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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
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 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
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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
January 31, 1996 (only one class): 21,196,649
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<TABLE>
<CAPTION>
KELLWOOD COMPANY
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INDEX
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Page No.
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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 10
</TABLE>
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
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KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
------------------------------------------------
(Amounts in thousands)
January 31, April 30,
--------------------- ---------
1996 1995 1995
---------- --------- ---------
<S> <C> <C> <C>
ASSETS
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Current assets:
Cash and time deposits $ 13,485 $ 11,525 $ 11,082
Receivables, net 192,016 196,753 240,045
Inventories 280,369 253,938 239,461
Prepaid taxes and expenses 27,695 20,179 20,687
---------- -------- --------
Total current assets 513,565 482,395 511,275
Property, plant and equipment, net 64,749 68,772 63,629
Intangible assets, net 119,919 134,394 131,527
Other assets 66,640 59,190 61,706
---------- -------- --------
$ 764,873 $ 744,751 $ 768,137
========== ======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities:
Current portion of long-term debt $ 18,193 $ 8,221 $ 8,276
Notes payable 133,330 115,160 124,267
Accounts payable 76,981 71,269 77,863
Accrued expenses 53,000 46,132 63,947
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Total current liabilities 281,504 240,782 274,353
Long-term debt 126,178 145,238 144,793
Deferred income taxes and other 39,681 39,013 40,794
Shareowners' equity:
Common stock 94,374 93,219 93,400
Retained earnings 261,836 265,616 253,736
Cumulative translation adjustment (8,788) (8,901) (8,861)
---------- -------- --------
347,422 349,934 338,275
Less treasury stock, at cost (29,912) (30,216) (30,078)
---------- -------- --------
Total shareowners' equity 317,510 319,718 308,197
---------- -------- --------
$ 764,873 $ 744,751 $ 768,137
========== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
--------------------------------------------------------
(Amounts in thousands except per share data)
Three Months Ended Nine Months Ended
January 31, January 31,
---------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 288,490 $ 291,493 $ 1,054,750 $ 968,454
Costs and expenses:
Cost of products sold 235,840 239,984 844,230 775,211
Selling, general and
administrative expenses 47,839 46,882 153,188 138,214
Amortization of intangible
assets 3,803 4,092 11,650 10,951
Gain on disposal of assets - - - (104)
Interest expense 5,058 4,862 17,266 13,244
Interest income and other,
net (606) (908) (1,503) (2,671)
--------- --------- ---------- ---------
Earnings before income taxes (3,444) (3,419) 29,919 33,609
Income taxes (1,400) (1,400) 12,300 13,800
--------- --------- ---------- ---------
Net earnings $ (2,044) $ (2,019) $ 17,619 $ 19,809
========= ========= ========== =========
Weighted average shares
outstanding:
Primary 21,180 21,100 21,156 21,068
========= ========= ========== =========
Fully diluted 21,411 21,479 21,389 21,453
========= ========= ========== =========
Earnings per share:
Primary $ (.10) $ (.10) $ .83 $ .94
========= ========= ========== =========
Fully diluted $ (.09) $ (.09) $ .82 $ .93
========= ========= ========== =========
Dividends paid per share $ .15 $ .15 $ .45 $ .45
========= ========= ========== =========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
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(Amounts in thousands)
Nine Months Ended
January 31,
---------------------
1996 1995
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<S> <C> <C>
Operating activities:
Net earnings $ 17,619 $ 19,809
Add (deduct) items not affecting operating
cash flows:
Depreciation and amortization 21,244 20,319
Increase in prepaid pension cost (5,681) (5,547)
Gain on disposal of assets, net of write-offs - (104)
Deferred taxes and other 121 (501)
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33,303 33,976
Changes in noncash working capital components,
net of effect of acquisition:
Receivables 48,029 19,431
Inventories (40,908) (34,577)
Prepaid expenses (7,008) (371)
Accounts payable (882) (4,405)
Accrued expenses (10,947) (29,199)
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Net cash provided by (used for)
operating activities 21,587 (15,145)
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Investing activities:
Additions to property, plant and equipment (13,795) (7,636)
Proceeds from disposal of assets 2,750 4,724
Investment in subsidiaries - (52,885)
Other investing activities (125) 529
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Net cash (used for) investing activities (11,170) (55,268)
-------- --------
Financing activities:
Proceeds from notes payable, net 9,063 79,815
Reduction of long-term debt (8,698) (8,471)
Dividends paid (9,519) (9,483)
Stock transactions under incentive plans 1,140 2,411
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Net cash (used for) provided by
financing activities (8,014) 64,272
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Net increase (decrease) in cash and time deposits 2,403 (6,141)
Cash and time deposits - beginning of period 11,082 17,666
-------- --------
Cash and time deposits - end of period $ 13,485 $ 11,525
======== ========
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>
January 31, April 30,
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1996 1995 1995
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<S> <C> <C> <C>
Finished goods $ 153,215 $ 114,491 $ 108,656
Work in process 63,874 65,918 64,180
Raw materials 63,280 73,529 66,625
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$ 280,369 $ 253,938 $ 239,461
========== ======== ========
</TABLE>
If inventories were valued at current replacement costs, they
would have totalled $289,391, $262,796 and $247,356 at
January 31, 1996, January 31, 1995, and April 30, 1995,
respectively.
3. Intangible assets consisted of:
<TABLE>
<CAPTION>
January 31, April 30,
---------------------- ----------
1996 1995 1995
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<S> <C> <C> <C>
Goodwill $ 101,907 $ 97,874 $ 99,032
Other identifiable
intangibles 90,884 107,371 90,910
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192,791 205,245 189,942
Less accumulated
amortization 72,872 70,851 58,415
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$ 119,919 $ 134,394 $ 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 January 31, 1996, 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 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 $291,493 for the three months ended January 31,
1995, and $1,029,966 for the nine months ended January 31,
1995. 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
-----------------------------------
RESULTS OF OPERATIONS
- ---------------------
Third quarter sales decreased slightly from the same period last
year. Despite the third quarter decline, sales still reached
record levels for the nine months ended January 31, 1996.
Kellwood generally sells its products prior to the principal retail
selling seasons including spring, summer, fall and holiday. Sales
and earnings for the third quarter, ending January 31, have
historically been lower than other quarters of the fiscal year
since the last half of the third quarter falls between the peak
periods for the holiday and spring selling seasons.
Sales by Domestic branded operations increased 1% for the quarter
and 14% for the nine month period. The nine month increase in
branded sales is principally attributable to the acquisitions of
Halmode Apparel and David Dart. Sales from the branded portfolio
accounted for 70% of Kellwood's total volume for the nine months
ended January 31, 1996. This compares to 67% for the same period
last year. The lackluster retail holiday season was especially felt
by our branded units where operating profits were negatively
impacted by intense margin pressure.
Sales by Domestic private label operations declined 6% for the
quarter and 5% for the nine month period. Adjusting last year's
volume for the Home Fashions division which was sold in December,
1994, Domestic private label sales were flat for the quarter but up
5% for the nine month period. Operating profits in the Domestic
private label portfolio were improved as a result of several
successful private label programs with key customers as well as
from the divestiture of the Home Fashions division.
Sales by Far East operations were down 3% for the quarter but up 3%
for the nine month period. Despite the third quarter decline in
volume, operating profits improved as production shifted from the
closed plant in Saipan to more efficient plants in Hong Kong, China
and Sri Lanka. In October, the Company received $2.7 million in
proceeds from the sale of assets in Saipan. The costs of the
divestiture have remained in line with the provision established in
the fourth quarter last year.
The increase in interest expense for the nine months ended January
31, 1996 correlates with the increase in average outstanding debt
coupled with overall higher rates.
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KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Continued)
FINANCIAL CONDITION
- -------------------
The current ratio was 1.8 to 1 at January 31, 1996 as compared to
1.9 to 1 at April 30, 1995 and 2.0 at January 31, 1995. The
decrease in the current ratio was partially due to increased short-
term debt as an additional $10 million of scheduled maturities on
long-term debt shifted to current status. Inventory levels have
also increased but remain in balance with anticipated future
demand. Accounts receivable have declined from April 30, 1995 in
response to seasonal fluctuations in sales.
Cash used for investing activities and cash provided by financing
activities were both substantially higher last year because of the
acquisition of Halmode Apparel in September, 1994. Total debt
represents 47% of capitalization at January 31, 1996 and April 30,
1995 as compared to 46% at January 31, 1995. In June, 1994
Kellwood negotiated a $120 million fully committed revolving credit
agreement. At January 31, 1996 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.
OUTLOOK
- -------
With the retail environment showing little sign of improvement in
the near term, Kellwood expects sales to be flat in the last
quarter of the year. However, earnings are expected to show
substantial improvement in the fourth quarter as the Company
realizes some of the benefits from the steps it took last year to
improve future profitability.
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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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<TABLE>
a) EXHIBITS:
<CAPTION>
S.E.C. Exhibit
Reference No. Description
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<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 January 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 duly signed
on its behalf by the undersigned thereunto duly authorized.
KELLWOOD COMPANY
March 1, 1996 /s/ Thomas H. Pollihan
---------------------------------
Thomas H. Pollihan
Vice President, Secretary and
General Counsel
March 1, 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 January 31, 1996, and from the Condensed Consolidated
Statement of Earnings and Condensed Consolidated Statement of Cash
Flows for the nine months ended January 31, 1996, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 13,485
<SECURITIES> 0
<RECEIVABLES> 198,636
<ALLOWANCES> 6,620
<INVENTORY> 280,369
<CURRENT-ASSETS> 513,565
<PP&E> 169,538
<DEPRECIATION> 104,789
<TOTAL-ASSETS> 764,873
<CURRENT-LIABILITIES> 281,504
<BONDS> 126,178
0
0
<COMMON> 94,374
<OTHER-SE> 223,136
<TOTAL-LIABILITY-AND-EQUITY> 764,873
<SALES> 1,054,750
<TOTAL-REVENUES> 1,054,750
<CGS> 844,230
<TOTAL-COSTS> 844,230
<OTHER-EXPENSES> 163,335
<LOSS-PROVISION> 1,850
<INTEREST-EXPENSE> 17,266
<INCOME-PRETAX> 29,919
<INCOME-TAX> 12,300
<INCOME-CONTINUING> 17,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,619
<EPS-PRIMARY> .83
<EPS-DILUTED> .82
</TABLE>
