<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 July 31, 1997
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 July 31,
1997 (only one class): 21,389,025
--------------
<PAGE> 2
KELLWOOD COMPANY
----------------
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <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>
- 2 -
<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
------------------------------
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
------------------------------------------------
(Amounts in thousands)
<CAPTION>
July 31,
----------------------- April 30,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and time deposits $ 19,421 $ 22,968 $ 22,513
Receivables, net 251,840 208,832 271,629
Inventories 362,120 293,257 298,938
Prepaid taxes and expenses 28,732 20,817 28,444
-------- -------- --------
Total current assets 662,113 545,874 621,524
Property, plant and equipment, net 62,178 62,467 62,800
Intangible assets, net 112,755 116,577 113,873
Other assets 78,453 70,471 76,390
-------- -------- --------
$915,499 $795,389 $874,587
======== ======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities:
Current portion of long-term debt $ 15,392 $ 18,217 $ 15,409
Notes payable 237,175 152,818 159,129
Accounts payable 100,660 84,111 122,049
Accrued expenses 52,312 50,212 77,823
-------- -------- --------
Total current liabilities 405,539 305,358 374,410
Long-term debt 106,480 122,060 109,831
Deferred income taxes and other 46,593 39,816 42,532
Shareowners' equity:
Common stock 106,032 94,901 99,077
Retained earnings 296,749 271,693 293,986
Cumulative translation adjustment (7,407) (8,794) (8,280)
-------- -------- --------
395,374 357,800 384,783
Less treasury stock, at cost (38,487) (29,645) (36,969)
-------- -------- --------
Total shareowners' equity 356,887 328,155 347,814
-------- -------- --------
$915,499 $795,389 $874,587
======== ======== ========
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
July 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net sales $400,604 $327,435
Costs and expenses:
Cost of products sold 321,602 261,904
Selling, general and administrative expenses 56,423 46,789
Amortization of intangible assets 3,752 3,818
Interest expense 6,887 5,178
Interest income and other, net (476) (272)
-------- --------
Earnings before income taxes 12,416 10,018
Income taxes 5,200 4,200
-------- --------
Net earnings $ 7,216 5,818
======== ========
Weighted average shares outstanding:
Primary 21,252 21,237
======== ========
Fully diluted 21,769 21,506
======== ========
Earnings per share:
Primary .34 .27
======== ========
Fully diluted .33 .27
======== ========
Dividends paid per share .16 .15
======== ========
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>
Three Months Ended
July 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Operating activities:
Net earnings $7,216 $ 5,818
Add (deduct) items not affecting operating
cash flows:
Depreciation and amortization 7,192 6,932
Increase in prepaid pension cost (2,125) (2,000)
Deferred taxes and other 4,961 (283)
--------- ---------
17,244 10,467
Changes in noncash working capital components:
Receivables 19,789 26,276
Inventories (63,182) (28,674)
Prepaid expenses (288) (1,193)
Accounts payable (21,389) (14,037)
Accrued expenses (25,511) (10,967)
--------- ---------
Net cash (used for) operating activities (73,337) (18,128)
--------- ---------
Investing activities:
Additions to property, plant and equipment (2,819) (1,782)
Investment in subsidiaries (2,610) 0
Other investing activities 12 7
--------- ---------
Net cash (used for) investing activities (5,417) (1,775)
--------- ---------
Financing activities:
Proceeds from notes payable, net 78,046 24,053
Reduction of long-term debt (3,368) (3,364)
Dividends paid (3,398) (3,185)
Other financing activities 4,382 324
--------- ---------
Net cash provided by financing activities 75,662 17,828
--------- ---------
Net decrease in cash and time deposits (3,092) (2,075)
Cash and time deposits - beginning of period 22,513 25,043
--------- ---------
Cash and time deposits - end of period $ 19,421 $ 22,968
========= =========
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 1997 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,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Finished goods $186,596 $ 135,448 $127,630
Work in process 106,237 96,172 98,607
Raw materials 69,287 61,637 72,701
--------- --------- --------
$362,120 $ 293,257 $298,938
======== ========= ========
</TABLE>
If inventories were valued at current replacement costs, they would
have totalled $371,384, $303,898, and $307,702 at July 31, 1997, July
31, 1996, and April 30, 1997, respectively.
3. Intangible assets consisted of:
<TABLE>
<CAPTION>
July 31,
------------------------ April 30,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Goodwill $112,101 $100,765 $109,491
Other identifiable
intangibles 81,446 90,840 81,446
------- -------- --------
193,547 191,605 190,937
Less accumulated
amortization 80,792 75,028 77,064
------- --------- -------
112,755 116,577 113,873
======== ========= ========
</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.
- 6 -
<PAGE> 7
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(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, 1997, outstanding short-term loans and
letters of credit under the agreement were $110,000 and $106,000
respectively. Covenants are more flexible than those currently existing
for Kellwood's notes due insurance companies.
- 7 -
<PAGE> 8
KELLWOOD COMPANY AND SUBSIDIARIES
---------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
OPERATING RESULTS
- -----------------
Kellwood's sales increased 22% for the quarter compared to last year. This
increase in volume was broad-based across each of the Company's three
business portfolios- Branded, Domestic Private Label and Far East Private
Label - and across every channel of distribution. Also, the Company was able
to ship $23 million of Fall goods earlier than anticipated, as a number of
retailers requested that August deliveries be moved up into the last half of
July.
Operating earnings (defined as net sales less cost of products sold and
selling, general and administrative expenses) increased $ 3.8 million or 20%
for the quarter as compared to the same period last year. The increase in
operating earnings was due to the increased volume, partially offset by
increased spending this year on the Vision 2000 program. Last year's margins
included the benefit of $1.9 million (pretax) from the sale of certain excess
quota rights.
The increase in interest expense is due to the increase in average debt.
FINANCIAL CONDITION
- -------------------
The current ratio declined slightly to 1.6 to 1 at July 31, 1997 as compared
to 1.7 at April 30, 1997 and 1.8 at July 31, 1996. Accounts receivable have
increased due to the growth in the volume of business with certain large
customers which have terms of sale in excess of the company average and due
to the timing of shipments, which fell heavily in the last two weeks of the
quarter. Inventory levels have increased because of a shift to more offshore
sourcing which results in having to carry more goods in transit.
Total debt represent 50% of capitalization at July 31, 1997 as compared to
45% at April 30, 1997 and 47% at July 31, 1996. Notes Payable have increased
from last year as the Company has utilized short-term debt to fund the
working capital needs associated with increased sales. 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, 1997, $84 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 and to meet existing obligations.
OUTLOOK
- -------
Kellwood is into a period of solid internal growth. As the retail industry
continues to consolidate, Kellwood is increasingly becoming the vendor of
choice for popular-to-moderately priced women's sportswear, men's woven
shirts and other value priced categories of apparel. Additionally, the
Company is benefiting from the turnaround of certain restructured divisions.
Finally, the overall market for apparel at retail appears to be strengthening
as the Fall selling season approaches.
- 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 July 31, 1997.
- 9 -
<PAGE> 10
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 12, 1997 /s/ Thomas H. Pollihan
------------------------------
Thomas H. Pollihan
Vice President, Secretary and
General Counsel
September 12, 1997 /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 July 31,
1997, and from the Condensed Consolidated Statement of Earnings and Condensed
Consolidated Statement of Cash Flows for the three months ended July 31, 1997,
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-30-1997
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 19,421
<SECURITIES> 0
<RECEIVABLES> 258,168
<ALLOWANCES> 6,328
<INVENTORY> 362,120
<CURRENT-ASSETS> 662,113
<PP&E> 180,360
<DEPRECIATION> 118,182
<TOTAL-ASSETS> 915,499
<CURRENT-LIABILITIES> 405,539
<BONDS> 106,480
<COMMON> 106,032
0
0
<OTHER-SE> 250,855
<TOTAL-LIABILITY-AND-EQUITY> 915,499
<SALES> 400,604
<TOTAL-REVENUES> 400,604
<CGS> 321,602
<TOTAL-COSTS> 321,602
<OTHER-EXPENSES> 59,699
<LOSS-PROVISION> 1,141
<INTEREST-EXPENSE> 6,887
<INCOME-PRETAX> 12,416
<INCOME-TAX> 5,200
<INCOME-CONTINUING> 7,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,216
<EPS-PRIMARY> .34
<EPS-DILUTED> .33
</TABLE>
