter and early first.
Scott Krasik: Okay, and then can you give us an idea of, you know,
within the percentages of you business, how much, you
know, you expect to do on dress this year? I
STEVEN MADDEN LIMITED
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 18
mean is it going to be, you know, most of the new products
going out, I mean you're not going to - especially in the
younger side - you're not going to completely abandon the
chunky clunky?
Richard Olicker: No, no. The idea is to expand by categories with
abandoning anything that historically have been our
strength. However, we are (needing) to aggressively go
after the categories that are trending with the young
customer today that and today, that category includes
dress.
So, without commenting on as a percentage I'm going to go
where my customers are telling me to go.
Scott Krasik: Uh-huh. And then I guess just lastly, maybe if you could
compare, you know, in the past and then also going
forward, are there differences, you know, what you're
targeting for you wholesale customers versus what you're
going to sell in your own retail stores?
Richard Olicker: Well, there are always differences because retail includes
a much broader array of assortment and included in that
assortment are an array of test products. So the answer
is, you know, we still rely on retail as a very, very
strong indicator for our wholesale assortment mix.
So test and react is still very much alive and it's part
of the reason that we were able to so quickly evolved the
brand to where the consumer was wanting to see our
products. That will not change.
Scott Krasik: Okay. Thanks very much.
Richard Olicker: Okay.
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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Operator: Our next question from Sam Poser with Mosaic Research.
Sam Poser: Good morning. Has everybody - question on Candies. I mean
with your - with the low single digit increase for 2004. I
mean that - how much Candies revenue do you see happening
in 2004?
Richard Olicker: Sam, rather than go division by division and we have seven
wholesale operating divisions. Some are going to be
dramatically increasing and Candies is one of them. What
I'd rather say to you is that it is part of the overall
mix that gets us to a low single digit. So as Candies
increases, other divisions are projected at least two
either be flat or declining.
That's is much as far as I'd like to go now. We had it
very detailed in our own internal plans, but all of this
can be - can change and can tweak and in particular as it
relates to Candies is reliant on the success. We expect to
have on the spring product that's being delivered to
retail now.
Sam Poser: Okay, and then your retail - and on your retail stores,
you have found your business gotten better lately, it
sounds like because of the new product that has hit the
stores, would that be a reasonable assumption?
Richard Olicker: Yes.
Jamieson Karson: Yes.
Sam Poser: So, are you going to guide, are you going to give - can
you give any more color on the retail business for the
year?
Richard Olicker: For the year?
STEVEN MADDEN LIMITED
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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Sam Poser: For 2004, going forward, guidance.
Richard Olicker: Mid-single growth.
Sam Poser: And if you were to say in the wholesale division, you
know, which areas - which of those basically need the
most, you know, that you feel most comfortable with and
those that you think are going to be the most challenging
businesses for the year, can you give us some color there?
Richard Olicker: In the whole - I don't quite...
Sam Poser: Between Madden Women's, lei, Men's, and so on. Can you
sort of, you know, say where, you know, where your highest
expectations are and where you might see some issues, just
sort of in a general sense?
Richard Olicker: The issues will be in lei and in Men. The highest
expectations are in Steven and I'd like to leave it at
that.
Sam Poser: All right.
Richard Olicker: I would also say Candies on the expectation side.
Sam Poser: And do you think, with the dress product, have you made,
you know, from a scale of one to ten, where do you think
you are on sort of switching gears to get into that, you
know, with the sort of more tailored looks that are coming
around. Where do you think you are in that transition?
Richard Olicker: In which division are you asking?
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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Sam Poser: Well, I mean, as you said, it really ran through, you
know, even in lei you said it earlier that, you know, even
that was getting slightly more less chunky clunky. And...
Richard Olicker: Yes, you know, it's a wave Sam, as you know. Discovered at
retail, maximized at retail first, followed by Steve
Madden wholesale and now being enjoyed I think at retail
in our wholesale customer base, and being introduced to -
and appropriately so as the customer accepts it further,
you know, back in the cycle at the mid year channels
where, lei is distributed.
So, yes, as you could see from the product as WSA, it's
trending much more tailored looking, less chunky and
clunky and more colorful. That's an important aspect
because that's one of the things that's trending right now
is color and detail.
Sam Poser: Great. Thanks, Richard.
Richard Olicker: Okay.
Operator: Our next question comes from (Christina Fereue) with
(Dolton Garno).
(Christina Fereue): Hi, good morning, I have a couple of questions on the lei
business. First is given that that was such a strong
profit contributor this year and it's been sustaining
itself like revenues and profit have on the income versus
some of your other major businesses. I'm wondering how you
offset that weakness next year now that you're saying it's
trending down.
And then also, the question as to, given some of the
announcements recently about licenses being taken and
(unintelligible) purchases, what you think the likelihood
of you being able to keep these businesses a couple of
years out?
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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Richard Olicker: As it relates to the trend?
(Christina Fereue): Yes.
Richard Olicker: I think it's dependent on a couple of things.
We're addressing the trend from a product standpoint
aggressively. And if the consumer is as accepting of the
change, as quickly as the Steve Madden wholesale customer
did, I think we could stand the projected challenges
quickly.
A lot of it depends on how aggressively retailers are
going to be, you know, lei wholesale customers are going
to feel confident that they could move lei away from its
historical clunky, chunky, brown and black, into a lot
more dressy, a lot more tailored, flatter, pointy toes,
heels, dress, you know.
It's a much more diversified opportunity as long as our
wholesale customers accept it and their customers in turn
respond. And part of what our conservative projection on
lei is that, until we see that occur, we can't say that
it's going to happen for sure. But if it does, we'll
certainly be on it and as anyone that saw the product at
WSA can attest, we're showing it aggressively and moving
there as fast as we can.
In terms of the duration of the agreement, I believe Jamie
just jumped in. We're out till October ...
Jamieson Karson: September, yes, September of 2006 is when the agreement
ends.
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 23
(Christina Fereue): Good, but will you know before then if you're going to be
able to keep the license?
Jamieson Karson: I wouldn't know. I mean, you know, we're assuming that the
agreement on its face ends in 2006 and that's when it's
going to go back to the license source.
So, I can only accept what I have at face value.
(Christina Fereue): Okay. Thank you.
Operator: Our next question comes from (Sid Nacarmi) with Royal
Capital.
(Sid Nacarmi): Thanks. Good morning. Got a couple of questions, first, on
the retail side.
Comps were down this year. What are some of the levers or
opportunities for positive surprises next year? What do
you see needing to happen to sort of regain the comps and
the positive direction?
Richard Olicker: I think it's - it's summed up in the word `diversity'. If
we continue to jump on the trends, and we have, retail is
the first place where - or is the leading indicator, if
you will, of where our business is going. And we're -
we've been doing that early first quarter quite
successfully. And our consumers have responded.
So, I think that the opportunity is always there. But it's
very - it's a tight window of opportunity. You've got to
be there very, very quickly. You don't want to miss the
trend and you don't want to be on it too long because then
you're liquidating the same inventory that you jumped on.
STEVEN MADDEN LIMITED
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 24
So, it's a big challenge. It's the same challenge that has
always been there. But I think it's more accentuated today
as the customers shift around very quickly. But we feel
confident that our formula and our model are well
positioned to address those needs. And we're able and
capable to turn around in our comps all the time.
(Sid Nacarmi): Okay. And then with regards to the EPS guidance for next
year, have you assumed the same sort of year-end fully
diluted shares and tax rate?
Richard Olicker: Tax rate, yes.
(Sid Nacarmi): Yes, (give me the number).
Richard Olicker: Diluted shares, I'm going to take a look.
(Sid Nacarmi): (Thank you).
Richard Olicker: I think they're slightly higher.
(Sid Nacarmi): Okay. And then, the final question is, with the large cash
balance you mentioned potentially an acquisition
candidate, as well as, are you considering repurchases as
well?
Jamieson Karson: Well, (Sid), we are always - we are always looking for
ways to enhance shareholder value. And we do have
authorization from the board for the buy-back. And we'll
continue to optimis - or opportunistic about it. I mean
it's something we always look at.
(Sid Nacarmi): Okay.
STEVEN MADDEN LIMITED
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 25
Great. Thanks very much.
Bye-bye.
Operator: Our next question comes from (Mike Onguy) with (iBest
Capital).
(Mike Onguy): Hi, yeah. My question is regarding your agreement with
Candies. Is there a scaling royalty agreement in terms of
percentage of sales?
And my second question was, who are the customers of
Candies? I mean I know you have a wholesale business
there, but can you just give me some color there?
Thanks.
Richard Olicker: We really can't comment on the royalty arrangement. It's -
we're confidential on that.
(Mike Onguy): Okay.
Richard Olicker: It's not - I think I can say that it's not anything that's
not...
Jamieson Karson: Customary.
Richard Olicker: ...conventional.
Jamieson Karson: Yeah.
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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Richard Olicker: As to the distribution channels, we're currently in
department store, national department store chain, better
specialty, and we're working on international distribution
as well.
(Mike Onguy): When you said Candies business is dramatically increasing,
can you give more market color on that? Is that because -
is it exceeding your expectations, or is it because you're
starting from a zero base or something like that?
Richard Olicker: Starting from zero base.
(Mike Onguy): Okay. All right.
Thank you.
Richard Olicker: Okay.
Operator: Our next question comes from John Shanley with Wells
Fargo.
John Shanley: Good morning.
Richard, I wonder if you could give me some, a little bit
more information on the retail side of your business, the
8 to 12 new units that you may bring on board this year.
Are they about the same square-footage as most of your
existing portfolio? And also, what would that bring you to
in terms of total square-footage by the end of the year?
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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Jamieson Karson: John, some of the stores that we're looking at this year
that we feel confident that we will open will be street
deals. And invariably, the street locations are a little
bit bigger.
So, there will be some stores coming on line that will
have bigger square-footage in terms of the total
square-footage...
Richard Olicker: Yeah. What I'd like to do, John, is first add to what
Jamie said which is this is in anticipation of a (late)
'04, '05, and in the future, moving a little bit more
aggressively into accessory product and license product
opportunities so that we have a footprint that can
accommodate them.
As to your question about total square-footage for the
year-end '04, what I'd like to do is give - I have the
stores, but I don't have the square-footage in front of
me. I'd like to tally it up and give you a call offline,
if that's okay.
John Shanley: Yeah, it's fine.
Where did you wind up with square-footage in the end of
'03?
Richard Olicker: (Marvin), do we have that?
John Shanley: Okay. You can get back to me with that as well.
Man: We have it, John.
Man: (Unintelligible) but we'll call you back.
John Shanley: Okay. And also, I have a question, Richard, on the coming
out of WSA.
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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What - can you give us a little bit more sense in terms of
the Junior component of your wholesale business, where the
thinking is in terms of your key department store,
especially store customers? Are they increasing, staying
the same, or decreasing, they're open to buy commitments
for the Junior product category?
Richard Olicker: We've never really had a pushback on the open to buy or
(receipt) dollars. What's it all about in Junior is, if
the product is fresh and the consumer is responding, and
you're a Junior buyer, you will find the (receipt)
dollars. The trick is holding on to enough (receipt)
dollars to respond to what she's reacting to, immediately
at retail.
So, you know, in the Junior state, it's not about
committing upfront. It's about having dollars that need to
be committed when the consumer responds. I mean, it's
fleece lined or faux fur or, you know, because that was
something that happened late but everybody needed to find
the dollars to support it, otherwise, they miss the
business.
John Shanley: Right.
Are they - the buyers for the Junior products seem more
optimistic at this WSA than they may have at August or at
- in the February of `003?
Richard Olicker: Yes.
John Shanley: Are we...
Richard Olicker: (I think) so. And it's based on - it's based on
performance at retail of (new products).
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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John Shanley: The product that's selling at retail, is that what you're
saying?
Richard Olicker: Yes.
John Shanley: Okay. The last question I had, Jamie, you mentioned there
wasn't any share re-purchase authorization.
What is the amount of shares that's involved in that
authorization?
Jamieson Karson: Was it...
John Shanley: How many shares are you authorized to buy-back if you were
going to go ahead and do that?
Jamieson Karson: I believe the authorization is for two million shares.
John Shanley: Okay, great.
Thanks a lot. I appreciate it.
Operator: Our next question is a follow-up with Scott Krasik, CL
King.
Scott Krasik: Yeah, two quick ones.
The first one is, did you guys buy-back any shares in
2003?
Jamieson Karson: No.
Richard Olicker: No.
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Scott Krasik: Okay. And then, I guess I'm just a little confused. I
mean, you talk about - that you have the business model,
that you can get product out quickly, and you can, you
know, adhere and adhere to the trend, so you can switch
over to the demand for dress. But then you put language in
your lease saying your demanding marked down environment.
I mean, is it - are you saying that the product that
you're going to be putting out will eventually has to be
marked down? Or will that come form the fact that
wholesalers won't take the dress product?
I guess I'm just confused about, you know, where that's
coming from?
Richard Olicker: It's a fair question.
The issue is really the movement, aggressive movement,
into new categories that have not been our traditional
strength. When that happens, you're now in a different
playing field that has competitive players already
entrenched.
Already entrenched at certain retail price point that
forces us to find our niche within not only the fashion
side, but also the price point side. It's not as wide-open
space as, "Get it out there and charge whatever the top
price that you possibly can get."
So, there's an initial competition that relates to the
movement into broader product category.
And related to that is a very competitive overall
landscape as it relates to department store margin demand.
And that is something that we share with all of our
competitors.
STEVEN MADDEN LIMITED
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Moderator: Cara O'Brien
02-26-04/9:00 am CT
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So, as a combination of those two things is why we're
feeling that we need to be responsible in communicating
that, and also making sure that that's reflected
accurately in our projection.
Scott Krasik: I guess, have you gotten any feedback from wholesalers
that, you know, or just saying, "Look, we like chunky,
clunky from you and, you know, for whatever chunky, clunky
we sell you our (guides), but we don't want to take the
dress stuff?"
Richard Olicker: Well, what happens is that it's not that they don't want
to take it. It's that the clunky chunky is trending down
so it's appropriately being bought down. And the dress has
a competitive vendor structure already in existence.
So, you're proving yourself first, and then, as your
average selling prices gain a market share, you gain
(receipt) dollars or open to buy. So, it's a "Prove
yourself first." in new categories, and then grow market
share in those new categories.
It's not instantaneous as it - the customer has to vote
that you are a dress resource. And once that happens, the
(receipt) dollars generally flow.
Scott Krasik: I guess, and how pleased are you with the wholesalers'
response so far to your new or dressier, more, you know,
fitted, tailored product?
Richard Olicker: Very pleased.
Scott Krasik: Okay.
Jamieson Karson: Very pleased.
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Scott Krasik: Okay. Thanks.
Operator: We'll take our next question from (Mike Onguy) with a
follow-up from (iBest).
(Mike Onguy): Hi.
So - I just wanted to ask - so, are you pretty happy with
Candies so far in terms of your business there? And is it
exceeding your expectations?
Jamieson Karson: Well, let me just say, I think that we have - we're very
comfortable with the team that we have in place. And we're
confident that the team will execute on the strategy that
we have in place.
(Mike Onguy): Okay. All right.
Thank you.
Richard Olicker: John, if you - John Shanley, if you're still listening,
the assumptions on our dollars per square-foot based on a
square-footage of 138,528 square feet.
Operator: Once again, if you do have a question, press the Star and
1 on your phone at this time.
Woman: (Unintelligible).
Operator: We'll take our next question from (Lauren Romeo) with
(Royce and Associates).
Woman: (And) my next one.
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(Lauren Romeo): Hi, a couple of questions.
First, can you comment on your free cash flow expectations
for '04?
Richard Olicker: (Lauren), we - I - we couldn't hear you. Can you repeat
the question?
(Lauren Romeo): Can you comment on your free cash flow expectations for
2004?
Richard Olicker: Yes. Free cash flow - our net cash provided by operating
activities, 7.9 million for '03; and our projection,
roughly, 10 million.
(Lauren Romeo): Okay. What will CAPEX be?
Man: Yeah. That's 7 million.
(Lauren Romeo): I'm sorry?
Man: About 7 million.
(Lauren Romeo): And that's what it was this year as well?
Man: I'm sorry?
Richard Olicker: I think it was slightly less than that for this year.
(Lauren Romeo): Okay. Can you hear me?
Richard Olicker: Yes.
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
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(Lauren Romeo): Okay.
I guess, just going back to this issue, the cash - Jamie,
I think on the last call, just looking at the transcript,
you had said that, you know, again, the board is
considering a lot of alternatives. And the transcript
indicates you had said that you would be in a better
position to report this quarter in terms of the plans that
you have for the cash.
And I don't really hear anything different than what you
guys have said, you know, over the last several quarters
in terms of your cash uses. I mean, you look at the stock
worth value today, you could use half of your
authorization in, you know, $20 million and buy-back stock
and still have, you know, 60 million in cash.
You're going to be free cash flow positive this coming
year. And you have no debt. So, that, you know, you're not
hamstrung if you do that to go and make acquisitions if
that's, you know, if you have those accretive ones on the
radar screen.
So, I guess I'm just puzzled as to, you know, at what
point will you guys decide that you're going to make
better use of this cash in terms of earning and good
return for shareholders.
Jamieson Karson: Well, first of all - I mean, I think we all agree with
you. I think that we do have a lot of cash and the board
is - has in the past and is continually looking at various
things to enhance shareholder value.
So, what we said on the last call does in fact continue
forward. And I think we have taken an aggressive view
towards some of the things that we enunciated in the call,
certainly, with respect to licenses and acquisitions, all
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
Page 35
of which require money. We are taking an aggressive view
of all of those things, as well as the buy-back.
I mean, we have, you know, we have - I've said this
several times. I mean, we do remain opportunistic about
the buy-back, specifically, you know, could I tell you at
what level (it's) going to occur? No, I couldn't.
(Lauren Romeo): Okay, thanks.
Operator: Once again if you do have a question, press the star and
1.
And we'll take our next question from (Mike Onguy).
Go ahead.
(Mike Onguy): Yes. So, what are your expectations for Candies for '04
and '05 revenue expectations?
Richard Olicker: We don't disclose specific revenue expectations by
wholesale division.
(Mike Onguy): Okay.
Thank you.
Operator: We'll take our last question from (Sid Nacarmi) with Royal
Capital.
(Sid Nacarmi): Follow-up on one of the (asked), the cash flow question.
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
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And that is, if you're sort of looking at net income to
stay roughly around 20 million again. And I think you said
that cash flow from operations was going to be 10 million.
What accounts for the difference? I it if sales are flat,
why would working capital need to increase that much?
Man: Its increase (unintelligible) inventory.
(Sid Nacarmi): Right. But I guess, if the sales are flat, are you saying
that the inventory turns are going to drop or...
Richard Olicker: Well, the turns will drop.
Man: Slightly drop...
Richard Olicker: Yes.
Man: ...due to our new division.
(Sid Nacarmi): Okay. So, the newer divisions will have flow returns until
they rump up.
Richard Olicker: That's right, and as retail also has flow-returning
inventory.
(Sid Nacarmi): Okay. And so, since the retail growth might be a little
higher than the wholesale...
Man: Yes.
(Sid Nacarmi): ...this year with low returns, that will require more
working capital?
STEVEN MADDEN LIMITED
4th Quarter Earnings
Moderator: Cara O'Brien
02-26-04/9:00 am CT
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Richard Olicker: That's correct.
(Sid Nacarmi): Okay. Great. Thanks very much.
Man: Okay.
(Sid Nacarmi): Bye-bye.
Operator: There are no further questions.
Please continue with any closing comments.
Jamieson Karson: Okay.
Well, thank you for participating in the call.
And we will speak to you again in a few months.
Thanks.
Operator: Ladies and gentlemen, that does conclude our conference
call for today.
You may all disconnect and thank you for participating.
END