EX-99 2 ex993qearn1.htm STAGE STORES, INC. FORM 8-K, NOV 17, 2005, EX. 99

Exhibit 99

NEWS RELEASE

CONTACT:     
Bob Aronson     
Vice President, Investor Relations   
(800) 579-2302    
(baronson@stagestores.com)
 
FOR IMMEDIATE RELEASE

STAGE STORES ANNOUNCES THIRD QUARTER RESULTS; UPDATES FOURTH QUARTER AND FULL YEAR GUIDANCE

--Reports Net Income of $0.31 Per Diluted Share--

HOUSTON, TX, November 17, 2005 -- Stage Stores, Inc. (Nasdaq: STGS) today reported that total sales for the third quarter ended October 29, 2005 rose 7.3% to $306.0 million from $285.3 million for the prior year third quarter ended October 30, 2004. The increase in third quarter sales was driven by a comparable store sales gain of 3.9%, as well as revenue generated by new stores.

The Company further reported that net income increased to $9.1 million, or $0.31 per diluted share, versus $8.9 million, or $0.30 per diluted share, last year.

Jim Scarborough, Chairman, President and Chief Executive Officer, commented, "Despite unseasonably warm weather during much of August and September, and the significant business disruptions we experienced due to two major Gulf Coast hurricanes, we managed to grow our comparable store sales by 3.9%, while our total sales increased by 7.3%, to $306.0 million. Most of our key merchandise categories achieved comparable store sales gains during the period, with our women’s special sizes once again leading the way with a 14.7% increase. Additionally, our Peebles stores continued to benefit from our sales productivity initiatives, and each of our small, mid-size and large market store groups posted positive comparable store sales results.”

Mr. Scarborough continued, “We also accomplished a number of important strategic and operational objectives during the quarter. We opened eleven new stores and expanded our geographic presence to thirty-one states by entering Connecticut and Georgia. We also relocated six stores, remodeled four stores and expanded one store. Unfortunately, we had to close four stores due to damage that they sustained during hurricanes Katrina and Rita, but we currently expect to reopen all of them during 2006. In August, we completed our three-for-two stock split. In September, we issued our first quarterly cash dividend in the amount of 2.5 cents per share. In October, we completed our $30 million Stock Repurchase Program. We also
 

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Stage Stores Announces
Third Quarter Results
Page - 2


launched our initial two-store test of Clinique, by Estee Lauder in October in our Stage Division, and we are very pleased with our results. Additionally, we continued to make progress on our Peebles South Hill, Virginia distribution center and merchandising system initiatives, and we expect to complete both in January. Lastly, from a humanitarian perspective, we reached out to those whose lives were affected by hurricanes Katrina and Rita. Through a combination of internal initiatives and relief efforts, we provided significant assistance to those in need to help make their recovery a little easier.”

Mr. Scarborough concluded, "Considering the challenges presented to us by the natural disasters during the quarter, I want to thank each of our 13,000 associates for their hard work, their charitable giving, and their dedication."

Total sales for the nine-month period ended October 29, 2005 increased 8.3% to $925.5 million from $854.8 million last year. Comparable store sales increased 5.3% versus an increase of 1.8% for the prior year. Net income for the period was $36.2 million, or $1.22 per diluted share, compared to $32.8 million, or $1.09 per diluted share, last year.   

Stock Repurchase Program

The Company reported that, during the third quarter, it repurchased 1,260,549 shares of its common stock at a total cost of $33.6 million, resulting in an average price paid of $26.65 per share. The Company noted that the shares were repurchased using a combination of its $30.0 million Stock Repurchase Program, which has now been completed, and $3.6 million of proceeds that it received from the exercise of employee stock options. The 1.3 million shares repurchased in the third quarter raises the total number of shares that have been repurchased to date by the Company to approximately 6.5 million shares.

Fiscal 2005 - Fourth Quarter and Full Year Outlook

Fiscal 2005 - 4th Quarter:
The Company reaffirmed comfort with its previously provided sales and net income outlook ranges for the fourth quarter ending January 28, 2006 of $406.0 to $414.0 million, and $18.5 to $19.5 million, respectively, with the expectation of a comparable store sales increase in the low single digits. However, due to an anticipated higher diluted share count for the fourth quarter as compared to the Company’s previous estimate, principally due to a higher stock price assumption, diluted earnings per share are now projected to be in a range of $0.64 to $0.67. In projecting diluted earnings per share, the Company used a diluted share count of 28.9 million
 
 
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Stage Stores Announces
Third Quarter Results
Page - 3


shares, which is up from the 28.6 million shares used previously. This compares to the Company’s previously provided earnings guidance for the fourth quarter of $0.65 to $0.68 per diluted share. The Company earned $18.6 million, or $0.62 per diluted share, last year.

In comparing this year’s fourth quarter earnings outlook to last year’s actual results, the Company noted that its fourth quarter projections include non-recurring costs expected to be incurred principally in connection with the closure of its Knoxville, Tennessee distribution center, as well as expenses associated with improvements being made to its South Hill, Virginia distribution center and merchandising system, of approximately $0.8 million, or $0.03 per diluted share, on an after tax basis.

Fiscal 2005 - Full Year:
Updating its outlook for the 2005 fiscal year ending January 28, 2006 to include actual results for the first three quarters of the year, the Company currently anticipates reporting revenues in the range of $1.332 to $1.340 billion, with the expectation of a comparable store sales increase in the upper low single digits. Net income is currently estimated to be in the range of $54.7 to $55.7 million, or earnings of $1.85 to $1.89 per diluted share, using an estimated diluted share count of 29.5 million shares. This outlook compares to earnings of $51.4 million, or $1.72 per diluted share, for the 2004 fiscal year.

Conference Call Information

The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss the third quarter's results. Interested parties can participate in the Company’s conference call by dialing 703-639-1213. Alternatively, interested parties can listen to a live webcast of the conference call by logging on to the Company's web site at www.stagestores.com and then clicking on Investor Relations, then Webcasts, then the webcast link. A replay of the conference call will be available online until midnight on Friday, November 25, 2005.

About Stage Stores

Stage Stores, Inc. brings nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family to small towns and communities through 554 stores located in 31 states. The Company operates under the Bealls, Palais Royal and Stage names throughout the South Central states, and under the Peebles name throughout the Mid-Atlantic, Southeastern and Midwestern states. For more information about Stage Stores, visit the Company's web site at www.stagestores.com.


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Stage Stores Announces
Third Quarter Results
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"Safe Harbor" Statement

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including comments regarding the Company's outlook and expectations for the fourth quarter of the 2005 fiscal year and for the full 2005 fiscal year. The Company intends forward looking terminology such as "believes", "expects", "may", "will", "should", "could", "anticipates", "plans" or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause the Company's actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC") on April 28, 2005, in the Company's Quarterly Reports on Form 10-Q as filed with the SEC and other factors as may periodically be described in other Company filings with the SEC.
 

(Tables to Follow)


Condensed Consolidated Statements of Income
(in thousands, except earnings per share)
(unaudited)

   
Thirteen Weeks Ended
 
   
October 29, 2005
  
October 30, 2004
  
   
Amount
  
% to Sales (1)
  
Amount
  
% to Sales (1)
  
                   
Net sales
  
$
306,044
    
100.0%
     
$
285,296
    
100.0%
 
Cost of sales and related buying, occupancy and distribution expenses
   
215,328
   
70.4%
 
  
201,170
   
70.5%
 
Gross profit
    
90,716
   
29.6%
 
  
84,126
   
29.5%
 
Selling, general and administrative expenses
   
73,936
   
24.2%
 
  
68,160
   
23.9%
 
Store pre-opening costs
    
1,293
   
0.4%
 
  
1,065
   
0.4%
 
Interest expense, net of interest income of $8 and $0, respectively
    
971
   
0.3%
 
  
774
   
0.3%
 
Income before income tax
   
14,516
   
4.7%
 
  
14,127
   
5.0%
 
Income tax expense
    
5,371
   
1.8%
 
  
5,227
   
1.8%
 
Net income
  
$
9,145
    
3.0%
 
$
8,900
    
3.1%
 
 
                          
(1) Percentages may not foot due to rounding.
                          
 
                          
 
                          
Basic and diluted earnings per share data:
                          
Basic earnings per share
  
$
0.34
        
$
0.33
        
Basic weighted average shares outstanding
   
27,030
         
26,794
       
 
                          
Diluted earnings per share
  
$
0.31
        
$
0.30
        
Diluted weighted average shares outstanding
   
29,502
         
29,246
       


Stage Stores, Inc.
Condensed Consolidated Statements of Income
(in thousands, except earnings per share)
(unaudited)

   
Thirty-Nine Weeks Ended
  
   
October 29, 2005
  
October 30, 2004
  
   
Amount
  
% to Sales (1)
  
Amount
  
% to Sales
  
                   
Net sales
  
$
925,534
    
100.0%
     
$
854,826
    
100.0%
 
Cost of sales and related buying, occupancy and distribution expenses
   
647,888
   
70.0%
 
  
601,574
   
70.4%
 
Gross profit
    
277,646
   
30.0%
 
  
253,252
   
29.6%
 
Selling, general and administrative expenses
   
215,144
   
23.2%
 
  
197,832
   
23.1%
 
Store pre-opening costs
    
2,987
   
0.3%
 
  
1,561
   
0.2%
 
Interest expense, net of interest income of $136 and $13, respectively
    
2,085
   
0.2%
 
  
1,831
   
0.2%
 
Income before income tax
   
57,430
   
6.2%
 
  
52,028
   
6.1%
 
Income tax expense
    
21,249
   
2.3%
 
  
19,250
   
2.3%
 
Net income
  
$
36,181
    
3.9%
 
$
32,778
    
3.8%
 
                           
(1) Percentages may not foot due to rounding.
                          
                           
                           
Basic and diluted earnings per share data:
                          
Basic earnings per share
  
$
1.33
        
$
1.19
        
Basic weighted average shares outstanding
   
27,240
         
27,491
     
                           
Diluted earnings per share
  
$
1.22
        
$
1.09
        
Diluted weighted average shares outstanding
   
29,688
         
30,072
     
 

Condensed Consolidated Balance Sheets
(in thousands, except par values)
(unaudited)

   
October 29, 2005
  
January 29, 2005
  
ASSETS
          
Cash and cash equivalents
 
$
15,570
  
$
40,455
  
Merchandise inventories, net
    
386,943
   
281,588
 
Current deferred taxes
    
23,549
   
24,031
 
Prepaid expenses and other current assets
    
29,652
   
22,278
 
Total current assets
    
455,714
   
368,352
 
               
Property, equipment and leasehold improvements, net
    
238,821
   
212,179
 
Goodwill
    
79,353
   
79,353
 
Intangible asset
    
14,910
   
14,910
 
Other non-current assets, net
    
14,461
   
12,205
 
Total assets
 
$
803,259
  
$
686,999
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
Accounts payable
 
$
112,832
  
$
74,957
  
Income taxes payable
    
2,469
   
11,024
 
Current portion of debt obligations
    
72
   
130
 
Accrued expenses and other current liabilities
    
68,017
   
57,080
 
Total current liabilities
   
183,390
   
143,191
 
               
Debt obligations
    
76,460
   
3,048
 
Deferred taxes
    
9,912
   
11,527
 
Other long-term liabilities
   
55,779
   
47,960
 
Total liabilities
    
325,541
   
205,726
 
               
Commitments and contingencies
              
               
Common stock, par value $0.01, 75,000 shares authorized, 32,633 and 32,107 shares issued, respectively
    
326
   
321
 
Additional paid-in capital
    
405,990
   
396,229
 
Less treasury stock - at cost, 6,448 and 4,625 shares, respectively
    
(143,515
)
  
(94,828
)
Minimum pension liability adjustment
    
(451
)
  
(451
)
Retained earnings
    
215,368
   
180,002
 
Stockholders' equity
   
477,718
   
481,273
 
Total liabilities and stockholders' equity
 
$
803,259
  
$
686,999
  



Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

   
Thirty-Nine
  
Thirty-Nine
  
   
Weeks Ended
  
Weeks Ended
  
   
October 29, 2005
  
October 30, 2004
  
Cash flows from operating activities:
          
Net income
  
$
36,181
  
$
32,778
  
Adjustments to reconcile net income to net cash provided by operating activities:
              
Depreciation and amortization
   
30,043
   
26,724
 
Deferred income taxes
    
(1,133
)
  
3,773
 
Amortization of debt issue costs
    
335
   
335
 
Provision for bad debts
   
-
   
311
 
Deferred stock compensation
    
592
   
173
 
Proceeds from sale of proprietary credit card portfolio, net
    
-
   
34,764
 
Construction allowances received from landlords
    
9,583
   
2,058
 
Changes in operating assets and liabilities:
              
Decrease in accounts receivable and retained interest in receivables sold
    
-
   
2,880
 
Increase in merchandise inventories
    
(105,355
)
  
(99,563
)
(Increase) decrease in other assets
   
(8,549
)
  
5,323
 
Increase in accounts payable and other liabilities
    
38,493
   
43,101
 
Total adjustments
   
(35,991
)
  
19,879
 
Net cash provided by operating activities
    
190
   
52,657
 
 
              
Cash flows from investing activities:
              
Additions to property, equipment and leasehold improvements
    
(58,492
)
  
(32,260
)
Proceeds from retirement of fixtures and equipment
    
391
   
16
 
Net cash used in investing activities
    
(58,101
)
  
(32,244
)
 
              
Cash flows from financing activities:
              
Proceeds from (payments on):
              
Revolving credit facility, net
    
73,461
   
34,210
 
Finance lease obligations
    
-
   
1,650
 
Repurchases of common stock
    
(48,687
)
  
(61,701
)
Debt obligations
    
(107
)
  
(832
)
Exercise of stock options
   
9,174
   
6,392
 
Payments of cash dividends
    
(815
)
  
-
 
Net cash provided by (used in) financing activities
    
33,026
   
(20,281
)
               
Net increase (decrease) in cash and cash equivalents
   
(24,885
)
  
132
 
Cash and cash equivalents:
              
Beginning of period
    
40,455
   
14,733
 
End of period
  
$
15,570
  
$
14,865
  
Supplemental disclosures:
              
Interest paid
  
$
1,737
  
$
1,319
  
Income taxes paid
  
$
27,499
  
$
8,189