<PAGE> 1
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended April 30, 1994
---------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ---------------- to ---------------
Commission File Number 1-7340
----------------
KELLWOOD COMPANY
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-2472410
- - ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 KELLWOOD PARKWAY, P.O. BOX 14374, ST. LOUIS, MO 63178
- - --------------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314)576-3100
-------------------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, par value $.01 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
==============================================================================
Indicate by check mark whether the registrant (1) has filed all
reports required 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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
At June 27, 1994, Kellwood Company had 21,050,831 shares of Common
Stock, par value $.01, outstanding. While it is difficult to
determine the number of shares owned by nonaffiliates, the Company
estimates that the aggregate market value of the Common Stock on
June 27, 1994 (based upon the closing price of these shares on the
New York Stock Exchange) held by nonaffiliates was approximately
$434,173,000.
- - ------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareowners for fiscal year ended April 30, 1994
(Item 1 in Part I; Items 5, 6, 7 and 8 in Part II, and Part IV).
Proxy Statement for Annual Meeting of Shareowners to be held on
August 25, 1994 (Items 10, 11, 12 and 13 in Part III).
<PAGE> 2
PART I
ITEM 1. BUSINESS
(a) Kellwood Company and its subsidiaries (the "Company")
manufacture and market apparel and related soft goods. Kellwood
Company was founded in 1961 as the successor by merger of fifteen
independent suppliers to Sears.
During the second half of the 1980's, the Company
implemented a business strategy to expand its branded label
products, broaden its customer base, increase its channels of
distribution and further develop its global product sourcing
capability. Since 1985, Kellwood has acquired the following 12
domestic companies.
<TABLE>
<CAPTION>
Company Name Date of Acquisition
------------ -------------------
<S> <C>
* Cape Cod-Cricket Lane, Inc.(1) . . . . . . . . . . March, 1985
* Parsons Place Apparel Company, Ltd. (Sag Harbor)(1) June, 1986
* E Z Sportswear (Melrose)(1) . . . . . . . . . . . . December, 1986
* En Chante, Inc.(1) . . . . . . . . . . . . . . . . December, 1986
* Robert Scott Ltd., Inc. (SBH Group)(1) . . . . . . July, 1987
David Brooks Ltd., Inc.,(1)
and Andrew Harvey Ltd.(1)
* American Recreation Products, Inc. . . . . . . . . November, 1988
* Slumberjack, Inc. . . . . . . . . . . . . . . . . . September, 1989
* Crowntuft Manufacturing Corp.(1) . . . . . . . . . October, 1989
* decorp INC.(1) . . . . . . . . . . . . . . . . . . October, 1990
* California Ivy, Inc.. . . . . . . . . . . . . . . . July, 1992
* A. J. Brandon, Inc.(1). . . . . . . . . . . . . . . December, 1992
* Goodman Knitting Co., Inc.(1) . . . . . . . . . . . July, 1993
<FN>
(1) Subsequent to acquisition, these companies were
liquidated and consolidated into Kellwood Company
as separate divisions. The purpose of these
consolidations was to simplify the Company's
organizational structure, and has no impact on the
operations of these divisions.
</TABLE>
These companies are principally marketers of branded
apparel except for American Recreation Products, Inc. and
Slumberjack which are manufacturers and marketers of branded
camping soft goods and Crowntuft Manufacturing Corp. which is a
vertically integrated manufacturer of chenille robes.
In addition to its domestic acquisitions, in the early
1980's, the Company acquired Smart Shirts Limited of Hong Kong, a
leading shirt and blouse manufacturer in the Far East. Smart
Shirts has, since its acquisition, continued to diversify its
manufacturing capabilities from its principal base of Hong Kong to
the People's Republic of China, Sri Lanka, Saipan and Costa Rica.
Kellwood has invested $231 million acquiring the 12 U.S.
companies above and companies in Saipan and Costa Rica since the
inception of the acquisition program that began in 1985. These
investments were primarily financed by cash provided from
operations and short-term borrowings. Kellwood's short-term
borrowings related to these acquisitions were subsequently replaced
with long-term notes due insurance companies or repaid with cash
repatriated from Kellwood's Far East operations, other cash
provided by operations, or cash provided by the public sale of
common stock. The total investment in subsidiaries was
approximately $28,324,000, $42,266,000, and $10,301,000 for 1994,
1993 and 1992, respectively.
As a result of the above business strategy, the Company
has redirected its focus from primarily the manufacturing of
private label apparel and home fashions for Sears to a marketing-
driven emphasis on branded apparel and related soft goods. The
Company's acquisition strategy has further diversified its customer
base and has broadened its channels of distribution. As a result
of these efforts, sales to Sears declined to 9% of total sales in
fiscal year 1994, compared to 50% in fiscal year 1985.
(b) All of the Company's operations are in the apparel and
related soft goods industry.
-2-
<PAGE> 3
(c) The Company manufactures and markets apparel and other
soft goods products made from cloth or fabric or knitted from yarn.
These products are manufactured primarily domestically and in the
Far East.
(i) The Company's products include diversified lines of
men's, women's and children's clothing, furnishings for the home,
sleeping bags, and other soft goods. Products are mainly sold to
retailers under either the Company's or customer's brands and
labels.
(ii) The Company anticipates no significant change in
products or new industry segments which would require a material
investment. However, business acquisitions within the apparel and
related soft goods industry are continually being considered, and
it is anticipated that external and internal growth will generate
increasing requirements for capital. The Company has negotiated a
$120 million fully committed revolving credit agreement to replace
its current $60 million agreement which expired on July 1, 1994.
The combined operating, cash and equity position of the Company
should continue to provide the capital flexibility necessary to
fund future opportunities as well as to meet existing obligations.
(iii) The Company purchases the majority of its raw
materials directly from numerous textile mills and yarn producers
and converters. The Company has not experienced difficulty in
obtaining raw materials essential to its business.
(iv) The Company holds patents covering various aspects
of its products, the machinery used to manufacture its products,
and various manufacturing processes. The Company is a licensee of
certain trade names and patented machines and processes. The
expiration, or invalidation, of any of the patents or licenses
would not, in the opinion of management, have a material effect
upon the continuation of business.
(v) Although specific styles are seasonal, the Company's
various product lines are manufactured and sold on a year-round
basis. Products are primarily manufactured and sold prior to each
of the principal retail selling seasons including spring, summer,
fall and holiday.
(vi) Consistent with the seasonality of specific product
offerings, the Company carries necessary levels of inventory to
meet the anticipated delivery requirements of its customers.
(vii) Approximately $150,130,000 (12%) of the
Company's sales in the fiscal year ended April 30, 1994, were to J.
C. Penney Company, Inc. ("J. C. Penney"). No other customer
accounts for more than 10% of the Company's revenues.
Approximately $112,236,000 (9%) of the Company's sales in the
fiscal year ended April 30, 1994, were to Sears, Roebuck and
Co. ("Sears"). Other information relating to J. C. Penney and
Sears is set forth in the Company's 1994 Annual Report to
Shareowners, under the caption "Significant Customers" in the Notes
to Consolidated Financial Statements, which information is
incorporated herein by reference. The Company's management
believes that the relationships with J. C. Penney and Sears will
continue into the foreseeable future.
(viii) Approximately 30% of the Company's domestic
sales are produced under contracts for distribution on a seasonal
basis. It is normal for the merchandise manufactured under these
contracts to be sold within 12 months after production. Because of
this, the Company does not believe backlog is important for this
merchandise. In addition to these contracts, the backlog for
domestic operations totalled approximately $302 million as of April
30, 1994 ($209 million - 1993). The backlog for Far East
operations totalled approximately $90 million ($89 million - 1993).
All of the Company's backlog is expected to be filled within 12
months.
(ix) Government contracts or subcontracts with the
Company are not material.
(x) The Company has substantial competition from
numerous manufacturers and marketers, but accurate statistics
relative to the competitive position of the Company are not
available.
-3-
<PAGE> 4
(xi) The Company has a continuing program for the purpose
of improving its products and production machinery. The Company is
not engaged in any material customer sponsored research and
development programs. The dollar amount spent in the research and
development activities during fiscal 1994, 1993 and 1992 was not
material.
(xii) In the opinion of management, there will be no
material effect on the Company resulting from compliance with any
federal, state or local provisions which have been enacted or
adopted regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment.
(xiii) At the end of fiscal 1994, there were
approximately 15,500 people employed by the Company. Substantially
all of the work force is non-union, and the Company considers its
relations with its employees to be satisfactory.
(d) Except for its Far East operations, the Company's foreign
activities including foreign manufacturing operations and customers
have not been material. The Company owns all of the outstanding
shares of Smart Shirts Limited, a Hong Kong corporation engaged in
apparel manufacturing, and other Far East companies under Smart
Shirts' management. The sales, operating profit, and identifiable
assets attributable to each geographic area is set forth in the
Company's 1994 Annual Report to Shareowners, under the caption
"Industry Segment and Geographic Area Information" in the Notes to
Consolidated Financial Statements, which note is incorporated
herein by reference. The risk attendant to the Company's Far East
operations is slightly greater than that of domestic operations
primarily due to quota allocations and political instability.
Utilization of existing quota rights and diversification of Far
East manufacturing capacity to various countries help to mitigate
these risks.
ITEM 2. PROPERTIES
At April 30, 1994, the Company operated 32 production plants
and various distribution facilities. Domestic business operated 19
plants in eight states, two plants in the Dominican Republic, one
plant in Honduras and one plant in Canada. These domestically
managed plants aggregated to approximately 3,350,000 square feet
and were operating at an estimated 87% of capacity at April 30,
1994. Nineteen of these domestically managed plants were primarily
producing private label goods and four were primarily producing
branded goods. The Company's Far East subsidiaries operated nine
plants which aggregated to approximately 800,000 square feet and
were operating at an estimated 90% of capacity. Far East
subsidiaries manage operations in Hong Kong, Sri Lanka, Saipan,
Costa Rica and China.
In management's opinion, current facilities generally are well
maintained and provide adequate production capacity for future
operations. However, management continues to evaluate the need to
reposition the Company's portfolio of businesses and facilities to
meet the needs of the changing markets it serves and reflect the
international business environment.
The Company's operating facilities are primarily leased under
long-term capital leases with renewal options at decreasing
rentals. Certain facilities are leased under operating leases that
generally contain renewal options. The Company also leases its
corporate space in St. Louis County, Missouri and major showrooms
in New York City, New York; Chicago, Illinois; Dallas, Texas; and
Los Angeles, California.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in several routine lawsuits incidental
to the Company's business. Management and general counsel are of
the opinion that the ultimate disposition of such litigation should
have no material adverse effect on the Company's financial position
or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-4-
<PAGE> 5
<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JUNE 27, 1994
<CAPTION>
Name of Office and Employment During
Officer Age the Last Five Fiscal Years
- - -------------------- --- --------------------------------------
<S> <C> <C>
William J. McKenna 67 Chairman, President and Chief
Executive Officer since May 1,
1991; President and Chief Executive
Officer (1984-1991)
George K. Hansen 64 Executive Vice President Operations
since February 26, 1991; Chairman
and Chief Executive Officer of
Bayly Corp. (1987-1991)
Harry B. Holding 57 Executive Vice President Marketing
since May 30, 1991; President and
Chief Executive Officer of the
Hartwell Company (1967-1991)
James C. Jacobsen 59 Executive Vice President
Administration since May 31, 1989;
Senior Vice President Finance-
Administration (1989)
Hal J. Upbin 55 Executive Vice President Corporate
Development since May 28, 1992;
Vice President Corporate
Development (1990-1992); President
of American Recreation Products,
Inc. (1988-1992)
F. Lee Fox 59 Vice President Human Resources
since May 31, 1990; Director of
Personnel (1982-1990)
Lawrence E. Hummel 51 Vice President Controller since
February 25, 1992; Controller
(1983-1992)
Roger D. Joseph 52 Vice President Treasurer since
February 25, 1992; Treasurer (1986-
1992)
Robert E. Madden 54 Vice President since August 24,
1993; Chief Executive Officer of
SBH Group (1987-1993)
Leon M. McWhite 52 Vice President since March 24,
1994; President of Kellwood
Lingerie/Activewear (1989-1994)
Verner L. Page 63 Vice President since February 26,
1991; Vice President, Catalog
Merchandising and Marketing for
Sears, Roebuck and Co. (1989-1990)
Thomas H. Pollihan 44 Vice President, Secretary and
General Counsel since May 27, 1993;
General Counsel and Secretary
(1989-1993)
Paul M. Rivard 52 Vice President Information Services
since May 27, 1993; Director of
Management Information Services
(1990-1993); Computer Services
Director (1984-1990)
John A. Turnage 48 Vice President Manufacturing and
Sourcing since February 28, 1989
</TABLE>
-5-
<PAGE> 6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The information required by this Item is set forth in the
Company's 1994 Annual Report to Shareowners, at the "Financial
Highlights" page inside the front cover under the caption "Common
Stock Data," which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in the
Company's 1994 Annual Report to Shareowners, at page 20 under the
caption "Supplemental Selected Financial Data," which information
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is set forth in the
Company's 1994 Annual Report to Shareowners, at pages 21 to 22
under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which information
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the
report thereon of Price Waterhouse dated June 1, 1994, appearing at
pages 10 to 22 of the Company's 1994 Annual Report to Shareowners,
are incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this Item regarding
directors is set forth in the Company's Proxy Statement for the
1994 Annual Meeting of Shareowners, at pages 3 and 4 under the
captions "Nominees for Election to Serve Until 1996" and "Directors
Continuing to Serve Until 1995," which information is incorporated
herein by reference.
(b) Reference is made to "Executive Officers of the
Registrant as of June 27, 1994" in Part I after Item 4.
(c) The information called for with respect to the
identification of certain significant employees is not applicable
to the registrant.
(d) There are no family relationships between the
directors and executive officers listed above. There are no
arrangements nor understandings between any named officer and any
other person pursuant to which such person was selected as an
officer.
(e) Each of the officers named in Part I was elected to
serve in the office indicated until the first meeting of the Board
of Directors following the Annual Meeting of Shareowners in August
1994 and until his successor is elected and qualified.
(f) There are no legal proceedings involving directors,
nominees for directors, or officers.
The information required by this Item regarding compliance
with Section 16(a) of the Exchange Act is set forth in the
Company's Proxy Statement for the 1994 Annual Meeting of
Shareowners at page 13 under the caption "Compliance with
-6-
<PAGE> 7
Section 16(a) of the Exchange Act," which information is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the
Company's Proxy Statement for the 1994 Annual Meeting of
Shareowners, at pages 6 through 13 under the captions "Compensation
of Executive Officers," "Retirement Program," and "Other Officer
Agreements," which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is set forth in the
Company's Proxy Statement for the 1994 Annual Meeting of
Shareowners, at pages 2 and 5 under the captions "Security
Ownership of Certain Beneficial Owners" and "Management Ownership
of the Company's Stock," which information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the
Company's Proxy Statement for the 1994 Annual Meeting of
Shareowners, at page 4 under the caption "Transactions Since May 1,
1993 in Which Nominees for Directors, Directors, Officers and Major
Shareowners Had Interests," which information is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements, together with the
report thereon of Price Waterhouse dated June 1, 1994, appearing at
pages 10 to 22 of the 1994 Annual Report to Shareowners are
incorporated by reference in this Form 10-K. With the exception of
the aforementioned information and information incorporated in
Items 1, 5, 6, 7 and 8, the 1994 Annual Report to Shareowners is
not to be deemed filed as part of this Form 10-K. The following
financial statement schedule should also be read in conjunction
with the financial statements in such 1994 Annual Report to
Shareowners. Financial statement schedules not included in this
Form 10-K have been omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto. Separate financial statements of 50% or less owned
persons accounted for by the equity method which are not shown
herein have been omitted because, if considered in the aggregate,
they would not constitute a significant subsidiary.
(i) Financial Statements:
Report of Independent Accountants
Consolidated Statement of Earnings, Years Ended
April 30, 1994, 1993 and 1992
Consolidated Balance Sheet, April 30, 1994 and 1993
Consolidated Statement of Cash Flows, Years Ended
April 30, 1994, 1993 and 1992
Consolidated Statement of Shareowners' Equity,
Years Ended April 30, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(ii) Report of Independent Accountants on Financial
Statement Schedule:
-7-
<PAGE> 8
Financial Statement Schedule for the Years Ended
April 30, 1994, 1993 and 1992
Valuation and Qualifying Accounts (Schedule VIII)
Consent of Independent Accountants
(iii) Exhibits:
Exhibits filed as part of this report are listed
below. Certain exhibits have been previously filed
with the Commission and are incorporated herein by
reference.
<TABLE>
<CAPTION>
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- - -------------- -----------
<S> <C>
3.1 - Restated Certificate of Incorporation of Kellwood
Company, as amended, incorporated herein by
reference to Form 10-Q for the quarter ended July
31, 1987, SEC File No. 1-7340.
3.2 - By-Laws, as amended through November 23, 1993,
incorporated herein by reference to Form 10-Q for
the quarter ended October 31, 1993, SEC File No.
1-7340.
4.1 - Note Purchase Agreement dated December 29, 1986,
with exhibits, incorporated herein by reference
to Form 10-Q for the quarter ended January 31,
1987, SEC File No. 1-7340.
4.2 - Indenture between the Registrant and Centerre
Trust Company of St. Louis, and the 9%
Convertible Subordinated Debentures due 1999,
incorporated herein by reference to Registration
Statement on Form S-2, Registration No. 2-93522,
effective October 18, 1984.
4.3 - Note Agreement dated July 1, 1993, incorporated
herein by reference to Form 10-Q for the quarter
ended July 31, 1993, SEC File No. 1-7340.
4.4 - Rights to Acquire Series A Junior Preferred
Stock, pursuant to a Rights Agreement between the
registrant and Centerre Trust Company of St.
Louis, incorporated herein by reference to
Registration Statement on Form 8-A, effective
June 24, 1986 and Amendment dated August 21,
1990, incorporated herein by reference to Form
10-Q for the quarter ended October 31, 1990, SEC
File No. 1-7340.
4.5 - Note Purchase Agreement dated December 1, 1987,
with exhibits, incorporated herein by reference
to Form 10-Q for the quarter ended January 31,
1988, SEC File No. 1-7340.
4.6 - Note Purchase Agreement dated December 15, 1989,
with exhibits, incorporated herein by reference
to the Form 10-Q for the quarter ended January
31, 1990, SEC File No. 1-7340.
-8-
<PAGE> 9
<CAPTION>
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- - -------------- -----------
4.7 - Credit Agreement dated July 1, 1991, with
exhibits, incorporated herein by reference, to
the Form 10-Q for the quarter ended July 31,
1991, SEC File No. 1-7340.
10.1 - Sears Master Agreement and Supplements,
incorporated herein by reference to Registration
Statement on Form S-2, Registration No. 2-93522,
effective October 18, 1984.
10.2* - Employment Agreement dated December 9, 1992,
between Kellwood Company and William J. McKenna,
effective December 1, 1992, incorporated herein
by reference to the Form 10-Q for the quarter
ended January 31, 1993, SEC File No. 1-7340, and
Amendment dated May 28, 1993, effective May 1,
1993, incorporated herein by reference to Form
10-K for the fiscal year ended April 30, 1993,
SEC File No. 1-7340.
10.3* - Form of Employment Agreement dated November 30,
1984, between Kellwood Company and executive
officers, incorporated herein by reference to
Form 10-K for the fiscal year ended April 30,
1985, SEC File No. 1-7340.
10.4* - 1990 Omnibus Incentive Stock Option Plan,
incorporated herein by reference to Exhibit A to
the Company's definitive proxy statement dated
June 28, 1990, SEC File No. 1-7340.
10.5* - Deferred Compensation Retirement Benefit
Agreement dated November 14, 1991, between
Kellwood Company and Harry B. Holding,
incorporated herein by reference to Form 10-K for
the fiscal year ended April 30, 1992, SEC File
No. 1-7340.
10.6* - Death Benefit Compensation Agreement dated
November 14, 1991, between Kellwood Company and
Harry B. Holding, effective July 17, 1991,
incorporated herein by reference to Form 10-K for
the fiscal year ended April 30, 1992, SEC File
No. 1-7340.
10.7* - Corporate Development Incentive Plan of 1986 (As
Amended) formerly the Key Executive Long-Term
Incentive Plan of 1983; filed herewith.
13 - Portions of the Annual Report to Shareowners for
the fiscal year ended April 30, 1994, which are
incorporated by reference at Item 1 in Part I,
Items 5, 6, 7 and 8 in Part II, and Part IV;
filed herewith.
21 - Subsidiaries of the Company
23 - Consent of Independent Accountants, appearing at
page 11 of this report.
24 - Powers of Attorney: Ms. Dickerson and Messrs.
Bentele, Bottum, Conerly, Fung, Kerley, Marcus
and Wenzel; filed herewith.
<FN>
* Denotes management contract or compensatory plan.
</TABLE>
(b) REPORTS ON FORM 8-K:
No reports were filed on Form 8-K during the three months
ended April 30, 1994.
-9-
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
KELLWOOD COMPANY
Dated: July 21, 1994 /s/ Thomas H. Pollihan
------------------------------
Thomas H. Pollihan
Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following on
behalf of Kellwood Company and in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ William J. McKenna Director, Chairman of the July 21, 1994
- - ------------------------- Board, President and
William J. McKenna Chief Executive Officer
(principal executive and
operating officer)
/s/ James C. Jacobsen Director, Executive Vice July 21, 1994
- - ------------------------- President Administration
James C. Jacobsen (principal financial and
accounting officer)
Raymond F. Bentele Director
/s/ Thomas H. Pollihan
---------------------------
Edward S. Bottum Director Thomas H. Pollihan
Attorney-in-fact
Richard P. Conerly Director July 21, 1994
Kitty G. Dickerson Director
Wai Yiu Fung Director
James J. Kerley Director
James S. Marcus Director
Fred W. Wenzel Director
-10-
<PAGE> 11
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Kellwood Company
Our audits of the consolidated financial statements referred
to in our report dated June 1, 1994 appearing at page 10 of the
1994 Annual Report to Shareowners of Kellwood Company (which report
and consolidated financial statements are incorporated by reference
in this Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in Item 14(a) of this Form 10-
K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial
statements.
/s/ PRICE WATERHOUSE
St. Louis, Missouri
June 1, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 33-38106) of Kellwood
Company of our report dated June 1, 1994 appearing at page 10 of
the 1994 Annual Report to Shareowners which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation
by reference of our report on the Financial Statement Schedule,
which appears at page 11 on this Form 10-K.
/s/ PRICE WATERHOUSE
St. Louis, Missouri
July 21, 1994
-11-
<PAGE> 12
KELLWOOD COMPANY AND SUBSIDIARIES
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
- - -------- -------- --------------------- -------- --------
Additions
---------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
----------- ---------- ---------- ---------- ---------- ---------
YEAR ENDED APRIL 30, 1994:
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $4,118 1,152 -- $ 997(A) 4,273
<CAPTION>
YEAR ENDED APRIL 30, 1993:
Allowance for
doubtful accounts 3,448 $1,667 -- 997(A) $4,118
<CAPTION>
YEAR ENDED APRIL 30, 1992:
Allowance for
doubtful accounts 3,715 2,748 -- 3,015(A) 3,448
<FN>
(A) Write-off bad debts, net of recoveries.
</TABLE>
-12-
<PAGE> 13
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
S.E.C. Exhibit
Reference No. Description
- - -------------- -----------
<S> <C>
3.1 - Restated Certificate of Incorporation of
Kellwood Company, as amended, incorporated
herein by reference to Form 10-Q for the
quarter ended July 31, 1987, SEC File No.
1-7340.
3.2 - By-Laws, as amended through November 23, 1993,
incorporated herein by reference to Form 10-Q
for the quarter ended October 31, 1993, SEC
File No. 1-7340.
4.1 - Note Purchase Agreement dated December 29,
1986, with exhibits, incorporated herein by
reference to Form 10-Q for the quarter ended
January 31, 1987, SEC File No. 1-7340.
4.2 - Indenture between the Registrant and Centerre
Trust Company of St. Louis, and the 9%
Convertible Subordinated Debentures due 1999,
incorporated herein by reference to
Registration Statement on Form S-2,
Registration No. 2-93522, effective
October 18, 1984.
4.3 - Note Agreement dated July 1, 1993,
incorporated herein by reference to Form 10-Q
for the quarter ended July 31, 1993, SEC File
No. 1-7340.
4.4 - Rights to Acquire Series A Junior Preferred
Stock, pursuant to a Rights Agreement between
the registrant and Centerre Trust Company of
St. Louis, incorporated herein by reference to
Registration Statement on Form 8-A, SEC File
No. 1-7340, effective June 24, 1986 and
Amendment dated August 21, 1990, incorporated
herein by reference to Form 10-Q for the
quarter ended October 31, 1990, SEC File No.
1-7340.
4.5 - Note Purchase Agreement dated December 1,
1987, with exhibits, incorporated herein by
reference to Form 10-Q for the quarter ended
January 31, 1988, SEC File No. 1-7340.
4.6 - Note Purchase Agreement dated December 15,
1989, with exhibits, incorporated herein by
reference to the Form 10-Q for the quarter
ended January 31, 1990, SEC File No. 1-7340.
4.7 - Credit Agreement dated July 1, 1991, with
exhibits, incorporated herein by reference, to
the Form 10-Q for the quarter ended July 31,
1991, SEC File No. 1-7340.
10.1 - Sears Master Agreement and Supplements,
incorporated herein by reference to
Registration Statement on Form S-2,
Registration No. 2-93522, effective October
18, 1984.
-13-
<PAGE> 14
<CAPTION>
S.E.C. Exhibit
Reference No. Description
- - -------------- -----------
10.2* - Employment Agreement dated December 9, 1992,
between Kellwood Company and William J.
McKenna, effective December 1, 1992,
incorporated herein by reference to the Form
10-Q for the quarter ended January 31, 1993,
SEC File No. 1-7340, and Amendment dated
May 28, 1993, effective May 1, 1993,
incorporated herein by reference to Form 10-K
for the fiscal year ended April 30, 1993, SEC
File No. 1-7340.
10.3* - Form of Employment Agreement dated
November 30, 1984, between Kellwood Company
and executive officers, incorporated herein by
reference to Form 10-K for the fiscal year
ended April 30, 1985, SEC File No. 1-7340.
10.4* - 1990 Omnibus Incentive Stock Option Plan,
incorporated herein by reference to Exhibit A
to the Company's definitive proxy statement
dated June 28, 1990, SEC File No. 1-7340.
10.5* - Deferred Compensation Retirement Benefit
Agreement dated November 14, 1991, between
Kellwood Company and Harry B. Holding,
incorporated herein by reference to Form 10-K
for the fiscal year ended April 30, 1992, SEC
File No. 1-7340.
10.6* - Death Benefit Compensation Agreement dated
November 14, 1991, between Kellwood Company
and Harry B. Holding, effective July 17, 1991,
incorporated herein by reference to Form 10-K
for the fiscal year ended April 30, 1992, SEC
File No. 1-7340.
10.7* - Corporate Development Incentive Plan of 1986
(As Amended) formerly the Key Executive Long-
Term Incentive Plan of 1983; filed herewith.
13 - Portions of the Annual Report to Shareowners
for the fiscal year ended April 30, 1994,
which are incorporated by reference at Item 1
in Part I, Items 5, 6, 7 and 8 in Part II, and
Part IV; filed herewith.
21 - Subsidiaries of the Company
23 - Consent of Independent Accountants, appearing
at page 11
24 - Powers of attorney: Ms. Dickerson and Messrs.
Bentele, Bottum, Conerly, Fung, Kerley, Marcus
and Wenzel; filed herewith.
<FN>
*Denotes management contract or compensatory plan.
</TABLE>
-14-
<PAGE> 1
EXHIBIT 10.7*
-------------
KELLWOOD COMPANY
CORPORATE DEVELOPMENT INCENTIVE PLAN OF 1986, AS AMENDED
(Formerly known as the Key Executive Long-Term
Incentive Plan of 1983, as amended)
1. Purpose
A. To cause the interests of key executives and stockholders
to coincide by basing certain of the executive long-term
incentives on the achievement of long range corporate
goals.
B. To provide meaningful incentive to Participants to
improve the Company's long-term growth and profitability.
C. To encourage Participants to enhance the growth and
profitability of the entire Company rather than
concentrating efforts on only a specific segment of the
Company.
D. To encourage acceptance and continuation of employment.
2. Name of Plan
The Plan shall be known as the Kellwood Company Corporate
Development Incentive Plan of 1986, as amended.
3. Definitions
The following words and phrases, when used in this Plan, shall
have the meanings indicated herein:
(1) Award: A number of Shares in Stock earned
by a Participant under the Plan.
(2) Board of Directors
or Board: The Board of Directors of the
Company.
(3) Change in Control: Change in Control of the Company
shall be defined to have occurred if
(i) any "person" (as such term is
used in Section 13(d) and 14(d) of
the Exchange Act) is or becomes the
"beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act),
directly or indirectly, of
securities of the Company
representing 25% or more of the
combined voting power of the
1 Rev. 3-94
<PAGE> 2
Company's then outstanding
securities; or (ii) during any
period of two consecutive years,
individuals who, at the beginning of
the two year period, were members of
the Board cease for any reason to
constitute at least a majority of
the Board.
(4) Chief Executive
Officer: The Chief Executive Officer of the
Company.
(5) Committee: The Compensation and Stock Option
Committee of the Company's Board of
Directors, no members of which will
be eligible to participate in this
Plan.
(6) Company: Kellwood Company.
(7) Disability: A physical or mental condition,
which in the judgment of the
Committee, based on medical evidence
acceptable to the Committee, would
result in a Participant being
determined to be totally and
permanently disabled under normal
Company policy.
(8) Employer: Kellwood Company and each of its
subsidiaries, affiliates and related
companies to which the Plan has been
extended by the Committee.
(9) Escrow Agent: The Escrow Agent selected by the
Committee to receive and hold
restricted Stock under the Plan.
(10) Fiscal Year: The Company's fiscal year.
(11) Measurement Period: The Company's fiscal year.
(12) Participant: An Employee of the Employer selected
by the Committee to whom an Award
has been made under the provisions
of the Plan. A Participant will be
selected by the Committee in its
sole discretion, based upon the
Committee's judgment of the
employee's ability to significantly
affect major decisions and actions
2 Rev. 3-94
<PAGE> 3
which influence the continued
profitable growth and development of
the total Employer, the value of the
employee's continuing service and
the probable detriment of his or her
employment with competitors.
(13) Plan: The Kellwood Company Corporate
Development Incentive Plan of 1986
as amended.
(14) Retires or
Retirement: The termination of a Participant's
employment with all Employers after
(a) he has fulfilled all requirement
for a pension under any pension or
retirement plan of an Employer or
(b), if he is not a participant
under any such plan of an Employer,
he is terminated after having
attained the Company's Normal
Retirement Date as defined by the
Kellwood Company Pension Plan.
(15) Sale of Part of
the Company: A sale of any part of the Company at
a price equal to or greater than Ten
Million Dollars ($10,000,000).
(16) Share(s) or Stock: Share(s) of the Company's common
stock.
(17) Stockholder: An owner of one or more Shares.
(18) Targeted Criterion: The level of performance during the
Company's next Fiscal Year which
must be met for the full amount of
an Award to be earned by a
Participant. The measures and
objectives may be based on earnings
per share or on other criteria which
the Committee establishes.
(19) Targeted Shares: The number of restricted Shares
which a Participant can earn at 100%
of the Targeted Criterion.
4. Shares Reserved for Awards
The total number of Shares reserved for distribution as Awards
under this Plan shall be 787,500 shares, subject to adjustment
as provided in Section 9 hereof. No more than 157,500 Shares
3 Rev. 3-94
<PAGE> 4
of Stock shall be subject to Awards in any one Fiscal Year.
5. Award Procedure
A. The Committee, upon the recommendation of the Chief
Executive Officer, shall determine each Participant, each
Participant's Targeted Shares and shall make Awards to
the Participants in accordance with further provisions of
the Plan.
B. The Committee shall determine the following at the time
of setting the Targeted Criterion:
1. The Targeted Criterion level for the measurement
Period necessary for a Participant to receive any
Award.
2. The Targeted Criterion level for the Measurement
Period necessary to meet the Targeted Shares.
3. Any known or anticipated Board actions or changes
in tax laws or regulations which are to be
excluded, if any, from the Targeted Criterion
levels identified by the Committee.
C. The Committee shall determine the following at the time
of making each Award:
1. The extent that the Targeted Criterion of the
Company have been met.
2. The value of each Award shall be determined in
accordance with the attached "Schedule for
Determination of Award".
6. Adjustments to Targeted Criterion
The Committee shall have the power, exercisable at its sole
discretion, to adjust the Targeted Criterion to reflect any
major alterations in the course of the business or to exclude
the effects of any action by the Board or of any changes in
the tax laws or regulations which impact significantly on the
Targeted Criterion and which were not anticipated on the date
a Participant's Targeted Shares were determined.
7. Payment
A. The payment of a Participant's Award shall be made in
restricted Company Stock.
B. A total of 25% of the stock comprising the award will be
paid to a participant by the Company on the first
business day in December each year.
C. The Company shall place in escrow with the escrow agent,
in the name of the participant, as restricted stock, 100%
of the stock earned by the participant under this Plan.
The restrictions on the stock placed in escrow shall
lapse, and the stock shall be transferred to the
4 Rev. 3-94
<PAGE> 5
participant from the escrow at the rate of 25% a year,
with the first release on the first business day in
December each year, and the remaining 75% in three equal
installments commencing on the first business day in June
of the year following the calendar year in which the
award is earned and on each first business day of each
June thereafter.
D. In the event of the death, Disability or Retirement of a
Participant during a Fiscal Year, the Participant or his
beneficiary shall be entitled to receive a pro rata
portion of the Award which would otherwise have been due
to him had he remained an Employee until the end of the
Company's Fiscal Year based on the number of full months
during which the Employee was employed during the
Company's Fiscal Year.
E. In the event of Disability or Retirement of a
Participant, or in the case of an officer of the Company,
termination of employment within one year following a
Change in Control of the Company, the restricted stock
which was in escrow as of the date of the Participant's
Disability or Retirement shall be released from escrow in
accordance with the release dates at the same rate as if
the Participant continued as an Employee. The
Compensation Committee, in its sole discretion, may
accelerate the lapse of restrictions in the event of a
particular hardship affecting the employee at or after
the employee's retirement.
F. In the event of the death of a Participant, any
restricted Stock, which was in escrow as of the date of
the Participant's death, shall be released and shall be
paid to such one or more beneficiaries as the Participant
may have designated in writing and filed with the
Secretary of the Committee. Beneficiaries may be named
contingently or successively and may share in different
portions, if so designated by the Participant. If no
beneficiary has been designated, the payments shall be
made to the estate of the decedent.
G. In the event of a Sale of Part of the Company and as a
result of it the Participant is terminated, the
Committee, in its sole discretion, may accelerate all of
the release dates on restricted Stock and cash of Awards
earned by the terminated Participant. The acceleration
may be immediate or for a period of not to exceed three
(3) years after the termination.
H. The Compensation Committee, in its sole discretion, may
accelerate the lapse of restrictions in the event of a
particular hardship affecting the employee at or after
the employee's retirement.
5 Rev. 3-94
<PAGE> 6
8. Forfeitures
Upon the termination of employment of a Participant from the
services of all Employers due to any reason other than death,
Disability, Retirement, or in the case of an officer of the
Company within one year following a Change in Control of the
Company, any restricted Stock then in the escrow on the date
of such termination shall be forfeited by the Participant,
except as provided in Section 7, G. Any restricted Stock
forfeited hereunder shall be available for further awards
under the Plan.
9. Change in Capitalization
A. In the event of any Stock dividend, split-up,
reclassification or other changes in the Stock, the
Committee shall make such adjustments as it deems
equitable to accomplish the purpose of the Plan. A
Committee's determination as to any adjustments shall be
final and conclusive.
B. Each participant who receives an Award of restricted
Stock under the Plan shall be entitled to dividends on
the shares of restricted Stock and to all the rights of
a stockholder with respect to the restricted stock from
the date restricted Stock was issued. Any Stock received
as a result of a Stock dividend or Stock split, or
otherwise in respect of any restricted Stock, shall be
subject to the same restrictions as the original Stock.
10. Administration and Interpretation of the Plan
The Committee shall have full responsibility for the
administration of the Plan and may establish rules deemed by
it to be appropriate to carry out the purposes of the Plan.
The decision of the Committee with respect to selection of
Participants, the amount of Targeted Shares and Awards, and
the interpretation of the Plan shall be conclusive and binding
on all parties.
11. Miscellaneous
A. By acceptance of any Award under this Plan, the
Participant agrees that the value of any Stock issued to
him pursuant to an Award is special compensation and that
the value of the Stock will not be taken into account in
determining the amount of any pension or other retirement
benefits under any Employer's retirement program, the
amount of life insurance coverage under any Employer's
program, or be considered as "income" in determining the
gross monthly indemnity under any Employer's long-term
disability benefit program.
B. No interest of a Participant may be sold, donated,
6 Rev. 3-94
<PAGE> 7
pledged, or otherwise assigned or otherwise transferred
in whole or in part, except by will or the laws of
descent and distribution.
C. The Awards hereunder shall not be funded in any way by
the Company, but shall remain unfunded obligations of the
Company.
D. Participation in the Plan does not give a Participant any
right to be retained as an Employee of any Employer.
E. The delivery of any Stock under the Plan to a Participant
may also be subject to such other provisions as the
Committee determines appropriate, including any which may
be considered necessary to comply with federal or state
securities laws or stock exchange requirements or
withholding tax requirements.
F. The titles and headings of the sections in this Plan are
for convenience or reference only and in the event of any
conflict, the text of this Plan, rather than such
headings, shall control.
12. Adoption Amendments or Termination of the Plan
A. After the initial approval of this Plan by the
Stockholders of the Company, the Committee shall have the
right to extend the length of this Plan, amend or modify
this Plan from time to time, or to terminate this Plan
entirely or to discontinue the establishment of Targeted
Shares, either temporarily or permanently; provided,
however, no amendment or modification of this Plan or its
termination shall affect or impair the provisions of any
Award theretofore made without the written consent of
each Participant whose Award would be affected or
impaired by the amendment, modification or termination.
B. This Plan is effective as of May 1, 1983.
C. Unless extended by the Board, no Award may be made under
this Plan after July 1, 1996.
13. Immediate Release from Escrow
Notwithstanding the other provisions of this Plan, upon (i) a
Change in Control of the Company, or (ii) a resolution to the
following effect by the Committee passed after commencement of
a tender offer or other acquisition plan or program by any
person which, if consummated in accordance with its terms,
would result in a Change in Control of the Company; then all
restrictions on stock in escrow shall automatically and
immediately lapse, and all restricted stock which was in
escrow as of the above pertinent date shall be released from
escrow immediately and transferred to the Participants.
14. Withholding
When a participant is required to pay to the Company an amount
7 Rev. 3-94
<PAGE> 8
required to be withheld under applicable tax laws, in
connection with the release of shares under the Plan, the
Committee may, in its discretion and subject to such rules as
it may adopt, permit the participant to satisfy the
obligation, in whole or in part, by electing to have the
Company withhold shares of Common Stock having a fair market
value equal to the amount required to be withheld. The
election must be made on or before the date that the amount of
tax to be withheld is determined (the "Tax Date"). The fair
market value of the shares to be withheld is the average of
the high and low market price of the Common Stock on the New
York Stock Exchange on the Tax Date. Fractional amounts will
be paid in cash. Elections will be subject to the following
restrictions: (1) they must be made on or prior to the Tax
Date, (2) they will be irrevocable, and (3) they will be
subject to the disapproval of the Committee. Elections by
participants whose transactions in Common Stock are subject to
Section 16(b) of the Securities Exchange Act of 1934
("Officers") will be subject to the following additional
restrictions: (1) they may not be made within six months of
the grant of the award (except that this limitation will not
apply in the event death or disability of the participant
occurs prior to the expiration of the six-month period), and
(2) they must be made either six months or more prior to the
Tax Date or in a ten day "window period" beginning on the
third day following the release of the Company's quarterly or
annual summary statement of sales and earnings.
8 Rev. 3-94
<PAGE> 1
CONTENTS
1 To Our Shareowners
5 Designed To Compete
11 Financial Review
23 Directors and Officers
24 Shareowner Information
<TABLE>
FINANCIAL HIGHLIGHTS
- - -----------------------------------------------------------------------------------------
<CAPTION>
(Dollars in thousands except per share data) Year ended April 30,
---------------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales................................. $ 1,203,086 $ 1,077,655 $ 914,926
----------- ----------- -----------
Net Earnings.............................. $ 35,614 $ 28,694 $ 22,837
----------- ----------- -----------
Per Share Data:
Net Earnings:
Primary.............................. $ 1.71 $ 1.39 $ 1.26
----------- ----------- -----------
Fully diluted........................ $ 1.68 $ 1.36 $ 1.23
----------- ----------- -----------
Cash Dividends Declared................... $ .55 $ .53 $ .53
----------- ----------- -----------
</TABLE>
<TABLE>
COMMON STOCK DATA
<CAPTION>
- - ---------------------------------------------------------------------------------------------------
Fiscal 1994 Fiscal 1993
----------------------------- ---------------------------
Stock Price Stock Price
------------------ Dividends ----------------- Dividends
High Low Paid High Low Paid
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter (July 31).......... $20 3/4 $18 $.133 $19 3/8 $16 1/8 $.133
Second Quarter (October 31)...... 26 1/2 19 5/8 .133 19 1/2 14 1/4 .133
Third Quarter (January 31)....... 27 24 3/4 .133 18 7/8 14 7/8 .133
Fourth Quarter (April 30)........ 26 7/8 22 5/8 .150 20 1/8 15 7/8 .133
</TABLE>
Common stock of Kellwood Company is traded on the New York Stock Exchange,
ticker symbol KWD. At June 10, 1994, there were approximately 2,405
shareowners. All per share and common stock data have been adjusted to
reflect stock splits. The current annual dividend rate per year is $.60.
1----------------------------
GROWTH IN NET SALES
(dollars in millions)
[ GRAPH ]
2-----------------------------
GROWTH IN NET EARNINGS
(dollars in millions)
[ GRAPH ]
3-----------------------------
AVERAGE INVENTORY DAYS' SUPPLY
[ GRAPH ]
<PAGE> 2
10
REPORTS OF MANAGEMENT AND INDEPENDENT ACCOUNTANTS
Kellwood Company and Subsidiaries
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
REPORT OF MANAGEMENT
The management of Kellwood Company is responsible for the fair
presentation of the financial statements and other financial information
included in this report. The financial statements have been prepared in
conformity with generally accepted accounting principles applying estimates
and management's best judgments as required to present fairly Kellwood
Company's financial position, results of operations and cash flows.
The accounting systems and internal accounting controls of Kellwood are
designed to provide reasonable assurance that the financial records are
reliable for preparing financial statements and maintaining accountability
for assets and that, in all material respects, assets are safeguarded against
loss from unauthorized use or disposition. Qualified personnel throughout
the organization maintain and monitor these internal accounting controls on
an ongoing basis, and internal auditors systematically review the adequacy
and effectiveness of the controls. Price Waterhouse also studies and
evaluates internal controls for the purpose of establishing a basis for
reliance thereon relative to the scope of their audits of the financial
statements. It is management's opinion that the Company has an effective
system of internal accounting controls.
The Board of Directors, through its Audit Committee consisting solely of
nonmanagement directors, meets periodically with management, the internal
auditors and Price Waterhouse to discuss audit and financial reporting
matters. Both the internal auditors and Price Waterhouse have direct access
to the Audit Committee.
/s/ WILLIAM J. MCKENNA
William J. McKenna
Chairman, President and
Chief Executive Officer
/s/ JAMES C. JACOBSEN
James C. Jacobsen
Executive Vice President Administration
(Chief Financial Officer)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners and Board of Directors of Kellwood Company:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, of cash flows and of
shareowners' equity present fairly, in all material respects, the financial
position of Kellwood Company and its subsidiaries at April 30, 1994 and 1993,
and the results of their operations and their cash flows for each of the
three years in the period ended April 30, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Kellwood's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE
St. Louis, Missouri
June 1, 1994
<PAGE> 3
11
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS Kellwood Company and Subsidiaries
- - --------------------------------------------------------------------------------
<CAPTION>
(Dollars in thousands except per share data)
- - --------------------------------------------------------------------------------
Year ended April 30,
--------------------------------------
1994 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales............................... $1,203,086 $1,077,655 $914,926
Costs and Expenses:
Cost of products sold................. 949,075 865,814 736,505
Selling, general and administrative
expenses............................. 170,232 143,771 123,404
Amortization of intangible assets..... 12,808 9,317 7,580
Gain on disposal of assets............ (3,047) (4,089) (5,019)
Interest expense...................... 15,634 13,829 14,155
Interest income and other, net........ (2,630) (2,881) (3,216)
---------- ---------- --------
Earnings Before Income Taxes............ 61,014 51,894 41,517
Income Taxes............................ 25,400 23,200 18,680
---------- ---------- --------
Net Earnings............................ $ 35,614 $ 28,694 $ 22,837
---------- ---------- --------
Earnings Per Share:
Primary............................... $ 1.71 $ 1.39 $ 1.26
---------- ---------- --------
Fully diluted......................... $ 1.68 $ 1.36 $ 1.23
---------- ---------- --------
See notes to consolidated financial statements.
</TABLE>
<PAGE> 4
12
<TABLE>
CONSOLIDATED BALANCE SHEET Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
<CAPTION>
(Dollars in thousands except per share data)
- - -------------------------------------------------------------------------------
April 30,
--------------------
1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash, including time deposits of $6,945
($10,265 in 1993).................................... $ 17,666 $ 39,178
Receivables, net...................................... 180,724 178,621
Inventories........................................... 196,017 192,432
Prepaid taxes and expenses............................ 18,650 15,597
-------- --------
Total Current Assets.............................. 413,057 425,828
Property, Plant and Equipment........................... 177,896 169,556
Less accumulated depreciation and amortization........ 109,921 101,297
-------- --------
67,975 68,259
Intangible Assets, net.................................. 107,692 96,036
Other Assets............................................ 53,133 46,332
-------- --------
$641,857 $636,455
-------- --------
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Current portion of long-term debt..................... $ 8,916 $ 7,576
Notes payable......................................... 9,010 93,309
Accounts payable...................................... 63,238 63,527
Accrued expenses...................................... 69,487 63,898
-------- --------
Total Current Liabilities......................... 150,651 228,310
Long-Term Debt.......................................... 153,014 102,923
Deferred Income Taxes and Other......................... 31,236 25,362
Commitments and Contingencies........................... - -
Shareowners' Equity:
Common stock, par value $.01 per share, authorized
50,000,000 shares; issued and outstanding
20,960,675 shares (20,712,742 in 1993)............... 90,657 85,851
Retained earnings..................................... 255,290 231,145
Cumulative translation adjustment..................... (8,926) (8,882)
-------- --------
337,021 308,114
Less treasury stock, at cost.......................... 30,065 28,254
-------- --------
306,956 279,860
-------- --------
$641,857 $636,455
-------- --------
See notes to consolidated financial statements.
</TABLE>
<PAGE> 5
13
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS Kellwood Company and Subsidiaries
- - -----------------------------------------------------------------------------------------
<CAPTION>
(Dollars in thousands except per share data)
- - -----------------------------------------------------------------------------------------
Year ended April 30,
---------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings..........................................$ 35,614 $ 28,694 $ 22,837
Add (deduct) items not affecting operating
cash flows:
Depreciation and amortization....................... 25,113 21,282 18,515
Gain on disposal of assets.......................... (3,047) (4,089) (5,019)
Increase in prepaid pension costs................... (6,967) (6,900) (6,953)
Deferred income taxes............................... (540) 2,488 3,743
Other............................................... 767 (414) 323
-------- -------- --------
50,940 41,061 33,446
Changes in noncash working capital components,
net of effects of acquisitions:
Receivables........................................... 6,147 (38,916) (22,127)
Inventories........................................... 7,419 (1,341) (25,418)
Prepaid expenses...................................... 522 (263) 470
Accounts payable and accrued expenses................. 2,549 (8,448) 16,086
-------- -------- --------
Net cash provided by (used for)
operating activities............................ 67,577 (7,907) 2,457
-------- -------- --------
INVESTING ACTIVITIES:
Additions to property, plant and equipment............ (12,464) (16,823) (12,595)
Proceeds from disposal of assets...................... 3,047 4,089 5,019
Investment in subsidiaries, net of cash acquired...... (28,324) (42,266) (10,301)
Other investing activities............................ 1,084 2,627 936
-------- -------- --------
Net cash (used for) investing activities......... (36,657) (52,373) (16,941)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from (reduction of) notes payable, net....... (95,389) 77,144 (15,399)
Proceeds from issuance of long-term debt.............. 60,000 - -
Reduction of long-term debt........................... (8,569) (9,550) (7,371)
Proceeds from public sale of common stock............. - - 45,102
Stock transactions under incentive plans.............. 2,995 2,094 1,121
Dividends paid........................................ (11,469) (11,019) (9,496)
-------- -------- --------
Net cash (used for) provided by financing
activities...................................... (52,432) 58,669 13,957
-------- -------- --------
Net (decrease) in cash and time deposits................ (21,512) (1,611) (527)
Cash and time deposits - beginning of year.............. 39,178 40,789 41,316
-------- -------- --------
Cash and time deposits - end of year....................$ 17,666 $ 39,178 $ 40,789
-------- -------- --------
See notes to consolidated financial statements.
</TABLE>
<PAGE> 6
14
<TABLE>
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY Kellwood Company and Subsidiaries
- - -----------------------------------------------------------------------------------------------
<CAPTION>
(Dollars in thousands except per share data)
- - -----------------------------------------------------------------------------------------------
Common Stock Treasury Cumulative
---------------------- Stock Retained Translation
Shares Amount Amount Earnings Adjustment
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, May 1, 1991.......... 17,696,846 $ 58,306 $(49,363) $200,129 $ (8,849)
Net earnings................ 22,837
Cash dividends declared,
$.53 per share............. (9,496)
Public sale of common stock. 2,587,500 22,090 23,012
Shares issued under stock
plans...................... 300,217 2,715
Treasury stock acquired in
conjunction with incentive
plans...................... (89,142) (1,594)
Debentures converted........ 40,875 251
Currency translation
adjustment................. (5)
---------- -------- -------- -------- --------
Balance, April 30, 1992....... 20,536,296 83,362 (27,945) 213,470 (8,854)
Net earnings................ 28,694
Cash dividends declared,
$.53 per share............. (11,019)
Shares issued under stock
plans...................... 179,867 2,403
Treasury stock acquired in
conjunction with incentive
plans...................... (16,990) (309)
Debentures converted........ 13,569 86
Currency translation
adjustment................. (28)
---------- -------- -------- -------- --------
Balance, April 30, 1993....... 20,712,742 85,851 (28,254) 231,145 (8,882)
Net earnings................ 35,614
Cash dividends declared,
$.55 per share............. (11,469)
Shares issued under stock
plans...................... 292,579 4,585 71
Treasury stock acquired in
conjunction with incentive
plans...................... (80,627) (1,882)
Debentures converted........ 35,981 221
Currency translation
adjustment................. (44)
---------- -------- -------- -------- --------
Balance, April 30, 1994....... 20,960,675 $ 90,657 $(30,065) $255,290 $ (8,926)
---------- -------- -------- -------- --------
See notes to consolidated financial statements.
</TABLE>
<PAGE> 7
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
(Dollars in thousands except per share data)
- - -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. Substantially
all foreign subsidiaries are consolidated based upon a fiscal year ending March
31. All significant intercompany accounts and transactions have been
eliminated.
2. INVENTORIES AND REVENUE RECOGNITION: Inventories are stated at the lower
of cost or market. The first-in, first-out (FIFO) method is used to determine
the value of 54% of the domestic inventories, and the last-in, first-out
(LIFO) method is used to value the remaining domestic inventories. Inventories
of foreign subsidiaries are valued using the specific identification method.
Sales are recognized when goods are shipped.
3. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. A significant portion of domestic manufacturing facilities and some
machinery and equipment are leased under long-term capital leases which are
recorded at the beginning of the lease term at the present value of the minimum
lease payments.
Depreciation is computed generally on the declining balance method over
estimated useful lives of 15 to 40 years for buildings and of 3 to 10 years for
machinery and equipment. Leasehold improvements are amortized principally on the
straight-line basis over the shorter of their estimated useful lives or the
remaining lease term.
4. INTANGIBLE ASSETS: The excess costs over net tangible assets of businesses
acquired are recorded as intangible assets. These intangibles are amortized
using the straight-line method over their estimated useful lives which range
from 1 to 20 years.
5. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: Effective in 1994, Kellwood
adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The principles of
SFAS 106 require recognition of postretirement benefits on an accrual basis.
The adoption of SFAS 106 had an insignificant effect on the Company's financial
position and results of operations.
6. INCOME TAXES: Effective in 1993, Kellwood adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
adoption of SFAS 109 had an insignificant effect on the Company's financial
position and results of operations.
In accordance with the requirements of SFAS 109, deferred income taxes are
recognized for the effect of temporary differences between the financial
statement and income tax basis of assets and liabilities. For 1992, deferred
taxes were recognized for the effect of timing differences between financial
and tax reporting in accordance with the requirements of Accounting Principles
Board Opinion (APB) No. 11.
7. FOREIGN CURRENCY TRANSLATION: Foreign currency financial statements and
transactions are translated into United States dollars using period-end rates of
exchange for assets and liabilities and monthly average rates of exchange for
sales, costs and expenses. Gains and losses resulting from translation are
accumulated in the Cumulative Translation Adjustment component of Shareowners'
Equity. Gains or losses from foreign currency transactions are included in
income in the period in which they occur. The net foreign currency gains and
losses recognized in 1994, 1993 and 1992 were not significant.
8. EARNINGS PER SHARE: Primary earnings per share are computed by dividing
net earnings by the weighted average number of shares of common stock
outstanding of 20,851,328 for the year ended April 30, 1994 (20,655,642 for 1993
and 18,083,040 for 1992). Common stock equivalents are excluded from the
primary earnings per share computation because their dilutive effect is not
significant. During 1994, 35,981 shares of common stock were issued upon
conversion of 9% convertible subordinated debentures. Had the conversions taken
place on May 1, 1993, primary earnings per share for 1994 would not have been
significantly different.
In March 1992, 2,587,500 shares of common stock, previously held as
treasury stock, were sold through a public offering. Proceeds from the sale of
the stock were used in part to repay domestic short-term borrowings under demand
notes. Had the portion of the offering necessary to repay such year-to-date
average borrowings of $29,719 been outstanding since May 1, 1991, and
considering the related reduction in after tax interest expense, primary
earnings per share would have been $1.21 for 1992.
The calculation of fully diluted earnings per share includes common stock
equivalents in addition to the weighted average shares outstanding as defined
above and assumes that all convertible debentures were converted to common stock
at the beginning of the year. The average number of shares used in the fully
diluted computation was 21,251,760 in 1994 (21,036,805 in 1993 and 18,565,300 in
1992). Net earnings are increased by the after tax interest on the convertible
debentures in the computation of fully diluted earnings per share.
<PAGE> 8
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
(Dollars in thousands except per share data)
- - -------------------------------------------------------------------------------
ACQUISITIONS:
On July 1, 1993, all of the capital stock of Goodman Knitting
Co., Inc., a designer and marketer of branded apparel, was
purchased for cash. The acquisition has been accounted for
using the purchase method and, accordingly, the results of
operations are included in the Consolidated Statement of Earnings
from the date of acquisition. Assets acquired and liabilities
assumed were recorded at their estimated fair market value, and
the excess costs over net tangible assets are being amortized
over the estimated useful lives of the related intangible assets.
Had the purchase taken place May 1, 1992, unaudited pro forma
consolidated net sales would have been $1,210,838 and $1,128,775
for the years ended April 30, 1994 and 1993, respectively.
Consolidated net earnings and earnings per share would not have
been significantly different.
All of the capital stock of AJ Brandon, Inc., and California
Ivy, Inc., was purchased for cash on December 30, 1992, and
July 10, 1992, respectively. Both companies design and market
branded sportswear apparel. These acquisitions were also
accounted for using the purchase method with the excess costs
over net tangible assets being amortized over the estimated
useful lives of the related intangible assets. Had the purchases
taken place May 1, 1991, unaudited pro forma consolidated net
sales would have been $1,137,170 and $1,036,211 for the years
ended April 30, 1993 and 1992, respectively. Consolidated net
earnings and earnings per share would not have been significantly
different.
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
The allowance for doubtful accounts at April 30, 1994, was
$4,273 ($4,118 at April 30, 1993).
INVENTORIES:
Inventory valued under the LIFO method totalled $71,211 at April
30, 1994 ($72,693 at April 30, 1993). The remainder of the
inventory was valued using the FIFO and specific identification
methods. If LIFO inventories had been valued at current
replacement costs, they would have totalled $80,382 at April 30,
1994 ($81,687 at April 30, 1993).
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
April 30, 1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Finished goods................................... $ 81,998 $ 82,160
Work in process.................................. 46,896 48,966
Raw materials.................................... 67,123 61,306
--------- ---------
$ 196,017 $ 192,432
--------- ---------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
April 30, 1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Land.............................................. $ 3,068 $ 3,611
Buildings and improvements........................ 82,567 77,641
Machinery and equipment........................... 92,261 88,304
--------- ---------
177,896 169,556
Less accumulated depreciation
and amortization................................. 109,921 101,297
--------- ---------
$ 67,975 $ 68,259
--------- ---------
</TABLE>
The amounts above include the cost and accumulated amortization
of assets under capital leases (primarily buildings) of $21,940
and $18,817 at April 30, 1994, and $21,940 and $17,895 at April
30, 1993.
Certain machinery and equipment are leased under operating
leases having remaining terms ranging up to 6 years. Rent
expense under all operating leases for the year ended April 30,
1994 totalled $11,615 ($11,942 for 1993 and $9,455 for 1992).
<TABLE>
The future minimum lease payments under capital and
operating leases at April 30, 1994, were as follows:
<CAPTION>
- - ----------------------------------------------------------------------------
Capital Operating
- - ----------------------------------------------------------------------------
<S> <C> <C>
1995............................................... $ 603 $ 11,290
1996............................................... 711 10,004
1997............................................... 701 8,599
1998............................................... 668 6,931
1999............................................... 615 5,078
Later years........................................ 2,505 9,988
---------- ---------
Total minimum lease payments....................... 5,803 $ 51,890
---------
Less amount representing interest.................. 1,591
----------
Present value of net minimum lease payments........ $ 4,212
----------
</TABLE>
Minimum lease payments were not reduced for future minimum
sublease rentals of $2,104.
<PAGE> 9
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
(Dollars in thousands except per share data)
- - -------------------------------------------------------------------------------
<TABLE>
INTANGIBLE ASSETS:
<CAPTION>
- - ---------------------------------------------------------------------------
April 30, 1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Goodwill.......................................... $ 73,373 $ 56,240
Other identifiable intangibles.................... 94,218 86,887
---------- ---------
167,591 143,127
Less accumulated amortization..................... 59,899 47,091
---------- ---------
$ 107,692 $ 96,036
---------- ---------
</TABLE>
Identifiable intangible assets consist primarily of trademarks,
customer lists, contractor networks and agreements not to
compete. They arise from the allocation of purchase prices of
businesses acquired. Values assigned to such identifiable
intangibles were based on independent appraisals or internal
estimates. Goodwill represents any residual purchase price after
allocation to all identifiable net assets.
NOTES PAYABLE AND LONG-TERM DEBT:
1. NOTES PAYABLE: A revolving credit agreement dated July 1,
1991, provides a $60,000 line of credit through July 1, 1994, with
interest at the interbank rate plus 5/8% to 3/4% and a fee of
3/10% on any unused portion. Covenants under the credit agreement
are substantially the same as for Kellwood's notes due insurance
companies. At April 30, 1994, unused committed credit under this
facility totalled $60,000, and unused uncommitted lines of credit
totalled $166,500 with various banks at rates less than prime.
The Company is currently negotiating a new revolving credit
agreement in the amount of $120,000, which will become effective
July 1, 1994.
During the year ended April 30, 1994, the highest level of
borrowings under all lines was $128,887 ($118,051 for 1993). For
the year, the average daily short-term borrowings were $54,840
($60,036 for 1993) and the weighted average interest rate was
3.8% (4.1% for 1993).
<TABLE>
2. LONG-TERM DEBT:
<CAPTION>
- - ---------------------------------------------------------------------------
April 30, 1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Notes due insurance companies, 5.34% - 10.77%..... $ 156,625 $ 103,875
Capital lease obligations, 4.9% - 10.0%........... 4,212 5,303
9% convertible subordinated debentures............ 1,093 1,321
---------- ---------
161,930 110,499
Less current maturities........................... 8,916 7,576
---------- ---------
$ 153,014 $ 102,923
---------- ---------
</TABLE>
Aggregate maturities on long-term debt for the next five
years are as follows: 1995 - $8,916; 1996 - $8,255; 1997 -
$18,256; 1998 - $15,481; 1999 - $15,462.
Notes payable to insurance companies are due in quarterly
and semiannual installments from June 1994 through September
2005. Restrictive covenants of these notes include the
maintenance of minimum working capital and certain key ratios as
well as a limitation on the payment of dividends and the
repurchase of Company stock. Under the most restrictive
covenants, future dividends and purchases of Company stock are
limited to $61,706 plus 45% of net earnings after April 30, 1994,
excluding gains and losses on the disposal of capital assets.
The 9% convertible subordinated debentures may be converted
into common stock by debenture holders at a rate of $6.33 per
share at any time prior to maturity on October 15, 1999, subject
to certain restrictions. Also, subject to certain restrictions,
the debentures are redeemable, in whole or in part, at the option
of the Company at predetermined redemption prices. During 1994,
$228 principal amount of these debentures was converted into
35,981 shares of common stock. Interest on outstanding
debentures is paid semiannually. The debentures are subordinated
to senior indebtedness, as provided for in the agreements.
<TABLE>
ACCRUED EXPENSES:
<CAPTION>
- - ---------------------------------------------------------------------------
April 30, 1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Salaries and employee benefits.............. $ 27,363 $ 23,991
Income taxes................................ 14,103 9,847
Other accrued expenses...................... 28,021 30,060
---------- ---------
$ 69,487 $ 63,898
---------- ---------
</TABLE>
EMPLOYEE BENEFIT PLANS:
1. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS: Various
contributory and noncontributory retirement plans cover
substantially all domestic and certain foreign employees. Benefits
under pension plans are generally based on years of service and
compensation. Pension plans are funded in accordance with the
applicable laws and regulations plus such amounts, if any, as the
actuarial consultants advise to be appropriate. Company
contributions under the contributory retirement plan are
determined based on formulas defined in the plan.
The total credit under all retirement plans was $(3,569),
$(3,661), and $(4,086) in 1994, 1993, and 1992, respectively.
The total credits reflect $(6,638), $(6,563), and $(6,620) for
defined benefit plans.
<PAGE> 10
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
(Dollars in thousands except per share data)
- - -------------------------------------------------------------------------------
<TABLE>
The net credit for defined benefit plans included the following components:
<CAPTION>
- - -----------------------------------------------------------------------------------
1994 1993 1992
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current service cost................................. $ 1,793 $ 1,689 $ 1,423
Interest cost on projected benefit
obligation.......................................... 3,970 3,563 3,455
Return on assets:
Actual return............................. (9,943) (13,537) (8,675)
Deferred actuarial gain................... 1,593 5,773 1,228
-------- -------- --------
Assumed return............................ (8,350) (7,764) (7,447)
Amortization of transition asset and
prior service costs................................. (4,051) (4,051) (4,051)
-------- -------- --------
Net pension credit........................ $ (6,638) $ (6,563) $ (6,620)
-------- -------- --------
</TABLE>
<TABLE>
The funded status of the defined benefit plans at April 30 was as follows:
<CAPTION>
- - ------------------------------------------------------------------------------------
1994 1993
- - ------------------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value..................................... $ 114,873 $ 110,417
Actuarial present value of benefit obligation:
Vested benefits.................................... 41,694 38,393
Nonvested benefits................................. 2,976 2,954
--------- ---------
Accumulated benefit obligation..................... 44,670 41,347
Impact of future salary increases.................. 4,400 3,880
--------- ---------
Projected benefit obligation.................................. 49,070 45,227
--------- ---------
Plan assets in excess of projected benefit obligation......... 65,803 65,190
Unamortized transition asset.................................. (15,280) (19,208)
Unamortized prior service costs............................... (560) (684)
Unrecognized actuarial gains.................................. (2,898) (5,200)
--------- ---------
Prepaid pension costs included in other assets..... $ 47,065 $ 40,098
--------- ---------
</TABLE>
The assumed long-term rate of return on plan assets used in
determining the projected benefit obligation was 8.0%. The
discount rate was 8.25% for 1994 and 8.5% for 1993 and 1992. The
rate of increase in future compensation levels was 5.5% for 1994
and 6% for 1993 and 1992. The change in actuarial assumptions
had an insignificant effect on the net pension credit for 1994.
The assets of the retirement plans consist primarily of U.S.
Government obligations, corporate debt obligations, short-term
marketable debt securities, marketable equity securities and
guaranteed income contracts.
The Company provides health care insurance benefits to
certain employees upon retirement. The annual costs of these
benefits in 1994, 1993 and 1992 were not significant.
2. INCENTIVE COMPENSATION PLANS: Options to purchase common
stock have been granted to key employees under various plans at
option prices not less than the fair market value on the date of
the grant. At April 30, 1994, 122 officers and other key
employees held options to purchase shares. The options expire 10
years after grant on dates ranging from May 1994 to February 2004
and are exercisable in cumulative installments only after stated
intervals of time and are conditional upon active employment,
except for periods following disability or retirement.
<TABLE>
Stock options outstanding under all plans were as follows:
- - ------------------------------------------------------------------------------------
<S>
Shares under option: <C>
Balance, May 1, 1993............................................... 857,328
Granted, ranging from $19.96 to $20.50 per share................... 283,200
Cancelled.......................................................... (4,352)
Exercised, ranging from $5.07 to $18.46 per share.................. (232,248)
---------
Balance, April 30, 1994............................................ 903,928
---------
Shares exercisable at April 30, 1994:
Number of shares exercisable....................................... 199,768
---------
Price range of options: From...................................... $ 6.04
---------
To........................................ $ 18.46
---------
Average exercise price............................................. $ 13.16
---------
</TABLE>
The amended Restricted Stock Compensation Plan of 1969 and
the Corporate Development Incentive Plan of 1986 provide for the
granting of common stock to key employees as performance and
incentive bonuses. The shares granted may not be transferred,
sold, pledged or otherwise disposed of prior to the lapse of
certain restrictions. Under the plans, $1,459 was charged to
earnings in 1994 for shares to be issued after the end of the
year ($1,062 in 1993 and $1,320 in 1992). At April 30, 1994,
473,613 shares were available to be granted under these plans to
qualified employees.
CAPITAL STOCK:
The Board of Directors declared a three-for-two split of the
common stock effective March 18, 1994. All share and per share
data for the periods presented in the consolidated financial
statements and notes thereto have been adjusted to reflect the
split.
The reported outstanding shares of common stock have been
reduced by treasury stock totalling 3,232,992 shares at April 30,
1994 (3,159,990 at April 30, 1993, and 3,143,000 at April 30,
1992).
Authorized capital includes 500,000 shares of preferred
stock, none of which have been issued. Nonvoting share purchase
rights, exercisable only upon satisfaction of certain conditions,
entitle the holder to purchase Series A Junior Preferred Stock
(160,000 shares reserved) or, under certain conditions, common
shares at prices specified in the rights agreement. None of the
rights were exercisable as of April 30, 1994.
<PAGE> 11
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
(Dollars in thousands except per share data)
- - -------------------------------------------------------------------------------
GAIN ON DISPOSAL OF ASSETS:
The gain on disposal of assets represents gains on the sale
of certain excess export quota rights.
<TABLE>
INTEREST INCOME AND OTHER, NET:
<CAPTION>
- - -------------------------------------------------------------------------------------
Year ended April 30, 1994 1993 1992
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income........................... 839 1,146 2,171
Other, net................................ 1,791 1,735 1,045
--------- --------- ---------
$ 2,630 $ 2,881 $ 3,216
--------- --------- ---------
</TABLE>
INCOME TAXES:
<TABLE>
The provision for income taxes consisted of:
<CAPTION>
- - -------------------------------------------------------------------------------------
Year ended April 30, 1994 1993 1992
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Domestic:
Federal.............................. $ 19,784 $ 14,893 $ 10,902
State................................ 3,000 3,500 2,252
Foreign................................ 3,156 2,319 1,783
--------- --------- ---------
25,940 20,712 14,937
Deferred (primarily federal)...................... (540) 2,488 3,743
--------- --------- ---------
$ 25,400 $ 23,200 $ 18,680
--------- --------- ---------
</TABLE>
<TABLE>
Current income taxes are the amounts payable under the
respective tax regulations on each year's earnings and on foreign
earnings remitted during the year. Deferred income taxes
included the following:
<CAPTION>
- - -------------------------------------------------------------------------------------
Year ended April 30, 1994 1993 1992
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee related costs.................... $ 1,671 $ 4,103 $ 1,409
Depreciation and amortization............. (299) (1,417) 265
Allowance for asset valuations............ (1,235) (905) 625
Provision for business and
facilities realignment................... 76 (86) 726
Other..................................... (753) 793 718
--------- --------- ---------
$ (540) $ 2,488 $ 3,743
--------- --------- ---------
</TABLE>
<TABLE>
A reconciliation of the federal statutory income tax rate to the
effective tax rate (provision for taxes) was as follows:
<CAPTION>
- - -------------------------------------------------------------------------------------
Year ended April 30, 1994 1993 1992
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate...................................... 35.0% 34.0% 34.0%
Foreign tax differences............................. - 3.2 -
Amortization of intangible assets................... 5.6 4.1 5.2
State tax........................................... 3.2 4.5 4.3
Other............................................... (2.2) (1.1) 1.5
---- ---- ----
41.6% 44.7% 45.0%
---- ---- ----
</TABLE>
<TABLE>
Deferred income tax liabilities and assets consisted of the
following:
<CAPTION>
- - ------------------------------------------------------------------------------------
April 30, 1994 1993
- - ------------------------------------------------------------------------------------
<S> <C> <C>
Employee related costs.................................. $ 11,647 $ 9,943
Depreciation and amortization........................... 12,114 9,274
Allowance for asset valuations.......................... (5,950) (4,899)
Other .................................................. (2,365) (983)
---------- ---------
$ 15,446 $ 13,335
---------- ---------
Included in:
Prepaid taxes and expenses.............................. $ (14,557) $ (11,139)
Deferred income taxes and other......................... 30,003 24,474
---------- ---------
$ 15,446 $ 13,335
---------- ---------
</TABLE>
Earnings before income taxes included $17,319 of Far East
earnings in 1994 ($15,298 in 1993 and $13,339 in 1992).
Federal income taxes are provided on earnings of foreign
subsidiaries except to the extent that such earnings are expected
to be indefinitely reinvested abroad. Undistributed foreign
earnings considered to be indefinitely reinvested abroad totalled
$84,251 through April 30, 1994.
CASH FLOWS:
For purposes of the Consolidated Statement of Cash Flows, all
highly liquid short-term time deposits maintained under cash
management activities are considered cash equivalents. The effect
of foreign currency exchange rate fluctuations on cash and
time deposits was not significant for the years ended April 30,
1994, 1993 and 1992.
Interest paid in 1994 was $14,838 ($13,736 in 1993 and
$14,359 in 1992) and income taxes paid were $18,700 ($14,822 in
1993 and $16,882 in 1992). Liabilities assumed in connection
with the Investment in Subsidiaries totalled $16,491 in 1994 and
$20,065 in 1993. Cash acquired totalled $208 in 1993. No
liabilities were assumed in 1992, and no cash was acquired in
1994 and 1992.
SIGNIFICANT CUSTOMERS:
Sales to J.C. Penney Company, Inc., totalled $150,130 for the year
ended April 30, 1994 ($112,687 for 1993 and $63,666 for 1992).
Receivables included $16,994 due from J.C. Penney at April 30, 1994
($20,386 at April 30, 1993).
Sales to Sears, Roebuck and Co. totalled $112,236 for the
year ended April 30, 1994 ($156,295 for 1993 and $154,192 for
1992). Receivables included $20,511 due from Sears at April 30,
1994 ($31,078 at April 30, 1993).
<PAGE> 12
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
(Dollars in thousands except per share data)
- - -------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES:
There are various lawsuits and other legal proceedings against the
Company. Management and general counsel are of the opinion that the
ultimate disposition of such litigation will have no material adverse
effect on the Company's financial position or results of operations.
<TABLE>
SELECTED QUARTERLY DATA (UNAUDITED):
<CAPTION>
- - -------------------------------------------------------------------------------------
Quarter First Second Third Fourth
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1994:
Net sales.................... $ 298,480 $ 342,058 $ 251,600 $ 310,948
Gross profit................. 62,329 72,185 50,950 68,547
Net earnings................. 9,908 10,706 3,509 11,491
Earnings per share:
Primary.................... .48 .51 .17 .55
Fully diluted.............. .47 .50 .17 .54
Fiscal 1993:
Net sales.................... $ 250,931 $ 281,830 $ 235,893 $ 309,001
Gross profit................. 49,744 53,162 43,159 65,776
Net earnings................. 8,436 7,432 2,469 10,357
Earnings per share:
Primary.................... .41 .36 .12 .50
Fully diluted.............. .40 .35 .12 .49
NOTE: Quarterly results reflect pretax gains on disposal of
assets of $3,047 and $3,391 in the first quarter of 1994 and
1993, respectively, and $698 in the fourth quarter of 1993.
</TABLE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION:
All operations are in the apparel and related soft goods
industry. A summary of operations by geographic area is
presented in the column to the right. Substantially all
Domestic and Far East sales are to U.S. customers. Sales
and transfers between geographic areas were not significant
and intercompany accounts have been eliminated.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------
Year ended April 30, 1994 1993 1992
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales to customers:
Domestic............................ $ 1,044,409 $ 914,541 $ 759,322
Far East............................ 158,677 163,114 155,604
------------ ----------- ---------
$ 1,203,086 $ 1,077,655 $ 914,926
------------ ----------- ---------
Operating profit:
Domestic............................ $ 78,208 $ 63,347 $ 56,821
Far East............................ 14,375 11,275 8,454
------------ ----------- ---------
92,583 74,622 65,275
Gain on disposal of assets.............. 3,047 4,089 5,019
Interest expense........................ (15,634) (13,829) (14,155)
General corporate expense............... (18,982) (12,988) (14,622)
------------ ----------- ---------
Earnings before income taxes............ $ 61,014 $ 51,894 $ 41,517
------------ ----------- ---------
Assets at end of year:
Domestic............................ $ 475,639 $ 465,943 $ 360,144
Far East............................ 103,269 99,162 108,677
Corporate........................... 62,949 71,350 69,171
------------ ----------- ---------
$ 641,857 $ 636,455 $ 537,992
------------ ----------- ---------
Capital expenditures:
Domestic............................ $ 6,666 $ 11,913 $ 6,274
Far East............................ 5,368 4,341 6,025
Corporate........................... 430 569 296
------------ ----------- ---------
$ 12,464 $ 16,823 $ 12,595
------------ ----------- ---------
Depreciation and amortization:
Domestic............................ $ 19,745 $ 15,815 $ 13,447
Far East............................ 4,038 4,140 3,763
Corporate........................... 1,330 1,327 1,305
------------ ----------- ---------
$ 25,113 $ 21,282 $ 18,515
------------ ----------- ---------
All of the gains on disposal of assets were Far East gains.
</TABLE>
<TABLE>
SUPPLEMENTAL SELECTED FINANCIAL DATA
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
(Dollars in thousands except per share data) 1994 1993 1992 1991 1990
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 1,203,086 $ 1,077,655 $ 914,926 $ 807,953 $ 779,866
Net earnings............................... 35,614 28,694 22,837 12,447 14,025
Earnings per share:
Primary............................... 1.71 1.39 1.26 .70 .80
Fully diluted......................... 1.68 1.36 1.23 .69 .78
Cash dividends declared per share.......... .55 .53 .53 .53 .53
Working Capital............................ 262,406 197,518 218,931 177,940 181,605
Total assets............................... 641,857 636,455 537,992 484,312 468,901
Long-term debt............................. 153,014 102,923 110,566 120,009 127,781
Total debt................................. 170,940 203,808 126,589 149,618 155,162
Shareowners' equity........................ 306,956 279,860 260,033 200,223 197,099
Equity per share........................... 14.64 13.51 12.66 11.31 11.17
NOTE: All per share data have been adjusted to reflect stock splits.
</TABLE>
<PAGE> 13
21
SUPPLEMENTAL DATA Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (UNAUDITED)
Domestic operations include marketing-oriented branded businesses
offering apparel and camping soft goods, and manufacturing-oriented
private label units offering apparel and home fashions product lines.
Domestic operations produce goods in the United States, the
Caribbean, and Canada. Far East operations produce high quality,
competitively priced, private label cotton and cotton-blended shirts
and blouses in Hong Kong, China, Sri Lanka, Saipan and Costa Rica.
In addition to the Company's owned and leased plants, products are
sourced through contracting relationships with other manufacturers in
various countries. The Company sells its products through multiple
channels of distribution, including national retail chains,
department stores, specialty stores, mass merchants, mail order
houses, sporting goods stores and other manufacturers.
RESULTS OF OPERATIONS
FISCAL 1994
Kellwood Company achieved record sales and net earnings for the year
ended April 30, 1994. The fiscal 1994 growth came from a combination
of internal growth and acquisitions. The internal growth was
attributable to increased volume with existing and new accounts as
well as several marketing programs initiated in 1994. These marketing
programs also provide growth opportunities for the upcoming fiscal
year and beyond.
Sales by Domestic branded operations were up $175 million or
28% reflecting the continued success of Kellwood's acquisition
strategy. The increase in branded sales is approximately 55%
attributable to recent acquisitions with the remaining 45% from
internal growth of existing business units. Sales from the
branded portfolio accounted for 66% of Kellwood's total volume
for fiscal 1994. This compares to 58% last year and puts the
Company well on its way to achieving its goal of 75% from the
branded sector. The growth in the Domestic branded operations
with their overall higher margins contributed significantly to
the improvement in total Company earnings.
Sales by Domestic private label operations were down 16%, or
$45 million, below the level reported last year principally
because Sears closed its catalog operation. Operating profits in
the Domestic private label portfolio were adversely affected by
the decline in sales and by continuing margin pressure,
especially in the lingerie market.
Sales by Far East operations, principally of high quality
private label shirts sold to U.S. department stores and premier
mail order houses, decreased $4 million or 3% below the prior
year. The decline in sales was caused by changes in capacity as
production was shifted among plants. During 1994, Kellwood's
manufacturing capacity was expanded in China and Sri Lanka, and
productivity was improved in Saipan and Hong Kong. Far East
operating margins improved significantly from last year because
of these changes.
Sales to J.C. Penney in 1994 exceeded $150 million, an
increase of $37 million, or 33% over 1993. J.C. Penney is now
Kellwood's largest customer and is being serviced by all 15
operating units of the Company.
Improved earnings were achieved as the result of greater
sales volume, more effective sourcing, increased branded product
sales, and a reduction in the overall effective tax rate. The
increase in amortization expense results from increased
intangible assets associated with recent acquisitions. The
increase in interest expense correlates with the increase in
average outstanding debt. The decrease in the effective tax rate
is due to changes in the earnings mix.
Operating results include gains in the disposal of certain
excess export quota rights. Additional quota disposals, which
would result in gains, are continually evaluated based upon
operating needs and market conditions. Quota prices for the
categories held by Kellwood have dropped substantially since the
first quarter of fiscal 1994.
FISCAL 1993
In terms of results and positioning the Company for future growth,
1993 was a productive year for Kellwood. Sales increased 18% in
1993, and net earnings increased 26%. The growth in sales was broad-
based across all three business portfolios and every channel of
distribution.
The sales increase was most significant in the Domestic
branded portfolio which experienced an increase of 27% or $134.5
million for the year. Approximately half of the increase was due
to the acquisitions of California Ivy, Inc., and AJ Brandon, Inc.
The Domestic branded businesses with their overall higher margins
continued to contribute significantly to total earnings; however,
their profits were partially offset by costs associated with
restructuring Kellwood's two start-up divisions into other
business units.
Sales to Sears, which represented 15% of total Kellwood
sales in 1993, increased 1% as the result of additional volume
from Domestic branded and Far East operations even though there
was
<PAGE> 14
22
SUPPLEMENTAL DATA Kellwood Company and Subsidiaries
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
a 4% decline in Domestic private label sales to Sears. Total
sales by Domestic private label units were up 8%, or $21 million,
because of additional business with customers other than Sears.
Sales by Far East operations increased 5%, or $7.5 million.
Far East operating margins improved significantly from 1992
because of a shift of production from operations in Taiwan to
more efficient plants in Hong Kong, China and Sri Lanka.
The 26% increase in net earnings for 1993 was primarily
attributable to increased volume, improved operating efficiency
and product sourcing, and a shift in mix to higher margin branded
volume. These gains were partially offset by the higher
amortization expense of intangible assets associated with recent
acquisitions and lower income from the disposal of certain excess
export quota rights in Hong Kong.
FISCAL 1992
Sales by Domestic branded units increased $70 million, or 17%,
including a $62 million, or 15%, increase in ongoing branded
businesses and additional volume attributable to decorp, acquired
in October 1990. Sales have increased across Kellwood's various
branded product offerings with sales to the national retail
chains and specialty stores showing the largest growth. Sales to
Sears increased 4% because of the additional branded volume, even
though there was a 2% decline in Domestic private label sales to
Sears. Total sales by Domestic private label units were up 7%
because of additional business with customers other than Sears.
Sales by Far East operations increased $20 million, or 15%, in
1992 because of strong demand for their high-quality products and
a broadening of Smart Shirts' customer base.
Gross profit margin increased to 20% of sales in 1992
reflecting improvements by both Domestic and Far East operations.
The improvement in overall operating results was primarily
attributable to higher volume and better gross margins generated
by Domestic branded businesses. Operating problems related to
plants in Costa Rica and Saipan adversely affected earnings
before income taxes by $3 million in 1992. The 83% increase in
net earnings for 1992 reflects the improvement in sales and
margins and lower interest expense, even though gains on disposal
of assets and interest income were down. The 1992 gain on disposal
of assets represents gains on the sale of certain excess export quota
rights in Hong Kong.
FINANCIAL CONDITION
The current ratio was 2.7 to 1 at April 30, 1994, as compared to 1.9
to 1 at April 30, 1993. Accounts receivable and inventory levels,
especially after netting for the effects of recent acquisitions, are
at very satisfactory levels. The improved net accounts receivable
and inventory levels contributed significantly to the increase in
cash provided by operating activities.
The decrease in the cash used for investing activities
resulted primarily from the completion of only one significant
acquisition (Goodman Knitting Co.) during 1994 versus two
acquisitions (AJ Brandon, Inc. and California Ivy, Inc.) last
year. Viable acquisition candidates that would expand and
complement Kellwood's existing portfolio of companies are
continually being considered. Capital expenditures, excluding
acquisitions and related payments, were $12.5 million in 1994,
compared with $16.8 million in 1993 and $12.6 million in 1992.
There are no material commitments for capital expenditures as of
April 30, 1994. Ten million dollars was repatriated from Far
East operations in 1994, compared with $20 million in 1993 and
$10 million in 1992.
Total debt represents 36% of capitalization at April 30,
1994, compared to 42% at April 30, 1993. During 1994, Kellwood
converted $60 million of its short-term borrowings to long-term
debt. The remaining short-term borrowings were repaid with cash
generated from operations. The Company is currently negotiating
a $120 million fully committed revolving credit agreement that
will replace its current $60 million agreement which expires on
July 1, 1994.
Cash provided by operations and borrowings under various
lines of credit are the primary sources of liquidity. The
combined operating, cash and equity position of the Company
should continue to provide the capital flexibility necessary to
fund future opportunities and to meet existing obligations.
OUTLOOK
Almost every economic indicator points to an improving economy and a
more receptive consumer. The consumer, while perhaps more willing to
buy, is definitely looking for value when shopping for apparel. This
plays to one of the Company's core strengths. Kellwood is poised to
respond through its market niche brands and broad based private label
capability.
<PAGE> 15
Appendix
The Inside Front Cover of the printed Annual Report includes three
bar graphs. The first bar graph plots the Growth in Net Sales for 1992,
1993, and 1994. The second bar graph plots the Growth in Net Earnings
for 1992, 1993, and 1994. The third bar graph plots the Average
Inventory Days' Supply for 1992, 1993, and 1994.
<PAGE> 1
EXHIBIT 21
PARENTS AND SUBSIDIARIES
The Company and its subsidiaries* as of June 27, 1994 are as follows:
<TABLE>
<CAPTION>
State (Country) of Percentage of Voting
Name of Company Incorporation Securities Owned
- - --------------- ------------------ --------------------
<S> <C> <C>
Kellwood Company Delaware Parent
American Recreation Products, Inc. Delaware 100%
Kellwood Asia Limited Hong Kong 100%
Smart Shirts Limited Hong Kong 100%
Keeta Company Limited Hong Kong 100%
South Asia Garment Limited Hong Kong 100%
KWD Holdings, Inc. Delaware 100%
RSDB Sportswear, Inc. Delaware 100%
Tri-W Corporation North Carolina 100%
California Ivy, Inc. California 100%
<FN>
* Some of the above subsidiaries also have subsidiaries which are
not listed because, in the aggregate, they are not considered to be
significant.
</TABLE>
<PAGE> 1
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
The undersigned, a director of Kellwood Company (the "Company"),
does hereby constitute and appoint Thomas H. Pollihan his/her true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, to sign
the Company's Form 10-K Annual Report pursuant to Section 13 of the
Securities Exchange Act of 1934 as Amended for the fiscal year ended
April 30, 1994, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto the attorney-in-fact full power and
authority to sign such document on behalf of the undersigned and to make
such filing, as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done
by virtue hereof.
Dated: June 1, 1994
/s/ RAYMOND F. BENTELE /s/ JAMES C. JACOBSEN
- - ------------------------------------ -------------------------------------
Raymond F. Bentele James C. Jacobsen
/s/ EDWARD S. BOTTUM /s/ JAMES J. KERLEY
- - ------------------------------------ -------------------------------------
Edward S. Bottum James J. Kerley
/s/ RICHARD P. CONERLY /s/ JAMES S. MARCUS
- - ------------------------------------ -------------------------------------
Richard P. Conerly James S. Marcus
/s/ KITTY G. DICKERSON /s/ WILLIAM J. MCKENNA
- - ------------------------------------ -------------------------------------
Kitty G. Dickerson William J. McKenna
/s/ WAI YIU FUNG /s/ FRED W. WENZEL
- - ------------------------------------ -------------------------------------
Wai Yiu Fung Fred W. Wenzel
