<PAGE> 1
================================================================================
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, 1996
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
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-2472410
- --------------------------------------------- --------------------------------
(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
================================================================================
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,
1996 (only one class): 21,168,993
--------------
<PAGE> 2
<TABLE>
KELLWOOD COMPANY
----------------
INDEX
-----
<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 7
PART II. OTHER INFORMATION 9
</TABLE>
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
------------------------------
<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
------------------------------------------------
(Amounts in thousands)
<CAPTION>
October 31,
------------------------- April 30,
1996 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and time deposits $ 40,982 $ 15,593 $ 25,043
Receivables, net 258,247 261,390 235,108
Inventories 247,857 236,217 264,583
Prepaid taxes and expenses 19,996 19,977 19,624
-------- -------- --------
Total current assets 567,082 533,177 544,358
Property, plant and equipment, net 63,667 65,704 63,808
Intangible assets, net 116,873 123,728 120,401
Other assets 72,010 64,760 68,121
-------- -------- --------
$819,632 $787,369 $796,688
======== ======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities:
Current portion of long-term debt $ 20,439 $ 8,164 $ 18,198
Notes payable 143,063 127,789 128,765
Accounts payable 96,914 85,283 98,148
Accrued expenses 62,595 64,597 61,179
-------- -------- --------
Total current liabilities 323,011 285,833 306,290
Long-term debt 118,996 139,585 125,443
Deferred income taxes and other 39,863 39,647 39,763
Shareowners' equity:
Common stock 95,113 94,114 94,562
Retained earnings 282,943 267,056 269,060
Cumulative translation adjustment (8,819) (8,809) (8,800)
-------- -------- --------
369,237 352,361 354,822
Less treasury stock, at cost (31,475) (30,057) (29,630)
-------- -------- --------
Total shareowners' equity 337,762 322,304 325,192
-------- -------- --------
$819,632 $787,369 $796,688
======== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
- 3 -
<PAGE> 4
<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,
----------------------- -----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $429,435 $425,635 $756,870 $766,260
Costs and expenses:
Cost of products sold 341,751 337,182 603,655 608,390
Selling, general and
administrative expenses 54,306 55,202 101,095 105,349
Amortization of intangible
assets 3,810 3,899 7,628 7,847
Interest expense 5,388 6,281 10,566 12,208
Interest income and other, net (758) (748) (1,030) (897)
-------- -------- -------- --------
Earnings before income taxes 24,938 23,819 34,956 33,363
Income taxes 10,500 9,800 14,700 13,700
-------- -------- -------- --------
Net earnings $ 14,438 $ 14,019 $ 20,256 $ 19,663
======== ======== ======== ========
Weighted average shares
outstanding:
Primary 21,239 21,157 21,238 21,145
======== ======== ======== ========
Fully diluted 21,557 21,559 21,556 21,547
======== ======== ======== ========
Earnings per share:
Primary $ .68 $ .66 $ .95 $ .93
======== ======== ======== ========
Fully diluted $ .67 $ .65 $ .94 $ .91
======== ======== ======== ========
Dividends paid per share $ .15 $ .15 $ .30 $ .30
======== ======== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
- 4 -
<PAGE> 5
<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
----------------------------------------------------------
(Amounts in thousands)
<CAPTION>
Six Months Ended
October 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
Operating activities:
Net earnings $ 20,256 $ 19,663
Add (deduct) items not affecting operating
cash flows:
Depreciation and amortization 14,013 14,596
Increase in prepaid pension cost (4,000) (3,766)
Deferred taxes and other 383 (207)
-------- --------
30,652 30,286
Changes in noncash working capital components,
net of effect of acquisition:
Receivables (20,290) (21,345)
Inventories 19,048 3,244
Prepaid expenses (348) 710
Accounts payable (1,297) 7,420
Accrued expenses (1,142) 650
-------- --------
Net cash provided by operating activities 26,623 20,965
-------- --------
Investing activities:
Additions to property, plant and equipment (6,090) (11,272)
Proceeds from disposal of assets - 2,750
Investment in subsidiaries (7,185) -
Other investing activities 166 (526)
-------- --------
Net cash (used for) investing activities (13,109) (9,048)
-------- --------
Financing activities:
Proceeds from notes payable, net 14,298 3,522
Reduction of long-term debt (4,206) (5,320)
Dividends paid (6,373) (6,343)
Purchase of treasury stock (1,961) -
Stock transactions under incentive plans 667 735
-------- --------
Net cash provided by (used for)
financing activities 2,425 (7,406)
-------- --------
Net increase in cash and time deposits 15,939 4,511
Cash and time deposits - beginning of period 25,043 11,082
-------- --------
Cash and time deposits - end of period $ 40,982 $ 15,593
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
- 5 -
<PAGE> 6
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 1996 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,
1996 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Finished goods $103,626 $109,006 $110,207
Work in process 85,678 64,299 91,682
Raw materials 58,553 62,912 62,694
-------- -------- --------
$247,857 $236,217 $264,583
======== ======== ========
</TABLE>
If inventories were valued at current replacement costs, they would have
totalled $258,998, $244,864 and $274,722 at October 31, 1996, October 31,
1995, and April 30, 1996, respectively.
3. Intangible assets consisted of:
<TABLE>
<CAPTION>
October 31,
---------------------- April 30,
1996 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Goodwill $104,877 $ 96,856 $100,765
Other identifiable
intangibles 84,245 90,893 90,840
-------- -------- --------
189,122 187,749 191,605
Less accumulated
amortization 72,249 64,021 71,204
-------- -------- --------
$116,873 $123,728 $120,401
======== ======== ========
</TABLE>
4. A credit facility agreement dated May 31, 1996, in the amount of $300,000
expires October 30, 1999. Under the agreement, up to $200,000 can be
utilized for short-term loans and up to $200,000 can be utilized for
letters of credit. Each borrowing under the agreement 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. At October 31, 1996, outstanding short-term loans and
letters of credit under the agreement were $40,000 and $106,491,
respectively. Covenants are more flexible than those currently existing
for Kellwood's notes due insurance companies.
- 6 -
<PAGE> 7
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
OPERATING RESULTS
- -----------------
Kellwood Company achieved record sales and earnings for the second quarter
ended October 31, 1996.
Sales by Domestic branded operations were up slightly for the quarter and
down 2% for the six month period. The slowdown in volume was principally due
to lower sales in divisions restructured during the second half of the prior
fiscal year. Sales for the portfolio, exclusive of restructured divisions,
increased 9% for the quarter and 6% for the six month period. Domestic
branded sales accounted for 71% of Kellwood's total volume for the six months
ended October 31, 1996 compared to 72% last year. The Domestic branded
operations continued to contribute significantly to total company earnings.
Sales by Domestic private label operations increased 2% for the quarter and
decreased 2% for the six month period. Operating profits in the Domestic
private label portfolio have remained strong as a result of a steady stream
of successful private label programs with several key retailers.
Sales by Far East operations, principally of high quality private label
shirts sold to U.S. department stores and premier mail order houses,
increased 4% for both the quarter and six month periods. The customer mix
continues to improve as operations gain market share in the better dress
shirt and sport shirt categories.
The decrease in interest expense for the six months ended October 31, 1996
correlates with the decrease in average outstanding debt coupled with overall
lower rates. The increase in the effective tax rate is due to changes in the
earnings mix.
FINANCIAL CONDITION
- -------------------
The current ratio remained relatively constant at 1.8 to 1 at October 31,
1996 and April 30, 1996 as compared to 1.9 to 1 October 31, 1995. Cash
levels are up primarily due to improvement in our Far East operations.
Accounts receivable have remained in line with sales volume. Inventory
levels are up 5% from last October because of a shift to more offshore
sourcing which results in having to carry more goods in transit.
Cash used for investing activities for the six months ended October 31, 1996
includes approximately $7 million for the purchase of the assets of a small
business acquired to complement one of Kellwood's existing business units.
The investment activity for the same period last year includes approximately
$5 million used to purchase an office and warehouse facility for another
Kellwood business unit.
Total debt represents 46% of capitalization at October 31, 1996 which is
consistent with the levels carried at both April 30, 1996 and October 31,
1995. In September, the Board of Directors authorized the Company to
repurchase from time to time up to 10% of the outstanding shares of its
common stock (approximately 2 million shares) in the open market through
privately negotiated transactions at management's discretion and depending on
market conditions. As of October 31, 1996, the Company had purchased 111,000
shares. Kellwood maintains a $300 million credit facility agreement of which
up to $200 million can be utilized for short-term loans and up to $200
million can be utilized for letters of credit. At October 31, 1996, $154
million was available for future use.
- 7 -
<PAGE> 8
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Continued)
Cash provided by operations and borrowing 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.
OUTLOOK
- -------
Operationally, Kellwood has taken steps to enhance its competitive position
by containing overhead spending and shifting more of its contractor
production from domestic to offshore. Additionally, the costs of
consolidating and restructuring certain businesses, which was largely
incurred during the second half of fiscal 1996, is now behind us. The
Company has also been working on a number of marketing programs and
initiatives with a broad range of leading retailers in each of its three
business portfolios. As we move into the second half of this fiscal year,
these actions should result in increased market share with the leading
retailers in the United States and in improved operating margins in
comparison with the prior year.
- 8 -
<PAGE> 9
PART II. OTHER INFORMATION
---------------------------
KELLWOOD COMPANY
----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
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
October 31, 1996.
- 9 -
<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
December 3, 1996 /s/ Thomas H. Pollihan
----------------------------------------
Thomas H. Pollihan
Vice President, Secretary and General
Counsel
December 3, 1996 /s/ James C. Jacobsen
----------------------------------------
James C. Jacobsen
Vice Chairman
(Chief Financial Officer)
- 10 -
<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,
1996, and from the Condensed Consolidated Statement of Earnings and Condensed
Consolidated Statement of Cash Flows for the six months ended October 31, 1996,
and is qualified in its entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 40,982
<SECURITIES> 0
<RECEIVABLES> 263,460
<ALLOWANCES> 5,213
<INVENTORY> 247,857
<CURRENT-ASSETS> 567,082
<PP&E> 173,109
<DEPRECIATION> 109,442
<TOTAL-ASSETS> 819,632
<CURRENT-LIABILITIES> 323,011
<BONDS> 118,996
<COMMON> 95,113
0
0
<OTHER-SE> 242,649
<TOTAL-LIABILITY-AND-EQUITY> 819,632
<SALES> 756,870
<TOTAL-REVENUES> 756,870
<CGS> 603,655
<TOTAL-COSTS> 603,655
<OTHER-EXPENSES> 107,693
<LOSS-PROVISION> 673
<INTEREST-EXPENSE> 10,566
<INCOME-PRETAX> 34,956
<INCOME-TAX> 14,700
<INCOME-CONTINUING> 20,256
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,256
<EPS-PRIMARY> .95
<EPS-DILUTED> .94
</TABLE>
