<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-5256
----------------------------------------------------
GERBER CHILDRENSWEAR, INC.
(Exact name of registrant as specified in its charter)
----------------------------------------------------
Delaware 62-1624764
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
----------------------------------------------------
7005 Pelham Road
Greenville, SC 29615
(Address of principal executive offices)
(864) 987-5200
(Registrant's telephone number, including area code)
----------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed 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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES [ ] NO
As of August 10, 2000, there were outstanding 8,271,739 shares of Common Stock
and 8,692,315 shares of Class B Common Stock.
<PAGE> 2
GERBER CHILDRENSWEAR, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of July 1, 2000,
July 3, 1999 and December 31, 1999............................... 1
Condensed Consolidated Statements of Income and
Comprehensive Income for the quarters ended July 1, 2000 and
July 3, 1999 and for the six months ended July 1, 2000 and
July 3, 1999..................................................... 2
Condensed Consolidated Statements of Cash Flows for the six
months ended July 1, 2000 and July 3, 1999...................... 3
Notes to Condensed Consolidated Financial Statements............ 4-7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results Of Operations....................................... 8-11
Item 3 - Quantitative and Qualitative Disclosures about Market Risk...... 11
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders............. 12
Item 6 - Exhibits and Reports on Form 8-K................................ 12
Signatures............................................................... 13
Exhibit - Financial Data Schedule........................................ 14
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GERBER CHILDRENSWEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED) (NOTE)
JULY 1, JULY 3, DECEMBER 31,
2000 1999 1999
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ................................ $ 14,960 $ 4,328 $ 17,503
Accounts receivable, net ................................. 36,944 35,987 37,261
Inventories .............................................. 78,762 94,641 65,286
Deferred income taxes .................................... 4,203 4,603 3,100
Other .................................................... 2,245 2,240 1,831
-------- -------- --------
Total current assets ............................... 137,114 141,799 124,981
-------- -------- --------
Property, plant and equipment ................................ 42,915 35,228 39,149
Less accumulated depreciation ............................ 14,559 9,920 12,273
-------- -------- --------
28,356 25,308 26,876
-------- -------- --------
Other Assets
Excess of cost over fair value of net assets acquired, net 17,563 19,061 18,395
Other .................................................... 8,794 7,964 8,172
-------- -------- --------
Total other assets ................................. 26,357 27,025 26,567
-------- -------- --------
$191,827 $194,132 $178,424
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable ......................................... $ 13,976 $ 17,629 $ 9,239
Accrued expenses ......................................... 19,064 16,244 15,155
Revolving credit loan payable ............................ -- 11,150 --
Current portion of long-term debt and capital leases ..... 6,674 6,544 6,686
Income tax payable ....................................... 4,785 5,018 3,054
-------- -------- --------
Total current liabilities .......................... 44,499 56,585 34,134
-------- -------- --------
Non-Current Liabilities
Long-term debt ........................................... 9,501 16,185 12,843
Other non-current liabilities ............................ 20,579 17,667 19,521
-------- -------- --------
Total non-current liabilities ...................... 30,080 33,852 32,364
-------- -------- --------
Shareholders' Equity ......................................... 117,248 103,695 111,926
-------- -------- --------
$191,827 $194,132 $178,424
======== ======== ========
</TABLE>
Note: The amounts were derived from the audited financial statements at that
date.
See accompanying notes
1
<PAGE> 4
GERBER CHILDRENSWEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
------------------------------------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
------- ------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales .................................. $58,345 $58,768 $118,834 $125,053
Cost of sales .............................. 45,125 44,574 89,369 92,415
------- ------- -------- --------
Gross margin ............................... 13,220 14,194 29,465 32,638
Selling, general and administrative expenses 10,044 10,254 20,166 20,642
------- ------- -------- --------
Income before interest and income taxes .... 3,176 3,940 9,299 11,996
Interest expense, net of interest income ... 9 543 135 1,198
------- ------- -------- --------
Income before income taxes ................. 3,167 3,397 9,164 10,798
Provision for income taxes ................. 824 1,182 2,902 3,814
------- ------- -------- --------
Net income ................................. 2,343 2,215 6,262 6,984
Foreign currency translation ........... (70) (827) (916) (2,246)
------- ------- -------- --------
Comprehensive income ....................... $ 2,273 $ 1,388 $ 5,346 $ 4,738
======= ======= ======== ========
Earnings per common share ................ $ .14 $ .13 $ .37 $ .42
Earnings per common share - diluted ...... $ .12 $ .11 $ .31 $ .35
Denominator
Weighted average shares - basic ............ 16,792 16,621 16,773 16,599
Effect of dilutive securities:
Warrants ................................. 2,958 2,958 2,958 2,958
Nonvested stock/stock options ............ 144 349 167 373
------- ------- -------- --------
Adjusted weighted average shares - diluted . 19,894 19,928 19,898 19,930
======= ======= ======== ========
</TABLE>
See accompanying notes
2
<PAGE> 5
GERBER CHILDRENSWEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-----------------------
JULY 1, JULY 3,
2000 1999
-------- --------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income ........................................ $ 6,262 $ 6,984
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ................... 3,111 3,030
Other ........................................... (1,986) (888)
Changes in assets and liabilities
Accounts receivable, net .................... 142 241
Inventories ................................. (13,565) (7,922)
Accounts payable ............................ 4,759 5,876
Other assets and liabilities, net ........... 6,459 4,488
-------- --------
5,182 11,809
-------- --------
INVESTING ACTIVITIES
Purchases of property, plant and equipment ........ (4,209) (3,048)
Proceeds from sale of property, plant and equipment 95 50
-------- --------
(4,114) (2,998)
-------- --------
FINANCING ACTIVITIES
Borrowings under revolving credit agreement ....... -- 37,500
Repayments under revolving credit agreement ....... -- (41,650)
Principal payments on long-term borrowings
and capital leases ............................... (3,346) (1,714)
Other ............................................. (74) (34)
-------- --------
(3,420) (5,898)
-------- --------
Effect of exchange rate changes on cash ........... (191) (365)
-------- --------
Net (decrease) increase in cash and cash equivalents .. (2,543) 2,548
Cash and cash equivalents at beginning of period ...... 17,503 1,780
-------- --------
Cash and cash equivalents at end of period ............ $ 14,960 $ 4,328
======== ========
</TABLE>
See accompanying notes
3
<PAGE> 6
GERBER CHILDRENSWEAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements included herein have
been prepared by Gerber Childrenswear, Inc. ("the Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations; however, the Company believes
that the disclosures are adequate to make the information presented not
misleading. The interim financial statements are unaudited and, in the opinion
of management, contain all adjustments necessary to present fairly the Company's
financial position and the results of its operations and cash flows for the
interim periods presented. It is suggested that these interim financial
statements be read in conjunction with the Company's audited consolidated
financial statements and notes thereto included in the Company's 1999 Annual
Report on Form 10-K.
2. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. The financial
statements of all foreign subsidiaries were prepared in their respective local
currencies and translated into United States dollars based on the current
exchange rate at the end of the period for the balance sheet and a weighted
average rate for the periods on the statements of income. All significant
intercompany balances have been eliminated in consolidation.
3. SEASONALITY OF BUSINESS
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for a full fiscal year, due
to the seasonal nature of some of the Company's products and retailer initiated
promotions.
4. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4
<PAGE> 7
GERBER CHILDRENSWEAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. INVENTORIES
Inventories consist of the following (in thousands):
July 1, 2000 July 3, 1999 December 31, 1999
------------ ------------ -----------------
Raw materials $10,557 $13,694 $10,058
Work in process 15,339 15,191 12,583
Finished goods 52,866 65,756 42,645
------ ------ ------
$78,762 $94,641 $65,286
======= ======= =======
6. INCOME TAXES
The Company's effective income tax rate of 26.0% and 31.7% for the
quarter and the six months ended July 1, 2000, respectively, was lower than the
statutory rates due to the impact in 2000 of foreign earnings, certain of which
are taxed at lower rates than in the United States, partially offset by goodwill
amortization, most of which is not deductible for federal and state income tax
purposes.
7. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). This statement established
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Adoption of FAS 133 is not anticipated to have a material impact on the
Company's financial statements.
5
<PAGE> 8
GERBER CHILDRENSWEAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
The Company operates in two business segments: apparel and hosiery. The
apparel segment consists of the production and sale of infant and toddler's
sleepwear, playwear, underwear, bedding, bath, cloth diapers and other products
to mass merchandise outlets in the United States under the Gerber brand and
other labels. The hosiery segment consists of the production and sale of sport
socks under the Wilson, Coca-Cola, Converse and Dunlop names to major retailers
in the United States and/or Europe.
Net sales, income before interest and income taxes, depreciation and
amortization, and capital additions are reported based on the operations of each
business segment or geographic region. Assets are those used exclusively in the
operations of each business segment or geographic region, or which are allocated
when used jointly. The following table sets forth certain unaudited results of
operations and other financial information of the Company by business segment
and geographic region (in thousands):
<TABLE>
<CAPTION>
BUSINESS SEGMENTS FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
------------------------------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales:
Apparel ................................. $38,559 $40,349 $ 82,584 $ 89,787
Hosiery ................................. 19,786 18,419 36,250 35,266
------- ------- -------- --------
Total net sales ............................. $58,345 $58,768 $118,834 $125,053
======= ======= ======== ========
Income before interest and income taxes:
Apparel ................................. $ 678 $ 1,704 $ 4,720 $ 8,711
Hosiery ................................. 2,498 2,236 4,579 3,285
------- ------- -------- --------
Total income before interest and income taxes $ 3,176 $ 3,940 $ 9,299 $ 11,996
======= ======= ======== ========
Depreciation and amortization:
Apparel ................................. $ 733 $ 715 $ 1,491 $ 1,462
Hosiery ................................. 801 776 1,620 1,568
------- ------- -------- --------
Total depreciation and amortization ......... $ 1,534 $ 1,491 $ 3,111 $ 3,030
======= ======= ======== ========
Capital additions:
Apparel ................................. $ 1,208 $ 1,750 $ 2,340 $ 2,569
Hosiery ................................. 1,751 412 1,869 479
------- ------- -------- --------
Total capital additions ..................... $ 2,959 $ 2,162 $ 4,209 $ 3,048
======= ======= ======== ========
</TABLE>
6
<PAGE> 9
GERBER CHILDRENSWEAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS (CONTINUED)
JULY 1, JULY 3, DECEMBER 31,
2000 1999 1999
-------- -------- --------
Assets:
Apparel .......................... $138,785 $144,203 $129,897
Hosiery .......................... 53,042 49,929 48,527
-------- -------- --------
Total assets ......................... $191,827 $194,132 $178,424
======== ======== ========
Inventories (included in assets):
Apparel .......................... $ 70,694 $ 87,828 $ 57,538
Hosiery .......................... 8,068 6,813 7,748
-------- -------- --------
Total inventories (included in assets) $ 78,762 $ 94,641 $ 65,286
======== ======== ========
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
------------------------------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales:
United States ........................... $53,367 $53,359 $108,186 $113,364
All other ............................... 4,978 5,409 10,648 11,689
------- ------- -------- --------
Total net sales ............................. $58,345 $58,768 $118,834 $125,053
======= ======= ======== ========
Income before interest and income taxes:
United States ........................... $ 2,728 $ 3,556 $ 8,070 $ 10,686
All other ............................... 448 384 1,229 1,310
------- ------- -------- --------
Total income before interest and income taxes $ 3,176 $ 3,940 $ 9,299 $ 11,996
======= ======= ======== ========
</TABLE>
JULY 1, JULY 3, DECEMBER 31,
2000 1999 1999
-------- -------- --------
Assets:
United States..... $167,296 $170,445 $153,820
All other ........ 24,531 23,687 24,604
-------- -------- --------
Total assets ......... $191,827 $194,132 $178,424
======== ======== ========
7
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SAFE-HARBOR STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
This report includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, which represent
the Company's expectations or beliefs concerning future events that involve
known and unknown risks and uncertainties, including, without limitation, those
associated with the effect of national and regional economic conditions, the
overall level of consumer spending, the performance of the Company's products
within the prevailing retail environment, customer acceptance of both new
designs and newly-introduced product lines, competition, financial difficulties
encountered by customers and Year 2000 compliance by the Company and third
parties. All statements other than statements of historical facts included in
this quarterly report, including, without limitation, the statements under
Management's Discussion and Analysis of Financial Condition and Results of
Operations, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statement are reasonable, it
can give no assurance that such expectations will prove to have been correct and
actual results, performance or events could differ materially from those
expressed in such statements.
RESULTS OF OPERATIONS
BUSINESS SEGMENT DATA
For information regarding net sales, income before interest and income
taxes and assets by industry segment, reference is made to the information
presented in Note 8 "Business Segments and Geographic Areas" to the condensed
consolidated financial statements.
SECOND QUARTER ENDED JULY 1, 2000 COMPARED TO SECOND QUARTER ENDED JULY 3, 1999
Net sales. Apparel net sales were $38.6 million for the second quarter
of 2000, a decrease of $1.8 million or 4.4% below net sales of $40.3 million for
the second quarter of 1999. The Apparel sales decline was due to a reduction in
sales of seasonal products as well as lower closeouts and irregular sales in
2000. Hosiery net sales were $19.8 million in the second quarter of 2000, an
increase of $1.4 million or 7.4% above net sales of $18.4 million for the second
quarter of 1999. The 2000 increase was due to both higher unit sales and
increased sales of multi-packs, partially offset by a drop in the average
exchange rate between the Irish Punt and the U.S. Dollar in the translation of
the Irish operations.
Gross margin. Gross margin as a percentage of net sales decreased from
24.2% in 1999 to 22.7% in 2000. The decrease in gross margin in 2000 was due to
unexpected losses on certain imported Apparel merchandise.
Selling, general and administrative expenses. Selling, general and
administrative expenses ("SG&A") decreased in absolute dollars and as a
percentage of net sales to 17.2% for the second quarter of 2000, from 17.4% for
the second quarter of 1999. The percentage decrease was due to a lower
percentage level of advertising expenditures, professional fees, and
miscellaneous other expenses in 2000.
8
<PAGE> 11
Income before interest and income taxes. Apparel income before interest
and income taxes ("EBIT") was $0.7 million in the second quarter of 2000
compared to $1.7 million in the second quarter of 1999. The decrease in Apparel
EBIT in 2000 was the result of unexpected losses on certain imported
merchandise. Hosiery EBIT was $2.5 million in the second quarter of 2000
compared with $2.2 million in the second quarter of 1999. The increase in
Hosiery EBIT was the result of improved margins due to lower material costs and
a favorable volume mix of products.
Interest expense, net of interest income. Interest expense, net was
$9,000 in the second quarter of 2000 compared to $543,000 in the second quarter
of 1999. The decrease in interest expense, net is due to higher cash balances
maintained in 2000 due to the Company's lower overall inventory levels.
Provision for income taxes. Provision for income taxes was $0.8 million
in the second quarter of 2000 compared to $1.2 million in the second quarter of
1999. The effective tax rate was 26.0% for 2000 compared to 34.8% for 1999. The
Company's effective income tax rate reflects the impact of foreign earnings,
certain of which are taxed at lower rates than in the United States, partially
offset by goodwill amortization, most of which is not deductible for federal and
state income tax purposes.
Net income. As a result of the above, net income for the second quarter
was $2.3 million in 2000 and $2.2 million in 1999.
SIX MONTHS ENDED JULY 1, 2000 COMPARED TO SIX MONTHS ENDED JULY 3, 1999
Net sales. Apparel net sales were $82.6 million for the first six
months of 2000, a decrease of $7.2 million or 8.0% below net sales of $89.8
million for the first six months of 1999. The Apparel sales decline was
primarily due to a reduction in sales of seasonal products as well as a general
decline in closeouts and irregular sales in 2000. Hosiery net sales were $36.3
million for the first six months of 2000, an increase of $1.0 million or 2.8%
above net sales of $35.3 million for the first six months of 1999 due to an
increase in unit sales, partially offset by a drop in the average exchange rate
between the Irish Punt and the U.S. Dollar in the translation of the Irish
operations.
Gross margin. Gross margin as a percentage of net sales was 24.8% in
2000 and 26.1% in 1999. The decrease in gross margin in 2000 was due to the
Apparel segment's slower than planned return to prior efficiency levels in
manufacturing, higher transitional costs of sourcing a larger percentage of
products offshore, and unexpected losses on certain imported merchandise.
Selling, general and administrative expenses. Selling, general and
administrative expenses ("SG&A") decreased in absolute dollars but as a
percentage of net sales increased to 17.0% for the first six months of 2000 from
16.5% for the same period in 1999. The percentage increase was due to the
Apparel segment's lower sales in 2000.
Income before interest and income taxes. Apparel income before interest
and income taxes ("EBIT") was $4.7 million for the first six months of 2000
compared to $8.7 million for the first six months of 1999. The drop in Apparel
EBIT in 2000 was the result of the reduction in sales combined with a shift in
product mix during the period and unexpected losses on certain imported
merchandise. Hosiery EBIT was $4.6 million for the first six months of 2000
compared
9
<PAGE> 12
with $3.3 million for the first six months of 1999. The increase in Hosiery EBIT
was the result of improved margins due to increased sales, lower material costs,
and a favorable volume mix of products.
Interest expense, net of interest income. Interest expense, net was
$0.1 million for the first six months of 2000 compared to $1.2 million for the
first six months of 1999. The decrease in interest expense, net is due to higher
cash balances maintained in 2000 due to the Company's lower overall inventory
levels.
Provision for income taxes. Provision for income taxes was $2.9 million
for the first six months of 2000 compared to $3.8 million for the first six
months of 1999. The effective tax rate was 31.7% for 2000 compared to 35.3% for
1999. The Company's effective income tax rate reflects the impact of foreign
earnings, certain of which are taxed at lower rates than in the United States,
partially offset by goodwill amortization, most of which is not deductible for
federal and state income tax purposes.
Net income. As a result of the above, net income for the first six
months of 2000 was $6.3 million and $7.0 million in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs are for working capital, capital
expenditures and debt service. The Company has financed its cash needs primarily
through internally generated cash flow, in addition to funds borrowed under the
Company's credit agreement.
For the Apparel segment, working capital requirements vary throughout
the year. Working capital requirements generally increase during the first half
of the year as inventory, primarily blanket sleepers, builds to support peak
shipping periods. The Hosiery segment is less seasonal and, while working
capital requirements tend to increase slightly during the second half of the
year, the variation is small.
Net cash provided by operating activities for the six months ended July
1, 2000 and July 3, 1999 was $5.2 million and $11.8 million, respectively. The
decrease in cash provided by operating activities was primarily due to increases
in inventories. Inventories increased in the first six months of 2000 due to the
seasonality of the Apparel segment's business. To support third and fourth
quarter sales volumes of certain seasonal products (such as blanket sleepers),
the Apparel segment builds inventory in the first six months of each year. The
inventory increase in 1999 was partially offset by higher sales during the
period and ongoing efforts to reduce excessive inventories through improvements
in production planning and procurement practices.
Capital expenditures were $4.2 million and $3.0 million for the first
six months of 2000 and 1999, respectively. These expenditures consisted
primarily of building/leasehold improvements, normal replacement of
manufacturing equipment, purchases of office equipment and upgrades of
information systems.
Net cash used in financing activities was $3.4 million and $5.9 million
for the first six months of 2000 and 1999, respectively. Based on the cash
provided by operating activities in the first six months of 2000 and 1999, the
Company made repayments on the Company's revolving credit agreement and/or other
long-term borrowing arrangements.
10
<PAGE> 13
The Company believes that cash generated from operations, together with
amounts available under its credit facilities, will be adequate to meet its
working capital, capital expenditures and debt service requirements for the next
twelve months.
INFLATION
In general, costs are affected by inflation and the Company may
experience the effects of inflation in future periods. The Company does not
currently consider the impact of inflation to be significant in the businesses
or countries in which the Company operates.
RECENT ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). This statement established
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Adoption of FAS 133 is not anticipated to have a material impact on the
Company's financial statements.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not utilize derivative financial or commodity based
instruments for trading or for speculative purposes but does utilize them in the
regular course of business. A review of the Company's financial instruments and
risk exposures at July 1, 2000 revealed that the Company had exposure to
interest rate and foreign currency exchange rate risks. The Company performed
sensitivity analysis at December 31, 1999 to assess the potential effect of a
change in the interest rate and a change to the foreign currency exchange rates
and concluded that near-term changes in either should not materially affect the
Company's financial position, results of operations or cash flows. The Company
has experienced no significant changes in these financial instruments or risk
exposures during the first six months of 2000 and thus believes that the
Company's year-end assessment is still appropriate at July 1, 2000.
11
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on May 16, 2000,
for the following purposes: (i) to elect seven directors to the Board of
Directors to serve a one year term and until their successors are duly elected
and qualified, and (ii) to ratify the re-appointment of Ernst & Young LLP as
independent accountants for 2000.
The following table sets forth the number of votes "For" and "Withheld"
with respect to each nominee:
VOTES
-----------------------------------
NOMINEE FOR WITHHELD
Edward Kittredge 6,748,894 20,502
Richard L. Solar 6,748,894 20,502
Richard M. Cashin 6,748,894 20,502
Lawrence R. Glenn 6,748,894 20,502
James P. Manning 6,748,894 20,502
Joseph Medalie 6,748,894 20,502
John D. Weber 6,748,894 20,502
The appointment of Ernst & Young LLP as independent accountants for
2000 was approved, with 6,756,133 votes "For", 10,863 votes cast "Against" and
2,400 abstentions.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K - None
12
<PAGE> 15
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GERBER CHILDRENSWEAR, INC.
(Registrant)
DATE: August 11, 2000 By: /s/ Edward Kittredge
-------------------------
Edward Kittredge
Chairman, Chief Executive Officer
and President
(Principal Executive Officer)
DATE: August 11, 2000 By: /s/ Richard L. Solar
---------------------------------
Richard L. Solar
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
DATE: August 11, 2000 By: /s/ David E. Uren
------------------------------
David E. Uren
Vice President of Finance, Secretary
and Treasurer
(Principal Accounting Officer)
13
