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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from -------------------- to --------------------
Commission File Number 1-7340
KELLWOOD COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 36-2472410
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(State or other jurisdiction (IRS Employer
of 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
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- -------------------------------------------------------------------------------
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
--- ---
Number of shares of common stock, par value $.01, outstanding at October 31,
1995 (only one class): 21,171,450
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KELLWOOD COMPANY
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<TABLE>
INDEX
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<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet 3
Condensed Consolidated Statement of Earnings 4
Condensed Consolidated Statement of Cash Flows 5
Notes to Condensed Consolidated Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION 9
</TABLE>
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PART I. FINANCIAL INFORMATION
------------------------------
<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
------------------------------------------------
(Amounts in thousands)
<CAPTION>
October 31,
----------------------- April 30,
1995 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and time deposits $ 15,593 $ 14,494 $ 11,082
Receivables, net 261,390 248,977 240,045
Inventories 236,217 216,579 239,461
Prepaid taxes and expenses 19,977 21,498 20,687
-------- -------- --------
Total current assets 533,177 501,548 511,275
Property, plant and equipment, net 65,704 73,100 63,629
Intangible assets, net 123,728 136,586 131,527
Other assets 64,760 57,147 61,706
-------- -------- --------
$ 787,369 $ 768,381 $ 768,137
======== ======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities:
Current portion of long-term debt $ 8,164 $ 9,462 $ 8,276
Notes payable 127,789 100,331 124,267
Accounts payable 85,283 83,876 77,863
Accrued expenses 64,597 62,526 63,947
-------- -------- --------
Total current liabilities 285,833 256,195 274,353
Long-term debt 139,585 148,710 144,793
Deferred income taxes and other 39,647 38,806 40,794
Shareowners' equity:
Common stock 94,114 92,964 93,400
Retained earnings 267,056 270,799 253,736
Cumulative translation adjustment (8,809) (8,958) (8,861)
-------- -------- --------
352,361 354,805 338,275
Less treasury stock, at cost (30,057) (30,135) (30,078)
-------- -------- --------
Total shareowners' equity 322,304 324,670 308,197
-------- -------- --------
$ 787,369 $ 768,381 $ 768,137
======== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
--------------------------------------------------------
(Amounts in thousands except per share data)
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
---------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 425,635 $ 376,024 $ 766,260 $ 676,961
Costs and expenses:
Cost of products sold 337,182 300,609 608,390 535,227
Selling, general and
administrative expenses 55,202 49,358 105,349 91,332
Amortization of intangible
assets 3,899 3,649 7,847 6,859
Gain on disposal of assets - - - (104)
Interest expense 6,281 4,465 12,208 8,382
Interest income and other, net (748) (974) (897) (1,763)
-------- -------- -------- --------
Earnings before income taxes 23,819 18,917 33,363 37,028
Income taxes 9,800 7,800 13,700 15,200
-------- -------- -------- --------
Net earnings $ 14,019 $ 11,117 $ 19,663 $ 21,828
======== ======== ======== ========
Weighted average shares
outstanding:
Primary 21,157 21,081 21,145 21,051
======== ======== ======== ========
Fully diluted 21,559 21,515 21,547 21,491
======== ======== ======== ========
Earnings per share:
Primary $ .66 $ .53 $ .93 $ 1.04
======== ======== ======== ========
Fully diluted $ .65 $ .52 $ .91 $ 1.02
======== ======== ======== ========
Dividends paid per share $ .15 $ .15 $ .30 $ .30
======== ======== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
----------------------------------------------------------
(Amounts in thousands)
<CAPTION>
Six Months Ended
October 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating activities:
Net earnings $ 19,663 $ 21,828
Add (deduct) items not affecting operating
cash flows:
Depreciation and amortization 14,596 13,156
Increase in prepaid pension cost (3,766) (3,698)
Gain on disposal of assets, net of write-offs - (104)
Deferred taxes and other (207) (480)
-------- --------
30,286 30,702
Changes in noncash working capital components,
net of effect of acquisition:
Receivables (21,345) (36,829)
Inventories 3,244 851
Prepaid expenses 710 (1,863)
Accounts payable 7,420 12,684
Accrued expenses 650 (11,615)
-------- --------
Net cash provided by (used for)
operating activities 20,965 (6,070)
-------- --------
Investing activities:
Additions to property, plant and equipment (11,272) (5,208)
Proceeds from disposal of assets 2,750 104
Investment in subsidiaries - (46,081)
Other investing activities (526) 223
-------- --------
Net cash (used for) investing activities (9,048) (50,962)
-------- --------
Financing activities:
Proceeds from notes payable, net 3,522 61,700
Reduction of long-term debt (5,320) (3,758)
Dividends paid (6,343) (6,319)
Stock transactions under incentive plans 735 2,237
-------- --------
Net cash (used for) provided by
financing activities (7,406) 53,860
-------- --------
Net increase (decrease) in cash and time deposits 4,511 (3,172)
Cash and time deposits - beginning of period 11,082 17,666
-------- --------
Cash and time deposits - end of period $ 15,593 $ 14,494
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Amounts in thousands except per share data)
1. It is the opinion of management that all adjustments necessary for a fair
presentation of results for the interim periods have been reflected in
the statements presented. Such adjustments were normal and recurring in
nature.
Accounting policies have been continued without change and are described
in the Summary of Significant Accounting Policies contained in the
Company's 1995 Annual Report to Shareowners. For additional information
regarding the Company's financial condition, refer to the footnotes
accompanying the annual financial statements. Details in those notes have
not changed significantly except as a result of normal transactions in the
interim.
2. Total inventory consisted of:
<TABLE>
<CAPTION>
October 31,
----------------------- April 30,
1995 1994 1995
---------- ---------- -----------
<S> <C> <C> <C>
Finished goods $ 109,006 $ 85,683 $ 108,656
Work in process 64,299 58,694 64,180
Raw materials 62,912 72,202 66,625
-------- -------- --------
$ 236,217 $ 216,579 $ 239,461
======== ======== ========
</TABLE>
If inventories were valued at current replacement costs, they would have
totalled $244,864, $226,500 and $247,356 at October 31, 1995, October 31,
1994, and April 30, 1995, respectively.
3. Intangible assets consisted of:
<TABLE>
<CAPTION>
October 31,
----------------------- April 30,
1995 1994 1995
---------- ---------- -----------
<S> <C> <C> <C>
Goodwill $ 96,856 $ 96,799 $ 99,032
Other identifiable
intangibles 90,893 106,545 90,910
-------- -------- --------
187,749 203,344 189,942
Less accumulated
amortization 64,021 66,758 58,415
-------- -------- --------
$ 123,728 $ 136,586 $ 131,527
======== ======== ========
</TABLE>
4. Revolving credit agreements dated June 24, 1994, and totalling $120,000
expire June 22, 1996 ($50,000), and June 24, 1997 ($70,000). Each
borrowing under the agreements bears interest at one of several specified
rates dependent upon several factors including the Company's leverage
ratio, senior debt rating and the applicable Eurodollar margin. Facility
fees can range from .1% to .25% of the committed amount outstanding. At
October 31, 1995, the entire $120,000 was available for future
borrowings. Covenants are more flexible than those currently existing
for Kellwood's notes due insurance companies.
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KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Amounts in thousands except per share data)
(Continued)
5. On September 30, 1994, all of the capital stock of Halmode Apparel, Inc.,
a multidivisional women's apparel maker, 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, 1994, unaudited pro forma consolidated net
sales would have been $425,635 and $405,498 for the three months ended
October 31, 1995 and 1994, and $766,260 and $738,473 for the six months
ended October 31, 1995 and 1994, respectively. Consolidated net
earnings and earnings per share would not have been significantly
different.
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KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
OPERATING RESULTS
- -----------------
Sales reached record levels for both the quarter and the six month period
ended October 31, 1995.
Sales by Domestic branded operations increased 18% for the quarter and 20%
for the six month period. The sales increase is principally attributable to
the acquisitions of Halmode and David Dart. Sales from the branded portfolio
accounted for 72% of Kellwood's total volume for the six months ended
October 31, 1995. This compares to 68% for the same period last year and
moves the Company closer to achieving its goal of 75% from the branded
sector. The Domestic branded operations, with their overall higher margins,
contributed significantly to total company earnings.
Sales by Domestic private label operations declined 4% for both the quarter
and the six month period. Adjusting last year's volume for the Home Fashions
division which was sold in December, 1994, Domestic private label sales were
up 5% for the quarter and 7% for the six month period. The increases are due
primarily to growth in private label programs with several key customers.
Operating profits in the Domestic private label portfolio were improved as a
result of these successful programs.
Sales by Far East operations, principally of high quality private label
shirts sold to U.S. department stores and premier mail order houses,
increased 21% for the quarter and 6% for the six month period. The majority
of the second quarter gain resulted from a shifting of sales from the first
quarter as retailers delayed their orders. However, the Far East operations
also gained market share across a broad range of customers over the six month
period.
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 coupled with overall
higher rates.
FINANCIAL CONDITION
- -------------------
The current ratio was 1.9 to 1 at October 31, 1995 and April 30, 1995 as
compared to 2.0 to 1 at October 31, 1994. Accounts receivable have increased
as a result of the increased sales. Inventory levels are also up from last
October to support increased demand.
Cash used for investing activities was substantially higher last year because
of the acquisition of Halmode Apparel, Inc. in September, 1994. In October,
1995 the Company received $2.75 million in proceeds from the sale of assets
in Saipan. The costs of the divestiture are expected to fall within the
provision established in the fourth quarter of last year.
Total debt represents 46% of capitalization at October 31, 1995, as compared
to 47% at April 30, 1995 and 44% at October 31, 1994. The increase from last
October resulted from increased working capital needed to fund internal
growth. In June, 1994 Kellwood negotiated a $120 million fully committed
revolving credit agreement. At October 31, 1995 the entire $120 million was
available for future borrowings.
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 as well as to meet existing
obligations.
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PART II. OTHER INFORMATION
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KELLWOOD COMPANY
----------------
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
- ---------------------------------------------
At the August 24, 1995 Annual Meeting of Shareowners, six directors were
elected to serve for two-year terms, the 1995 Omnibus Incentive Stock Plan
was approved, and the 1995 Stock Option Plan for Nonemployee Directors was
approved. The tabulation was as follows:
<TABLE>
<CAPTION>
Shares Shares Shares Shares Broker
Voted For Withheld Against Abstaining Non-Votes
---------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Directors
- ---------
Raymond F. Bentele 18,695,559 141,253 - - -
Edward S. Bottum 18,718,460 141,253 - - -
Kitty G. Dickerson 18,696,348 141,253 - - -
Leonard A. Genovese 18,627,679 141,253 - - -
Hal J. Upbin 18,616,695 141,253 - - -
Fred W. Wenzel 18,605,243 141,253 - - -
1995 Omnibus
Incentive Stock
Plan 11,853,635 - 4,802,173 691,751 1,453,692
- ----------------
1995 Stock Option
Plan for Nonemployee
Directors 14,681,861 - 2,563,406 102,292 1,453,692
- ---------------------
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
<TABLE>
a) EXHIBITS:
<CAPTION>
S.E.C. Exhibit
Reference No. Description
------------- -------------------------------------------
<C> <S>
27 Financial Data Schedule, filed herewith.
</TABLE>
b) REPORTS ON FORM 8-K:
No reports were filed on Form 8-K during the three months ended
October 31, 1995.
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<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be duly signed on its behalf by the
undersigned thereunto duly authorized.
KELLWOOD COMPANY
November 29, 1995 /s/ Thomas H. Pollihan
---------------------------------------
Thomas H. Pollihan
Vice President, Secretary and
General Counsel
November 29, 1995 /s/ James C. Jacobsen
---------------------------------------
James C. Jacobsen
Vice Chairman
(Chief Financial Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KELLWOOD
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AT OCTOBER 31,
1995, AND FROM THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED OCTOBER 31, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 15,593
<SECURITIES> 0
<RECEIVABLES> 267,420
<ALLOWANCES> 6,030
<INVENTORY> 236,217
<CURRENT-ASSETS> 533,177
<PP&E> 170,375
<DEPRECIATION> 104,671
<TOTAL-ASSETS> 787,369
<CURRENT-LIABILITIES> 285,833
<BONDS> 139,585
<COMMON> 94,114
0
0
<OTHER-SE> 228,190
<TOTAL-LIABILITY-AND-EQUITY> 787,369
<SALES> 766,260
<TOTAL-REVENUES> 766,260
<CGS> 608,390
<TOTAL-COSTS> 608,390
<OTHER-EXPENSES> 112,299
<LOSS-PROVISION> 1,156
<INTEREST-EXPENSE> 12,208
<INCOME-PRETAX> 33,363
<INCOME-TAX> 13,700
<INCOME-CONTINUING> 19,663
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,663
<EPS-PRIMARY> .93
<EPS-DILUTED> .91
</TABLE>
