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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, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-7340
KELLWOOD COMPANY
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(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
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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 July 31,
1996 (only one class): 21,250,665
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<TABLE>
KELLWOOD COMPANY
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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 6-7
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
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
------------------------------------------------
(Amounts in thousands)
<CAPTION>
July 31,
----------------------- April 30,
1996 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and time deposits $ 22,968 $ 12,178 $ 25,043
Receivables, net 208,832 238,008 235,108
Inventories 293,257 284,229 264,583
Prepaid taxes and expenses 20,817 21,127 19,624
-------- -------- --------
Total Current Assets 545,874 555,542 544,358
Property, plant and equipment, net 62,467 68,142 63,808
Intangible assets, net 116,577 127,575 120,401
Other assets 70,471 63,365 68,121
-------- -------- --------
$795,389 $814,624 $796,688
======== ======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities:
Current portion of long-term debt $ 18,217 $ 8,296 $ 18,198
Notes payable 152,818 183,583 128,765
Accounts payable 84,111 74,138 98,148
Accrued expenses 50,212 55,573 61,179
-------- -------- --------
Total current liabilities 305,358 321,590 306,290
Long-term debt 122,060 141,405 125,443
Deferred income taxes and other 39,816 40,853 39,763
Shareowners' equity:
Common stock 94,901 93,715 94,562
Retained earnings 271,693 256,211 269,060
Cumulative translation adjustment (8,794) (8,943) (8,800)
-------- -------- --------
357,800 340,983 354,822
Less treasury stock, at cost (29,645) (30,207) (29,630)
-------- -------- --------
Total shareowners' equity 328,155 310,776 325,192
-------- -------- --------
$795,389 $814,624 $796,688
======== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
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(Amounts in thousands except per share data)
<CAPTION>
Three Months Ended
July 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Net sales $327,435 $340,625
Costs and expenses:
Cost of products sold 261,904 271,208
Selling, general and administrative expenses 46,789 50,147
Amortization of intangible assets 3,818 3,948
Interest expense 5,178 5,927
Interest income and other, net (272) (149)
--------- --------
Earnings before income taxes 10,018 9,544
Income taxes 4,200 3,900
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Net earnings $ 5,818 $ 5,644
========= ========
Weighted average shares outstanding:
Primary 21,237 21,132
========= ========
Fully diluted 21,506 21,505
========= ========
Earnings per share:
Primary $ .27 $ .27
========= ========
Fully diluted $ .27 $ .26
========= ========
Dividends paid per share $ .15 $ .15
========= ========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
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(Amounts in thousands)
<CAPTION>
Three Months Ended
July 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Operating activities:
Net earnings $ 5,818 $ 5,644
Add (deduct) items not affecting operating
cash flows:
Depreciation and amortization 6,932 7,259
Increase in prepaid pension cost (2,000) (1,850)
Deferred taxes and other (283) 169
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10,467 11,222
Changes in noncash working capital components,
net of effect of acquisition:
Receivables 26,276 2,037
Inventories (28,674) (44,768)
Prepaid expenses (1,193) (440)
Accounts payable (14,037) (3,725)
Accrued expenses (10,967) (8,374)
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Net cash (used for) operating activities (18,128) (44,048)
-------- --------
Investing activities:
Additions to property, plant and equipment (1,782) (7,890)
Other investing activities 7 69
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Net cash (used for) investing activities (1,775) (7,821)
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Financing activities:
Proceeds from notes payable, net 24,053 59,316
Reduction of long-term debt (3,364) (3,368)
Dividends paid (3,185) (3,169)
Other financing activities 324 186
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Net cash provided by financing activities 17,828 52,965
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Net (decrease) increase in cash and time deposits (2,075) 1,096
Cash and time deposits - beginning of period 25,043 11,082
-------- --------
Cash and time deposits - end of period $ 22,968 $ 12,178
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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KELLWOOD COMPANY AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(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>
July 31,
----------------------- April 30,
1996 1995 1996
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<S> <C> <C> <C>
Finished goods $135,448 $144,216 $110,207
Work in process 96,172 70,920 91,682
Raw materials 61,637 69,093 62,694
-------- -------- --------
$293,257 $284,229 $264,583
======== ======== ========
</TABLE>
If inventories were valued at current replacement costs, they would
have totalled $303,898, $292,626 and $274,722 at July 31, 1996, July 31,
1995, and April 30, 1996, respectively.
3. Intangible assets consisted of:
<TABLE>
<CAPTION>
July 31,
----------------------- April 30,
1996 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Goodwill $100,765 $ 99,031 $100,765
Other identifiable
intangibles 90,840 90,902 90,840
-------- -------- --------
191,605 189,933 191,605
Less accumulated
amortization 75,028 62,358 71,204
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$116,577 $127,575 $120,401
======== ======== ========
</TABLE>
4. Earnings before income taxes for the three months ended July 31, 1996
include net proceeds of $1,889 from the sale of certain excess export
quota rights.
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KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(Amounts in thousands except per share data)
(Continued)
5. 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 July 31, 1996, outstanding short-term loans and
letters of credit under the agreement were $40,000 and $84,000,
respectively. 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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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
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OPERATING RESULTS
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Kellwood's sales declined 4% for the quarter compared to last year. This
decline in volume was anticipated as Kellwood has been and will continue to
realign its assets and internal capabilities with the requirements of its
retail customers and the ultimate consumer.
Operating earnings (defined as net sales less cost of products sold and
selling, general and administrative expenses) decreased $0.5 million or 3%
for the quarter as compared to the same period last year. The drop in
operating earnings was largely due to the decline in volume. Margins were
also off from last year. However, the decline in margins was offset by $1.9
million in net proceeds from the sale of certain excess quota rights.
The decrease in interest expense correlates with the decline in average
outstanding debt.
FINANCIAL CONDITION
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The current ratio remained relatively constant at 1.8 to 1 at July 31, 1996
and April 30, 1996 as compared to 1.7 to 1 at July 31, 1995 but the mix has
changed. Accounts receivable have declined in response to the lower sales
volume and improved collection results. Inventory levels have increased
because of a shift to more offshore sourcing which results in having to carry
more goods in transit.
The cash used for investing activities was higher last year because in May,
1995 approximately $5 million was used to purchase an office and warehouse
facility for one of Kellwood's existing business units.
Total debt represents 47% of capitalization at July 31, 1996 as compared to
46% at April 30, 1996 and 52% at July 31, 1995. Notes payable have declined
from last year as the Company has utilized some of its cash provided by
operating activities to pay down its short-term debt. 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 July 31, 1996, $176 million was available for future
use.
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 retail apparel climate remains sluggish with continued price deflation
and margin pressure throughout the entire supply chain. Kellwood has
responded by taking a number of steps to improve its competitive position
during a soft retail environment. These steps include reducing overhead,
more effective sourcing and a better product mix. In addition, the Company
has been working on a number of programs and initiatives which should begin
to bear fruit during the later half of the fiscal year.
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PART II. OTHER INFORMATION
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KELLWOOD COMPANY
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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a) EXHIBITS:
S.E.C. Exhibit
Reference No. Description
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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, 1996.
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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 signed on its behalf by the
undersigned thereunto duly authorized.
KELLWOOD COMPANY
September 3, 1996 /s/ Thomas H. Pollihan
---------------------------------------------
Thomas H. Pollihan
Vice President, Secretary and General Counsel
September 3, 1996 /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, 1996, and from the Condensed Consolidated Statement of
Earnings and Condensed Consolidated Statement of Cash Flows for the
three months ended July 31, 1996, 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-30-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 22,968
<SECURITIES> 0
<RECEIVABLES> 214,007
<ALLOWANCES> 5,175
<INVENTORY> 293,257
<CURRENT-ASSETS> 545,874
<PP&E> 169,727
<DEPRECIATION> 107,260
<TOTAL-ASSETS> 795,389
<CURRENT-LIABILITIES> 305,358
<BONDS> 122,060
<COMMON> 94,901
0
0
<OTHER-SE> 233,254
<TOTAL-LIABILITY-AND-EQUITY> 795,389
<SALES> 327,435
<TOTAL-REVENUES> 327,435
<CGS> 261,904
<TOTAL-COSTS> 261,904
<OTHER-EXPENSES> 50,335
<LOSS-PROVISION> 425
<INTEREST-EXPENSE> 5,178
<INCOME-PRETAX> 10,018
<INCOME-TAX> 4,200
<INCOME-CONTINUING> 5,818
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,818
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
