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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 July 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
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(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
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Number of shares of common stock, par value $.01, outstanding at
July 31, 1995 (only one class): 21,142,442
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KELLWOOD COMPANY
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<TABLE>
INDEX
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<CAPTION>
Page No.
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<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>
July 31,
----------------------- April 30,
1995 1994 1995
---------- ---------- ---------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and time deposits $ 12,178 $ 11,183 $ 11,082
Receivables, net 238,008 194,308 240,045
Inventories 284,229 233,266 239,461
Prepaid taxes and expenses 21,127 19,950 20,687
--------- --------- --------
Total Current Assets 555,542 458,707 511,275
Property, plant and equipment, net 68,142 67,284 63,629
Intangible assets, net 127,575 112,077 131,527
Other assets 63,365 55,089 61,706
--------- --------- --------
$ 814,624 $ 693,157 $ 768,137
========= ========= ========
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities:
Current portion of long-term debt $ 8,296 $ 9,429 $ 8,276
Notes payable 183,583 58,611 124,267
Accounts payable 74,138 62,991 77,863
Accrued expenses 55,573 65,882 63,947
--------- --------- --------
Total current liabilities 321,590 196,913 274,353
Long-term debt 141,405 149,514 144,793
Deferred income taxes and other 40,853 30,590 40,794
Shareowners' equity:
Common stock 93,715 92,476 93,400
Retained earnings 256,211 262,843 253,736
Cumulative translation adjustment (8,943) (8,946) (8,861)
--------- --------- --------
340,983 346,373 338,275
Less treasury stock, at cost (30,207) (30,233) (30,078)
--------- --------- --------
Total shareowners' equity 310,776 316,140 308,197
--------- --------- --------
$ 814,624 $ 693,157 $ 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)
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(Amounts in thousands except per share data)
<CAPTION>
Three Months Ended
July 31,
--------------------------
1995 1994
------------- -----------
<S> <C> <C>
Net sales $ 340,625 $ 300,937
Costs and expenses:
Cost of products sold 271,208 234,618
Selling, general and administrative expenses 50,147 41,974
Amortization of intangible assets 3,948 3,210
Gain on disposal of assets - (104)
Interest expense 5,927 3,917
Interest income and other, net (149) (789)
--------- ---------
Earnings before income taxes 9,544 18,111
Income taxes 3,900 7,400
--------- ---------
Net earnings $ 5,644 $ 10,711
========= =========
Weighted average shares outstanding:
Primary 21,132 21,022
========= =========
Fully diluted 21,505 21,477
========= =========
Earnings per share:
Primary $ .27 $ .51
========= =========
Fully diluted $ .26 $ .50
========= =========
Dividends paid per share $ .15 $ .15
========= =========
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>
Three Months Ended
July 31,
----------------------------
1995 1994
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<S> <C> <C>
Operating activities:
Net earnings $ 5,644 $ 10,711
Add (deduct) items not affecting operating
cash flows:
Depreciation and amortization 7,259 6,324
Increase in prepaid pension cost (1,850) (1,849)
Gain on disposal of assets, net of write-offs - (104)
Deferred taxes and other 169 (888)
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11,222 14,194
Changes in noncash working capital components,
net of effect of acquisition:
Receivables 2,037 (10,399)
Inventories (44,768) (34,177)
Prepaid expenses (440) (1,260)
Accounts payable (3,725) (878)
Accrued expenses (8,374) (3,679)
-------- ---------
Net cash (used for) operating activities (44,048) (36,199)
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Investing activities:
Additions to property, plant and equipment (7,890) (2,358)
Proceeds from disposal of assets - 104
Investment in subsidiaries - (5,500)
Other investing activities 69 92
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Net cash (used for) investing activities (7,821) (7,662)
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Financing activities:
Proceeds from notes payable, net 59,316 41,872
Reduction of long-term debt (3,368) (2,987)
Dividends paid (3,169) (3,158)
Other financing activities 186 1,651
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Net cash provided by financing activities 52,965 37,378
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Net increase (decrease) in cash and time deposits 1,096 (6,483)
Cash and time deposits - beginning of period 11,082 17,666
-------- ---------
Cash and time deposits - end of period $ 12,178 $ 11,183
======== =========
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.
<TABLE>
2. Total inventory consisted of:
<CAPTION>
July 31,
----------------------- April 30,
1995 1994 1995
------------ ----------- ----------
<S> <C> <C> <C>
Finished goods $ 144,216 $ 109,050 $ 108,656
Work in process 70,920 53,369 64,180
Raw materials 69,093 70,847 66,625
-------- -------- --------
$ 284,229 $ 233,266 $ 239,461
======== ======== ========
</TABLE>
If inventories were valued at current replacement costs,
they would have totalled $292,626, $242,812 and $247,356 at
July 31, 1995, July 31, 1994, and April 30, 1995,
respectively.
<TABLE>
3. Intangible assets consisted of:
<CAPTION>
July 31,
----------------------- April 30,
1995 1994 1995
------------ ----------- ----------
<S> <C> <C> <C>
Goodwill $ 99,031 $ 80,864 $ 99,032
Other identifiable
intangibles 90,902 94,322 90,910
-------- -------- --------
189,933 175,186 189,942
Less accumulated
amortization 62,358 63,109 58,415
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$ 127,575 $ 112,077 $ 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 July 31, 1995,
$90,000 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
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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 womens 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 $340,625 and $332,975 for the three months
ended July 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
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CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
OPERATING RESULTS
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Sales were up 13% for the quarter compared to last year. The
sales increase was largely due to the recent acquisitions of
Halmode Apparel, Inc. and David Dart, Inc. less sales from the
Home Fashions division which was sold in December of last year.
It is significant to note that the flat sales from businesses in
operation during both years were primarily caused by the
divisions Kellwood consolidated and repositioned and in the
process downsized during the second half of last year -- namely
Melrose, de'corp dresses, California Ivy, AJ Brandon, Crowntuft
and Smart Shirts. Collectively these divisions represent $66
million or 19% of first quarter sales for the total Company.
Their sales were down $23 million or 26% due largely to our
downsizing and repositioning efforts. The remaining divisions of
the Company posted an 11% increase in sales on a comparable
basis.
Operating earnings (defined as net sales less cost of products
sold and selling, general and administrative expenses) decreased
$5 million or 21% for the quarter as compared to the same period
last year. The drop in operating earnings was largely due to the
results posted by the business units that were consolidated and
repositioned during the second half of last year and continued
margin pressure in the apparel industry.
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
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The current ratio was 1.7 to 1 at July 31, 1995 as compared to
1.9 to 1 at April 30, 1995 and 2.3 to 1 at July 31, 1994.
Accounts receivable have increased from last year as a result of
recent acquisitions and increased sales. Inventory levels have
also increased but on a days on hand basis remain relatively
consistent with both the prior year and April 30, 1995 inventory
days on hand.
The cash used for investing activities remained relatively
constant between the two first quarter periods but the mix
changed. In May, 1995 approximately $5 million was used to
purchase an office and warehouse facility for one of Kellwoods
existing business units. In May 1994 approximately $5 million
was spent by Kellwood to acquire Sierra Designs.
Total debt represents 52% of capitalization at July 31, 1995, as
compared to 47% at April 30, 1995 and 41% at July 31, 1994. The
increase from year end resulted from additional working capital
needed to fund internal growth. The increase from July 31, 1994
resulted from additional financing associated with recent
acquisitions. Kellwood maintains a $120 million fully committed
revolving credit agreement with several financial institutions.
At July 31, 1995, $90 million was available for future
borrowings.
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.
OUTLOOK
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The steps management took last year to strengthen operations and
to improve profitability have been completed for the most part
during the first quarter. As each subsequent quarter unfolds,
Kellwood increasingly will benefit from these efforts and the
year should finish substantially improved.
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PART II. OTHER INFORMATION
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KELLWOOD COMPANY
----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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a) EXHIBITS:
S.E.C. Exhibit
Reference No. Description
--------------- --------------------------------------------
27 Financial Data Schedule, filed herewith.
b) REPORTS ON FORM 8-K:
No reports were filed on Form 8-K during the three months
ended July 31, 1995.
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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
September 6, 1995 /s/ Thomas H. Pollihan
---------------------------------------
Thomas H. Pollihan
Vice President, Secretary and
General Counsel
September 6, 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 JULY 31, 1995,
AND FROM THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED JULY 31, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1995
<PERIOD-END> JUL-31-1995
<CASH> 12,178
<SECURITIES> 0
<RECEIVABLES> 244,249
<ALLOWANCES> 6,241
<INVENTORY> 284,229
<CURRENT-ASSETS> 555,542
<PP&E> 180,927
<DEPRECIATION> 112,785
<TOTAL-ASSETS> 814,624
<CURRENT-LIABILITIES> 321,590
<BONDS> 141,405
<COMMON> 93,715
0
0
<OTHER-SE> 217,061
<TOTAL-LIABILITY-AND-EQUITY> 814,624
<SALES> 340,625
<TOTAL-REVENUES> 340,625
<CGS> 271,208
<TOTAL-COSTS> 271,208
<OTHER-EXPENSES> 53,946
<LOSS-PROVISION> 681
<INTEREST-EXPENSE> 5,927
<INCOME-PRETAX> 9,544
<INCOME-TAX> 3,900
<INCOME-CONTINUING> 5,644
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,644
<EPS-PRIMARY> .27
<EPS-DILUTED> .26
</TABLE>
