<PAGE>
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SECURITIES AND EXCHANGE COMMISSION,
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 1999
Commission File Number: 1-7340
KELLWOOD COMPANY
Exact name of registrant as specified in its charter)
DELAWARE 36-2472410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 KELLWOOD PARKWAY, P.O. BOX 14374, ST. LOUIS, MO 63178
(Address, including Zip Code, of registrant's principal executive offices)
(314) 576-3100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- ---------------------
<S> <C>
Common Stock, par value $.01..................... New York Stock Exchange
Preferred Stock Purchase Rights.................. New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
At June 28, 1999, Kellwood Company had 27,723,131 shares of Common Stock,
par value $.01, outstanding. While it is difficult to determine the number of
shares owned by nonaffiliates, the Company estimates that the aggregate market
value of the Common Stock on June 28, 1999 (based upon the closing price of
these shares on the New York Stock Exchange) held by nonaffiliates was
approximately $753,723,000.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareowners for fiscal year ended April 30, 1999 (Item 1 in
Part I; Items 5, 6, 7 and 8 in Part II, and Part IV).
Joint Proxy Statement / Prospectus with Koret, Inc. dated March 25, 1999
(Item 4 in Part I).
Proxy Statement for Annual Meeting of Shareowners to be held on August 26,
1999 (Items 10, 11, 12 and 13 in Part III).
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<PAGE>
PART I
Item 1. Business
(a) Kellwood Company and its subsidiaries (the "Company") manufacture and
market apparel and related soft goods. Kellwood Company was founded in 1961 as
the successor by merger of fifteen independent suppliers to Sears.
Beginning in 1985, the Company implemented a business strategy to expand its
branded label products, broaden its customer base, increase its channels of
distribution and further develop its global product sourcing capability. Since
1985, Kellwood has acquired the following 16 domestic companies.
<TABLE>
<CAPTION>
Date of
Company Name Acquisition
------------ --------------
<S> <C>
Cape Cod-Cricket Lane, Inc...................................... March, 1985
Parsons Place Apparel Company, Ltd. (Sag Harbor)................ June, 1986
E Z Sportswear (Melrose)........................................ December, 1986
En Chante, Inc. (E.N.C)......................................... December, 1986
Robert Scott Ltd., Inc. (Robert Scott/David Brooks) David Brooks
Ltd., Inc.,
and Andrew Harvey Ltd.......................................... July, 1987
American Recreation Products, Inc............................... November 1988
Slumberjack, Inc................................................ September 1989
Crowntuft Manufacturing Corp.................................... October 1989
decorp INC...................................................... October 1990
California Ivy, Inc. (Ivy)...................................... July 1992
A. J. Brandon, Inc.............................................. December 1992
Goodman Knitting Co., Inc....................................... July 1993
Halmode Apparel, Inc............................................ September 1994
David Dart, Inc. and Force One, Inc. ........................... November 1994
Fritzi California (excluding real estate)....................... December 1998
Koret, Inc. .................................................... April 1999
</TABLE>
These companies are principally marketers of branded apparel except for
American Recreation Products, Inc. and Slumberjack, Inc. which are
manufacturers and marketers of branded camping soft goods and Crowntuft
Manufacturing Corp. which is a vertically integrated manufacturer of chenille
robes.
In addition to its domestic acquisitions, in the early 1980's, the Company
acquired Smart Shirts Limited of Hong Kong, a leading shirt and blouse
manufacturer in the Far East. Smart Shirts, since its acquisition, continued to
diversify its manufacturing capabilities from its principal base of Hong Kong
to the People's Republic of China, Sri Lanka, Saipan and Costa Rica. During
fiscal year 1996, the Company shut down the facilities in Saipan and Costa
Rica.
As a result of the above business strategy, the Company has redirected its
focus from primarily the manufacturing of private label apparel and home
fashions for Sears to a marketing-driven emphasis on branded apparel and
related soft goods. The Company's acquisition strategy has further diversified
its customer base and has broadened its channels of distribution. As a result
of these efforts, sales to Sears declined to 7% of total sales in fiscal year
1999, compared to 50% in fiscal year 1985.
(b) The information required by this Item is set forth in the Company's 1999
Annual Report to Shareowners, at page 30 under the caption "Industry Segment
and Geographic Area Information," which information is incorporated herein by
reference.
(c) The Company manufactures and markets apparel and other soft goods
products made from cloth or fabric or knitted from yarn. These products are
manufactured primarily domestically and in the Far East.
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(i) The Company's products include diversified lines of men's, women's and
children's clothing, sleeping bags, and other soft goods. Products are mainly
sold to retailers under either the Company's or customer's brands and labels.
(ii) The Company anticipates no significant change in products or new
industry segments which would require a material investment. However, business
acquisitions within the apparel and related soft goods industry are continually
being considered, and it is anticipated that external and internal demands will
generate increasing requirements for capital.
(iii) The Company purchases the majority of its raw materials directly from
numerous textile mills and yarn producers and converters. The Company has not
experienced difficulty in obtaining raw materials essential to its business.
(iv) The Company holds patents covering various aspects of its products. The
Company is a licensee of certain trade names. The expiration, or invalidation,
of any of the patents would not, in the opinion of management, have a material
effect upon the continuation of business.
(v) Although specific styles are seasonal, the Company's various product
lines are manufactured and sold on a year-round basis. Products are primarily
manufactured and sold prior to each of the principal retail selling seasons
including spring, summer, fall and holiday.
(vi) Consistent with the seasonality of specific product offerings, the
Company carries necessary levels of inventory to meet the anticipated delivery
requirements of its customers.
(vii) No customer accounts for more than 10% of the Company's revenues. The
Company's management believes that the relationships with its customers will
continue into the foreseeable future.
(viii) At the end of fiscal 1999, backlog was approximately $856 million,
compared with a backlog of $884 million at the end of fiscal 1998. The company
does not believe that backlog is a meaningful indicator of sales that can be
expected for any period. All of the Company's backlog is expected to be filled
within 12 months, but there can be no assurance that the backlog at any point
in time will translate into sales in any particular subsequent period.
(ix) Government contracts or subcontracts with the Company are not material.
(x) The Company has substantial competition from numerous manufacturers and
marketers, but accurate statistics relative to the competitive position of the
Company are not available.
(xi) The Company has a continuing program for the purpose of improving its
products and production machinery. The Company is not engaged in any material
customer-sponsored research and development programs. Approximately $248,000,
$359,000 and $740,000 were spent on research and development activities during
fiscal years 1999, 1998 and 1997, respectively.
(xii) In the opinion of management, there will be no material effect on the
Company resulting from compliance with any federal, state or local provisions
which have been enacted or adopted regulating the discharge of materials into
the environment or otherwise relating to the protection of the environment.
(xiii) At the end of fiscal 1999, there were approximately 19,200 people
employed by the Company. Substantially all of the work force is non-union, and
the Company considers its relations with its employees to be satisfactory.
(d) Except for its Smart Shirts operations, the Company's foreign activities
including foreign manufacturing operations and customers have not been
material. The Company owns all of the outstanding shares of Smart Shirts
Limited, a Hong Kong corporation engaged in apparel manufacturing, and other
Asian companies under Smart Shirts' management. The sales, operating profit,
and identifiable assets attributable to each segment are set forth in the
Company's 1999 Annual Report to Shareowners at page 30 under the caption
"Industry Segment and Geographic Area Information" in the Notes to Consolidated
Financial Statements, which note is incorporated herein by reference. The risk
attendant to the Company's Smart Shirts operations is
3
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slightly greater than that of domestic operations primarily due to quota
allocations and political instability. Utilization of existing quota rights and
diversification of Smart Shirts manufacturing capacity to various countries
help to mitigate these risks.
Item 2. Properties
At April 30, 1999, the Company operated 30 production plants and various
distribution facilities. Domestic business operated:
. 13 plants in 7 states,
. two plants in the Dominican Republic,
. two plants in Honduras,
. one plant in El Salvador, and
. three plants in Canada.
These domestically managed plants aggregated to approximately 2.2 million
square feet. They include the 5 domestic plants scheduled to close during
fiscal 2000 (as discussed in Note 2 to the Consolidated financial statements
incorporated herein by reference) which aggregate to approximately 700,000
square feet and are operating at approximately 64% of capacity at April 30,
1999. The remaining 16 plants aggregate 1.5 million square feet and were
operating at an estimated 75% of capacity at April 30, 1999.
The Company's Smart Shirts subsidiaries operated nine plants which
aggregated to approximately 798,000 square feet and were operating at an
estimated 90% of capacity. Smart Shirts' subsidiaries manage operations in Hong
Kong, Sri Lanka and China.
As Kellwood's product sourcing continues to shift from products manufactured
in the Company's domestic facilities to foreign-sourced product, warehousing
and distribution facilities assume increasing importance. During fiscal 1999
major milestones were achieved in the Warehousing and Distribution initiative,
one of Kellwood's Vision 2000 programs, including:
. The Kellwood Western Region Distribution Center in the Los Angeles area
became fully operational. This facility serves as the headquarters for
five divisions in a multi-tiered 630,000 square foot facility.
. A 294,000 square foot facility in Brockton, Massachusetts was renovated
and is shared by two divisions.
. A 240,000 square foot facility in Roanoke, Virginia was renovated and
converted to a distribution center.
. A multi-tiered 880,000 square foot warehouse and distribution center was
built in Trenton, Tennessee.
Combined, these efforts are expected to generate new economies of scale in
warehousing and distribution activities while eliminating the redundant costs
of smaller, inefficient facilities.
In management's opinion, current facilities generally are well maintained
and provide adequate production capacity for future operations. However,
management continues to evaluate the need to reposition the Company's portfolio
of businesses and facilities to meet the needs of the changing markets it
serves and reflect the international business environment.
The Company's operating facilities are primarily leased under long-term
capital leases with renewal options at decreasing rentals. Certain facilities
are leased under operating leases that generally contain renewal options. The
Company also leases its corporate space in St. Louis County, Missouri and major
showrooms in New York City, New York; Atlanta, Georgia; Dallas, Texas; and Los
Angeles, California.
Item 3. Legal Proceedings
The Company is involved in several routine lawsuits incidental to the
Company's business. Management and general counsel are of the opinion that the
ultimate disposition of such litigation should have no material adverse effect
on the Company's financial position or results of operations.
4
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of the stockholders of Kellwood Company was held on April
27, 1999 to consider and vote upon a proposal to approve the issuance of
5,241,000 shares of Kellwood common stock under the Agreement and Plan of
Merger, dated December 1, 1998, between Kellwood Company and Koret, Inc. The
Agreement and Plan of Merger provided for each outstanding share of Koret to be
converted into .6025391 shares of Kellwood common stock and for Koret to become
a wholly-owned subsidiary of Kellwood. Stockholders of record at the close of
business on March 5, 1999 were given notice by a joint proxy
statement/prospectus dated March 25, 1999, which document is incorporated
herein by reference. The stockholders approved the proposal, with 18,542,137
votes cast for the proposal, 182,362 votes against it, and 56,046 votes
abstaining,
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
The information required by this Item is set forth in the Company's 1999
Annual Report to Shareowners, at page 1 under the caption "Common Stock Data,"
which information is incorporated herein by reference.
Item 6. Selected Financial Data
The information required by this Item is set forth in the Company's 1999
Annual Report to Shareowners, at page 31 under the caption "Supplemental
Selected Financial Data," which information is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item is set forth below and in the
Company's 1999 Annual Report to Shareowners, at pages 32 thru 37 under the
caption "Management's Discussion and Analysis," which information is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated May 26, 1999, appearing at pages 18 to 31 of
the Company's 1999 Annual Report to Shareowners, are incorporated herein by
reference.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) The information required by this Item regarding directors is set forth
in the Company's Proxy Statement for the 1999 Annual Meeting of Shareowners, at
pages 5 thru 7 under the captions "Nominees for Election to Serve Until 2001"
and "Directors Continuing to Serve Until 2000," which information is
incorporated herein by reference.
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(b) EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JULY 2, 1999.
<TABLE>
<CAPTION>
Office and Employment During the Last Five Fiscal
Name of Officer Age Years
--------------- --- -------------------------------------------------
<C> <C> <S>
William J. McKenna.. 72 Chairman since November 25, 1997;
Chairman and Chief Executive Officer (1994-1997);
Chairman, President and Chief Executive Officer
(1991-1994)
Hal J. Upbin........ 60 President and Chief Executive Officer since November
25, 1997;
President and Chief Operating Officer (1994-1997);
Executive Vice President Corporate Development
(1992-1994);
Vice President Corporate Development (1990-1992);
President of American Recreation Products, Inc.
(subsidiary) (1988-1992).
Gerald M. Chaney.... 52 Vice President Finance and Chief Financial Officer
since December 21, 1998;
Executive Vice President of Administration and Chief
Financial Officer, Petrie Retail, Inc. (1996-1998);
Executive Vice President and Chief Operating
Officer, Canadians Corp. (1995-1996);
Executive Vice President Operations and Chief
Financial Officer, Crystal Brands (1985-1995).
James C. Jacobsen... 64 Vice Chairman since November 22, 1994;
Executive Vice President Administration (1989-1994)
Enoch Harding, Jr... 68 Executive Vice President Operations since April 3,
1995;
President of Kellwood Sportswear (1989-1995)
W. Lee Capps III.... 51 Vice President Corporate Development since May 28,
1998;
Director of Corporate Development (1996-1998);
Chief Financial Officer of American Recreation
Products, Inc. (subsidiary)
(1987-1996).
John R. Henderson... 51 Vice President Merchandising since June 1, 1995;
Director of Merchandising (1993-1995);
Executive Vice President Marketing of Kellwood She
Knows (1992-1993)
Lawrence E. Hummel.. 56 Vice President Controller since February 25, 1992;
Controller (1983-1992)
Roger D. Joseph..... 57 Vice President Treasurer since February 25, 1992;
Treasurer (1986-1992)
Leon M. McWhite..... 57 Vice President Human Resources since June 1, 1995;
Vice President (1994-1995);
President of Kellwood Lingerie/Activewear (1989-
1994)
Thomas H. Pollihan.. 49 Vice President, Secretary and General Counsel since
May 27, 1993;
General Counsel and Secretary (1989-1993)
John A. Turnage..... 53 Vice President Manufacturing since August 28, 1997;
Vice President Manufacturing and Sourcing (1989-
1997).
</TABLE>
(c) The information called for with respect to the identification of certain
significant employees is not applicable to the registrant.
6
<PAGE>
(d) There are no family relationships between the directors and executive
officers listed above. There are no arrangements nor understandings between any
named officer and any other person pursuant to which such person was selected
as an officer.
(e) Each of the officers named in Item 10(b) above was elected to serve in
the office indicated until the first meeting of the Board of Directors
following the Annual Meeting of Shareowners in August 1999 and until his
successor is elected and qualified.
(f) There are no legal proceedings involving directors, nominees for
directors, or officers.
The information required by this Item regarding compliance with Section
16(a) of the Exchange Act is set forth in the Company's Proxy Statement for the
1999 Annual Meeting of Shareowners at page 23 under the caption "Compliance
with Section 16(a) of the Exchange Act," which information is incorporated
herein by reference.
Item 11. Executive Compensation
The information required by this Item is set forth in the Company's Proxy
Statement for the 1999 Annual Meeting of Shareowners, at pages 12 through 23
under the captions "Compensation of Executive Officers," "Retirement Program,"
and "Other Officer Agreements," which information is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is set forth in the Company's Proxy
Statement for the 1999 Annual Meeting of Shareowners, at pages 3, 4 and 11
under the captions "Security Ownership of Certain Beneficial Owners" and
"Management Ownership of the Company's Stock," which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is set forth in the Company's Proxy
Statement for the 1999 Annual Meeting of Shareowners, at page 21 under the
caption "Compensation Committee Interlocks and Insider Participation," which
information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated May 26, 1999, appearing at pages 18 to 31 of
the 1999 Annual Report to Shareowners are incorporated by reference in this
Form 10-K. With the exception of the aforementioned information and information
incorporated in Items 1, 5, 6, 7 and 8, the 1999 Annual Report to Shareowners
is not to be deemed filed as part of this Form 10-K. The following financial
statement schedule should also be read in conjunction with the financial
statements in such 1999 Annual Report to Shareowners. Financial statement
schedules not included in this Form 10-K have been omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto. Separate financial statements of 50% or less owned persons
accounted for by the equity method which are not shown herein have been omitted
because, if considered in the aggregate, they would not constitute a
significant subsidiary.
(i) Financial Statements:
Report of Independent Accountants
Consolidated Statement of Earnings, Years Ended April 30, 1999, 1998 and
1997
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Consolidated Balance Sheet, April 30, 1999 and 1998
Consolidated Statement of Cash Flows, Years Ended April 30, 1999, 1998
and 1997
Consolidated Statement of Shareowners' Equity, Years Ended April 30,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
(ii) Report of Independent Accountants on Financial Statement Schedule:
Financial Statement Schedule for the Years Ended April 30, 1999, 1998
and 1997:
Valuation and Qualifying Accounts (Schedule VIII)
Consent of Independent Accountants
(iii) Exhibits:
Exhibits filed as part of this report are listed below. Certain exhibits
have been previously filed with the Commission and are incorporated herein
by reference.
<TABLE>
<CAPTION>
S.E.C. Exhibit
Reference No. Description
-------------- -----------
<C> <S>
2.1 --Agreement and Plan of Merger, dated December 1, 1998, as
amended among Kellwood Company and Koret, Inc., incorporated
herein by reference to Form S-4 dated March 25, 1999, SEC File
No. 333-74967.
3.1 --Restated Certificate of Incorporation of Kellwood Company, as
amended, incorporated herein by reference to Form 10-Q for the
quarter ended July 31, 1987, SEC File No. 1-7340.
3.2 --By-Laws, as amended through November 21, 1995, incorporated
herein by reference to Form 10-K for the fiscal year ended
April 30, 1996, SEC File No. 1-7340.
4.1 --Note Purchase Agreement dated December 29, 1986,with
exhibits, incorporated herein by reference to Form 10-Q for
the quarter ended January 31, 1987, SEC File No. 1-7340.
4.2 --Indenture between the Registrant and Centerre Trust Company
of St. Louis, and the 9% Convertible Subordinated Debentures
due 1999, incorporated herein by reference to Registration
Statement on Form S-2, Registration No. 2-93522, effective
October 18, 1984.
4.3 --Note Agreement dated July 1, 1993, incorporated herein by
reference to Form 10-Q for the quarter ended July 31, 1993,
SEC File No. 1-7340.
4.4 --Rights to Acquire Series A Junior Preferred Stock, pursuant
to a Rights Agreement between the registrant and Centerre
Trust Company of St. Louis, incorporated herein by reference
to Registration Statement on Form 8-A, effective June 24, 1986
and Amendment dated August 21, 1990, incorporated herein by
reference to Form 10-Q for the quarter ended October 31, 1990,
and Amendment dated May 31, 1996 incorporated herein by
reference to Form 8-A/A effective June 3, 1996, SEC File No.
1-7340.
4.5 --Note Purchase Agreement dated December 1, 1987, with
exhibits, incorporated herein by reference to Form 10-Q for
the quarter ended January 31, 1988, SEC File No. 1-7340.
4.6 --Note Purchase Agreement dated December 15, 1989, with
exhibits, incorporated herein by reference to the Form 10-Q
for the quarter ended January 31, 1990, SEC File No. 1-7340.
4.7 --Credit Agreement dated as of May 31, 1996 among Kellwood
Company, certain commercial lending institutions, and The Bank
of Nova Scotia, as Administrative Agent and Syndication Agent,
and Bank of America National Trust and Savings Association, as
documentation Agent, incorporated herein by reference to Form
10-K for the fiscal year ended April 30, 1996, SEC File No. 1-
7340.
</TABLE>
8
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<TABLE>
<CAPTION>
S.E.C. Exhibit
Reference No. Description
-------------- -----------
<C> <S>
10.2* --Employment Agreement dated December 9, 1992, between Kellwood
Company and William J. McKenna, effective December 1, 1992,
incorporated herein by reference to the Form 10-Q for the
quarter ended January 31, 1993, SEC File No. 1-7340; Amendment
dated May 28, 1993, effective May 1, 1993, incorporated herein
by reference to Form 10-K for the fiscal year ended April 30,
1993, SEC File No. 1-7340; Amendment dated November 26, 1996,
effective May 1, 1996, incorporated herein by reference to the
Form 10-Q for the quarter ended January 31, 1997, SEC File No.
1-7340; Amendment dated November 11, 1997, effective May 1,
1997 incorporated herein by reference to the Form 10-K for the
fiscal year ended April 30, 1998, SEC File No. 1-7340; and
Amendment dated November 24, 1998, effective November 24, 1998
filed herewith.
10.3* --Form of Employment Agreement dated November 30, 1984, between
Kellwood Company and executive officers, incorporated herein
by reference to Form 10-K for the fiscal year ended April 30,
1985, SEC File No. 1-7340.
10.4* --1995 Stock Option Plan For Nonemployee Directors and 1995
Omnibus Incentive Stock Option Plan, incorporated herein by
reference to Appendixes A & B to the Company's definitive
Proxy Statement dated July 13, 1995, SEC File No. 1-7340.
10.5* --Executive Deferred Compensation Plan, adopted and effective
as of January 1, 1997; and Executive Deferred Compensation
Plan Amendment, adopted March 18, 1997, incorporated herein by
reference to Form 10-K for the fiscal year ended April 30,
1997, SEC File
No. 1-7340.
10.6** --Agreement for Services Between Kellwood Company and
Electronic Data Systems Corporation, dated June 21, 1996; and
Amendment Regarding Use of Kellwood Purchase Card by EDS
Employees, dated April 29, 1997, incorporated herein by
reference to Form 10-K for the fiscal year ended April 30,
1997, SEC File No. 1-7340.
10.7* --Corporate Development Incentive Plan of 1986 (As Amended),
formerly the Key Executive Long-Term Incentive Plan of 1983,
incorporated herein by reference to Form 10-K for the fiscal
year ended April 30, 1994, SEC File No. 1-7340; and Amendment
dated May 29, 1997, incorporated herein by reference to
Exhibit A to the Company's definitive Proxy Statement dated
July 17, 1997, SEC File No. 1-7340.
10.8* --Employment Agreement dated December 1, 1997, between Kellwood
Company and Hal J. Upbin, effective December 1, 1997,
incorporated herein by reference to Form 10-K for the fiscal
year ended April 30, 1998, SEC File No. 1-7340.
13 --Portions of the Annual Report to Shareowners for the fiscal
year ended April 30, 1999, which are incorporated by reference
at Item 1 in Part I, Items 5, 6, 7 and 8 in Part II, and Part
IV; filed herewith.
21 --Subsidiaries of the Company, appearing at page 14 of this
report.
22 --Joint Proxy Statement/Prospectus dated March 25, 1999,
incorporated herein by reference to Form S-4 dated March 25,
1999, SEC File No. 333-74967.
23 --Consents of Independent Accountants, appearing at page 13 of
this report.
24 --Powers of Attorney: Ms. Dickerson and Messrs. Bentele,
Bottum, Genovese, Hunter, Jacobsen, Marcus and Wenzel; filed
herewith.
27 --Financial Data Schedule, filed herewith.
</TABLE>
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* Denotes management contract or compensatory plan.
9
<PAGE>
** Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
(b) REPORTS ON FORM 8-K:
One report was filed on Form 8-K during the three months ended April 30,
1999 as follows:
. Current Report on Form 8-K dated February 23, 1999.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Dated: July 15, 1999 /s/ Thomas H. Pollihan
-------------------------------------
Thomas H. Pollihan
Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following on behalf of Kellwood Company and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ William J. McKenna Director, Chairman of the July 15, 1999
_________________________________ Board
William J. McKenna
/s/ Hal J. Upbin Director, President and July 15, 1999
_________________________________ Chief Executive Officer
Hal J. Upbin
/s/ Gerald M. Chaney Vice President Finance and July 15, 1999
_________________________________ Chief Financial Officer
Gerald M. Chaney (principal financial and
accounting officer)
/s/ James C. Jacobsen Director, Vice Chairman
_________________________________
James C. Jacobsen
/s/ Raymond F. Bentele Director
_________________________________
Raymond F. Bentele
/s/ Edward S. Bottum Director
_________________________________
Edward S. Bottum
/s/ Kitty G. Dickerson Director
_________________________________
Kitty G. Dickerson
/s/ Leonard A. Genovese Director /s/ Thomas H. Pollihan
_________________________________ ______________________
Leonard A. Genovese Thomas H. Pollihan
Attorney-in-fact
July 15, 1999
/s/ Jerry M. Hunter Director
_________________________________
Jerry M. Hunter
/s/ James S. Marcus Director
_________________________________
James S. Marcus
/s/ Fred W. Wenzel Director
_________________________________
Fred W. Wenzel
</TABLE>
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Kellwood Company
Our audits of the consolidated financial statements referred to in our
report dated May 26, 1999 appearing at page 18 of the 1999 Annual Report to
Shareowners of Kellwood Company (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
St. Louis, Missouri
May 26, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 033- 64847) of Kellwood Company of our report dated
May 26, 1999 relating to the financial statements which appear in the 1999
Annual Report to Shareowners which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report
dated May 26, 1999 relating to the Financial Statement Schedule, which appears
in this Form 10-K.
PricewaterhouseCoopers LLP
St. Louis, Missouri
July 12, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-36559) of Kellwood Company of our report dated
May 26, 1999 relating to the financial statements which appear in the 1999
Annual Report to Shareowners which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report
dated May 26, 1999 relating to the Financial Statement Schedule, which appears
in this Form 10-K.
PricewaterhouseCoopers LLP
St. Louis, Missouri
July 12, 1999
12
<PAGE>
KELLWOOD COMPANY AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- ---------- --------------------- ---------- ---------
Additions
---------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
- ----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED APRIL 30,
1999:
Allowance for doubtful
accounts............. $11,803 $3,868 -- $(4,390)(A) $11,281
YEAR ENDED APRIL 30,
1998:
Allowance for doubtful
accounts............. 6,191 3,751 -- 1,861 (A) 11,803
YEAR ENDED APRIL 30,
1997:
Allowance for doubtful
accounts............. 5,592 2,867 -- (2,268)(A) 6,191
</TABLE>
- --------
(A) Write-off bad debts (recoveries), net
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
S.E.C. Exhibit
Reference No. Description
- -------------- -----------
<S> <C>
2.1 - Agreement and Plan of Merger, dated December 1, 1998, as
amended among Kellwood Company and Koret, Inc., incorporated
herein by reference to Form S-4 dated March 25, 1999, SEC File
No. 333-74967.
3.1 - Restated Certificate of Incorporation of Kellwood Company, as
amended, incorporated herein by reference to Form 10-Q for the
quarter ended July 31, 1987, SEC File No. 1-7340.
3.2 - By-Laws, as amended through November 21, 1995, incorporated
herein by reference to Form 10-K for the fiscal year ended
April 30, 1996, SEC File No. 1-7340.
4.1 - Note Purchase Agreement dated December 29, 1986, with
exhibits, incorporated herein by reference to Form 10-Q for
the quarter ended January 31, 1987, SEC File No. 1-7340.
4.2 - Indenture between the Registrant and Centerre Trust Company of
St. Louis, and the 9% Convertible Subordinated Debentures due
1999, incorporated herein by reference to Registration
Statement on Form S-2, Registration No. 2-93522, effective
October 18, 1984.
4.3 - Note Agreement dated July 1, 1993, incorporated herein by
reference to Form 10-Q for the quarter ended July 31, 1993,
SEC File No. 1-7340.
4.4 - Rights to Acquire Series A Junior Preferred Stock, pursuant to
a Rights Agreement between the registrant and Centerre Trust
Company of St. Louis, incorporated herein by reference to
Registration Statement on Form 8-A, effective June 24, 1986
and Amendment dated August 21, 1990, incorporated herein by
reference to Form 10-Q for the quarter ended October 31, 1990,
and Amendment dated May 31, 1996 incorporated herein by
reference to Form 8-A/A effective June 3, 1996, SEC File No.
1-7340.
4.5 - Note Purchase Agreement dated December 1, 1987, with exhibits,
incorporated herein by reference to Form 10-Q for the quarter
ended January 31, 1988, SEC File No. 1-7340.
4.6 - Note Purchase Agreement dated December 15, 1989, with
exhibits, incorporated herein by reference to the Form 10-Q
for the quarter ended January 31, 1990, SEC File No. 1-7340.
4.7 - Credit Agreement dated as of May 31, 1996 among Kellwood
Company, certain commercial lending institutions, and The Bank
of Nova Scotia, as Administrative Agent and Syndication Agent,
and Bank of America National Trust and Savings Association, as
documentation Agent, incorporated herein by reference to Form
10-K for the fiscal year ended April 30, 1996, SEC File No. 1-
7340.
10.2* - Employment Agreement dated December 9, 1992, between Kellwood
Company and William J. McKenna, effective December 1, 1992,
incorporated herein by reference to the Form 10-Q for the
quarter ended January 31, 1993, SEC File No. 1-7340; Amendment
dated May 28, 1993, effective May 1, 1993, incorporated herein
by reference to Form 10-K for the fiscal year ended April 30,
1993, SEC File No. 1-7340; Amendment dated November 26, 1996,
effective May 1, 1996, incorporated herein by reference to the
Form 10-Q for the quarter ended January 31, 1997, SEC File No.
1-7340; and Amendment dated November 11, 1997, effective May
1, 1997,
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
S.E.C. Exhibit
Reference No. Description
- -------------- -----------
<S> <C>
incorporated herein by reference to the Form 10-K for the
fiscal year ended April 30, 1998, SEC File No. 1-7340; and
Amendment dated November 24, 1998, effective November 24, 1998
filed herewith.
10.3* - Form of Employment Agreement dated November 30, 1984, between
Kellwood Company and executive officers, incorporated herein
by reference to Form 10-K for the fiscal year ended April 30,
1985, SEC File No. 1-7340.
10.4* - 1995 Stock Option Plan For Nonemployee Directors and 1995
Omnibus Incentive Stock Option Plan, incorporated herein by
reference to Appendixes A & B to the Company's definitive
proxy statement dated July 13, 1995, SEC File No. 1-7340.
10.5* - Executive Deferred Compensation Plan, adopted and effective as
of January 1, 1997; and Executive Deferred Compensation Plan
Amendment, adopted March 18, 1997, incorporated herein by
reference to Form 10-K for the fiscal year ended April 30,
1997, SEC File No. 1-7340.
10.6** - Agreement for Services Between Kellwood Company and Electronic
Data Systems Corporation, dated June 21, 1996; and Amendment
Regarding Use of Kellwood Purchase Card by EDS Employees,
dated April 29, 1997, incorporated herein by reference to Form
10-K for the fiscal year ended April 30, 1997, SEC File No.
1-7340.
10.7* - Corporate Development Incentive Plan of 1986 ( As Amended )
formerly the Key Executive Long-Term Incentive Plan of 1983,
incorporated herein by reference to Form 10-K for the fiscal
year ended April 30, 1994, SEC File No. 1-7340; and Amendment
dated May 29, 1997, incorporated herein by reference to
Exhibit A to the Company's definitive Proxy Statement dated
July 17, 1997, SEC File No. 1-7340.
10.8* - Employment Agreement dated December 1, 1997, between Kellwood
Company and Hal J. Upbin, effective December 1, 1997,
incorporated herein by reference to Form 10-K for the fiscal
year ended April 30, 1998, SEC File No. 1-7340.
13 - Portions of the Annual Report to Shareowners for the fiscal
year ended April 30, 1999 which are incorporated by reference
at Item 1 in Part I, Items 5, 6, 7 and 8 in Part II, and Part
IV; filed herewith.
21 - Subsidiaries of the Company, appearing at page 14 of this
report.
22 - Joint Proxy Statement/Prospectus dated March 25, 1999,
incorporated herein by reference to Form S-4 dated March 25,
1999, SEC File No. 333-74967.
23 - Consents of Independent Accountants, appearing at page 13 of
this report.
24 - Powers of Attorney: Ms. Dickerson and Messrs. Bentele, Bottum,
Genovese, Hunter, Jacobsen, Marcus and Wenzel; filed herewith.
27 - Financial Data Schedule, filed herewith.
</TABLE>
* Denotes management contract or compensatory plan.
** Pursuant to the Securities Exchange Act of 1934, Rule 24b-2, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
<PAGE>
EXHIBIT 10.2
AMENDMENT
---------
OF
--
EMPLOYMENT AGREEMENT
--------------------
This Amendment Agreement made this 24/th/ day of November, 1998, between
Kellwood Company (the "Corporation") and William J. McKenna (the "Executive");
WHEREAS, the Corporation and Executive entered into an Employment Agreement
dated December 9, 1992 (the "Agreement"); and
WHEREAS, the Compensation Committee of this company agreed to amend the
Agreement to extend its term for one more year until November 30, 1999; and
WHEREAS, the Corporation and Executive desire to amend the Agreement
accordingly.
NOW THEREFORE, in consideration of their mutual promises and undertakings, the
parties hereby amend the Agreement as follows:
1. By deleting from paragraph 1 the words "November 30, 1998" and inserting in
their place "November 30, 1999."
2. By deleting from paragraph 15 the words "November 30, 1998" and inserting
in their place "November 30, 1999."
IN WITNESS WHEREOF, the parties have executed this Amendment of Employment
Agreement the day and year first above written.
KELLWOOD COMPANY
Secretary
/s/ [SIGNATURE ILLEGIBLE]
- -------------------------------- By: /s/ James S. Marcus,
----------------------------
James S. Marcus, Chairman,
Compensation Committee
EXECUTIVE
/s/ [SIGNATURE ILLEGIBLE] /s/ William J. McKenna
- -------------------------------- --------------------------------
Witness William J. McKenna
<PAGE>
EXHIBIT 13
July 12, 1999
Kellwood Company and Subsidiaries
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Year ended April 30,
------------------------------------
(Dollars in thousands except per share data) 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales......................................... $2,151,147 $2,094,389 $1,787,530
Earnings Before Unusual items and Income Taxes*... 101,491 87,634 61,725
Earnings Before Income Taxes...................... 39,153 87,634 61,725
Net Earnings...................................... 1,953 50,134 34,558
</TABLE>
* - Unusual items include Koret merger costs, provision for facilities shut-
down, and provision for goodwill impairment.
<TABLE>
<CAPTION>
Basic Earnings per Share:
<S> <C> <C> <C>
Earnings before unusual items....... $ 2.23 $1.92 $1.34
Costs of Koret merger............... ( .18) - -
Provision for facilities shut-down.. ( .15) - -
Provision for goodwill impairment... (1.83) - -
------ ----- -----
Net earnings........................ $ .07 $1.92 $1.34
------ ----- -----
Diluted Earnings per Share:
Earnings before unusual items....... $ 2.16 $1.85 $1.29
Costs of Koret merger............... ( .18) - -
Provision for facilities shut-down.. ( .14) - -
Provision for goodwill impairment... (1.77) - -
------ ----- -----
Net earnings........................ $ .07 $1.85 $1.29
------ ----- -----
Cash Dividends Declared............... $ .64 $ .64 $ .60
------ ----- -----
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK DATA
- ------------------------------------------------------------------------------------------------------
Fiscal 1999 Fiscal 1998
------------------------------ ----------------------------
Stock Price Dividends Stock Price Dividends
------------------- -----------------
High Low Paid High Low Paid
<S> <C> <C> <C> <C> <C> <C>
First Quarter (July 31)............. $36 11/16 $30 1/8 $.16 $34 1/2 $23 7/8 $.16
Second Quarter (October 31)......... 32 11/16 22 1/2 .16 38 9/16 30 7/8 .16
Third Quarter (January 31).......... 30 3/4 24 1/16 .16 36 26 5/16 .16
Fourth Quarter (April 30)........... 28 21 1/4 .16 34 5/8 29 1/8 .16
</TABLE>
Common stock of Kellwood Company is traded on the New York Stock Exchange,
ticker symbol KWD. At June 7, 1999, there were approximately 1,223 shareowners
of record and 3,078 shareowners in the Dividend Reinvestment Plan. The current
annual dividend rate per year is $.64.
<PAGE>
Reports of Management and Independent Accountants
Report of Management
The management of Kellwood Company is responsible for the fair presentation of
the financial statements and other financial information included in this
report. The financial statements have been prepared in conformity with generally
accepted accounting principles applying estimates and management's best
judgments as required to present fairly Kellwood Company's financial position,
results of operations and cash flows.
The accounting systems and internal accounting controls of Kellwood are designed
to provide reasonable assurance that the financial records are reliable for
preparing financial statements and maintaining accountability for assets and
that, in all material respects, assets are safeguarded against loss from
unauthorized use or disposition. Qualified personnel throughout the organization
maintain and monitor these internal accounting controls on an ongoing basis, and
internal auditors systematically review the adequacy and effectiveness of the
controls. PricewaterhouseCoopers LLP also studies and evaluates internal
controls for the purpose of establishing a basis for reliance thereon relative
to the scope of their audits of the financial statements. It is management's
opinion that the Company has an effective system of internal accounting
controls.
The Board of Directors, through its Audit Committee consisting solely of non-
management directors, meets periodically with management, the internal auditors
and PricewaterhouseCoopers LLP to discuss audit and financial reporting matters.
Both the internal auditors and PricewaterhouseCoopers LLP have direct access to
the Audit Committee.
/s/ Hal J. Upbin
Hal J. Upbin, President and Chief Executive Officer
/s/ William J. McKenna
William J. McKenna, Chairman
/s/ Gerald M. Chaney
Gerald M. Chaney, Chief Financial Officer
Report of Independent Accountants
To the Shareowners and Board of Directors of Kellwood Company:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of cash flows and of shareowners' equity
present fairly, in all material respects, the financial position of Kellwood
Company and its subsidiaries at April 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended April 30, 1999, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Kellwood's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
St. Louis, Missouri
May 26, 1999
18 Kellwood Company
<PAGE>
Consolidated Statement of Earnings
<TABLE>
<CAPTION>
Year ended April 30,
--------------------------------------------
(Dollars in thousands except per share data) 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $2,151,147 $2,094,389 $1,787,530
Costs and Expenses:
Cost of products sold 1,685,281 1,655,370 1,415,105
Selling, general and administrative expenses 315,139 300,601 268,808
Amortization of intangible assets 15,855 16,562 16,601
Interest expense 33,883 35,142 26,823
Interest income and other, net (502) (920) (1,532)
Costs of Koret merger 6,600 -- --
Provision for facilities shut-down 6,793 -- --
Provision for goodwill impairment 48,945 -- --
- -----------------------------------------------------------------------------------------------
Earnings Before Income Taxes 39,153 87,634 61,725
Income Taxes 37,200 37,500 27,167
- -----------------------------------------------------------------------------------------------
Net Earnings $ 1,953 $ 50,134 $ 34,558
- -----------------------------------------------------------------------------------------------
Earnings Per Share:
Basic $ .07 $ 1.92 $ 1.34
- -----------------------------------------------------------------------------------------------
Diluted $ .07 $ 1.85 $ 1.29
- -----------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
Kellwood Company 19
<PAGE>
Consolidated Balance Sheet
<TABLE>
<CAPTION>
As of April 30,
-----------------------
(Dollars in thousands except per share data) 1999 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash, including time deposits of $19,216 ($22,628 in 1998) $ 25,482 $ 29,711
Receivables, net 392,628 328,348
Inventories 340,778 427,770
Prepaid taxes and expenses 38,392 41,428
- ---------------------------------------------------------------------------------------
Total current assets 797,280 827,257
Property, plant and equipment 252,286 214,693
Less accumulated depreciation and amortization (149,988) (140,135)
- ---------------------------------------------------------------------------------------
Property, plant and equipment, net 102,298 74,558
Intangible assets, net 60,207 114,578
Other assets 94,427 87,497
- ---------------------------------------------------------------------------------------
Total assets $1,054,212 $1,103,890
=======================================================================================
Liabilities and Shareowners' Equity
Current liabilities:
Current portion of long-term debt $ 16,504 $ 19,453
Notes payable 93,963 141,736
Accounts payable 117,014 125,137
Accrued expenses 104,264 86,306
- ---------------------------------------------------------------------------------------
Total current liabilities 331,745 372,632
Long-term debt 227,659 252,508
Deferred income taxes and other 48,620 49,090
Shareowners' Equity:
Common stock, par value $.01 per share, authorized
50,000,000 shares; issued and outstanding 27,737,032
shares (26,327,618 in 1998) 163,097 133,895
Retained earnings 333,340 345,357
Accumulated other comprehensive income (9,330) (9,607)
- ---------------------------------------------------------------------------------------
487,107 469,645
Less treasury stock, at cost (40,919) (39,985)
- ---------------------------------------------------------------------------------------
Total shareowners' equity 446,188 429,660
- ---------------------------------------------------------------------------------------
Total liabilities and shareowners' equity $1,054,212 $1,103,890
=======================================================================================
</TABLE>
See notes to consolidated financial statements.
20 Kellwood Company
<PAGE>
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year ended April 30,
--------------------------------
(Dollars in thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net earnings $ 1,953 $ 50,134 $ 34,558
Add (deduct) items not affecting operating cash flows:
Depreciation and amortization 33,358 33,727 32,300
Increase in prepaid pension costs (4,780) (7,860) (8,100)
Deferred income taxes (4,790) (2,031) (7,446)
Non-cash portion of facilities shut-down provision 1,146 - -
Provision for goodwill impairment 48,945 - -
Other 2,307 3,903 935
Changes in working capital components:
Receivables, net (49,224) (54,378) (19,732)
Inventories 101,553 (78,066) (39,991)
Prepaid expenses 3,397 (6,134) 516
Accounts payable and accrued expenses (2,397) (7,202) 40,969
- ---------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 131,468 (67,907) 34,009
- ---------------------------------------------------------------------------------------
Investing Activities
Additions to property, plant and equipment (51,472) (21,640) (13,513)
Investment in subsidiaries (4,892) (6,810) (11,849)
Other investing activities 7,667 417 2,254
- ---------------------------------------------------------------------------------------
Net cash (used for) investing activities (48,697) (28,033) (23,108)
- ---------------------------------------------------------------------------------------
Financing Activities
Net proceeds from (reduction of) notes payable (50,680) (17,393) 30,364
Proceeds from issuance of long-term debt - 148,327 -
Reduction of long-term debt (28,278) (20,333) (29,436)
Stock transactions under incentive plans 5,928 7,609 2,956
Purchase of treasury stock - - (5,780)
Dividends paid (13,970) (13,698) (12,670)
- ---------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (87,000) 104,512 (14,566)
- ---------------------------------------------------------------------------------------
Net increase (decrease) in cash and time deposits (4,229) 8,572 (3,665)
Cash and time deposits - beginning of year 29,711 21,139 24,804
- ---------------------------------------------------------------------------------------
Cash and time deposits - end of year $ 25,482 $ 29,711 $ 21,139
=======================================================================================
Supplemental cash flow information:
Interest paid $ 34,361 $ 35,360 $ 27,365
Income taxes paid 42,708 41,275 24,403
Significant non-cash investing and financing activities:
Issuance of stock for the acquisition of Fritzi $ 22,340 - -
=======================================================================================
</TABLE>
See notes to consolidated financial statements.
Kellwood Company 21
<PAGE>
Consolidated Statement of Shareowners' Equity
<TABLE>
<CAPTION>
(Dollars in thousands except per share data)
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated
Common Stock Treasury Other Total
------------------------ Stock Retained Comprehensive Comprehensive
Shares Amount Amount Earnings Income Income
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1996 25,850,439 $118,487 $(29,630) $287,033 $(9,208)
Net earnings - - - 34,558 - $34,558
Currency translation adjustment - - - - 471 471
-------
Comprehensive Income $35,029
=======
Cash dividends declared,
$.60 per share - - - (12,670) -
Shares issued under stock plans 268,494 4,330 495 - -
Treasury stock acquired in
conjunction with incentive plans (80,514) - (2,068) - -
Treasury stock acquired under
repurchase program (324,300) - (5,766) - -
Debentures converted 29,208 185 - - -
- -------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1997 25,743,327 $123,002 (36,969) 308,921 (8,737)
Net earnings - - - 50,134 - $50,134
Currency translation adjustment - - - - (870) (870)
-------
Comprehensive Income - - - - - $49,264
=======
Cash dividends declared,
$.64 per share - - - (13,698) -
Shares issued under stock plans 658,469 10,740 261 - -
Treasury stock acquired in
conjunction with incentive plans (98,329) - (3,277) - -
Debentures converted 24,151 153 - - -
- -------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1998 26,327,618 $133,895 $(39,985) $345,357 $(9,607)
Net earnings - - - 1,953 - $ 1,953
Currency translation adjustment - - - - 277 277
-------
Comprehensive Income - - - - - $ 2,230
=======
Cash dividends declared,
$.64 per share - - - (13,970) -
Shares issued under stock plans 231,857 6,284 239 - -
Treasury stock acquired in
conjunction with incentive plans (34,857) - (1,173) - -
Debentures converted 4,414 28 - - -
Purchase of Fritzi 844,000 22,340 - - -
Warrants exercised 364,000 550 - - -
- -------------------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1999 27,737,032 $163,097 $(40,919) $333,340 $(9,330)
===============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
22 Kellwood Company
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and all majority-owned subsidiaries. Substantially all
foreign subsidiaries are consolidated based upon a fiscal year ending March 31.
All significant intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires that management make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates and
assumptions.
INVENTORIES AND REVENUE RECOGNITION: Inventories are stated at the lower of
cost or market. The first-in, first-out (FIFO) method is used to determine the
value of 57% of domestic inventories, primarily inventories purchased from the
Kellwood worldwide network of contractors. The last-in, first-out (LIFO) method
is used to value the inventories of domestic manufacturing operations.
Inventories of foreign subsidiaries are valued using the specific identification
method. Sales are recognized when goods are shipped.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. A significant portion of domestic manufacturing facilities and some
machinery and equipment are leased under long-term capital leases which are
recorded at the beginning of the lease term at the present value of the minimum
lease payments.
Depreciation is computed generally on the declining balance method over
estimated useful lives of 15 to 40 years for buildings and of 3 to 10 years for
machinery and equipment. Leasehold improvements are amortized principally on
the straight-line basis over the shorter of their estimated useful lives or the
remaining lease term.
INTANGIBLE ASSETS: The excess costs over net tangible assets of businesses
acquired are recorded as intangible assets. These intangibles are amortized
using the straight-line method over their estimated useful lives which range
from 1 to 20 years.
IMPAIRMENT OF ASSETS: The Company reviews long-lived assets, goodwill and other
intangibles to assess recoverability from future operations using expected
undiscounted future cash flows whenever events and circumstances indicate that
the carrying values may not be recoverable. Impairment losses are recognized in
operating results when expected undiscounted future cash flows are less than the
carrying value of the asset.
INCOME TAXES: Income taxes are based upon income for financial reporting
purposes. Deferred income taxes are recognized for the effect of temporary
differences between financial and tax reporting in accordance with the
requirements of Statement of Financial Accounting Standards (SFAS) No. 109.
FOREIGN CURRENCY TRANSLATION: Foreign currency financial statements are
translated into United States dollars using period-end rates of exchange for
assets and liabilities and monthly average rates of exchange for income and
expenses. Adjustments resulting from translation are accumulated in the
Cumulative Translation Adjustment component of Shareowners' Equity. Gains or
losses from foreign currency transactions are included in income in the period
in which they occur. The net foreign currency gains and losses recognized in
1999, 1998 and 1997 were not significant.
EARNINGS PER SHARE: In 1998 the Company adopted SFAS No. 128, "Earnings per
Share," for all periods presented.
STOCK-BASED COMPENSATION: Kellwood Company uses the intrinsic value method for
measuring stock-based compensation cost. Under this method, compensation cost
is the excess, if any, of the quoted market price of Kellwood's common stock at
the grant date over the amount the employee must pay for the stock. Kellwood's
policy is to grant stock options at fair market value at the date of grant.
CASH FLOWS: For purposes of the Consolidated Statement of Cash Flows, all
highly liquid short-term time deposits maintained under cash management
activities are considered cash equivalents. The effect of foreign currency
exchange rate fluctuations on cash and time deposits was not significant for the
years ended April 30, 1999, 1998 and 1997.
FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS: The Company's financial
instruments consist of cash, investments, short-term receivables and payables,
and debt. Based on quoted market prices obtained through independent pricing
sources for the same or similar types of borrowing arrangements, the Company
believes the major components of its long-term debt have a market value of
approximately $248,000 which compares to their book value of $241,000.
Management believes that the current carrying amounts for the company's other
financial instruments approximate fair market value.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------
NEW ACCOUNTING STANDARDS: In 1999 the Company adopted the following Statements
of Financial Accounting Standards (SFAS) and Statements of Position (SOP):
. SFAS 130, Reporting Comprehensive Income, which requires the reporting of
comprehensive earnings in addition to net earnings for all years presented.
. SFAS 131, Disclosures about Segments of an Enterprise and Related Information,
which requires additional segment disclosures for all years presented on a
basis consistent with the way the Company is managed.
. SFAS 132, Employers' Disclosures about Pensions and Other Postretirement
Benefits, which revises disclosures about pensions and other postretirement
benefits and requires presentation of information about such plans in a
standardized format for all years presented.
Adoption of these new standards required that the Company reclassify prior
years' information and make certain new disclosures in the notes to the
consolidated financial statements. The Company also adopted SOP 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use, as of
the beginning of 1999. This SOP requires that certain costs of developing or
obtaining software for internal use be capitalized. It had no impact on prior
years' financial statements.
In 1998 SFAS 133, Accounting for Derivative Instruments and Hedging Activities,
was issued. This standard establishes new accounting and reporting standards for
derivative financial instruments. The Company will adopt SFAS 133 for the fiscal
year ending April 30, 2002, and the company does not expect it to have a
material impact on consolidated financial position, results of operations or
cash flows.
NOTE 2. BUSINESS IMPROVEMENT AND OTHER PROGRAMS:
As part of its Vision 2000 program, Kellwood developed and began implementing a
plan to reorganize and restructure several operating units that were
experiencing operating losses or performing below expectations. Key components
of the plan include the consolidation of similar types of operating units,
relocation and consolidation of distribution facilities in the Northeast,
Midwest and West Coast, and elimination of redundancies between operating units.
Restructuring actions taken and planned include closing 5 domestic production
facilities. This action relates to current and future shifts in the Company's
business to foreign sourced product and resulted from the uncompetitive cost
structures of the plants being closed. These plant closures and the related
shift in manufacturing to offshore contractors are not expected to impact future
sales. These activities are currently in process and will continue through
fiscal 2000.
FACILITY CONSOLIDATIONS: In connection with the restructuring described above,
in the fourth quarter of 1999, the Company recorded, as a separate line item in
the consolidated statement of operations, a provision for facilities shut-down
of $6.8 million (pretax). This provision reduced net earnings and earnings per
diluted share by $3.9 million and $.14, respectively. On a pre-tax basis,
charges for restructuring consisted of termination benefits of $3,969, vacant
facilities costs of $1,418, other cash costs of $260, and non-cash charges of
$1,146. The non-cash charges represent primarily a write-down of obsolete or
abandoned fixed assets to their net realizable value.
Details of this provision and the accrual balances remaining are as follows:
<TABLE>
<CAPTION>
Year ended and as of April 30, 1999: Provision Accrual
- ---------------------------------------------------------------------------
<S> <C> <C>
Employee severance....................... $3,969 $3,595
Vacant facilities / lease termination.... 1,418 1,333
Other cash restructuring costs........... 260 260
- ---------------------------------------------------------------------------
Total restructuring, excluding non-cash.. 5,647 $5,188
======
Asset impairments........................ 1,146
- ----------------------------------------------------------
Total provision.......................... $6,793
==========================================================
</TABLE>
These charges provide for a reduction of domestic employment by approximately
1,500, primarily in production and production-support capacities; during 1999
approximately 100 employees were terminated or retired in connection with this
charge. Facility consolidations represented by the April 30, 1999 accrual
balance are expected to be substantially completed in fiscal 2000.
PROVISION FOR GOODWILL IMPAIRMENT: During the fourth quarter of 1999, the
Company completed a review of the intangible assets related to certain
underperforming business units to determine if the intangible assets were
impaired. Based on a comparison of the expected future cash flows to the
carrying
24
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------
value of the intangibles, it was determined that certain of the intangibles,
primarily goodwill, were impaired. Once impairment was identified, the Company
utilized discounted cash flows for each operating unit to determine the amount
of the impairment. The impairment charge, which is presented as a separate line
item in the consolidated statement of operations, totaled $48.9 million and
reduced net earnings and earnings per diluted share by $48.9 million and $1.77,
respectively.
Note 3. Business Combinations:
Effective April 30, 1999 the Company completed a merger with Koret, Inc.
(Koret), issuing approximately 5.2 million shares of Kellwood common stock in
exchange for all of the outstanding shares and options of Koret. The
transaction was accounted for as a pooling-of-interests for financial reporting
purposes. Accordingly, the consolidated financial statements give retroactive
effect to the merger with all periods presented as if the two companies had
always been combined. The following table shows the results of operations for
the separate companies and the combined amounts for periods prior to the merger.
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Kellwood Company $1,873,476 $1,781,582 $1,521,005
Koret 277,671 312,807 266,525
- -----------------------------------------------------------
Combined $2,151,147 $2,094,389 $1,787,530
===========================================================
Net Earnings:
Kellwood Company $ (4,317)/(1)/ $ 42,747 $ 37,596
Koret 6,270 /(1)/ 7,387 (3,038)
- -----------------------------------------------------------
Combined $ 1,953 $ 50,134 $ 34,558
===========================================================
</TABLE>
(1) Fees and expenses related to the Koret transaction aggregating $6.6 million
were incurred in 1999. These costs reduced the Net Earnings of Kellwood and
Koret reported above by $1,360 and $3,480, respectively.
On December 11, 1998 the Company purchased substantially all of the non-real
estate assets of Fritzi California (Fritzi), including intangible assets of $5.2
million. The purchase price included 0.84 million shares of Kellwood common
stock valued at $22.3 million and the assumption of certain liabilities totaling
$14.5 million. The transaction was accounted for as a purchase. Accordingly,
the results of operations of Fritzi are included in the consolidated financial
statements from the acquisition date. This acquisition was not significant to
the results of operations or the financial position of the Company.
Note 4. Supplemental Balance Sheet Information:
<TABLE>
<CAPTION>
April 30, 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Allowance for doubtful accounts $ 11,281 $ 11,803
======================================================================
Inventories:
Finished goods $ 196,214 $ 213,155
Work in process 77,992 139,433
Raw materials 66,572 75,182
- ----------------------------------------------------------------------
Total inventories $ 340,778 $ 427,770
- ----------------------------------------------------------------------
Includes inventories valued under LIFO of $ 128,003 $ 199,286
Value of LIFO inventories at current costs 133,299 209,529
======================================================================
Property, plant & equipment:
Land $ 3,460 $ 6,028
Buildings and improvements 95,002 92,988
Machinery and equipment 142,471 112,587
Capitalized software 11,353 3,090
- ----------------------------------------------------------------------
252,286 214,693
Less accumulated depreciation and amortization (149,988) (140,135)
- ----------------------------------------------------------------------
Property, plant & equipment, net $ 102,298 $ 74,558
- ----------------------------------------------------------------------
Includes assets under capital leases
(primarily buildings) of:
Cost $ 15,393 $ 14,475
Accumulated amortization (14,463) (13,159)
======================================================================
Intangible assets:
Goodwill $ 65,477 $ 128,737
Less accumulated amortization (19,479) (43,981)
- ----------------------------------------------------------------------
Net goodwill 45,998 84,756
- ----------------------------------------------------------------------
Other identifiable intangibles 40,229 86,030
Less accumulated amortization (26,020) (56,208)
- ----------------------------------------------------------------------
Net other identifiable intangibles 14,209 29,822
- ----------------------------------------------------------------------
Net intangible assets $ 60,207 $ 114,578
======================================================================
Accrued expenses:
Salaries and employee benefits $ 49,114 $ 38,187
Provision for facilities shut-down 5,188 -
Income taxes 8,847 11,090
Other accrued expenses 41,115 37,029
- ----------------------------------------------------------------------
Total accrued expenses $104,264 $ 86,306
======================================================================
</TABLE>
Kellwood Company 25
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------
Note 5. Leases
Certain machinery and equipment are leased under operating leases having
remaining terms ranging up to 6 years. Rent expense under all operating leases
for the year ended April 30, 1999 totaled $26,959 ($23,802 for 1998 and $21,523
for 1997). The future minimum lease payments under capital and operating leases
at April 30, 1999, were as follows:
<TABLE>
<CAPTION>
Capital Operating
- ------------------------------------------------------------------
<S> <C> <C>
2000 $ 962 $ 22,455
2001 946 18,857
2002 296 15,561
2003 296 12,420
2004 296 9,097
Later years 42 28,579
- ------------------------------------------------------------------
Total minimum lease payments 2,838 $106,969
========
Less amount representing interest (351)
- -----------------------------------------------------
Present value of net minimum lease payments $2,487
=====================================================
</TABLE>
Minimum lease payments were not reduced for future minimum sublease rentals of
$2,403.
Note 6. Notes Payable and Long-Term Debt:
Notes Payable: The Company entered into a committed credit facility agreement
on May 31, 1996, in the amount of $300,000, which 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, provided that the combined
utilization does not exceed $300,000. 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. At April 30, 1999, outstanding short-term loans and letters
of credit under the agreement were $0 and $122,000, respectively. Covenants are
less restrictive than those currently existing for Kellwood's notes due
insurance companies. During the first half of fiscal 2000, the Company plans to
put in place a new three-year $350,000 committed bank credit facility to replace
the expiring committed facility.
The Company maintains informal, uncommitted lines of credit with several banks
which totaled $190,000 at April 30, 1999. Borrowings under these uncommitted
lines totaled $94,000 at April 30, 1999.
During the year ended April 30, 1999, the highest level of borrowings under all
lines was $196,500 ($275,554 for 1998). For the year, the average daily short-
term borrowings were $153,913 ($179,479 for 1998) and the weighted average
interest rate was 5.8% (6.1% for 1998).
Long-Term Debt:
<TABLE>
<CAPTION>
April 30, 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
7.625% Debentures due October 15, 2017 $148,455 $148,371
Notes due insurance companies, 6.90% - 10.77% 92,291 107,323
Capital lease obligations, 4.9% - 10.2% 2,487 2,717
Term notes, secured by assets, 7.6% -- 12,392
Note due February 2000, 5.0% 200 400
Note due August 2002, 9.0% 275 275
9% convertible subordinated debentures 455 483
- --------------------------------------------------------------------
244,163 271,961
Less current maturities (16,504) (19,453)
- --------------------------------------------------------------------
$227,659 $252,508
====================================================================
</TABLE>
Aggregate maturities on long-term debt for the next five years are as follows:
2000 - $16,504; 2001 - $11,161; 2002 - $15,272; 2003 - $18,166; 2004 - $26,307;
2005 & thereafter - $156,753.
The Company issued $150,000 of 20 year senior unsecured debentures in a public
debt offering on October 27, 1997. The debentures, due October 15, 2017, have a
coupon rate of 7.625% payable semi-annually. Restrictive covenants of these
debentures are less restrictive than the covenants associated with the notes due
insurance companies discussed below.
Notes payable to insurance companies are due in quarterly and semiannual
installments from June 1998 through September 2005. Restrictive covenants of
these notes include the maintenance of minimum working capital and certain key
ratios as well as a limitation on the payment of dividends and the repurchase of
Company stock. Under the most restrictive covenants, future dividends and
purchases of Company stock are limited to $54,158 plus 45% of net earnings after
April 30, 1999, excluding gains and losses on the disposal of capital assets.
The 9% convertible subordinated debentures may be converted into common stock by
debenture holders at a rate of $6.33 per share at any time prior to maturity on
October 15, 1999, subject to certain restrictions. Also, subject to certain
restrictions, the debentures are redeemable, in whole or in part, at the option
of the Company at predetermined redemption prices.
Note 7. Retirement Benefits:
Various contributory and noncontributory retirement plans cover substantially
all domestic and certain foreign employees. Total retirement benefits expense
included the following:
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Single-employer defined benefit plans $(4,443) $(7,756) $(7,901)
Multi-employer plan 585 1,426 1,396
Defined contribution plans 3,731 4,153 3,382
- -------------------------------------------------------------------------
Total retirement benefits expense/(credit) (127) (2,177) (3,123)
- -------------------------------------------------------------------------
</TABLE>
26 Kellwood Company
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------
Single-Employer Defined Benefit Plans:
Summarized information on the Company's single-employer defined benefit plans is
as follows:
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Components of Net Periodic
Pension Credit:
Current service cost $ 2,649 $ 2,085 $ 1,867
Interest cost on projected benefit
obligation 4,591 4,456 4,244
Assumed return on assets (11,637) (10,576) (9,941)
Amortization of transition asset and
prior service costs (46) (3,721) (4,071)
- --------------------------------------------------------------------------
Net pension (credit) $ (4,443) $ (7,756) $ (7,901)
==========================================================================
Weighted average key actuarial
assumptions:
Discount rate 7.5% 8.0% 8.0%
Long-term rate of return on plan assets 8.0% 8.0% 8.0%
Compensation increases 4.5% 5.0% 5.0%
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
April 30, 1999 1998
- --------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of funded status to
prepaid pension cost:
Funded Status -- Plan assets in excess of
projected benefit obligation $113,729 $107,645
Unamortized transition liability 0 33
Unamortized prior service costs (15) (95)
Unrecognized actuarial gains (29,303) (27,682)
- --------------------------------------------------------------------------
Prepaid pension costs included
in other assets $ 84,411 $ 79,901
==========================================================================
Change in Projected Benefit Obligation (PBO):
PBO, beginning of year $ 62,612 $ 54,350
Service cost 2,649 2,085
Interest cost 4,591 4,456
Employee contributions (356) (284)
Plan amendments - 83
Actuarial gain/(loss) (259) 7,680
Benefits paid (5,358) (5,758)
- --------------------------------------------------------------------------
Projected benefit obligation, end of year $ 63,879 $ 62,612
==========================================================================
Change in Plan Assets:
Fair market value, beginning of year $170,256 $142,522
Actual return on plan assets 12,286 32,525
Employer contributions 67 683
Employee contributions 356 284
Benefits paid (5,358) (5,758)
- --------------------------------------------------------------------------
Fair market value, end of year $177,607 $170,256
==========================================================================
</TABLE>
Plan assets consist primarily of marketable equity securities, U.S. Government
obligations, corporate debt obligations and short-term marketable debt
securities.
Multi-Employer Defined Benefit Plan: One of the Company's subsidiaries makes
contributions to a multi-employer defined benefit plan on behalf of certain
employees. The plan administrator estimates that if the Company were to
withdraw from the plan, its potential liability for unfunded plan benefits would
be approximately $3.9 million as of December 31, 1997, the date of the most
recent actuarial valuation report.
Other: The Company provides health care insurance benefits to certain employees
upon retirement, with the majority of the cost paid by employee contributions.
The annual costs of these benefits in 1999, 1998 and 1997 and the accrued
benefits at April 30, 1999 and 1998 were not significant.
Note 8. Stock Option Plans:
The amended Restricted Stock Compensation Plan of 1969 and the Corporate
Development Incentive Plan of 1986 provide for the granting of common stock to
key employees as performance and incentive bonuses. The shares granted may not
be transferred, sold, pledged or otherwise disposed of prior to the lapse of
certain restrictions. Under the plans, $1,400 was charged to earnings in 1999
($2,129 in 1998, and $1,999 in 1997). At April 30, 1999 there were 239,648
shares available to be granted under these plans to qualified employees.
Options to purchase common stock have been granted to key employees under
various plans at option prices not less than the fair market value on the date
of the grant. At April 30, 1999, 141 officers and other key employees held
options to purchase shares. The options expire 10 years after grant on dates
ranging from May 1999 to August 2008 and are exercisable in cumulative
installments only after stated intervals of time and are conditional upon active
employment, except for periods following disability or retirement.
The Company uses the intrinsic value method in accounting for its stock option
plans. Had compensation cost for the Company's stock options been recognized
based upon the fair value on the grant date under the methodology prescribed by
SFAS 123, "Accounting for Stock-based Compensation," the Company's net earnings
and earnings per share for the years ended April 30, 1999, 1998 and 1997 would
have been impacted as indicated in the following table:
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- ----------------------------------------------------------------
<S> <C> <C> <C>
Reported net earnings $1,953 $50,134 $34,558
Pro forma net earnings $ 613 $49,219 $34,029
Reported diluted earnings per share $ .07 $ 1.85 $ 1.29
Pro forma diluted earnings per share $ .02 $ 1.82 $ 1.27
</TABLE>
The fair value of options granted (which is recorded as expense over the option
vesting period in determining the pro forma impact), is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions:
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Expected option life 5 years 5 years 5 years
Risk-free interest rate 5.1% to 5.6% 5.8% to 6.6% 6.3% to 6.4%
Expected volatility of
Kellwood stock 34% 35% 35%
Expected dividend yield on
Kellwood stock 2.0% 2.5% 3.7%
</TABLE>
Kellwood Company 27
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------
The weighted-average grant date fair value of options granted was $8.33 to
$10.82 for 1999, $8.42 to $11.36 for 1998, and $4.88 to $4.94 for 1997. The pro
forma effect on net earnings for 1999, 1998 and 1997 is not representative of
the pro forma effect on net earnings in future years because it does not take
into consideration pro forma compensation related to grants made prior to 1996.
Presented below is a summary of stock option plans' activity for the years and
as of the dates shown:
<TABLE>
<CAPTION>
Wtd. Avg.
Options Exercise Price
- ----------------------------------------------------
<S> <C> <C>
Balance, May 1, 1996 1,822,753 $16.55
Granted 408,000 $16.14
Exercised (210,573) $14.33
Canceled (88,415) $19.06
- ----------------------------------------------------
Balance, April 30, 1997 1,931,765 $16.59
Granted 377,800 $26.40
Exercised (429,755) $14.45
Canceled (82,899) $ 7.80
- ----------------------------------------------------
Balance, April 30, 1998 1,796,911 $19.57
Granted 339,950 $32.18
Exercised (151,829) $11.69
Canceled (2,900) $22.26
- ----------------------------------------------------
Balance, April 30, 1999 1,982,132 $22.34
====================================================
</TABLE>
Options outstanding and exercisable at April 30, 1999 include the following:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Range Remaining Number Exercise Number Exercise
of Prices Life (000's) Price (000's) Price
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6.04 - 9.92 2 years 16.7 $ 7.33 16.7 $ 7.33
$12.29 - 12.75 2 years 52.0 $12.35 52.0 $12.35
$16.13 - 19.96 6 years 661.0 $17.78 402.7 $18.63
$20.31 - 27.44 7 years 872.5 $22.24 418.2 $21.12
$32.28 - 36.00 9 years 379.9 $37.51 15.0 $34.82
- ---------------------------------------------------------------------
$6.04 - 36.00 7 years 1,982.1 $22.33 904.6 $19.48
=====================================================================
</TABLE>
Note 9. Capital Stock:
The reported outstanding shares of common stock have been reduced by treasury
stock totaling 3,589,395 shares at April 30, 1999 (3,575,572 at April 30, 1998,
and 3,499,326 at April 30, 1997). On September 30, 1996, Kellwood Company
adopted a common stock repurchase program, which authorized the repurchase of up
to 10% of the approximately 21,000,000 shares of its common stock outstanding at
that date. Through December 1998, approximately 324,000 shares had been
repurchased under this program. In December 1998, this repurchase program was
rescinded in connection with the Koret merger, and no future repurchases are
planned.
Warrants for the right to purchase Koret common stock equivalent to
approximately 364,000 shares of Kellwood Company common stock were issued on
June 30, 1992. These warrants were exercised in April 1999 at an aggregate
price of $550.
Authorized capital includes 500,000 shares of preferred stock, none of which
have been issued. Nonvoting share purchase rights, exercisable only upon
satisfaction of certain conditions, entitle the holder to purchase Series A
Junior Preferred Stock (160,000 shares reserved) or, under certain conditions,
common shares at prices specified in the rights agreement. None of the rights
were exercisable as of April 30, 1999.
Note 10. Income Taxes:
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Current:
Domestic:
Federal $33,508 $31,144 $28,073
State 6,873 5,677 4,525
Foreign 1,609 2,710 2,015
- -------------------------------------------------------------
Total current provision 41,990 39,531 34,613
Deferred (primarily federal) (4,790) (2,031) (7,446)
- -------------------------------------------------------------
Total income tax provision $37,200 $37,500 $27,167
=============================================================
</TABLE>
Current income taxes are the amounts payable under the respective tax
regulations on each year's earnings and on foreign earnings remitted during the
year. Deferred income taxes included the following:
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Employee related costs $ 1,653 $ 2,385 $ 2,330
Depreciation and amortization (939) (3,160) (1,180)
Allowance for asset valuations (846) 579 (9,130)
Shut-down accrual (2,462) - -
Other (2,196) (1,835) 534
- -------------------------------------------------------------
Deferred provision $(4,790) $(2,031) $(7,446)
=============================================================
</TABLE>
A reconciliation of the federal statutory income tax rate to the effective tax
rate (provision for taxes) was as follows:
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal rate 35.0% 35.0% 35.0%
Foreign tax differences (1.7) (1.8) 1.4
Amortization of intangible assets 3.6 3.9 5.2
State tax 5.0 4.0 3.4
Unusual items (primarily goodwill) 53.9% - -
Other (0.8) 1.7 (1.0)
- -------------------------------------------------------------
Effective tax rate 95.0% 42.8% 44.0%
=============================================================
</TABLE>
Deferred income tax liabilities and assets consisted of the following:
<TABLE>
<CAPTION>
Year ended April 30, 1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Employee related costs $ 24,629 $ 22,976 $ 20,591
Depreciation and amortization 7,016 7,955 11,115
Allowance for asset valuations (21,600) (20,754) (21,333)
Other (6,458) (1,800) 35
- -------------------------------------------------------------
$ 3,587 $ 8,377 $ 10,408
=============================================================
Included in:
(Prepaid taxes and expenses) $(35,563) $(31,308) $(29,483)
Deferred income taxes and other 39,150 39,685 39,891
- -------------------------------------------------------------
$ 3,587 $ 8,377 $ 10,408
=============================================================
</TABLE>
28 Kellwood Company
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------
Earnings before income taxes included $15,368, $10,773 and $6,465 of Smart
Shirts, Ltd. earnings in 1999, 1998 and 1997, respectively.
Federal income taxes are provided on earnings of foreign subsidiaries except to
the extent that such earnings are expected to be indefinitely reinvested abroad.
Undistributed foreign earnings considered to be indefinitely reinvested abroad
totaled $44,046 through April 30, 1999.
Note 11. Earnings Per Share:
A reconciliation of basic earnings per common share and diluted earnings per
common share follows:
<TABLE>
<CAPTION>
Basic Earnings Per Share
Computation
1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net earnings $ 1,953/(1)/ $50,134 $34,558
- -------------------------------------------------------------------
Denominator (000's):
Average common shares outstanding 26,765 26,096 25,753
- -------------------------------------------------------------------
Basic Earnings Per Share $ .07 $ 1.92 $ 1.34
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Diluted Earnings Per Share
Computation
1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net earnings $ 1,953/(1)/ $50,134 $34,558
Impact of assumed conversions:
debenture interest after-tax 27 37 39
- -------------------------------------------------------------------
$ 1,980 $50,171 $34,597
===================================================================
Denominator (000's):
Average common shares outstanding 26,765 26,096 25,753
Impact of debenture conversions 75 93 118
Impact of stock options 765 926 846
- -------------------------------------------------------------------
27,605 27,115 26,717
- -------------------------------------------------------------------
Diluted Earnings Per Share $ .07 $ 1.85 $ 1.29
===================================================================
</TABLE>
(1) 1999 Net earnings and Earnings per share are net of unusual charges for
merger costs, facilities shut-down, and goodwill impairment totaling $62,338
(pretax)
Note 12. Significant Customers:
No single customer provided 10% or more of consolidated net sales in any one or
more of the fiscal years ended April 30, 1999, 1998 and 1997.
Note 13. Commitments and Contingencies:
There are various lawsuits and other legal proceedings against the Company.
Management and general counsel are of the opinion that the ultimate disposition
of such litigation will have no material adverse effect on the Company's
financial position or results of operations.
Note 14. Selected Quarterly Financial Data (Unaudited):
<TABLE>
<CAPTION>
Quarter First Second Third Fourth
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1999:
Kellwood previously
reported:
Net sales $427,669 $509,763 $388,744 $547,300
Gross profit 80,869 104,061 75,224 118,315
Net earnings 7,754 17,540 3,002/(1)/ (32,613)/(2)/
Earnings per share -
Basic .36 .81 .14 (1.45)/(2)/
Diluted .35 .80 .13 (1.45)/(2)/
Impact of Koret merger:
Net sales $ 55,614 $ 90,777 $ 50,136 $ 81,144
Gross profit 17,593 28,481 16,145 25,178
Net earnings 898 4,812 (1,042)/(1)/ 1,602/(2)/
Earnings per share -
Basic (.03) .02 (.07) .32
Diluted (.03) .02 (.06) .32
Combined Kellwood
Results:
Net sales $483,283 $600,540 $438,880 $628,444
Gross profit 98,462 132,542 91,369 143,493
Net earnings 8,652 22,352 1,960 (31,011)
Earnings per share -
Basic .33 .83 .07 (1.13)
Diluted .32 .82 .07 (1.13)
Fiscal 1998:
Kellwood previously
reported:
Net sales $400,604 $502,852 $373,680 $504,446
Gross profit 79,002 99,970 69,485 104,313
Net earnings 7,216 16,512 2,414 16,605
Earnings per share -
Basic .34 .77 .11 .78
Diluted .33 .75 .11 .76
Impact of Koret merger:
Net sales $ 61,745 $102,167 $ 58,466 $ 90,429
Gross profit 16,191 25,501 16,830 27,727
Net earnings (401) 2,920 (794) 5,662
Earnings per share -
Basic (.08) (.03) (.05) .07
Diluted (.08) (.04) (.05) .06
Combined Kellwood
Results:
Net sales $462,349 $605,019 $432,146 $594,875
Gross profit 95,193 125,471 86,315 132,040
Net earnings 6,815 19,432 1,620 22,267
Earnings per share -
Basic .26 .74 .06 .85
Diluted .25 .71 .06 .82
</TABLE>
(1) Third quarter 1999 Net earnings include the impact of Merger costs (pretax)
of $662 and $450 incurred by Kellwood and Koret, respectively.
(2) Fourth quarter 1999 Net earnings include the impact of Merger costs (pretax)
of $699 and $4,590 incurred by Kellwood and Koret, respectively, as well as
Kellwood's provisions for facilities shut-down of $6.8 million and goodwill
impairment of $48.9 million, respectively.
Kellwood Company 29
<PAGE>
Notes to Consolidated Financial Statements
(Dollars in thousands except per share data)
- --------------------------------------------------------------------------------
Note 15. Industry Segment and Geographic Area Information:
Kellwood adopted SFAS 131, Disclosures about Segments of an Enterprise and
Related Information beginning with this Annual Report. This standard requires
disclosure of segment information on the same basis as used internally for
evaluating segment performance. The Company and its subsidiaries are principally
engaged in the apparel and related soft goods industry. The Company's business
units are organized by product line. For purposes of SFAS 131, these have been
aggregated into the following five reportable segments:
. Women's Branded Sportswear: Popular-to-Moderate, which includes blazers,
dresses, sweaters, blouses, vests, other tops, skirts, pants, skorts, and
other bottoms with "out the door" prices below $50.
. Women's Branded Sportswear: Better-to-Bridge, which includes upper price
point women's sportswear sold principally to small specialty stores, regional
department stores and catalog houses.
. Private Label Apparel, which covers a broad range of product from intimate
apparel and loungewear to outerwear, activewear, pants and jeans, workwear
and sweaters. The Private Label business partners with retailers in the
design and delivery of floor-ready merchandise and programs to meet targeted
price points.
. Smart Shirts, which is a leading manufacturer of woven dress and sport shirts
in Hong Kong and China. The company recently started a knit shirt operation
in Sri Lanka.
. Recreation Products, which includes American Recreation Products, a leading
company in the camping products industry. Major products include tents,
sleeping bags, backpacks and technical apparel and accessories under the
Wenzel(R), Slumberjack(R), Kelty(R) and Sierra Designs(R) brands.
Management evaluates the performance of its operating segments separately to
individually monitor the different factors affecting financial performance.
Segment Operating Earnings includes substantially all of the segment's costs of
production (on a FIFO basis), distribution and administration. Kellwood manages
the following expenses at the corporate level. Accordingly, they are not
allocated to the Segments:
. Interest income and expense,
. Corporate general and administrative expenses,
. Amortization of intangible assets,
. Merger and acquisition costs, including costs of the Koret merger,
. Provisions for facilities shut-down (primarily plants serving the Private
Label segment),
. Provision for goodwill impairment (which pertained to the goodwill of
businesses in the Better-to-Bridge (70%) and Popular-to-Moderate (30%)
segments, and
. Income taxes.
Segment net assets measures net working capital, net fixed assets and other
noncurrent operating assets and liabilities of the segment. Depreciation and
amortization excludes amortization of intangible assets accounted for at the
corporate level. Debt is not allocated to the segments. Capital expenditures
exclude the cost of long lived assets included in the Fritzi acquisition which
was accounted for as a purchase and is part of the Popular-to-Moderate segment.
Prior period amounts have been restated in accordance with the requirements of
the new standard and to reflect the Koret merger which was accounted for as a
pooling of interests and is part of the Popular-to-Moderate segment.
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
Popular-to-Moderate $1,381,688 $1,296,100 $1,021,393
Better-to-Bridge 167,279 197,991 224,212
Private Label Apparel 255,939 289,199 264,029
Smart Shirts 202,662 173,284 153,195
Recreation Products 143,579 137,815 124,701
- ---------------------------------------------------------------------------
Kellwood total $2,151,147 $2,094,389 $1,787,530
===========================================================================
Operating earnings:
Popular-to-Moderate $ 123,197 $ 105,202 $ 64,530
Better-to-Bridge 4,485 5,381 16,085
Private Label Apparel 28,129 34,244 23,102
Smart Shirts 16,634 14,759 11,144
Recreation Products 11,504 10,515 9,389
- ---------------------------------------------------------------------------
Total segments 183,949 170,101 124,250
Amortization of Intangible assets (15,855) (16,562) (16,601)
Interest expense (33,883) (35,142) (26,823)
Impairment, restructuring, & merger (62,338) -- --
General corporate and other (32,720) (30,763) (19,101)
- ---------------------------------------------------------------------------
Earnings before income taxes $ 39,153 $ 87,634 $ 61,725
===========================================================================
Net Assets at end of year:
Popular-to-Moderate $ 485,615 $ 510,368 $ 355,500
Better-to-Bridge 51,843 82,572 88,500
Private Label Apparel 106,910 96,303 99,200
Smart Shirts 66,152 75,541 70,100
Recreation Products 51,364 54,266 46,700
Corporate and Other 22,429 24,307 29,353
- ---------------------------------------------------------------------------
Kellwood total $ 784,314 $ 843,357 $ 689,353
===========================================================================
Capital expenditures:
Popular-to-Moderate $ 13,008 $ 8,407 $ 2,943
Better-to-Bridge 4,803 1,343 948
Private Label Apparel 21,659 7,361 4,744
Smart Shirts 2,829 3,314 4,051
Recreation Products 666 431 598
Corporate and Other 8,507 784 229
- ---------------------------------------------------------------------------
Kellwood total $ 51,472 $ 21,640 $ 13,513
===========================================================================
Depreciation expense:
Popular-to-Moderate $ 5,699 $ 5,169 $ 5,154
Better-to-Bridge 1,769 2,190 1,819
Private Label Apparel 4,822 4,492 3,919
Smart Shirts 3,350 3,117 2,319
Recreation Products 612 604 617
Corporate and Other 1,251 1,593 1,871
- ---------------------------------------------------------------------------
Kellwood total $ 17,503 $ 17,165 $ 15,699
===========================================================================
</TABLE>
Substantially all sales are to U.S. customers. Sales and transfers between
segments were not significant. Substantially all of the assets of Smart Shirts
are located in Asia.
30 Kellwood Company
<PAGE>
Supplemental Selected Financial Data
<TABLE>
<CAPTION>
(Dollars in thousands except per share data) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $2,151,147 $2,094,389 $1,787,530 $1,741,799 $1,621,029
Net earnings 1,953/(1)/ 50,134 34,558 31,857 13,330
Earnings per share:
Basic .07/(1)/ 1.92 1.34 1.24 .53
Diluted .07/(1)/ 1.85 1.29 1.20 .51
Cash dividends declared per share .64 .64 .60 .60 .60
Working capital 465,535 454,625 279,036 278,710 277,006
Total assets 1,054,212 1,103,890 956,368 886,690 878,144
Long-term debt 227,659 252,508 122,980 149,328 177,178
Total debt 338,126 413,697 303,096 302,168 326,693
Shareowners' Equity 446,188 429,660 386,257 366,722 346,118
Equity per Share 16.09 16.32 15.00 14.19 13.44
</TABLE>
(1) 1999 Net earnings and earnings per share are net of unusual charges for
merger costs, facilities shut-down, and goodwill impairment totaling
$62,338 (pretax).
All data have been adjusted to reflect the 1999 merger with Koret, Inc.,
which was accounted for as a pooling of interests.
Kellwood Company 31
<PAGE>
Management's Discussion and Analysis
(Dollars in millions except per share data)
- --------------------------------------------------------------------------------
The following discussion is a summary of the key factors management considers
necessary in reviewing the Company's results of operations, liquidity, capital
resources and operating segment results. This discussion should be read in
conjunction with the Consolidated Financial Statements and related notes.
Results of Operations
Overview
Sales for fiscal 1999 increased 3% to a record $2,151 from $2,094 in 1998. Net
earnings declined to $2 ($.07 per diluted share) due to special charges totaling
$62 taken in the fourth quarter, however earnings before unusual items and
income taxes increased 16% to $101 from $88 in the prior year. Diluted earnings
per share before unusual items increased 17% to $2.16 from $1.85 in fiscal 1998.
Reported results for all years were restated to include the sales and earnings
of Koret, Inc., which was merged into the Company in April 1999 in a transaction
accounted for as a pooling of interests.
Net Sales, Operating Earnings, and Earnings before Unusual Items
Summarized comparative financial data for fiscal 1999, 1998 and 1997, with
historical results for all periods revised to include Koret, are as follows
(dollars in millions; percentages are calculated based on actual data, but
columns may not add due to rounding):
<TABLE>
<CAPTION>
Percent change
----------------
1999 1998 1997 98-99 97-98
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $2,151 $2,094 $1,788 2.7% 17.2%
Cost of products sold 1,685 1,655 1,415 1.8% 17.0%
S,G&A 315 301 269 4.8% 11.8%
------------------------------------------------------------------------------------------------------
Operating earnings 151 138 104 8.9% 33.6%
Amortization of intangibles 16 17 17 (4.3%) (0.2%)
Interest, net & other 33 34 25 (2.5%) 35.2%
Koret merger costs 7 - -
Facilities shut-down 7 - -
Goodwill impairment 49 - -
---------------------------------------------------------------------------------
Earnings before tax 39/(1)/ 88 62
Income Taxes 37 38 27
---------------------------------------------------------------------------------
Net Earnings $ 2/(1)/ $ 50 $ 35
=================================================================================
Income Tax rate 95% 43% 44%
---------------------------------------------------------------------------------
</TABLE>
(1) Earnings before income taxes and Net earnings were $101 and 60,
respectively, excluding the impact of the unusual items (Merger costs,
Facilities shut-down, and Goodwill impairment).
Selected income statement components as a percentage of Sales are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Cost of products sold 78.3% 79.0% 79.2%
S,G&A 14.6% 14.4% 15.0%
- ------------------------------------------------------
Operating earnings 7.0% 6.6% 5.8%
Amortization of intangibles .7% .8% .9%
Interest, net & other 1.6% 1.6% 1.4%
</TABLE>
Sales increased 3% in fiscal 1999 after increasing 17% in 1998 vs. the prior
year. Fiscal 1999 sales benefited from:
. the continued growth of the Sag Harbor(R) line including the new Sag Harbor(R)
Sport weekendwear,
. the acquisition of Fritzi which added $48 in sales during the third and fourth
quarters,
. the Studio Ease(R) line of casual dresses sold to department stores,
. private label intimate apparel programs with major discounters and national
chains, and
. continued growth in the men's shirt business through private label programs.
These developments were partially offset by:
. decreases of approximately $93 related to exiting certain businesses,
including Counterparts(R) (a division of Koret), Brittania(R) pants, and a
nurse's uniforms and a maternitywear business,
. lower than expected results from the recently repositioned Cricket Lane(R) and
Melrose(R) brands,
. sales deferrals due to the timing of customer orders as Koret's accessory
business was repositioned to adopt a market segmentation strategy, and
. weak demand for private label outerwear and basic denim jeans.
The fiscal 1998 sales increase was broad-based across every channel of
distribution and almost all segments. Leading contributors were the Sag
Harbor(R), Kathie Lee(R), Koret(R) and Cricket Lane(R) labels as well as the
Smart Shirts segment.
Cost of products sold as a percent of sales decreased to 78.3% in fiscal 1999
compared to the fiscal 1998 level of 79.0%. This was primarily due to improved
production efficiencies and sourcing including cost reductions as a result of
lower material costs and labor costs in Asia, exiting certain low margin
businesses, and savings generated by the Supplier Management Initiative, one of
the Vision 2000 programs.
Cost of products sold increased from 1997 to 1998 primarily due to the increase
in sales. Cost of products sold as a percent of sales decreased from 79.2% in
1997 to 79.0% in 1998 as the impact of faster sales growth in businesses and
programs with gross margins below the Company average partially offset improved
production efficiencies and sourcing.
Selling, General and Administrative expenses (S,G&A) in fiscal 1999 increased
$14 or 4.8% to $315 (14.6% of sales) as compared to $301 (14.4%) and $269
(15.0%) in fiscal 1998 and 1997, respectively. The increase in S,G&A in fiscal
1999 included the impact of start-up costs for new products and brands, and
increased systems consulting and quota costs at Smart Shirts. These increases
were partially offset by cost reductions resulting from consolidation of
operations in the Better-to-Bridge segment.
32 Kellwood Company
<PAGE>
Management's Discussion and Analysis
(Dollars in millions except per share data)
- --------------------------------------------------------------------------------
The increase in 1998 resulted primarily from an $11 increase in spending on the
Vision 2000 initiative and from variable S,G&A associated with the 17% sales
increase.
Operating earnings (defined as net sales less cost of products sold and S,G&A)
increased to 7.0% of sales from 6.6% in fiscal 1998 and 5.8% in 1997. The 1999
increase was due primarily to improved production efficiencies and sourcing
including cost reductions as a result of lower material costs and labor costs in
Asia, exiting certain low margin businesses, and savings from the Supplier
Management Initiative.
The 1998 increase was due to the increased volume and improved production
efficiencies and sourcing, partially offset by increased spending on Vision 2000
programs.
Interest expense increased from 1997 to 1998 due primarily to the increase in
average debt and the higher interest rate that resulted from replacing short
term debt with the 20 year debentures (discussed below).
The effective tax rate fluctuated from 1997 to 1998 due primarily to the timing
of losses of Koret's foreign operations for which no tax benefit was recognized.
The 1999 rate of 95% was a consequence primarily of the non-deductible Goodwill
impairment charge and non-deductible Koret merger costs of $2.4.
Segment results:
- ----------------
Sales and Operating Earnings by Segment for the three years ended April 30, 1999
were as follows:
<TABLE>
<CAPTION>
Percent change
-------------------
<S> <C> <C> <C> <C> <C>
Net sales 1999 1998 1997 98-99 97-98
- --------------------------------------------------------------------
Popular-to-Moderate $1,382 $1,296 $1,021 6.6% 26.9%
Better-to-Bridge 167 198 224 (15.5%) (11.7%)
Private Label Apparel 256 289 264 (11.5%) 9.5%
Smart Shirts 203 173 153 17.0% 13.1%
Recreation Products 144 138 125 4.2% 10.5%
- --------------------------------------------------------------------
Kellwood total $2,151 $2,094 $1,788 2.7% 17.2%
- --------------------------------------------------------------------
Percent change
------------------
Operating earnings 1999 1998 1997 98-99 97-98
- --------------------------------------------------------------------
Popular-to-Moderate $123.2 $105.2 $ 64.5 17.1% 63.0%
Better-to-Bridge 4.5 5.4 16.1 (16.7%) (66.5%)
Private Label Apparel 28.1 34.2 23.1 (17.9%) 48.2%
Smart Shirts 16.6 14.8 11.1 12.7% 32.4%
Recreation Products 11.5 10.5 9.4 9.4% 12.0%
- --------------------------------------------------------------------
Total segment
Operating earnings $183.9 $170.1 $124.3 8.1% 36.9%
- --------------------------------------------------------------------
</TABLE>
Popular-to-Moderate sales were up 27% in '98 on the strength of the Sag
Harbor(R), Kathie Lee(R), Koret(R) and Cricket Lane(R) labels. The $41 increase
in Operating earnings (8.1% of sales in 1998 from 6.3% in 1997) was primarily
due to improved sourcing of products from Asia and Mexico, particularly the
Koret products. The 27% sales increase also contributed to the margin
improvement.
The acquisition of Fritzi in the third quarter of fiscal '99 added $48 to sales
which, along with continued strength of the Sag Harbor(R) line, contributed the
majority of the 7% increase in the sales of this segment. These increases were
partially offset by discontinued businesses, including Counterparts(R) (a
division of Koret), nurses' uniforms and maternitywear. Operating earnings
margin improved to 8.9% from 8.1% in the prior year largely due to improved
divisional mix (faster growth in businesses and programs with operating earnings
margins higher than the segment average), the discontinuation of Koret's
unprofitable Counterparts(R) business, and improved sourcing of Koret products.
Better-to-Bridge. Better-to-Bridge sales declined 12% in 1998 and 16% in 1999,
and operating earnings margin declined from 7.2% in 1997 to 2.7% in 1998 and
1999. These declines were driven by disappointing sales from the Melrose(R)
brand and lower sales to certain specialty stores. This segment contributed only
7.8% of Kellwood's sales and 2.4% of segment operating earnings in fiscal 1999.
Private Label sales for the fiscal year were down 12% in '99 due to weak demand
for private label outerwear and basic denim jeans after being up 10% in `98 due
primarily to the strength of outerwear sales. Operating earnings margins in the
Private Label segment declined to 11.0% in 1999 from 11.8% in 1998 and 8.7% in
1997 due to the impact of the Brittania business in 1998.
Smart Shirts sales were up 17% in '99 and 13% in `98 vs. the prior year. The
major drivers of this growth were the new knit shirt operation in Sri Lanka and
the Polo Ralph Lauren(R) business which began shipping in the fourth quarter of
fiscal 1997. Due to the increased volumes and improved worker productivity, as
well as Asian currency fluctuations, operating profit margins at Smart Shirts
have improved to 8.2% in 1999 and 8.5% in 1998 as compared to 7.3% in 1997.
Recreation Products sales were up 4% in '99 and 11% in `98 vs. the prior year.
Due to the increased volumes and improved worker productivity, as well as Asian
currency fluctuations, operating profit margins in the Recreation Products
segment improved to 8.0% in 1999 from 7.6% in 1998 and 7.5% in 1997.
Unusual items
The Koret merger. Effective April 30, 1999 the Company completed a merger with
Koret, Inc. (Koret), issuing approximately 5.2 million shares of Kellwood common
stock in exchange for all of the outstanding shares and options of Koret. The
transaction was accounted for as a pooling-of-interests. Accordingly, the
consolidated financial statements and this Management's Discussion and Analysis
give retroactive effect to the Merger with all periods presented as if the two
companies had always been combined. One-time costs of the Koret merger ($6.6)
decreased 1999 reported earnings per share by $.18.
Kellwood Company 33
<PAGE>
Management's Discussion and Analysis
(Dollars in millions except per share data)
- --------------------------------------------------------------------------------
Restructuring and Provision for Goodwill Impairment.
As part of its Vision 2000 program, Kellwood developed and began implementing a
plan to reorganize and restructure several operating units that were
experiencing operating losses or performing below expectations. Key components
of the plan include the consolidation of similar types of operating units,
relocation and consolidation of distribution facilities in the Northeast,
Midwest and West Coast, and elimination of redundancies between operating units.
These activities are currently in process and will continue through fiscal 2000.
During fiscal 1999, Kellwood closed a number of its domestic manufacturing
facilities as their work was transferred to Kellwood facilities in Mexico, the
Caribbean and Central America and the Company's network of contractors around
the world. These moves, in concert with certain other planned plant closings
scheduled to be completed in fiscal 2000, will enhance Kellwood's cost
competitiveness and sourcing flexibility in fiscal 2000 and beyond. These plant
closures and the related shift in manufacturing to offshore contractors relate
primarily to the Private Label segment and are not expected to impact future
sales. Cost reductions resulting from these moves will have a minimal impact on
margins, as it is expected to be necessary to pass much of the savings on to
customers in order to retain these businesses. These activities are currently in
process and will continue through fiscal 2000. In connection with this
restructuring, in the fourth quarter of 1999 the Company recorded a provision
for facilities shut-down of $6.8 (pretax). This provision consisted of
termination benefits of $4, vacant facilities costs of $1.4, other cash costs of
$.3, and non-cash charges of $1.1. The non-cash charges represent primarily a
write-down of obsolete or abandoned fixed assets to their net realizable value.
Of the total non-cash provision of $5.6, $.5 has been paid during fiscal 1999.
The total provision of $6.8 reduced net earnings and earnings per diluted share
by $3.9 and $.14, respectively for the year.
As a consequence of the changes discussed above and changing market conditions,
Kellwood conducted a review and analysis of the projected cash flows for certain
underperforming operating units and assessed the realizability of the carrying
value of the intangible assets of these units. During the fourth quarter the
Company completed this review and identified an impairment of $48.9, primarily
related to business units in the Better-to-Bridge segment. The provision for
this impairment reduced net earnings and earnings per diluted share by $48.9 and
$1.77, respectively for the year.
Financial Condition
Cash flow from operations is the Company's primary source of liquidity. Kellwood
uses financial leverage to minimize the overall cost of capital and maintain
adequate operating and financial flexibility. Management monitors leverage
through its debt-to-capital ratio. Working capital management is monitored
primarily by analysis of the Company's investment in accounts receivable and
inventories.
Leverage. Kellwood's debt-to-capital ended fiscal 1999 at 43%, the lowest in 5
years and down from 49% at April 30, 1998. This reduction was in spite of a
record level of capital spending and a $58 reduction in equity resulting from
the unusual charges discussed above. Four major factors contributed to this
decline:
. Better performance in the management of working capital, assisted by a slower
rate of sales growth at fiscal 1999 year-end compared to fiscal 1998,
. Operating earnings were up significantly, as planned, from fiscal 1998,
. The purchase of Koret and Fritzi using Kellwood stock and assuming only a
small amount of debt, and
. Repatriation of $35 from Smart Shirts in March 1999.
On a current equity market value basis, Kellwood's debt-to-capital declined to
32% at April 30, 1999 compared to 33% at the prior year-end.
Working Capital. The Company's working capital requirements for inventories and
receivables are influenced primarily by sales patterns which are highly
seasonal. Inventory levels are highly dependent upon forecasted sales, and
receivables are a result of the timing of recent months' sales and customer
payment terms.
The current ratio remained relatively stable at 2.4 to 1 at April 30, 1999 vs.
2.2 to 1 at April 30, 1998. Accounts receivable increased $64 (20%) vs. April
30, 1998, significantly ahead of the 3% increase in sales. This increase was due
principally to the inclusion of $46 of Koret receivables in the 1999 balance
sheet (compared to $8 at April 30, 1998) as a result of Kellwood's debt capacity
replacing the factor borrowing previously used by Koret. The other major factor
in the change is growth in the volume of business the Company does with certain
customers which have terms of sale in excess of the company average. This was
offset by an $87 decline in inventory levels (20%) as a consequence of improved
working capital management and lower expected sales in the first half of fiscal
2000 compared to sales in the first half of fiscal 1999.
Investing Activities. Capital spending was $52 for fiscal 1999 and $22 for 1998.
This compares with capital spending of $13-15 per year before the commencement
of the Vision 2000 program. The additional spending was largely for warehouse
construction and development of the Integrated
34 Kellwood Company
<PAGE>
Management's Discussion and Analysis
(Dollars in millions except per share data)
- --------------------------------------------------------------------------------
Business System (IBS). Capital spending for fiscal 2000 is planned to be in the
$25 to $30 range. About half of this to be invested in computer hardware and
software projects (including additional investments in the IBS, purchase and
modification of a Warehouse Management System, and new CAD systems for certain
divisions) and the other half to be invested in new domestic warehousing and
distribution facilities, new or remodeled showrooms and selling facilities, and
manufacturing facilities in Asia.
In the third quarter of fiscal 1999, the Company purchased substantially all of
the non-real estate assets of Fritzi. The purchase price included 0.84 million
shares of Kellwood common stock valued at $22.3 and the assumption of certain
liabilities totaling $14.5. The transaction was accounted for as a purchase.
Financing Activities. Long-term financings are arranged as necessary to meet the
Company's anticipated capital requirements, with the timing, principal amount
and terms depending on the prevailing securities markets generally and the
market for the Company's debt in particular.
In the second quarter of fiscal 1998, the Company completed a 20-year public
debt offering totaling $150. These debentures carry a 7.625% coupon rate. They
received investment grade ratings from Moody's and S&P of Baa3/BBB.
Long-term fixed-rate debt as a percentage of total debt was 67% at April 30,
1999 compared to 61% at the prior year-end. Kellwood plans to issue $150 of ten-
year fixed rate public debt in the first half of fiscal 2000 to replace current
short-term borrowings and to increase the Company's financial flexibility.
The Company maintains informal, uncommitted lines of credit with several banks
which totaled $190 at April 30, 1999. Borrowings under these uncommitted lines
totaled $94 at April 30, 1999.
Kellwood maintains a $300 committed credit facility agreement of which up to
$200 can be utilized for short-term loans and up to $200 can be utilized for
letters of credit. At April 30, 1999, $178 was available for future use. The
existing agreement expires October 30, 1999. During the first half of fiscal
2000 the Company plans to put in place a new three-year $350 committed bank
credit facility to ensure the liquidity necessary to support planned internal
growth as well as to provide the capacity for additional acquisitions.
Management believes that the combined operating, cash and equity position of the
Company will continue to provide the capital flexibility necessary to fund
future opportunities and to meet existing obligations.
In November 1998, the Board of Directors rescinded the share repurchase plan
which had been adopted in September 1996.
The additional shares outstanding as a result of the Koret merger will increase
the cash cost to the Company of the dividend compared to the dividends actually
paid in the periods presented in the financial statements. Based on the current
dividend rate and number of shares outstanding, the Company would expect to pay
dividends of $18 in fiscal 2000 compared with $14 actually paid in fiscal 1999
and 1998.
Market Risk Sensitivity and Inflation Risks
Foreign Currency Risk. The company does not believe that it has significant
foreign currency transactional exposures. The impact of a 10% unfavorable change
in the exchange rate of the U.S. dollar against the prevailing market rates of
the foreign currencies in which the Company does have transactional exposures
would be immaterial.
Interest Rate Risk. Interest rate risk is managed through the maintenance of a
portfolio of variable- and fixed-rate debt composed of short- and long-term
instruments. The objective is to maintain a cost-effective mix that management
deems appropriate. At April 30, 1999, the Company's debt portfolio was composed
of approximately 28% variable-rate debt (adjusted for the impact of variable
rate assets) and 72% fixed-rate debt. Kellwood's strategy regarding management
of its exposure to interest rate fluctuations did not change significantly
during fiscal 1999. Except for the planned issuance of $150 of ten-year debt,
management does not expect any significant changes in its exposure to interest
rate fluctuations or in how such exposure is managed in fiscal 2000.
Various financial instruments issued by the Company are sensitive to changes in
interest rates. Market interest rate changes would result in increases or
decreases in the market value of the Company's fixed-rate debt. With respect to
the Company's fixed-rate debt outstanding at April 30, 1999, a 10% change in
interest rates would have resulted in approximately a $13 change in the market
value of Kellwood's fixed-rate debt. With respect to the Company's variable-rate
debt, a 10% change in interest rates would have had an immaterial impact on the
Company's interest expense for fiscal 1999.
Commodity Price Risk. Kellwood is subject to commodity price risk arising from
price fluctuations in the market prices of sourced garments or the various raw
materials that comprise its manufactured products (synthetic fabrics, woolens,
denim, etc.). The Company is subject to commodity price risk to the extent that
any fluctuations in the market prices of its purchased garments and raw
materials are not reflected by adjustments in selling prices of its products or
if such adjustments significantly trail changes in these costs. Kellwood does
not use derivative instruments in the management of these risks.
Inflation Risk. Kellwood's inflation risks are managed by each business unit
through selective price increases when possible, productivity improvements, and
cost-containment measures. Management does not believe that inflation risk is
material to the Company's business or its consolidated financial position,
results of operations or cash flows.
Kellwood Company 35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in millions except per share data)
- --------------------------------------------------------------------------------
OUTLOOK
Management expects Kellwood's sales in the first half of fiscal 2000 to be
relatively flat, with growth picking up in the second half; sales for the year
are expected to be up approximately 5%.
While the demand for the quality products and superior service provided by Smart
Shirts to its customers remains strong, the outlook for fiscal 2000 calls for
flat to slightly lower sales due to quota constraints in Sri Lanka. Smart Shirts
is evaluating acquisition and joint venture opportunities in Singapore and other
countries which have ample quota to enable this segment to return to growth in
fiscal 2001. As retailers are demanding and receiving lower prices, margins for
2000 will be under pressure.
The Company's investments in its Vision 2000 initiative peaked in fiscal 1999
and are expected to decline thereafter. The benefits of the Vision 2000 programs
are expected to continue to further enhance the Company's competitive position
and ability to continue to gain market share and improve profitability in the
future.
Interest expense in fiscal 2000 is expected to be slightly lower due to lower
borrowing needs, partially offset by a higher borrowing cost on the planned $150
ten-year public debt offering and expected changes in market interest rates vs.
fiscal 1999. Though management believes that the rate on the new long-term debt
will be favorable, it is expected to be approximately 2% higher than the Company
would expect to pay for short-term floating rate debt.
The write-off of Goodwill in fiscal 1999 will reduce projected amortization of
intangibles by approximately $9 from the level that would have been experienced
had the impairment not occurred and had the assets continued to be written off
over their remaining scheduled lives. Additionally, the reduction of the
permanent difference related to this write-off in combination with other changes
in the Company's income tax position is expected to reduce the Company's
effective tax rate to approximately 41% for fiscal 2000.
YEAR 2000 ISSUE READINESS
In July 1996 the Company outsourced its Information Systems function to
Electronic Data Systems Corporation (EDS). Together, EDS and Kellwood employees
have completed an assessment and developed plans to make key operational and
financial systems year 2000 compliant and ensure uninterrupted functionality
through the year 2000. The Company is monitoring the progress and currently
believes such plans are 90% implemented. The major components of the plan
include:
. As part of the Vision 2000 initiative, several new information technologies
have been and are being installed to implement a Consistent Office
Environment (COE) and to replace several business and accounting systems with
an Integrated Business System (IBS).
. The COE initiative is a corporate-wide effort to install new PC's and
servers, and desktop software, all of which are year 2000 compliant. This
initiative was fully implemented in fiscal 1999.
. The Company is in the process of remediating the current systems at three
non-compliant locations. Development is complete, and testing of systems
modifications for the systems being remediated is in process. Remediation
projects at all three non-compliant locations are expected to be
substantially completed in July 1999.
. Remediation or replacement of certain "non-IT" systems, including telephone
systems, CAD systems, voice mail and shipping software and equipment is
approximately 90% complete. Testing is currently in process where necessary
and is progressing as planned.
The Company is incurring significant business process reengineering and system
replacement expenses as part of the Vision 2000 initiative as described in the
"Results of Operations" section. Kellwood's cost of remediation and replacement
of non-year 2000 compliant systems is estimated to be $3.1, of which
approximately $2.6 has already been incurred. The Company has utilized cash flow
from operations to fund year 2000 expenditures.
Several of the Company's pre-IBS business and accounting systems that have been
in use for several years are already year 2000 compliant. These compliant legacy
systems are in place at business units which encompass approximately 78% of
fiscal 1999 sales. Testing of year 2000 compliance for these systems has been
substantially completed. Implementation of IBS to replace these systems is not
scheduled until fiscal 2000 or later.
The Company believes its most reasonably likely worst case scenario with respect
to its own systems would involve either:
. discrete modules of the IBS which do not handle year 2000 data properly
because they are not properly written, interfaced or implemented, or
. components or subsystems of our legacy systems which are found to be not fully
or properly remediated.
In either case, the Company would utilize internal systems staff and increase
its utilization of EDS personnel and other qualified consultants from our
software vendors to correct the problems. Until necessary system modifications
could be made, manual procedures would be employed. Such a situation may result
in additional remediation costs to be incurred and/or delays in operating
activities.
Key trading partners such as customers, suppliers, banks, shipping companies and
insurance companies have been contacted to assess year 2000 compliance in key
potentially impacted business relationships. The Company does not have control
over these third parties and, as a result, the Company cannot currently
determine to what extent future operating results may be adversely affected by
the failure of these third parties
36 Kellwood Company
<PAGE>
Management's Discussion and Analysis
(Dollars in millions except per share data)
- --------------------------------------------------------------------------------
to successfully address their year 2000 issues. Electronic transactions with key
trading partners have been identified and year 2000 compliance has been
addressed.
. The Company's ability to process electronic data interchange transactions with
its customers has been tested and certified Year 2000 compliant by the
National Retail Federation.
. Electronic transactions dealing with funds transfers, letters of credit,
payroll, and employee benefits have also been addressed and are currently
either already year 2000 compliant or are in the process of becoming
compliant.
Based on the results of the Year 2000 readiness information received from third
parties, the Company believes that its key trading partners are putting forth
their best efforts to minimize identified exposures. However, the Company has
identified alternative suppliers for significant raw materials should current
key suppliers prove unable to satisfactorily address year 2000 issues and supply
necessary raw materials. The Company believes its contractors' most significant
challenges will relate to transportation and infrastructure of the foreign
countries in which they operate. Alternative contractors will be identified if
current key contractors are unable to satisfactorily address year 2000 issues
and manufacture product. Should customers be unable to satisfactorily address
year 2000 issues, manual procedures would be employed to ensure key functions
such as ordering and invoicing could be continued. The Company believes the most
reasonably likely worst case scenario with respect to key trading partners would
involve the inability of such partners to conduct business requiring manual
processes to be employed and/or alternative partners to be utilized. Such a
situation may result in temporary increases in costs, delays in receiving cash
payments and/or delays in operating activities.
Euro Conversion
The company has no significant sales, manufacturing or sourcing in Europe, and
therefore the Company does not expect to be impacted by the introduction or
adaptation of the Euro in the European Union.
Safe Harbor Regarding Forward-Looking Statements
This Annual Report includes "forward-looking statements" within the meaning of
the Securities Act of 1933, and of the Securities Exchange Act of 1934, which
represent the Company's expectations or beliefs concerning future events.
Although the Company believes that its expectations reflected in the forward-
looking statements are reasonable, it cannot and does not give any assurance
that these expectations will prove to be correct, since phases of the Company's
operations are subject to influences outside its control. Any one of these
factors or any combination of these factors could materially affect the results
of the Company's operations, and cause actual results to differ materially from
the Company's expectations. These factors include but are not limited to
national and regional economic conditions, inflation or deflation, the overall
level of consumer spending, the level of consumer debt, currency exchange
fluctuations, other capital market conditions, competitive pressures, the
performance of the Company's products within the prevailing retail environment,
customer acceptance of both new designs and newly introduced product lines, the
timing and magnitude of spending on and savings realized from our Vision 2000
initiative, stable governments and business conditions in the nations where the
Company's products are manufactured, and financial difficulties encountered by
customers. The words "believe", "expect", "will", "estimate", "project",
"forecast", "should", "anticipate" and similar expressions may identify forward-
looking statements. Additionally, all statements other than statements of
historical facts included in the Annual Report, including without limitation,
the statements under "Management's Discussion and Analysis," are also forward
looking statements. All forward-looking statements contained herein and all
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf, are expressly qualified in their
entirety by this cautionary statement.
Kellwood Company 37
<PAGE>
EXHIBIT 21
PARENTS AND SUBSIDIARIES
The Company and its subsidiaries* as of July 2, 1999 are as follows:
<TABLE>
<CAPTION>
State (Country) of Percentage of Voting Securities
Name of Company Incorporation Owned
- ------------------ -------------------- ----------
<S> <C> <C>
Kellwood Company.............................. Delaware Parent
American Recreation Products, Inc............. Delaware 100%
Kellwood Asia Limited......................... Hong Kong 100%
Smart Shirts Limited.......................... Hong Kong 100%
South Asia Garment Limited.................... Hong Kong 100%
KWD Holdings, Inc............................. Delaware 100%
Robert Scott & David Brooks Outlet Stores,
Inc.......................................... Delaware 100%
Tri-W Corporation............................. North Carolina 100%
Halmode Apparel, Inc.......................... Delaware 100%
Fritzi California, Inc........................ Delaware 100%
Koret, Inc.................................... Delaware 100%
</TABLE>
- --------
* Some of the above subsidiaries also have subsidiaries which are not listed
because, in the aggregate, they are not considered to be significant.
14
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, directors of Kellwood Company (the "Company"), do hereby
constitute and appoint Thomas H. Pollihan or Donald J. Gramke his/her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, to sign the
Company's Form 10-K Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 as Amended for the fiscal year ended April 30, 1999, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorney-in-fact full power and authority to sign such document on behalf of the
undersigned and to make such filing, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that the attorney-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: May 27, 1999
/s/ J C Jacobsen
- -------------------------------- -----------------------------
Raymond F. Bentele James C. Jacobsen
- -------------------------------- -----------------------------
Edward S. Bottum James S. Marcus
/s/ Kitty G. Dickerson /s/ William J. McKenna
- -------------------------------- -----------------------------
Kitty G. Dickerson William J. McKenna
/s/ Hal J. Upbin
- --------------------------------- -----------------------------
Leonard A. Genovese Hal J. Upbin
/s/ Fred W. Wenzel
- --------------------------------- ------------------------------
Jerry M. Hunter Fred W. Wenzel
<PAGE>
POWER OF ATTORNEY
The undersigned, director of Kellwood Company (the "Company"), do hereby
constitute and appoint Thomas H. Pollihan or Donald J. Gramke his/her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, to sign the
Company's Form 10-K Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 as Amended for the fiscal year ended April 30, 1999, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorney-in-fact full power and authority to sign such document on behalf of the
undersigned and to make such filing, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that the attorney-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: 5/28 , 1999
---------
/s/ Leonard A. Genovese
----------------------------------
LEONARD A. GENOVESE
<PAGE>
POWER OF ATTORNEY
The undersigned, director of Kellwood Company (the "Company"), do hereby
constitute and appoint Thomas H. Pollihan or Donald J. Gramke his/her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, to sign the
Company's Form 10-K Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 as Amended for the fiscal year ended April 30, 1999, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorney-in-fact full power and authority to sign such document on behalf of the
undersigned and to make such filing, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that the attorney-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: 5/28/ , 1999
-------
/s/ Raymond F. Bentele
---------------------------
RAYMOND F. BENTELE
<PAGE>
POWER OF ATTORNEY
The undersigned, director of Kellwood Company (the "Company"), do hereby
constitute and appoint Thomas H. Pollihan or Donald J. Gramke his/her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, to sign the
Company's Form 10-K Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 as Amended for the fiscal year ended April 30, 1999, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorney-in-fact full power and authority to sign such document on behalf of the
undersigned and to make such filing, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that the attorney-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: 6-1-99
-------
/s/ Edward S. Bottum
-------------------------------
EDWARD S. BOTTUM
<PAGE>
POWER OF ATTORNEY
The undersigned, director of Kellwood Company (the "Company"), do hereby
constitute and appoint Thomas H. Pollihan or Donald J. Gramke his/her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, to sign the
Company's Form 10-K Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 as Amended for the fiscal year ended April 30, 1999, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorney-in-fact full power and authority to sign such document on behalf of the
undersigned and to make such filing, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that the attorney-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: May 30, 1999
------
/s/ Jerry M. Hunter
------------------------------
JERRY M. HUNTER
<PAGE>
POWER OF ATTORNEY
The undersigned, director of Kellwood Company (the "Company"), do hereby
constitute and appoint Thomas H. Pollihan or Donald J. Gramke his/her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, to sign the
Company's Form 10-K Annual Report pursuant to Section 13 of the Securities
Exchange Act of 1934 as Amended for the fiscal year ended April 30, 1999, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorney-in-fact full power and authority to sign such document on behalf of the
undersigned and to make such filing, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that the attorney-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: June 2, 1999
------------
/s/ James S. Marcus
---------------------------
JAMES S. MARCUS
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KELLWOOD
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCED SHEET AT APRIL 30,
1999, AND FROM THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE TWELVE MONTHS ENDED APRIL 30, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1999
<CASH> 25,482
<SECURITIES> 0
<RECEIVABLES> 403,909
<ALLOWANCES> 11,281
<INVENTORY> 340,778
<CURRENT-ASSETS> 797,280
<PP&E> 252,286
<DEPRECIATION> 149,988
<TOTAL-ASSETS> 1,054,212
<CURRENT-LIABILITIES> 331,745
<BONDS> 227,659
0
0
<COMMON> 163,097
<OTHER-SE> 283,091
<TOTAL-LIABILITY-AND-EQUITY> 1,054,212
<SALES> 2,151,147
<TOTAL-REVENUES> 2,151,147
<CGS> 1,685,281
<TOTAL-COSTS> 1,685,281
<OTHER-EXPENSES> 392,830
<LOSS-PROVISION> 3,868
<INTEREST-EXPENSE> 33,883
<INCOME-PRETAX> 39,153
<INCOME-TAX> 37,200
<INCOME-CONTINUING> 1,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,953
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.07
</TABLE>
