<PAGE>
Filed Pursuant To Rule 424(b)(2)
Registration No. 333-36559
Prospectus Supplement dated July 21, 1999
(To Prospectus dated October 14, 1997)
$150,000,000
LOGO FOR KELLWOOD COMPANY
7 7/8% Senior Notes Due 2009
------------------
We will receive $148,152,000 of the proceeds from the sale of the notes, after
paying the underwriting discounts and commissions of $975,000 and before
expenses estimated at $200,000. The following is a summary of the terms of the
notes. For more detail, see "Description of the Notes" in this prospectus
supplement and "Description of Debt Securities" in the accompanying
prospectus.
. Interest . Security and Ranking
Cash interest on the notes will be The notes will not be secured by
payable semiannually on January 15 any collateral.
and July 15 of each year beginning The notes will rank equally with
January 15, 2000. all of our existing and future
unsecured senior debt and will rank
. Maturity senior to all of our existing and
The notes will mature on July 15, future subordinated debt.
2009.
. Guarantees
. Redemption; Sinking Fund The notes will not be guaranteed by
We may redeem the notes at any any of our subsidiaries.
time. The notes will not be subject
to any sinking fund.
------------------
Each note will be represented by one or more global securities registered in
the name of a nominee of The Depository Trust Company ("DTC"). Except under
the limited circumstances described in this prospectus supplement under
"Description of the Notes--Global Notes, Delivery and Form," owners of
beneficial interests in the notes will not be entitled to physical delivery of
individual certificates for their notes in definitive form.
The notes will trade in DTC's Same-Day Funds Settlement System until maturity
or until the issuance of notes in definitive form, and secondary market
trading activity in the notes will therefore settle in immediately available
funds.
<TABLE>
<CAPTION>
Underwriting
Discounts and Proceeds to
Price to Public Commissions Kellwood
--------------- ------------- ------------
<S> <C> <C> <C>
Per note............................. 99.418% 0.650% 98.768%
Total................................ $149,127,000 $975,000 $148,152,000
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved these securities, or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the notes to purchasers through the
facilities of DTC on July 26, 1999.
------------------
Bear, Stearns & Co. Inc.
Banc of America Securities LLC
Banc One Capital Markets, Inc.
Chase Securities Inc.
Lazard Freres & Co. LLC
<PAGE>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement includes "forward-looking statements" within the
meaning of the Securities Act of 1933 and of the Securities Exchange Act of
1934. These forward-looking statements represent our expectations or beliefs
concerning future events. Although we believe that our expectations reflected
in the forward-looking statements are reasonable, we cannot and do not give any
assurance that these expectations will prove to be correct. Factors that could
materially affect our results of operations and cause actual results to differ
materially from our expectations, 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 our
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 cost savings initiatives, stable
governments and business conditions in the nations where our 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.
All forward-looking statements contained herein and all subsequent written and
oral forward-looking statements attributable to us or persons acting on our
behalf, are expressly qualified in their entirety by this cautionary statement.
------------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the accompanying
prospectus is accurate as of the date hereof only. Our business, financial
condition, results of operations and prospects may have changed since that
date.
S-2
<PAGE>
KELLWOOD COMPANY
Kellwood Company is a leading diversified designer, manufacturer and
marketer of a broad range of apparel with sales of over $2.1 billion in fiscal
1999. We are one of the largest providers of popular-to-moderate women's
sportswear in the U.S. and a leading manufacturer of woven shirts. We also
design, manufacture and market other apparel products including outerwear,
lingerie, better-to-bridge women's sportswear and camping soft goods. We sell
our products to retailers in all channels of distribution including national
retail chains, department stores, specialty stores, mass merchants, mail order
houses, electronic retailers, sporting goods stores and other retailers. As a
result of our diversified customer base, we market our products at multiple
price points. In order to maintain our cost competitiveness, we source our
products from a worldwide network of quality manufacturers as well as through
our own plants. Our sourcing capabilities provide us with the ability to meet
the ever-changing needs of our customers on a timely basis.
Business Segments
We operate five strategic business segments:
. Popular-to-Moderate Women's Sportswear. This segment designs, contracts
for the manufacture of and markets a broad range of popular to moderately
priced apparel to department stores, national retail chains and mass
merchants under nationally recognized brand names including Sag
Harbor(R), Kathie Lee(R), Koret(R), My Michelle(R), Cricket Lane(R),
Studio Ease(R) and Plaza South(TM). The popular-to-moderate women's
sportswear segment accounted for 64% of our total sales in fiscal 1999.
. Better-to-Bridge Women's Sportswear. This segment designs, contracts for
the manufacture of and markets a broad range of apparel at higher price
points primarily to small specialty stores, department stores and
specialty store chains. Brand names include David Dart(R), Bill Burns(R),
Northern Isles(R), Robert Scott(R) and David Brooks(R). The better-to-
bridge women's sportswear segment accounted for 8% of our total sales in
fiscal 1999.
. Private Label Apparel. This segment develops, manufactures, contracts for
the manufacture of and markets a broad range of men's, women's and
children's apparel at various price points for all channels of
distribution. Our customers include Sears, LL Bean, Wal-Mart, Dayton
Hudson and JC Penney. The private label apparel segment accounted for 12%
of our total sales in fiscal 1999.
. Smart Shirts. This segment develops and manufactures private label men's
and women's woven and knit shirts. Our customers include Polo Ralph
Lauren, Lands' End, JC Penney, Dillard's and Sears. The Smart Shirts
segment accounted for 9% of our total sales in fiscal 1999.
. Recreation Products. This segment designs, manufactures, contracts for
the manufacture of and markets outdoor products including tents, sleeping
bags and backpacks. Our major brands include Wenzel(R), Kelty(R),
Slumberjack(R) and Sierra Designs(R). Each brand is positioned to target
a specific distribution channel. The recreation products segment
accounted for 7% of our total sales in fiscal 1999.
Strategy
Our business strategy is to develop and operate a portfolio of integrated
businesses with products, channels of distribution and sourcing capabilities
that provide us with the appropriate balance, flexibility and diversity
necessary to service the ever-changing needs of the retailer and the consumer.
There are a number of favorable industry trends that have recently benefited us
as a result of our size and market position and allowed us to grow faster than
the apparel industry as a whole. These trends include the consolidation of
retailers' vendor structures and the growth of the popular-to-moderate segment
of the women's apparel industry. We will continue to capitalize on these trends
and to leverage our infrastructure to enhance our profit margins and increase
cash flow. Key elements of our strategy are:
Maintain Strong Relationships with Our Customers. We have invested
significant capital in our systems and distribution operations in order to meet
the needs of our customers. As our customers have consolidated
S-3
<PAGE>
their vendor structures into a smaller number of suppliers who are able to
serve their changing needs, we have maintained our position as a leading vendor
by consistently delivering high quality fashion merchandise with a strong
price/value relationship. In addition, we supplement our ongoing customer
service with replenishment programs that provide us with a competitive
advantage when retailers are selecting their primary vendors. Most of our
competitors are smaller and less well-capitalized and are unable to invest in
the infrastructure needed to service large retailers in a similar manner. As a
result, we expect to continue to gain market share from our competitors.
Continue Leveraging Our Infrastructure. Over the past three fiscal years, we
have invested $78 million to streamline our operations and leverage our
infrastructure to enhance margins and increase cash flow. Primarily as a result
of these initiatives, EBITDA margins have increased from 6.6% in fiscal 1996 to
7.8% in fiscal 1999. While the largest part of the capital spending relating to
these projects has already occurred, we believe that many of the benefits of
these recent investments have yet to be realized. For example, we are
consolidating our contractor base as well as other suppliers from whom we
source raw materials to gain the benefits of economies of scale in purchasing.
In addition, we have consolidated twelve distribution centers into three new,
more efficient distribution centers, all of which opened in fiscal 1999. We are
also in the process of installing one common integrated business operating
system across the entire company and combining many back office functions such
as payroll, accounts payable, credit and accounts receivable utilized by many
of the operating units into company-wide shared functions to eliminate
duplication.
Continue to Diversify Our Product Offerings. We intend to continue to offer
a broad range of products at various price points. We will continue to seek
opportunities to penetrate new markets and to diversify our customer base. As
part of this strategy, we recently acquired Fritzi California which introduced
us into the junior, young women's and young girls' markets. We had not
participated in this market prior to the acquisition and we intend to fully
capitalize on the brand awareness of the Fritzi brands. In addition, we
acquired Koret, Inc. to increase our presence in the upper-to-moderate women's
coordinated sportswear and accessory markets. Each of these acquisitions was
paid for using our common stock. These acquisitions represent key elements of
our strategy to better service our customers as well as increase revenue and
profitability. We intend to continue to pursue an active acquisition strategy
in order to enhance our product offerings in existing markets as well as to
enter new markets.
We are headquartered in St. Louis, Missouri and employ approximately 19,200
people in fourteen states and seven foreign countries. We have been publicly
owned since 1961 and our common stock trades on The New York Stock Exchange
under the symbol "KWD."
S-4
<PAGE>
THE OFFERING
For a more complete description of the notes specified in the following
summary, please see "Description of the Notes" in this prospectus supplement
and "Description of Debt Securities" in the accompanying prospectus.
Securities offered............. $150,000,000 aggregate principal amount of 7
7/8% senior notes due 2009.
Maturity....................... July 15, 2009.
Interest payment dates......... Semi-annually on January 15 and July 15 of
each year, commencing January 15, 2000.
Ranking........................ The notes:
. will be our direct, senior unsecured
obligations;
. will rank equally with each other and with
all of our other unsecured and
unsubordinated indebtedness; and
. will be effectively subordinated to our
mortgages and our other secured
indebtedness and to indebtedness and other
liabilities of our subsidiaries.
Use of proceeds................ We intend to use the net proceeds (before
estimated expenses) of approximately
$148,152,000 from the sale of the notes to
reduce short-term bank borrowings and for
general corporate purposes.
Optional redemption............ We may redeem some or all of the notes at any
time at the redemption price set forth in the
section of this prospectus supplement
entitled "Description of the Notes--Optional
Redemption."
General indenture provisions... We will issue the notes under an indenture
with The Chase Manhattan Bank, as Trustee.
The indenture, among other things, restricts
our ability and the ability of our
subsidiaries to:
. use assets as security in other
transactions; and
. engage in sale and leaseback transactions.
S-5
<PAGE>
USE OF PROCEEDS
The net proceeds to be received from the sale of the notes will be used in
part to repay short-term bank borrowings on the date the proceeds are received.
At April 30, 1999, the borrowings were approximately $94.0 million at interest
rates ranging from 5.15% to 5.50%. The remaining net proceeds will be used to
fund seasonal working capital requirements.
DIVIDENDS
Dividends on our common stock are payable at the discretion of our Board of
Directors. We have continuously paid dividends on our common stock since 1961.
Our ability to pay dividends in the future will depend upon our operating
results, liquidity, financial condition and other factors considered relevant
by the Board of Directors. Restrictive covenants of certain notes due insurance
companies include a limitation on the payment of dividends and the repurchase
of common stock. In November 1998, our Board of Directors rescinded the share
repurchase plan which had been adopted in September 1996. Under the most
restrictive covenants, future dividends and purchases of common stock are
limited to approximately $54.0 million plus proceeds received on the sale of
common stock and 45% of net earnings after April 30, 1999, excluding gains and
losses on the disposal of capital assets. We do not intend to raise our
quarterly dividend in the foreseeable future.
S-6
<PAGE>
CAPITALIZATION
The following table sets forth our cash and consolidated capitalization as
of April 30, 1999 and as adjusted to give effect to the issuance of the notes
offered hereby and the application of the net proceeds to repay indebtedness as
described in "Use of Proceeds". Excess proceeds are expected to be temporary in
nature as April 30 is typically near the seasonal trough in borrowings.
<TABLE>
<CAPTION>
April 30, 1999
--------------------
As
Actual Adjusted
--------- ---------
(Dollars in
thousands)
<S> <C> <C>
Cash and cash equivalents................................. $ 25,482 $ 79,671
========= =========
Short-term debt:
Notes payable........................................... $ 93,963 $ --
Credit facility......................................... -- --
Current portion of long-term debt....................... 16,504 16,504
--------- ---------
Total short-term debt................................. $ 110,467 $ 16,504
--------- ---------
Long-term debt:
7.625% senior debentures................................ $ 148,455 $ 148,455
Notes due insurance companies........................... 76,741 76,741
Capital lease obligations............................... 1,988 1,988
Notes due 2000 and 2002................................. 475 475
7 7/8% senior notes offered hereby...................... -- 150,000
--------- ---------
Total long-term debt.................................. $ 227,659 $ 377,659
--------- ---------
Shareowners' equity:
Common stock par value $.01 per share................... $ 163,097 $ 163,097
Retained earnings....................................... 333,340 333,340
Accumulated other comprehensive income.................. (9,330) (9,330)
--------- ---------
487,107 487,107
Less treasury stock at cost............................... (40,919) (40,919)
--------- ---------
Total shareowners' equity............................. $ 446,188 $ 446,188
--------- ---------
Total capitalization.................................. $ 784,314 $ 840,351
========= =========
</TABLE>
S-7
<PAGE>
SELECTED FINANCIAL DATA
The selected consolidated financial data presented below as of and for each
of the five fiscal years ended April 30, 1999 are derived from our consolidated
financial statements, audited by PricewaterhouseCoopers LLP, independent
accountants. This selected financial data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained herein and with our consolidated financial statements and
notes thereto in our Annual Report on Form 10-K for the fiscal year ended April
30, 1999 which are incorporated herein by reference and other financial
information which is included or incorporated by reference in this prospectus
supplement and the accompanying prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended April 30,
------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net sales............... $2,151,147 $2,094,389 $1,787,530 $1,741,799 $1,621,029
Costs and expenses:
Cost of goods sold.... 1,685,281 1,655,370 1,415,105 1,380,161 1,298,084
Selling, general &
administrative....... 315,139 300,601 268,808 263,686 236,616
Amortization of
intangible assets.... 15,855 16,562 16,601 16,581 15,691
Special charges....... 62,338(1) -- -- -- 13,896(2)
Interest expense...... 33,883 35,142 26,823 29,269 26,898
Interest income and
other, net........... (502) (920) (1,532) (1,299) (2,529)
---------- ---------- ---------- ---------- ----------
Earnings before income
taxes.................. 39,153 87,634 61,725 53,401 32,373
Income taxes.......... 37,200 37,500 27,167 21,544 19,043
---------- ---------- ---------- ---------- ----------
Net earnings............ $ 1,953 $ 50,134 $ 34,558 $ 31,857 $ 13,330
========== ========== ========== ========== ==========
Diluted earnings per
share.................. $ 0.07 $ 1.85 $ 1.29 $ 1.20 $ 0.51
Diluted weighted average
shares................. 27,605 27,115 26,717 26,556 26,195
Selected Balance Sheet
Data
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
Total debt.............. 338,126 413,697 303,096 302,168 326,693
Shareowners' equity..... 446,188 429,660 386,257 366,722 346,118
Other Financial Data
Cash flow from operating
activities............. $ 131,468 $ (67,907) $ 34,009 $ 56,071 $ (34,365)
Cash flow from investing
activities............. (48,697) (28,033) (23,108) (14,990) (65,210)
Cash flow from financing
activities............. (87,000) 104,512 (14,566) (35,610) 100,883
Capital expenditures.... 51,472 21,640 13,513 18,379 15,954
Depreciation and
amortization........... 33,358 33,727 32,300 31,880 30,693
EBITDA(3)............... 168,732 156,503 120,848 114,550 103,860
Ratio of earnings to
fixed charges(4)....... 1.92x 3.04x 2.83x 2.48x 1.98x
EBITDA/interest expense. 4.98x 4.45x 4.51x 3.91x 3.86x
Cash dividends declared
per share.............. $ 0.64 $ 0.64 $ 0.60 $ 0.60 $ 0.60
</TABLE>
All data have been adjusted to reflect the 1999 merger with Koret, Inc.
which was accounted for as a pooling of interests.
- ----------
(1) Special charges in 1999 include a provision for goodwill impairment of
$48.9 million, a provision for facilities shut-down of $6.8 million, and
costs of the Koret merger of $6.6 million.
(2) Special charges in 1995 include a provision for facilities shut-down.
(3) EBITDA represents income from continuing operations before interest
expense, income tax expense, depreciation and amortization, and $62.3
million in special charges in 1999 and $13.9 million in 1995 discussed
above. We have included information concerning EBITDA because we believe it
is used by
S-8
<PAGE>
certain investors as one measure of a company's historical ability to fund
operations and meet its financial obligations. EBITDA is not intended to
represent cash flow from operations as defined by generally accepted
accounting principles. It should not be used as an alternative to operating
income or income from continuing operations as an indicator of our
operating performance or as an alternative to cash flows as a measure of
our liquidity. In addition, our definition of EBITDA may not be comparable
to other similarly titled measures reported by other companies.
(4) Ratio of earnings to fixed charges is determined by dividing the net
earnings before interest expense, income taxes, amortization of debt issue
costs and a portion of rent expense representative of the interest
component by the sum of interest expense, amortization of debt issue costs
and the portion of rent expense representative of the interest component.
In net earnings for fiscal 1999 and 1995 are special charges discussed in
notes 1 and 2 above. If these special charges had not occurred, the ratio
of earnings to fixed charges would have been 3.40 in 1999 and 2.41 in
1995.
S-9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in millions except per share data)
The following discussion is a summary of the key factors our management
considers necessary in reviewing our 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 $1.85 in
fiscal 1998. Reported results for all years were restated to include the sales
and earnings of Koret, Inc., which was merged into the company in April 1999 in
a transaction accounted for as a pooling of interests.
Net Sales, Operating Earnings, and Earnings before Unusual Items
Summarized comparative financial data for fiscal 1999, 1998 and 1997, with
historical results for all periods revised to include Koret, are as follows ($
in millions; percentages are calculated based on actual data, but columns may
not add due to rounding):
<TABLE>
<CAPTION>
% 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%
Selling, general & administrative... 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* 88 62
Income taxes........................ 37 38 27
------ ------ ------
Net earnings........................ $ 2* $ 50 $ 35
====== ====== ======
Income tax rate..................... 95% 43% 44%
------ ------ ------
</TABLE>
- ----------
*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%
Selling, general & administrative.................... 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>
S-10
<PAGE>
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.
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).
S-11
<PAGE>
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>
% change
--------------
Net sales 1999 1998 1997 98-99 97-98
--------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
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%
====== ====== ====== ====== ======
<CAPTION>
% change
--------------
Operating earnings 1999 1998 1997 98-99 97-98
------------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
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 1998 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 1999 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 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 1999 due to weak
demand for private label outerwear and basic denim jeans after being up 10% in
1998 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 1999 and 13% in 1998 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.
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Recreation Products sales were up 4% in 1999 and 11% in 1998 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 we completed a merger with Koret,
Inc., 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.
Restructuring and Provision for Goodwill Impairment. As part of our Vision
2000 program, we 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, we closed a number of our domestic manufacturing
facilities as their work was transferred to our facilities in Mexico, the
Caribbean and Central America and our 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 our 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 we 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, we 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 we 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 our primary source of liquidity. We use
financial leverage to minimize the overall cost of capital and maintain
adequate operating and financial flexibility. Our management monitors leverage
through its debt-to-capital ratio. Working capital management is monitored
primarily by analysis of our investment in accounts receivable and inventories.
Leverage. Our 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,
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. Operating earnings were up significantly, as planned, from fiscal 1998,
. The purchase of Koret and Fritzi using 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, our debt-to-capital declined to 32%
at April 30, 1999 compared to 33% at the prior year-end.
Working Capital. Our 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 our debt
capacity replacing the factor borrowing previously used by Koret. The other
major factor in the change is growth in the volume of business we do 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 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, we purchased substantially all of the
non-real estate assets of Fritzi. The purchase price included 0.84 million
shares of our 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
our anticipated capital requirements, with the timing, principal amount and
terms depending on the prevailing securities markets generally and the market
for our debt in particular.
In the second quarter of fiscal 1998, we 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.
We maintain 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.
We maintain 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 we
plan to put in place a new three-year $350 committed bank credit facility to
ensure the liquidity necessary to support planned
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internal growth as well as to provide the capacity for additional acquisitions.
Our management believes that our combined operating, cash and equity position
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 our cash cost 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, we 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. We do 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 we do 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, our debt portfolio was composed of
approximately 28% variable-rate debt (adjusted for the impact of variable rate
assets) and 72% fixed-rate debt. Our strategy regarding management of our
exposure to interest rate fluctuations did not change significantly during
fiscal 1999. 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 our fixed-rate debt. With respect to our
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 our
fixed-rate debt. With respect to our variable-rate debt, a 10% change in
interest rates would have had an immaterial impact on our interest expense for
fiscal 1999.
Commodity Price Risk. We are 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.). We are 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. We do not use
derivative instruments in the management of these risks.
Inflation Risk. Our inflation risks are managed by each business unit
through selective price increases when possible, productivity improvements, and
cost-containment measures. Our management does not believe that inflation risk
is material to our business or its consolidated financial position, results of
operations or cash flows.
Outlook
Our management expects the company'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
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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.
Our 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 our 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 of this
offering and expected changes in market interest rates vs. fiscal 1999. Though
our management believes that the rate on the new long-term debt will be
favorable, it is expected to be approximately 2% higher than we 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 our income tax position is expected to reduce the our effective tax
rate to approximately 41% for fiscal 2000.
Year 2000 Issue Readiness
In July 1996 we outsourced our 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. We are monitoring the progress and currently believe
such plans are 90% implemented.
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.
We are 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.
We are incurring significant business process reengineering and system
replacement expenses as part of the Vision 2000 initiative as described in the
"Results of Operations" section. Our 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. We have utilized cash flow from operations to
fund Year 2000 expenditures.
Several of our 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.
We believe our most reasonably likely worst case scenario with respect to
our 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
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. components or subsystems of our legacy systems which are found to be not
fully or properly remediated.
In either case, we would utilize internal systems staff and increase our
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. We do not have control over
these third parties and, as a result, we cannot currently determine to what
extent future operating results may be adversely affected by the failure of
these third parties to successfully address their Year 2000 issues. Electronic
transactions with key trading partners have been identified and Year 2000
compliance has been addressed.
Our 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, we believe that our key trading partners are putting forth their
best efforts to minimize identified exposures. However, we have identified
alternative suppliers for significant raw materials should current key
suppliers prove unable to satisfactorily address Year 2000 issues and supply
necessary raw materials. We believe our 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. We believe 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
We have no significant sales, manufacturing or sourcing in Europe, and
therefore we do not expect to be impacted by the introduction or adaptation of
the Euro in the European Union.
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<PAGE>
BUSINESS
History
We are a diversified portfolio of apparel businesses which have been merged
or acquired principally over the past 14 years. During this period, we operated
each of these businesses as independent divisions. However, over the past three
years, we have undertaken an initiative to integrate and leverage the operating
functions (sourcing, purchasing, warehousing and distribution, and
administrative services) of these businesses in order to realize economies of
scale and position ourselves to better serve the needs of our customers and
ultimately, the consumer. As a result of this initiative, we have consolidated
several of our facilities, leveraged our combined purchasing power, moved the
majority of our sourcing and manufacturing offshore and implemented other cost
savings measures. As we grow, we believe that this will enhance our operating
margins and provide added value as we integrate future acquisitions.
Strategy
Our business strategy is to develop and operate a portfolio of integrated
businesses with products, channels of distribution and sourcing capabilities
that provide us with the appropriate balance, flexibility and diversity
necessary to service the ever-changing needs of the retailer and the consumer.
There are a number of favorable industry trends that have recently benefited us
as a result of our size and market position and allowed us to grow faster than
the apparel industry as a whole. These trends include the consolidation of
retailers' vendor structures and the growth of the popular-to-moderate segment
of the women's apparel industry. We will continue to capitalize on these trends
and to leverage our infrastructure to enhance our profit margins and increase
cash flow. Key elements of our strategy are:
Maintain Strong Relationships with Our Customers. We have invested
significant capital in our systems and distribution operations in order to meet
the needs of our customers. As our customers have consolidated their vendor
structures into a smaller number of suppliers who are able to serve their
changing needs, we have maintained our position as a leading vendor by
consistently delivering high quality fashion merchandise with a strong
price/value relationship. In addition, we supplement our ongoing customer
service with replenishment programs that provide us with a competitive
advantage when retailers are selecting their primary vendors. Most of our
competitors are smaller and less well-capitalized and are unable to invest in
the infrastructure needed to service large retailers in a similar manner. As a
result, we expect to continue to gain market share from our competitors.
Continue Leveraging Our Infrastructure. Over the past three fiscal years, we
have invested $78 million to streamline our operations and leverage our
infrastructure to enhance margins and increase cash flow. Primarily as a result
of these initiatives, EBITDA margins have increased from 6.6% in fiscal 1996 to
7.8% in fiscal 1999. While the largest part of the capital spending relating to
these projects has already occurred, we believe that many of the benefits of
these recent investments have yet to be realized. For example, we are
consolidating our contractor base as well as other suppliers from whom we
source raw materials to gain the benefits of economies of scale in purchasing.
In addition, we have consolidated twelve distribution centers into three new,
more efficient distribution centers, all of which opened in fiscal 1999. We are
also in the process of installing one common integrated business operating
system across the entire company and combining many back office functions such
as payroll, accounts payable, credit and accounts receivable utilized by many
of the operating units into company-wide shared functions to eliminate
duplication.
Continue to Diversify Our Product Offerings. We intend to continue to offer
a broad range of products at various price points. We will continue to seek
opportunities to penetrate new markets and to diversify our customer base. As
part of this strategy, we recently acquired Fritzi California which introduced
us into the junior, young women's and young girls' markets. We had not
participated in this market prior to the acquisition and we intend to fully
capitalize on the brand awareness of the Fritzi brands. In addition, we
acquired Koret, Inc. to increase our presence in the upper-to-moderate women's
coordinated sportswear and accessory markets.
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Each of these acquisitions was paid for using our common stock. These
acquisitions represent key elements of our strategy to better service our
customers as well as increase revenue and profitability. We intend to continue
to pursue an active acquisition strategy in order to enhance our product
offerings in existing markets as well as to enter new markets.
Popular-to-Moderate Women's Sportswear
We design, contract for the manufacture of and market a broad range of
products to the $49 billion popular-to-moderate women's sportswear market under
a variety of labels including Sag Harbor(R), Kathie Lee(R), Koret(R), My
Michelle(R), Cricket Lane(R), Studio Ease(R) and Plaza South(TM). In addition,
as a result of the Koret acquisition, we also offer a line of accessories under
the licensed brand names Polo by Ralph Lauren(R), Chaps Ralph Lauren(R) and
Lauren Ralph Lauren(R). We have grown our popular-to-moderate sales at a
compounded annual growth rate of 14% (18% including acquisitions) from fiscal
1990 to fiscal 1999 versus the overall popular-to-moderate market's compounded
annual growth rate of 5%. We market our products through multiple distribution
channels and offer our products at varying price points as follows:
. National retail chains (including Sears, JC Penney, Wards, Kohls and
Mervyns) principally at the mid-price point;
. Department stores (including Federated, May Company, Dayton Hudson and
Dillard's), principally at the opening price point;
. Specialty stores (including The Limited, Goody's, Brooks Brothers, Jos.
A. Banks and American Retail Group) principally at the mid-price point;
and
. Mass merchants (including Wal-Mart, Kmart and Target) principally at the
mid-to-upper price points.
In fiscal 1999, the popular-to-moderate women's sportswear segment of our
business represented approximately 64% of total company sales.
The apparel market at retail in 1998 was $186 billion, compared to $177
billion in 1997, an increase of 4.8%. Women's apparel is the largest segment of
the market with sales at retail of $93 billion of which popular-to-moderate
priced women's sportswear accounted for $49 billion in 1998 or over 50% of all
women's apparel. Popular-to-moderate sportswear includes blazers, dresses,
sweaters, blouses, vests, other tops, skirts, pants, skorts and other bottoms
generally retailing below $50.
Our major brand names within the popular-to-moderate segment and their
related products and distribution channels are as follows:
<TABLE>
<CAPTION>
Brand Names Products Distribution Channel
----------- -------- --------------------
<S> <C> <C>
Sag Career and casual related Department stores, national
Harbor(R) separates with skirts, retail chains, specialty stores
blazers, pants, skorts, and catalogs.
blouses, sweaters, shirts,
dresses and tee tops creating
a total wardrobe concept
in all size ranges.
Koret(R), Coordinated sportswear Department stores and
Napa in the upper end of specialty stores.
Studio(TM), moderate.
and Jax(R)
Polo by Accessories, including Department stores
Ralph small leather goods, and specialty stores.
Lauren(R), marketed under license.
Chaps Ralph
Lauren(R)
and Lauren
Ralph
Lauren(R)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Brand Names Products Distribution Channel
----------- -------- --------------------
<S> <C> <C>
Kathie Dresses and sportswear Department stores, national
Lee(R), for misses, juniors, plus retail chains, mass merchants,
M.H.M.(R), and petite sizes at specialty stores, mail order
Plaza popular-to-better price and non-retail.
South(TM), points.
Vintage
Blue(TM)
and Studio
Ease(R)
My Junior (12 yrs.-29 yrs.) Specialty stores, department
Michelle(R) and young girls (6 yrs. - stores, and national retail chains.
11 yrs.) moderately
priced dresses and
sportswear.
</TABLE>
Items sold under the Kathie Lee(R) trademark are manufactured under license
from Lambchop Productions Ltd., the owner of that trademark.
Better-to-Bridge Women's Sportswear
We design, contract for the manufacture of and market a broad range of
better-to-bridge women's sportswear under a variety of labels. We market our
products primarily through approximately 5,000 small specialty stores,
department stores and specialty store chains at higher price points. In fiscal
1999, the better-to-bridge women's sportswear segment of our business
represented approximately 8% of total company sales.
The better-to-bridge market accounted for $9 billion, or 10% of all women's
apparel in 1998. Better-to-bridge sportswear includes products similar to the
popular-to-moderate products but generally retail between $60 and $250. The
better-to-bridge market is extremely competitive and is dominated by national
brands such as Jones New York, Liz Claiborne, Donna Karan and St. John Knits.
Our major brand names within the better-to-bridge segment, and their related
products and distribution channels are as follows:
<TABLE>
<CAPTION>
Brand Names Products Distribution Channel
----------- -------- --------------------
<S> <C> <C>
David Dart(R), and Bridge casual, career Upscale department
Bill Burns(R) sportswear and dresses and specialty stores
for misses, plus and and David Dart Emporiums.
petite sizes
Melrose(R), Better-priced casual and Better specialty stores,
David Brooks(R), career sportswear for mail order and better
Robert Scott(R) and women's and misses. department stores.
Northern Isles(R)
</TABLE>
Items manufactured under the Bill Burns(R) trademark are manufactured under
license from Bill Burns New York, Inc., the owner of that trademark.
Private Label Apparel
We develop, manufacture, contract for the manufacture of and market high
quality, private label intimate apparel, loungewear, outerwear, activewear,
pants, jeans, workwear and sweaters. We market our products principally through
national retail chains, mass merchants, catalog retailers and wholesale clubs.
Our customers include Sears, L.L. Bean, Wal-Mart, Dayton Hudson and JC Penney.
We distinguish ourselves from traditional private label manufacturers by
offering apparel retailers complete merchandise management programs such as
consumer, product and market analysis, design of individual styles and
differentiated merchandise assortments, inventory planning and sales
forecasting by SKU, retail pricing strategy, quick response electronic order
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execution and automatic replenishment by SKU of store level inventories. Our
private label business has evolved over the past few years into a product
development business strategically positioned to assist retailers in
differentiating their merchandising mix.
Smart Shirts
We are a leading manufacturer of woven dress and sport shirts and, to a
lesser degree, a manufacturer of ladies blouses, men's pants and knit shirts
primarily for sale to our customers under their own labels. Our customers
include Polo Ralph Lauren, Lands' End, JC Penney, Dillard's and Sears. We
develop programs in conjunction with our customers to provide value-added
design, merchandising and quality manufacturing. Our focus is on better shirts
that retail at prices in excess of $30. The smart shirts segment accounted for
9% of our total sales in fiscal 1999.
In order to enhance our competitive position, we have implemented a cost
reduction program that includes moving certain operations to regions with lower
labor costs and expanding capacity in these regions. These improvements have
resulted in increased gross margins.
Recreation Products
We design, manufacture, contract for the manufacture of and market outdoor
products including tents, sleeping bags and backpacks under four major brands.
Each brand is positioned to target a specific distribution channel. The
recreation products segment accounted for 7% of our total sales in fiscal 1999.
Our major brand names within the recreation products segment, and their
related products and distribution channels, are as follows:
<TABLE>
<CAPTION>
Brand Names Products Distribution Channel
----------- -------- --------------------
<S> <C> <C>
Wenzel(R) Tents, sleeping bags Mass merchants and
and packs. national retail chains.
Kelty(R) Tents, bags, child Specialty outdoor
carriers and backpacks. chains.
Slumberjack(R) Sleeping bags, self- Sporting goods chains
inflating mats and and catalogs.
camp furniture.
Sierra Designs(R) Tents, bags and Upper-end specialty
apparel. outdoor chains.
</TABLE>
Channels of Distribution and Customers
We sell our products through multiple channels of distribution, including
national retail chains, department stores, specialty stores, mass merchants,
mail order houses, electronic retailers, sporting goods stores and other
retailers. Apparel products accounted for approximately 93% of total sales in
the fiscal year ended April 30, 1999. JC Penney and Wal-Mart were our largest
customers in fiscal 1999, representing approximately 10% and 8%, respectively,
of total sales. Our other principal customers include Sears, Federated, May
Company, Dayton Hudson and Dillard's. In fiscal 1999, Kellwood's top 20
customers accounted for 69% of total sales, compared to 68% in fiscal 1998.
Sourcing and Manufacturing
We source products from a global network of quality manufacturers as well as
through our own plants. We maintain sourcing relationships with a network of
contract manufacturers in the United States and in over 30 countries around the
world. Products sourced through these relationships account for approximately
80% of
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Kellwood's total sales in fiscal 1999. This network is supplemented by 30
company-operated plants in the United States, Canada, the Caribbean Basin,
Central America, Hong Kong, the People's Republic of China and Sri Lanka.
Through the use of our global sourcing network, we seek to meet retailers'
needs for competitively priced merchandise, quick response and reorder
capability. As a result of our global sourcing strategy, products sourced
outside the United States from contractors and our plants have increased from
66% in fiscal 1997 and 73% in fiscal 1998 to 80% in fiscal 1999. No single
supplier provides more than five percent of total company purchases. Our
management is continually evaluating further diversification of our sourcing
and manufacturing capabilities to ensure our position as a responsive and low
cost producer.
S-22
<PAGE>
DESCRIPTION OF THE NOTES
We have summarized certain provisions of the notes below. This summary
supplements and replaces (if inconsistent with) the description of the general
terms and provisions of debt securities under the caption "Description of Debt
Securities" in the accompanying prospectus.
General
The notes will be issued under an indenture dated as of September 30, 1997
between us and The Chase Manhattan Bank, as trustee. The notes will be
redeemable at our option but will not be subject to any sinking fund.
The notes will mature on July 15, 2009 and will bear interest at 7 7/8% per
annum. Interest on the notes will accrue from July 26, 1999. We:
. will pay interest semiannually on January 15 and July 15 of each year,
commencing January 15, 2000,
. will pay interest to the person in whose name a note is registered at the
close of business on the January 1 or July 1 preceding the interest
payment date,
. will compute interest on the basis of a 360-day year consisting of twelve
30-day months,
. will make payments on the notes at the offices of the trustee, and
. may make payments by wire transfer for notes held in book-entry form or
by check mailed to the address of the person entitled to the payment as
it appears in the note register.
We will issue the notes only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof.
Ranking
The notes will be our senior unsecured obligations and will rank equally in
right of payment with all of our other senior unsecured and unsubordinated
indebtedness. The notes will rank senior to any subordinated indebtedness.
Notices
We will mail notices and communications to the holder's address shown on the
register of the notes.
Paying Agents and Transfer Agents
The trustee will be the paying agent and transfer agent for the notes.
The Trustee
The Chase Manhattan Bank is the trustee under the indenture. The trustee and
its affiliates also perform certain commercial banking services for us for
which they receive customary fees.
Optional Redemption
The notes will be redeemable as a whole or in part, at our option at any
time or from time to time, at a redemption price equal to the greater of (1)
100% of their principal amount or (2) the sum of the present values of the
Remaining Scheduled Payments (as defined below) discounted, on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at a rate
equal to the sum of the Treasury Rate (as defined below) and 25 basis points.
In each case, accrued interest will be payable to the redemption date.
S-23
<PAGE>
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury Price
for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by us.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the Reference Treasury Dealer Quotations for such redemption
date after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the trustee obtains fewer than five such Reference
Treasury Dealer Quotations, the average of all such quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the trustee
by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the
third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Bear, Stearns & Co. Inc., Banc of
America Securities LLC, Banc One Capital Markets, Inc., Chase Securities Inc.
and Lazard Freres & Co. LLC and their respective successors. If any of the
foregoing shall cease to be a primary U.S. Government securities dealer (a
"Primary Treasury Dealer"), we shall substitute another nationally recognized
investment banking firm that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each note to be
redeemed, the remaining scheduled payments of principal and interest on such
note that would be due after the related redemption date but for such
redemption. If such redemption date is not an interest payment date with
respect to such note, the amount of the next succeeding scheduled interest
payment on such note will be reduced by the amount of interest accrued on such
note to such redemption date.
Holders of notes to be redeemed will receive notice thereof by first-class
mail at least 30 and not more than 60 days prior to the date fixed for
redemption. In the case of any partial redemption, selection of the notes for
redemption will be made by the trustee on a pro rata basis, by lot or by such
other method as the trustee in its sole discretion shall deem to be fair and
appropriate, although no note of $1,000 in original principal amount or less
will be redeemed in part. If any note is to be redeemed in part only, the
notice of redemption relating to such note shall state the portion of the
principal amount thereof to be redeemed. A new note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original note. On and after the redemption
date, interest will cease to accrue on notes or portions thereof called for
redemption so long as we have deposited with the paying agent funds sufficient
to pay the principal of, premium (if any), plus accrued and unpaid interest, if
applicable, and liquidated damages (if any) on, the notes to be redeemed.
Book-Entry Delivery and Settlement
We will issue the notes in the form of one or more permanent global notes in
definitive, fully registered, book-entry form. The global notes will be
deposited with or on behalf of The Depository Trust Company ("DTC") and
registered in the name of Cede & Co., as nominee of DTC, or will remain in the
custody of the trustee in accordance with the FAST Balance Certificate
Agreement between DTC and the trustee.
DTC has advised us as follows:
. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve
S-24
<PAGE>
System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered under Section
17A of the Securities Exchange Act of 1934.
. DTC holds securities that its participants deposit with DTC and
facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
. Direct participants include securities brokers and dealers, trust
companies, clearing corporations and other organizations.
. DTC is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.
. Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either
directly or indirectly.
. The rules applicable to DTC and its participants are on file with the
SEC.
We have provided the following descriptions of the operations and
procedures of DTC solely as a matter of convenience. These operations and
procedures are solely within the control of DTC and are subject to change by
them from time to time. None of Kellwood, the underwriters nor the trustee
take any responsibility for these operations or procedures, and you are urged
to contact DTC or its participants directly to discuss these matters.
We expect that under procedures established by DTC:
. upon deposit of the global notes with DTC or its custodian, DTC will
credit on its internal system the accounts of direct participants
designated by the underwriters with portions of the principal amounts of
the global notes; and
. ownership of the notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC or its
nominee, with respect to interests of direct participants, and the
records of direct and indirect participants, with respect to interests of
persons other than participants.
The laws of some jurisdictions require that purchasers of securities take
physical delivery of those securities in definitive form. Accordingly, the
ability to transfer interests in the notes represented by a global note to
those persons may be limited. In addition, because DTC can act only on behalf
of its participants, who in turn act on behalf of persons who hold interests
through participants, the ability of a person having an interest in notes
represented by a global note to pledge or transfer those interests to persons
or entities that do not participate in DTC's system, or otherwise to take
actions in respect of such interest, may be affected by the lack of a physical
definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a global note, DTC
or that nominee will be considered the sole owner or holder of the notes
represented by that global note for all purposes under the indenture and under
the notes. Except as provided below, owners of beneficial interests in a
global note will not be entitled to have notes represented by that global note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated notes and will not be considered the owners or
holders thereof under the indenture or under the notes for any purpose,
including with respect to the giving of any direction, instruction or approval
to the trustee. Accordingly, each holder owning a beneficial interest in a
global note must rely on the procedures of DTC and, if that holder is not a
direct or indirect participant, on the procedures of the participant through
which that holder owns its interest, to exercise any rights of a holder of
notes under the indenture or the global note.
S-25
<PAGE>
Neither we nor the trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to the
notes.
Payments on the notes represented by the global notes will be made to DTC or
its nominee, as the case may be, as the registered owner thereof. We expect
that DTC or its nominee, upon receipt of any payment on the notes represented
by a global note, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the global note as
shown in the records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the global note held through
such participants will be governed by standing instructions and customary
practice as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. The participants will
be responsible for those payments.
Payments on the notes represented by the global notes will be made in
immediately available funds. Transfers between participants in DTC will be
effected in accordance with DTC rules and will be settled in immediately
available funds.
Certificated Notes
We will issue certificated notes to each person that DTC identifies as the
beneficial owner of the notes represented by the global notes upon surrender by
DTC of the global notes if:
. DTC notifies us that it is no longer willing or able to act as a
depository for the global notes, and we have not appointed a successor
depository within 90 days of that notice;
. an event of default has occurred and is continuing, and DTC requests the
issuance of certificated notes; or
. we determine not to have the notes represented by a global note.
Neither we nor the trustee will be liable for any delay by DTC, its nominee
or any direct or indirect participant in identifying the beneficial owners of
the related notes. We and the trustee may conclusively rely on, and will be
protected in relying on, instructions from DTC or its nominee for all purposes,
including with respect to the registration and delivery, and the respective
principal amounts, of the notes to be issued.
S-26
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated the date hereof, we have agreed to sell to each of the underwriters named
below and each of the underwriters severally has agreed to purchase the
principal amount of notes set forth opposite its name below:
<TABLE>
<CAPTION>
Principal
Amount of
Name Notes
---- ------------
<S> <C>
Bear, Stearns & Co. Inc..................................... $ 75,000,000
Banc of America Securities LLC.............................. 18,750,000
Banc One Capital Markets, Inc............................... 18,750,000
Chase Securities Inc........................................ 18,750,000
Lazard Freres & Co. LLC..................................... 18,750,000
------------
Total................................................... $150,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the notes are subject to, among
other things, the approval of certain legal matters, by their counsel and
certain other conditions. The underwriters are obligated to take and pay for
all the notes if any are taken.
The underwriters propose initially to offer all or part of the notes to the
public at the public offering price set forth on the cover page of this
prospectus supplement and to certain dealers at such price less a concession
not in excess of 0.40% of the principal amount of the notes. The underwriters
may allow, and such dealers may reallow, a discount not in excess of 0.25% of
the principal amount of the notes to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
The underwriting discounts and commissions to be paid to the underwriters by
us in connection with this offering will be 0.65% per note, for a total of
$975,000. In addition, we estimate that we will incur other offering expenses
of approximately $200,000.
In order to facilitate the offering of the notes, Bear, Stearns & Co. Inc.,
or its affiliates may engage in transactions that stabilize, maintain or
otherwise affect the price of the notes. Specifically, Bear Stearns, or its
affiliates may over-allot in connection with this offering, creating short
positions in the notes for its own account. In addition, to cover over-
allotments or to stabilize the price of the notes, Bear Stearns, or its
affiliates may bid for, and purchase notes in the open market. Finally, Bear
Stearns, or its affiliates may reclaim selling concessions allowed to an
underwriter or dealer for distributing notes in this offering, if Bear Stearns,
or its affiliates repurchases previously distributed notes in transactions that
cover syndicate short positions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the notes
above independent market levels. Bear Stearns, or its affiliates is not
required to engage in these activities, and may end any of these activities at
any time.
Neither we nor the underwriters makes any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the notes. In addition, neither we nor the
underwriters makes any representation that such transactions will be engaged in
or that such transactions, once commenced, will not be discontinued without
notice.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, and to
contribute to payments the Underwriters may be required to make in respect
thereof.
Certain of the underwriters and their affiliates engage in transactions with
and perform services for us in the ordinary course of business and have
engaged, and may in the future engage, in commercial banking and/or investment
banking transactions with us or our affiliates. In particular, affiliates of
certain of the underwriters
S-27
<PAGE>
may from time to time hold indebtedness under our credit facilities. Because we
intend to use a portion of the net proceeds of this offering to repay existing
indebtedness, it is possible that affiliates of the underwriters may receive in
excess of 10% of such net proceeds. Because more than 10% of the net proceeds
of the offering may be received by entities affiliated with members of the
National Association of Securities Dealers, Inc. (the "NASD") participating in
the offering made hereby, the offering is being conducted pursuant to Rules
2710(c)(8) and 2720(c)(3)(C) of the Conduct Rules of the NASD. See "Use of
Proceeds." The Trustee is an affiliate of Chase Securities Inc.
The notes will not have an established trading market when issued. There can
be no assurance of a secondary market for the notes or the continued liquidity
of such market if one develops. It is not anticipated that the notes will be
listed on any securities exchange.
LEGAL OPINIONS
The validity of the notes will be passed upon for us by McDermott, Will &
Emery, Chicago, Illinois, our special securities counsel. Certain McDermott,
Will & Emery attorneys own shares of Kellwood common stock. Certain legal
matters relating to this offering will be passed upon for the underwriters by
Kirkland & Ellis (a partnership including professional corporations), Chicago,
Illinois.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
incorporated in this prospectus supplement and accompanying prospectus by
reference to the Annual Report on Form 10-K for the year ended April 30, 1999,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
S-28
<PAGE>
PROSPECTUS
KELLWOOD COMPANY
$300,000,000
Debt Securities, Preferred Stock and Common Stock
---------------------
Kellwood Company ("Kellwood" or the "Company") from time to time may offer
(i) unsecured debt securities, which may be either senior (the "Senior Debt
Securities") or subordinated (the "Subordinated Debt Securities"), and which
may be convertible into shares of common stock, par value $.01 per share
("Common Stock") of the Company (the "Convertible Debt Securities" and,
together with the Senior Debt Securities and the Subordinated Debt Securities,
the "Debt Securities"), (ii) shares of its preferred stock (the "Preferred
Stock"), which may be convertible into shares of Common Stock and (iii) shares
of Common Stock. The Debt Securities, Preferred Stock and Common Stock
(collectively, the "Securities") may be offered either together or separately,
and will be offered in amounts, at prices and on terms to be determined at the
time of offering. The Securities offered pursuant to this Prospectus may be
issued in one or more series or issuances and will be limited to $300,000,000
aggregate public offering price (or the equivalent in foreign currency or
currency units).
The Senior Debt Securities will rank equally in right of payment with all
other Senior Indebtedness (as defined) of the Company. The Subordinated Debt
Securities will be subordinated in right of payment to all Senior Indebtedness
of the Company.
Certain specific terms of the particular Securities in respect of which
this Prospectus is being delivered (the "Offered Securities") are set forth in
the accompanying Prospectus Supplement (the "Prospectus Supplement"),
including, where applicable, the initial public offering price of the
Securities, the listing on any securities exchange, other special terms, and
(i) in the case of Debt Securities, the specific designation, aggregate
principal amount, original issue discount, if any, authorized denominations,
maturity, premium, if any, rate (which may be fixed or variable), time and
method of calculating payment of interest, if any, the place or places where
principal of, premium, if any, and interest, if any, on the Debt Securities
will be payable, the currency in which principal of, premium, if any, and
interest, if any, on the Debt Securities will be payable, whether the Debt
Securities will be Senior Debt Securities or Subordinated Debt Securities, any
terms of redemption at the option of the Company or the holder, any sinking
fund provisions and any terms for conversion or exchange into Common Stock,
(ii) in the case of any series of Preferred Stock, the specific title and
stated value, any dividend, liquidation, redemption, voting and other rights
and any terms for exchange for Debt Securities or conversion into Debt
Securities or Common Stock and (iii) in the case of Common Stock, the number
of shares of Common Stock and the terms of the offering and sale thereof. If
so specified in the applicable Prospectus Supplement, Offered Securities may
be issued in whole or in part in the form of one or more temporary or
permanent global securities. The shares of any series of Preferred Stock may
be represented by Depositary Shares as described herein.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------
The Company may sell the Securities to or through underwriters or dealers,
and may also sell Securities directly to other purchasers or through agents.
See "Plan of Distribution." The Prospectus Supplement sets forth the names of
any underwriters, dealers or agents involved in the sale of the Offered
Securities in respect of which this Prospectus is being delivered and any
applicable fee, commission or discount arrangements with them.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
---------------------
The date of this Prospectus is October 14, 1997
<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus or any Prospectus Supplement and, if given or made, such
information or representations must not be relied upon as having been
authorized. Neither this Prospectus nor any Prospectus Supplement constitutes
an offer to sell or the solicitation of an offer to buy any securities other
than the registered securities to which it relates or an offer to sell or the
solicitation of an offer to buy such securities to any person in any
jurisdiction to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus or any Prospectus
Supplement nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as
of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and other information with the Securities and
Exchange Commission (the "Commission"). Reports and proxy and other
information statements filed by the Company and the Registration Statement and
the exhibits thereto may be inspected, without charge, at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Midwest Regional Office, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511 and Northeast Regional Office, Seven World Trade
Center, Room 1028, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also
be inspected at the office of the New York Stock Exchange (the "NYSE") on
which the Company's Common Stock is listed: The New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005. The Company is subject to the
electronic filing requirements of the Commission. Accordingly, pursuant to the
rules and regulations of the Commission, certain documents, including annual
and quarterly reports and proxy statements, filed by the Company with the
Commission have been and will be filed electronically. The Commission
maintains a Web site at http:www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Company.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained
in the Registration Statement in accordance with the rules and regulations of
the Commission. Reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
Securities. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is made
to the copy of the document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company heretofore filed with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended April
30, 1997; and
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
July 31, 1997.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities
offered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part
2
<PAGE>
hereof from the date of filing of the reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this Prospectus or any Prospectus Supplement shall be deemed to be modified
or superseded for purposes of this Prospectus or any Prospectus Supplement to
the extent that a statement contained herein, therein or in any other
subsequently filed documents which also is or is deemed to be incorporated by
reference in this Prospectus or in any Prospectus Supplement modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
(without exhibits other than exhibits specifically incorporated by reference)
of any or all documents incorporated by reference into this Prospectus.
Requests for such copies should be directed to Corporate Secretary, Thomas H.
Pollihan, Kellwood Company, P.O. Box 14374, St. Louis, Missouri 63178,
telephone number (314) 576-3100.
This Prospectus and the accompanying Prospectus Supplement contain
"forward-looking" statements as defined in the Private Securities Litigation
Reform Act of 1995, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking statements.
These statements contain potential risks and uncertainties; therefore, actual
results may differ materially. The Company undertakes no obligation to update
publicly any forward-looking statements whether as a result of new
information, future events or otherwise. Important factors that may affect
these projections or expectations include, but are not limited to: changes in
competition in the wholesale and retail markets in which the Company operates;
the effect of national and regional economic conditions; the overall level of
consumer spending; the performance of the Company's products within the
prevailing retail environment; customer acceptance of both new designs and
newly-introduced product lines; financial difficulties encountered by
customers; and the Company's ability to successfully implement its business
and operational strategies.
THE COMPANY
Kellwood is a leading designer, manufacturer and marketer of apparel and
camping soft goods with sales of over $1.5 billion in fiscal year 1997. The
Company is one of the largest providers of popular-to-moderate women's
sportswear in the United States, servicing all channels of distribution.
Additionally, Kellwood is a major manufacturer of men's woven shirts and a
supplier of outerwear and lingerie. The Company also participates in the
better-to-bridge women's sportswear market.
The Company operates three strategic business portfolios: (i) Domestic
Branded, which designs, contracts for the manufacture of, and markets a broad
range of apparel under recognized brands such as Sag Harbor(R), Kathie Lee-
Registered(R) and Plaza South(TM); this portfolio also includes American
Recreation Products, a supplier of branded camping soft goods; (ii) Domestic
Private Label, which manufactures and markets a broad range of sportswear and
intimate apparel principally produced in plants operated by the Company in the
United States; and (iii) Far East Private Label, which principally
manufactures woven shirts in plants operated by the Company in the Far East
for sale primarily in the United States. The Company sells its products
through multiple channels of distribution, including national retail chains,
department stores, specialty stores, mass merchants, mail order houses,
sporting goods stores, discounters and other retailers. The Company's global
sourcing capability is diverse in terms of the range of products produced and
sourced. In order to enhance responsiveness to the changing needs of the
customer, to achieve flexibility and to reduce costs, the Company maintains
sourcing relationships with contract manufacturers around the world. This
network is supplemented by 31 Company-operated plants located in the United
States, Canada, the Caribbean Basin, Hong Kong, the People's Republic of China
and Sri Lanka.
Kellwood is headquartered in St. Louis, Missouri and employs approximately
17,500 persons in fourteen states and seven foreign countries. Kellwood has
been publicly owned since 1961 and its Common Stock trades on the NYSE under
the symbol "KWD."
3
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, including working capital, the repayment or
refinancing of indebtedness, future acquisitions and/or capital expenditures.
Pending application of the net proceeds for specific purposes, proceeds may be
invested in short-term or marketable securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical consolidated ratios of
earnings to fixed charges for the Company for the three months ended each of
July 31, 1997 and July 31, 1996 and for each of the fiscal years ended April
30, 1993 through April 30, 1997:
<TABLE>
<CAPTION>
Three Months
Ended July 31, Fiscal Year Ended April 30,
-------------- ---------------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
2.56 2.61 3.52 2.79 2.25 4.23 4.04
</TABLE>
The ratio of earnings to fixed charges is determined by dividing net
earnings before interest expense, taxes on income, amortization of debt
expense, and a portion of rent expense representative of the interest
component by the sum of interest expense, amortization of debt expense and the
portion of rent expense representative of the interest component. Included in
net earnings for fiscal 1995 is a restructuring charge of $14 million related
to the shutdown of the Company's Saipan facility as discussed in the Notes to
the Company's Consolidated Financial Statements. If the restructuring charge
had not occurred, the ratio of earnings to fixed charges would have been 2.86
for fiscal 1995.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may not apply thereto will be
described in the Prospectus Supplement relating to such Offered Debt
Securities.
The Debt Securities may be issued from time to time in one or more series
and will constitute either Senior Debt Securities or Subordinated Debt
Securities. Senior Debt Securities will be issued under an Indenture (the
"Senior Indenture"), between the Company and The Chase Manhattan Bank, as
Trustee (the "Senior Trustee"). The Subordinated Debt Securities will be
issued under an Indenture (the "Subordinated Indenture"), between the Company
and a trustee to be named prior to the offering of any Subordinated Debt
Securities, as Trustee (the "Subordinated Trustee"). The Senior Indenture and
the Subordinated Indenture are referred to herein individually as an
"Indenture" and, collectively, as the "Indentures," and the Senior Trustee and
the Subordinated Trustee are referred to herein individually as the "Trustee"
and collectively as the "Trustees."
The following summaries of certain provisions of the Debt Securities and
the Indentures do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Indentures, including the definitions therein of certain terms. Certain
capitalized terms used herein are defined in the Indentures. The Indentures
are substantially identical, except for certain covenants of the Company and
provisions relating to subordination.
General
The Indentures do not limit the amount of debt securities which can be
issued thereunder and provide that debt securities of any series may be issued
thereunder up to the aggregate principal amount which may be
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authorized from time to time by the Company. The Indentures do not limit the
amount of other Indebtedness or securities, other than certain secured
Indebtedness as described below, which may be issued by the Company or its
Subsidiaries. All Senior Debt Securities will be unsecured and will rank on a
parity with all other unsecured and unsubordinated Indebtedness of the
Company. All Subordinated Debt Securities will be unsecured and will be
subordinated in right of payment to the prior payment in full of Senior
Indebtedness (which term includes the Senior Debt Securities) of the Company
as described below under "Provisions Applicable Solely to Subordinated Debt
Securities--Subordination." In addition, creditors of Subsidiaries of the
Company are entitled to a claim on the assets of such Subsidiaries.
Consequently, in the event of a liquidation or reorganization of any
Subsidiary, creditors of the Subsidiary are likely to be paid in full before
any distribution is made to the Company and holders of Senior Debt Securities
or Subordinated Debt Securities, except to the extent that the Company is
itself recognized as a creditor of such Subsidiary, in which case the claims
of the Company would still be subordinate to any security interests in the
assets of such Subsidiary and any Indebtedness of such Subsidiary senior to
that held by the Company.
Reference is made to the Prospectus Supplement for the following terms
thereof: (i) the title of the Offered Debt Securities and classification as
Senior Debt Securities or Subordinated Debt Securities; (ii) any limit upon
the aggregate principal amount of the Offered Debt Securities; (iii) if other
than 100% of the principal amount, the percentage of the principal amount at
which the Offered Debt Securities will be offered; (iv) the date or dates on
which the principal of the Offered Debt Securities will be payable (or method
of determination thereof); (v) the rate or rates (which may be fixed or
variable) at which the Offered Debt Securities will bear interest (or method
of determination thereof), if any, the date or dates from which any such
interest will accrue and on which such interest will be payable, and the
record dates for the determination of the holders to whom interest is payable;
(vi) if other than U.S. dollars, the currency or units based on or relating to
currencies in which the Offered Debt Securities are denominated and which the
principal of, interest on and any Additional Amounts (as defined below) will
or may be payable; (vii) if other than as set forth herein, the place or
places where the principal of, interest on and any Additional Amounts payable
in respect of the Offered Debt Securities will be payable; (viii) the price or
prices at which, the period or periods within which, and the terms and
conditions upon which Offered Debt Securities may be redeemed, in whole or in
part, at the option of the Company; (ix) whether the Offered Debt Securities
are convertible into Common Stock and, if so, the terms and conditions upon
which such conversion will be effected, including the initial conversion price
or conversion rate, the conversion period and other conversion provisions in
addition to or in lieu of those described in the applicable Indenture; (x) the
obligation, if any, of the Company to redeem, repurchase or repay Offered Debt
Securities, whether pursuant to any sinking fund or analogous provisions or
pursuant to other provisions set forth therein or at the option of a holder
thereof; (xi) whether the Offered Debt Securities will be represented in whole
or in part by one or more global notes registered in the name of a depository
or its nominee; (xii) whether and under what circumstances the Company will
pay additional amounts ("Additional Amounts") in respect of certain taxes
imposed on certain holders of Offered Debt Securities or as otherwise
provided; and (xiii) any other terms or conditions not inconsistent with the
provisions of the Indenture upon which the Offered Debt Securities will be
offered. "Principal" when used herein includes, when appropriate, the premium,
if any, on the Debt Securities. For a description of the terms of the Offered
Debt Securities, reference must be made to both the Prospectus Supplement
relating thereto and to the description of Debt Securities set forth herein.
Unless otherwise provided in the Prospectus Supplement, principal, interest
and Additional Amounts, if any, will be payable, and the Debt Securities will
be transferable or, if applicable, convertible at the office or offices or
agency maintained by the Company for such purposes; provided that payment of
interest on registered Debt Securities may be made by check mailed to the
persons entitled thereto at the addresses of such persons appearing on the
Security register. In the case of registered Debt Securities, interest on the
Debt Securities will be payable on any interest payment date to the persons in
whose name the Debt Securities are registered at the close of business on the
record date with respect to such interest payment date.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued only in fully registered form without coupons in
minimum denominations of $1,000 and any integral multiple thereof.
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The Debt Securities may be represented in whole or in part by one or more
global notes registered in the name of a depository or its nominee and, if so
represented, interests in such global note will be shown on, and transfers
thereof will be effected only through, records maintained by the designated
depository and its participants as described below. Where Debt Securities of
any series are issued in bearer form, the special restrictions and
considerations, including special offering restrictions and special Federal
income tax considerations, applicable to any such Debt Securities and to
payment on and transfer and exchange of such Debt Securities will be described
in the applicable Prospectus Supplement.
Some of the Debt Securities may be issued as discounted Debt Securities
(bearing no interest or bearing interest at a rate which at the time of
issuance is below market rates) to be sold at a substantial discount below
their stated principal amount ("Original Issue Discount Securities"). Federal
income tax consequences and other special considerations applicable to any
such Original Issue Discount Securities will be described in the Prospectus
Supplement relating thereto.
If the purchase price of any Debt Securities is payable in one or more
foreign currencies or currency units or if any Debt Securities are denominated
in one or more foreign currencies or currency units or if the principal of or
interest, if any, on any Debt Securities is payable in one or more foreign
currencies or currency units, the restrictions, elections, certain Federal
income tax considerations, specific terms and other information with respect
to such issue of Debt Securities and such foreign currency or currency units
will be set forth in the applicable Prospectus Supplement.
Debt Securities may be presented for exchange, and registered Debt
Securities may be presented for transfer, in the manner, at the places or
subject to the restrictions set forth in the applicable Indenture, the Debt
Securities and the Prospectus Supplement relating thereto. Debt Securities in
bearer form and the coupons, if any, appertaining thereto will be transferable
by delivery. No service charge will be made for any transfer or exchange of
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Indentures require the annual filing by the Company with the Trustee of
a certificate as to compliance with certain covenants contained in the
Indentures.
The Company will comply with Section 14(e) under the Exchange Act, and any
other tender offer rules under the Exchange Act which may then be applicable,
in connection with any obligation of the Company to purchase Debt Securities
at the option of the holders thereof. Any such obligation applicable to a
series of Debt Securities will be described in the Prospectus Supplement
relating thereto.
Unless otherwise described in a Prospectus Supplement relating to any
Offered Debt Securities, other than as described below under "Certain
Covenants--Limitation on Liens", the Indentures do not contain any provisions
that would limit the ability of the Company to incur indebtedness or that
would afford holders of Debt Securities protection in the event of a sudden
and significant decline in the credit quality of the Company or a takeover,
recapitalization or highly leveraged or similar transaction involving the
Company. Accordingly, the Company could in the future enter into transactions
that could increase the amount of Indebtedness outstanding at that time or
otherwise affect the Company's capital structure or credit rating. Reference
is made to the Prospectus Supplement relating to the particular series of Debt
Securities offered thereby for information with respect to any deletions from,
modifications of or additions to the Events of Default described below or
covenants of the Company contained in the Indentures, including any addition
of a covenant or other provision providing event risk or similar protection.
Book-Entry Debt Securities
The Debt Securities may be issued in whole or in part in the form of one or
more temporary or permanent global securities (the "Global Securities") that
will be deposited with, or on behalf of, a depositary ("Depositary") or its
nominee identified in the applicable Prospectus Supplement. In such a case,
one or more
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Global Securities will be issued in a denomination or aggregate denomination
equal to the portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Global Security or Global
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in registered form, a Global Security may not be registered for
transfer or exchange except as a whole by the Depositary for such Global
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any nominee to a successor Depositary or a nominee of such successor
Depositary and except in the circumstances described in the applicable
Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited
with or on behalf of a Depositary will be represented by a Global Security
registered in the name of such Depositary or its nominee. Upon the issuance of
such Global Security, and the deposit of such Global Security with or on
behalf of the Depositary of such Global Security, the Depositary will credit,
on its book-entry registration and transfer system, the respective principal
amounts of the Debt Securities represented by such Global Security to the
accounts of institutions that have accounts with such Depositary or its
nominee ("participants"). The accounts to be credited will be designated by
the underwriters or agents of such Debt Securities or, if such Debt Securities
are offered and sold directly by the Company, by the Company. Ownership of
beneficial interests in such Global Security will be limited to participants
or Persons that may hold interests through participants. Ownership of
beneficial interests by participants in such Global Security will be shown on,
and the transfer of that ownership interest will be effected only through,
records maintained by the Depositary or its nominee for such Global Security.
Ownership of beneficial interests in such Global Security by Persons that hold
through participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Unless otherwise specified in the applicable Prospectus
Supplement, owners of beneficial interests in such Global Security will not be
entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the holders thereof for any purposes under the
applicable Indenture. Accordingly, each Person owning a beneficial interest in
such Global Security must rely on the procedures of the Depositary and, if
such Person is not a participant, on the procedures of the participant through
which such Person owns its interest, to exercise any rights of a holder under
the applicable Indenture. The Company understands that under existing industry
practices, if the Company requests any action of holders or an owner of a
beneficial interest in such Global Security desires to give any notice to take
any action a holder is entitled to give or take under the applicable
Indenture, the Depositary would authorize the participants to give such notice
or take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
Certain Covenants
Limitation on Liens. The Senior Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, create, incur
or otherwise cause or suffer to exist or become effective any Liens of
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any kind upon any Principal Property or any shares of stock or indebtedness of
any Restricted Subsidiary (whether such Principal Property, shares of stock or
indebtedness are now owned or hereafter acquired) unless all payments due
under the Senior Indenture and the Senior Debt Securities are secured on an
equal and ratable basis with the obligations so secured until such time as
such obligation is no longer secured by a Lien, except for Permitted Liens.
See also "Exempted Indebtedness" below.
The Subordinated Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, create, incur, or otherwise
cause or suffer to exist or become effective any Liens of any kind upon any
Principal Property or any shares of stock or indebtedness of any Restricted
Subsidiary (whether such Principal Property, shares of stock or indebtedness
are now owned or hereafter acquired) that secures any Indebtedness that is on
a parity in right of payment with the Subordinated Debt Securities unless all
payments due under the Subordinated Indenture and the Subordinated Debt
Securities are secured on an equal and ratable basis with the obligation so
secured until such time as such obligation is no longer secured by a Lien,
except for Permitted Liens. See also "Exempted Indebtedness" below.
Limitations on Sale and Leaseback Transactions. The Indentures provide that
neither the Company nor any Restricted Subsidiary will enter into any sale and
leaseback transaction with respect to any Principal Property (except for
temporary leases of a term, including renewals, not exceeding five years)
unless either (a) the Company or such Restricted Subsidiary would be entitled,
pursuant to the provisions of the Indentures, to incur Indebtedness secured by
a lien on the property to be leased without equally and ratably securing the
Debt Securities, or (b) the Company within 180 days after the effective date
of such transaction applies to the voluntary retirement of its funded debt an
amount equal to the value of such transaction, defined as the greater of the
net proceeds of the sale of the property leased in such transaction or the
fair value, in the opinion of the Board of Directors, of the leased property
at the time such transaction was entered into. See also "Exempted
Indebtedness" below.
Exempted Indebtedness. Notwithstanding the foregoing limitations on Liens
and sale and leaseback transactions, the Company and its Restricted
Subsidiaries may issue, assume, or guarantee Indebtedness secured by a Lien
without securing the Debt Securities, or may enter into sale and leaseback
transactions without retiring funded debt, or enter into a combination of such
transactions, if the sum of the principal amount of all such Indebtedness and
the aggregate value of all such sale and leaseback transactions does not at
any such time exceed 12.5% of the consolidated total assets of the Company and
its consolidated Subsidiaries as shown in the audited consolidated balance
sheet contained in the latest annual report to the shareholders of the
Company.
Conversion
The Indentures contain certain provisions regarding the conversion of Debt
Securities into Common Stock (or cash in lieu thereof). The specific terms
applicable to a series of Convertible Debt Securities, including the initial
conversion price or conversion rate, any adjustments to such conversion price
or conversion rate and the conversion period, and the conditions upon which
such conversion will be effected will be set forth in the Prospectus
Supplement relating thereto.
Events of Default and Remedies
An Event of Default with respect to the Debt Securities of any series is
defined in each Indenture as: (i) default in the payment of any installment of
interest on or any Additional Amounts payable in respect of any of the Debt
Securities of such series as and when the same shall become due and payable,
and continuance of such default for a period of 30 days; (ii) default in the
payment of all or any part of the principal of any of the Debt Securities of
such series as and when the same shall become due and payable either at
maturity, upon any redemption, or otherwise; (iii) the failure by the Company
to perform or observe any of its other covenants, conditions or agreements
contained in the Debt Securities of such series or set forth in the applicable
Indenture and continuance of such failure for a period of 90 days after due
notice by the applicable Trustee or by the holders of at least 25% in
principal amount of the Debt Securities of that series then outstanding; (iv)
default in
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the payment of any scheduled payment of principal of or interest on any
Indebtedness of the Company or any Subsidiary of the Company (other than the
Debt Securities of such series) aggregating more than $25 million in principal
amount, when due after giving effect to any applicable grace period, that
results in such Indebtedness becoming due and payable prior to the date on
which it would otherwise become due and payable, and such acceleration shall
not have been rescinded or annulled, or such Indebtedness shall not have been
discharged; or (v) certain events of bankruptcy, insolvency or reorganization
involving the Company or its Subsidiaries as more fully described in the
Indentures. Additional Events of Default may be added for the benefit of
holders of certain series of Debt Securities which, if added, will be
described in the Prospectus Supplement relating to such Debt Securities. The
Indentures provide that the Trustee shall notify the holders of Debt
Securities of each series of any continuing default known to the Trustee which
has occurred with respect to that series within 90 days after the occurrence
thereof. The Indentures provide that notwithstanding the foregoing, except in
the case of default in the payment of the principal of, interest on or any
Additional Amounts payable in respect of any of the Debt Securities of such
series the Trustee may withhold such notice if the Trustee in good faith
determines that the withholding of such notice is in the interests of the
holders of Debt Securities of such series.
If an Event of Default of the type described in clause (v) above shall
happen and be continuing, then the principal of (or, with respect to a series
of Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of such series), accrued and unpaid interest on,
and any Additional Amounts payable in respect of the Debt Securities will
become immediately due and payable. If one or more Events of Default of the
type described in clauses (i) through (iv) with respect to any series of Debt
Securities at the time outstanding shall happen and be continuing, then either
the Trustee or the holders of not less than 25% of the principal amount of
that series of the Debt Securities then outstanding may declare the principal
(or, with respect to a series of Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such
series), accrued and unpaid interest on and any Additional Amounts payable in
respect of the Debt Securities of that series due and payable immediately.
This provision is subject to the condition that if, after any declaration of
acceleration and before Stated Maturity of the principal with respect to the
Debt Securities of any series, all arrears of interest and any Additional
Amounts and the expenses of the Trustee, its agents or attorneys shall be paid
by or for the account of the Company, and all Defaults (other than the payment
of principal that has been declared due and payable) have been cured to the
satisfaction of the Trustee, then the Trustee shall, upon the written request
of the holders of a majority in principal amount of the Debt Securities of the
applicable series, waive such Default and rescind or annul the declaration of
acceleration; but no such waiver, rescission or annulment shall extend to or
affect any subsequent Default or impair any right consequent thereon.
No holder of any Debt Security of any series will have the right to pursue
a remedy under the applicable Indenture or the Debt Securities, unless (1)
such holder gives the Trustee notice of a continuing Default with respect to
the Debt Securities of that series, (2) the holders of at least a majority of
the Debt Securities of the applicable series make a request to the Trustee to
pursue the remedy, (3) such holder or holders offered the Trustee security or
indemnity satisfactory to the Trustee against any loss, liability or expense
and (4) the Trustee does not comply with the request within 30 days after the
receipt of the request and the offer of security or indemnity. However,
nothing contained in the Indentures shall affect or impair the right of any
holder of Debt Securities to institute suit to enforce payment of the
principal of, interest on and any Additional Amounts payable in respect of
such holder's Debt Securities on or after the due dates expressed in such Debt
Securities.
The Company must furnish to the Trustee a statement, detailing any Defaults
of which it is aware, within 5 days of becoming aware of the occurrence of any
Default.
Reports
The Indentures provide that the Company will file with the Trustee copies
of the annual reports and other information, documents and reports which the
Company is required to file with the Commission pursuant to the Exchange Act.
If the Company is not required to file such reports and other information, the
Indentures provide that the Company shall file with the Trustee and cause to
be mailed to the holders of Debt Securities (i) annual
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reports containing the information required to be contained in an Annual
Report on Form 10-K, (ii) quarterly reports containing the information
required to be contained in a Quarterly Report on Form 10-Q and (iii) promptly
after the occurrence of an event required to be therein reported, such other
reports containing information required to be contained in a Current Report on
Form 8-K. The Company shall also comply with the requirements of Trust
Indenture Act 314(a).
Successor Company
The Indentures provide that the Company will not consolidate or merge with
or into, or sell, lease, convey or otherwise dispose of all or substantially
all of its assets or assign any of its obligations under the Debt Securities
or applicable Indenture unless (i) the entity formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
lease, conveyance or other disposition shall have been made (the "Surviving
Entity"), is a corporation organized and existing under the laws of the United
States, any state thereof, or the District of Columbia; (ii) the Surviving
Entity assumes by supplemental indenture all of the obligations of the Company
under the Debt Securities and the applicable Indenture; and (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing. With respect to the sale of assets, the
phrase "all or substantially all" as used in the Indentures varies according
to the facts and circumstances of the subject transaction, has no clearly
established meaning under New York law (which governs the Indentures) and is
subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of a person, and therefore it may be unclear as to whether a
disposition of assets comes within the terms of this provision.
Discharge
Each Indenture provides that it will cease to be of further effect (except
that certain obligations will survive) with respect to a series of Debt
Securities when all outstanding Debt Securities of such series authenticated
and issued have been delivered (other than destroyed, lost or stolen Debt
Securities that have been replaced or paid) to the Trustee for cancellation
and the Company has paid all sums payable under such Indenture with respect to
such series of Debt Securities.
Modification of the Indentures
Each Indenture contains provisions permitting the Company and the
applicable Trustee, with the consent of the holders of not less than a
majority in principal amount of the Debt Securities of each series at the time
outstanding under such Indenture, to enter into supplemental indentures to
amend any of the provisions of each Indenture or any supplemental indenture
with respect to the Debt Securities of such series; provided that, unless
consented to by each holder of Debt Securities of such series, no such
supplemental indenture may (1) reduce the amount of Debt Securities whose
holders must consent to an amendment or a waiver; (2) reduce the rate of or
change the time for payment of interest or Additional Amounts, including
default interest on any Debt Security; (3) reduce the principal of or change
the Stated Maturity of any Debt Security or alter the provisions with respect
to redemption; (4) make any Debt Security payable in money other than that
stated in the Debt Security; (5) make any change in the types of amendment
that need the approval of every affected holder of Debt Securities; (6) with
respect to the Senior Indenture, affect the ranking of the Debt Securities; or
(7) waive a Default in the payment of principal of, any Additional Amounts
payable in respect of or interest on, or with respect to, any Debt Security.
The applicable Trustee and the Company may enter into supplemental
indentures which amend the applicable Indenture and the Debt Securities with
respect to a particular series without the consent of any holder of Debt
Securities of such series in order to: (a) cure any ambiguity, omission,
defect or inconsistency; (b) comply with such Indenture concerning the
substitution of successor corporations pursuant to a merger or consolidation;
(c) comply with any requirements of the Commission in connection with the
qualification of such
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Indenture under the Trust Indenture Act; (d) provide for uncertificated
securities; (e) make any change that does not materially adversely affect the
legal rights of any holder of Debt Securities under the applicable Indenture
as then in effect; (f) secure the Debt Securities and make intercreditor
arrangements with respect to any such Debt Securities (unless prohibited by
such Indenture); (g) provide for a replacement Trustee; or (h) add to the
covenants and agreements of the Company for the benefit of all the holders of
all of the Debt Securities with respect to a series and surrender any right or
power reserved for the Company in such Indenture.
Defeasance and Covenant Defeasance
Each Indenture provides that the Company may elect either (a) to terminate
(and be deemed to have satisfied) all its obligations with respect to such
Debt Securities (except for the obligations to register the transfer or
exchange of such Debt Securities, to replace mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of the Debt
Securities, to compensate and indemnify the applicable Trustee and to
punctually pay or cause to be paid the principal of, interest on and any
Additional Amounts payable in respect of all Debt Securities of such series
when due) ("defeasance") or (b) to be released from its obligations with
respect to certain covenants, including those described above under "Certain
Covenants--Limitation on Liens" and "--Limitations on Sale and Leaseback
Transactions" above ("covenant defeasance"), upon the deposit with the
Trustee, in trust for such purpose, of money and/or U.S. Government
Obligations (as defined in the Indentures) which through the payment of
principal and interest in accordance with their terms will provide money, in
an amount sufficient (in the opinion of a nationally recognized firm of
independent public accountants) to pay the principal of, interest on and any
Additional Amounts payable in respect of the outstanding Debt Securities of
such series, and any mandatory sinking fund or analogous payments thereon, on
the scheduled due dates therefor. Such a trust may be established only if,
among other things, the Company has delivered to the Trustee an opinion of
counsel (as specified in such Indenture) with regard to certain matters,
including an opinion to the effect that the holders of such Debt Securities
will not recognize income, gain or loss for Federal income tax purposes as a
result of such deposit and discharge and will be subject to Federal income tax
on the same amounts and in the same manner and at the same times as would have
been the case if such deposit and defeasance or covenant defeasance, as the
case may be, had not occurred. The Prospectus Supplement may further describe
these or other provisions, if any, permitting defeasance or covenant
defeasance with respect to the Debt Securities of any series.
Concerning the Trustee
The Senior Trustee acts as a co-agent under the Company's revolving credit
facility and maintains additional banking relationships with the Company in
the ordinary course of business. Prior to the issuance of any Subordinated
Debt Securities under the Subordinated Indenture, the Company will engage a
qualified trustee to serve as Trustee under the Subordinated Indenture. Any
such Trustee will be an "eligible trustee" under the Trust Indenture Act of
1939, as amended.
Provisions Applicable Solely to Subordinated Debt Securities
Subordination
The Subordinated Debt Securities will be subordinate and junior in right of
payment, to the extent set forth in the Subordinated Indenture, to all Senior
Indebtedness (as defined below) of the Company. If the Company should default
in the payment of any principal of, interest on or any Additional Amounts
payable in respect of any Senior Indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise, then, upon written notice of such default to the
Company by the holders of such Senior Indebtedness or any trustee therefor and
subject to certain rights of the Company to dispute such default and subject
to proper notification of the Trustee, unless and until such default shall
have been cured or waived or shall have ceased to exist, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) will be made
or agreed to be made for principal of, interest on or any Additional Amounts
payable in respect of the Subordinated Debt Securities, or in respect of any
redemption, retirement,
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purchase or other acquisition of the Subordinated Debt Securities other than
those made in capital stock of the Company (or cash in lieu of fractional
shares thereof) pursuant to any conversion right of the Subordinated Debt
Securities or otherwise made in capital stock of the Company.
The term "Senior Indebtedness" is defined to mean Indebtedness (including
the Senior Debt Securities) of the Company outstanding at any time except (a)
any Indebtedness as to which, by the terms of the instrument creating or
evidencing the same, it is provided that such Indebtedness is not senior in
right of payment to the Subordinated Debt Securities, (b) the Subordinated
Debt Securities, (c) any Indebtedness of the Company to a wholly-owned
Subsidiary of the Company, (d) interest accruing after the filing of a
petition initiating certain events of bankruptcy or insolvency unless such
interest is an allowed claim enforceable against the Company in a proceeding
under federal or state bankruptcy laws and (e) trade payables.
If (i) without the consent of the Company a court shall enter an order for
relief with respect to the Company under the United States federal bankruptcy
laws or a judgment, order or decree adjudging the Company a bankrupt or
insolvent, or enter an order for relief for reorganization, arrangement,
adjustment or composition of or in respect of the Company under the United
States federal or state bankruptcy or insolvency laws or (ii) the Company
shall institute proceedings for the entry of an order for relief with respect
to the Company under the United States federal bankruptcy laws or for an
adjudication of insolvency, or shall consent to the institution of bankruptcy
or insolvency proceedings against it, or shall file a petition seeking, or
seek or consent to reorganization, arrangement, composition or similar relief
under any applicable law, or shall consent to the filing of such petition or
to the appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator or similar official in respect of the Company or of substantially
all of its property, or the Company shall make a general assignment for the
benefit of creditors, then all Senior Indebtedness (including any interest
thereon accruing after the commencement of any such proceedings and any
Additional Amounts payable in respect thereof) will first be paid in full
before any payment or distribution, whether in cash, securities or other
property, is made on account of the principal of, interest on or any
Additional Amounts payable in respect of the Subordinated Debt Securities. In
such event, any payment or distribution on account of the principal of,
interest on or any Additional Amounts payable in respect of Subordinated Debt
Securities, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least
to the extent provided in the subordination provisions with respect to the
Subordinated Debt Securities, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such
plan of reorganization or readjustment), which would otherwise (but for the
subordination provisions) be payable or deliverable in respect of the
Subordinated Debt Securities will be paid or delivered directly to the holders
of Senior Indebtedness in accordance with the priorities then existing among
such holders until all Senior Indebtedness (including any interest thereon
accruing after the commencement of any such proceedings and any Additional
Amounts payable in respect thereof) has been paid in full. If any payment or
distribution on account of the principal of, interest on or any Additional
Amounts payable in respect of the Subordinated Debt Securities of any
character, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least
to the extent provided in the subordination provisions with respect to the
Subordinated Debt Securities, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such
plan of reorganization or readjustment), shall be received by any holder of
any Subordinated Debt Securities in contravention of any of the terms of the
Subordinated Indenture and before all the Senior Indebtedness shall have been
paid in full, such payment or distribution of securities will be received in
trust for the benefit of, and will be paid over or delivered and transferred
to, the holders of the Senior Indebtedness then outstanding in accordance with
the priorities then existing among such holders for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to pay all
such Senior Indebtedness remaining unpaid to the extent necessary to pay all
such Senior Indebtedness in full. In the event of any such proceeding, after
payment in full of all sums owing with respect to Senior Indebtedness, the
holders of Subordinated Debt Securities, together with the holders of any
obligations of the Company ranking on a parity with the Subordinated Debt
Securities, will be entitled to be repaid from the remaining assets of the
Company the amounts at that time due and owing on account of unpaid
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principal of, interest on and any Additional Amounts payable in respect of the
Subordinated Debt Securities and such other obligations before any payment or
other distribution, whether in cash, property or otherwise, shall be made on
account of any capital stock or obligations of the Company ranking junior to
the Subordinated Debt Securities and such other obligations.
By reason of such subordination, in the event of the insolvency of the
Company, holders of Senior Indebtedness may receive more, ratably, than
holders of the Subordinated Debt Securities. In addition, other creditors of
the Company who are not holders of Subordinated Debt Securities or holders of
Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than holders of Subordinated Debt
Securities. Such subordination will not prevent the occurrence of an Event of
Default or limit the right of acceleration in respect of the Subordinated Debt
Securities.
Certain Definitions
"Additional Amounts" shall mean any additional amounts which are required
by a Debt Security, under circumstances specified therein, to be paid by the
Company in respect of certain taxes imposed on certain holders of such Debt
Securities, or as otherwise specified in the terms of such Debt Security, and
which are owing to such holders.
"Capitalized Lease Obligation" shall mean an obligation that is required to
be classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented
by such obligation shall be the capitalized amount of such obligation
determined in accordance with such principles; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"Consolidated Net Worth" means the excess of assets over liabilities of the
Company and its consolidated Subsidiaries, plus Minority Interests, as
determined from time to time in accordance with GAAP.
"Default" shall mean any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Indebtedness" shall mean, with respect to any Person, at any date, any of
the following, without duplication, (i) any liability, contingent or
otherwise, of such Person (A) for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a
portion thereof), (B) evidenced by a note, bond, debenture or similar
instrument or (C) for the payment of money relating to a Capitalized Lease
Obligation or other obligation (whether issued or assumed) relating to the
deferred purchase price of property; (ii) all conditional sale obligations and
all obligations under any title retention agreement (even if the rights and
remedies of the seller under such agreement in the event of default are
limited to repossession or sale of such property), but excluding trade
accounts payable arising in the ordinary course of business; (iii) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction other than entered into in
the ordinary course of business; (iv) all indebtedness of others secured by
(or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on any asset or property
(including, without limitation, leasehold interests and any other tangible or
intangible property) of such Person, whether or not such indebtedness is
assumed by such Person or is not otherwise such Person's legal liability;
provided, that if the obligations so secured have not been assumed in full by
such Person or are otherwise not such Person's legal liability in full, the
amount of such indebtedness for the purposes of this definition shall be
limited to the lesser of the amount of such indebtedness secured by such Lien
or the fair market value of the assets of the property securing such Lien; (v)
all indebtedness of others (including all interest and dividends on any
Indebtedness or preferred stock of any other Person for the payment of which
is) guaranteed, directly or indirectly, by such Person or that is otherwise
its legal liability or which such Person has agreed to purchase or repurchase
or in respect of which such Person has agreed contingently to supply or
advance funds; and (vi) obligations in respect of Currency Agreements and
Interest Swap Obligations (as such capitalized terms are defined in the
Indentures).
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"Issue Date" shall mean, with respect to an Indenture, the first date on
which a Debt Security is authenticated by the applicable Trustee pursuant to
such Indenture.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien, charge or adverse claim affecting title or resulting in an encumbrance
against real or personal property or a security interest of any kind
(including, without limitation, any conditional sale or other title retention
agreement or lease in the nature thereof or any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute other than to reflect ownership by a third party or property leased to
the Company or any of its Subsidiaries under a lease that is not in the nature
of a conditional sale or title retention agreement).
"Minority Interest" is defined as any shares of stock of any class of a
Subsidiary that are not owned by the Company or a Subsidiary.
"Permitted Liens" shall mean, with respect to any Person: (i) Liens
existing on the Issue Date; (ii) Liens on property or assets of, or any shares
of stock of or secured debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Restricted Subsidiaries;
(iii) Liens in favor of the Company or any of its Restricted Subsidiaries;
(iv) Liens in favor of governmental bodies to secure progress or advance
payments; (v) Liens securing industrial revenue or pollution control bonds;
(vi) Liens on Property to secure Indebtedness incurred for the purpose of (a)
financing all or any part of the purchase price of such Property incurred
prior to, at the time of, or within 180 days after, the acquisition of such
Property or (b) financing all or any part of the cost of construction,
improvement, development or expansion of any such Property; (vii) statutory
liens or landlords', carriers', warehouseman's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course
of business and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have
been made therefor; (viii) Liens on current assets of Restricted Subsidiaries
securing Indebtedness of such Restricted Subsidiaries; and (ix) any
extensions, substitutions, replacements or renewals in whole or in part of a
Lien (an "existing Lien") enumerated in clauses (i) through (viii) above;
provided that the Lien may not extend beyond (A) the Property or Indebtedness
subject to the existing Lien and (B) improvements and construction on such
Property and the Indebtedness secured by the Lien may not exceed the
Indebtedness secured at the time by the existing Lien.
"Person" shall mean any individual, corporation, partnership, limited
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity.
"Principal Property" means any manufacturing plant or warehouse owned or
leased by the Company or any Subsidiary, the gross book value of which exceeds
one percent of Consolidated Net Worth, other than manufacturing plants and
warehouses which the Board of Directors by resolution declares, together with
all other plants and warehouses previously so declared, is not of material
importance to the total business conducted by the Company and its Restricted
Subsidiaries as an entirety.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in
the most recent consolidated financial statements of the Company and its
Subsidiaries under GAAP.
"Restricted Subsidiary" shall mean any Subsidiary which owns (i) a
Principal Property or (ii) any trademark, trade name, brand name or license
(collectively, "Intangible Property"), excluding any Intangible Property the
use of which did not give rise to revenues in excess of $25 million during the
Company's most recently completed fiscal year.
"Stated Maturity," when used with respect to any security or any
installment of interest thereon, shall mean the date specified in such
security as the fixed date on which the principal of such security or such
installment of interest is due and payable.
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"Subsidiary" of any Person shall mean (i) any Person of which more than 50%
of the total voting power of shares of Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the Subsidiaries of that Person or
a combination thereof, and (ii) any partnership, joint venture or other Person
in which such Person or one or more of the Subsidiaries of that Person or a
combination thereof has the power to control by contract or otherwise the
board of directors or equivalent governing body or otherwise controls such
entity.
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock, $.01
par value. Holders of Common Stock have full voting rights, one vote for each
share held of record, and, in the election of directors, are entitled to
cumulate their votes. Shareowners are entitled to receive such dividends, if
any, as may be declared by the Board of Directors out of funds legally
available therefore, and they are entitled to share equally and ratably in the
assets remaining, if any, after payment of all debts and liabilities upon the
Company's winding up and dissolution, subject to the rights of the holders of
any outstanding Preferred Stock. The holders of Common Stock have no
preemptive or other rights to subscribe for, or to purchase, additional shares
of Common Stock. The Common Stock is not subject to redemption or to any
liability for further calls. The outstanding shares are fully paid and
nonassessable. Harris Trust and Savings Bank is the transfer agent and
registrar for the Company's Common Stock.
If shares of Common Stock are offered, the Prospectus Supplement relating
thereto will set forth the number of shares offered, the public offering price
and information regarding the Company's dividend history and Common Stock
prices as reflected on the New York Stock Exchange Composite Tape, including a
recent last sale price of the Common Stock.
Preferred Stock
General. Under the Certificate of Incorporation, the Company's Board of
Directors is authorized to create and issue up to 500,000 shares of Preferred
Stock in one or more series and to determine the rights and preferences of
each series, to the extent permitted by the Certificate of Incorporation. As
of the date of this Prospectus, no shares of Preferred Stock had been issued.
One Hundred Sixty Thousand shares of Series A Junior Preferred Stock have been
reserved for issuance in connection with the Company's preferred stock
purchase rights described below.
Reference is made to the applicable Prospectus Supplement relating to the
series of Preferred Stock offered thereby and the Certificate of Designation
establishing such series of Preferred Stock for specific terms, including:
(i) The title and stated value of such Preferred Stock;
(ii) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the initial offering price of such
Preferred Stock;
(iii) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(iv) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(v) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(vi) The provisions for a sinking fund, if any, for such Preferred
Stock;
(vii) The provisions for redemption, if applicable, of such Preferred
Stock;
(viii) Any listing of such Preferred Stock on any securities exchange;
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(ix) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(x) A discussion of any material Federal income tax considerations
applicable to such Preferred Stock;
(xi) The relative ranking and preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
(xii) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company; and
(xiii) Any other specific terms, preferences, rights (including, without
limitation, voting rights), limitations or restrictions of such Preferred
Stock.
Liquidation Preference. Unless otherwise specified in the applicable
Prospectus Supplement, upon any liquidation, dissolution or winding up of the
Company whether voluntary or involuntary, the holders of any series of
Preferred Stock in respect of which this Prospectus is being delivered will
have preference and priority over the Common Stock and any other class of
stock or series of a class of stock of the Company ranking on liquidation
junior to such series of Preferred Stock, for payment out of the assets of the
Company or proceeds thereof, whether from capital or surplus, in the amount
set forth in the applicable Prospectus Supplement. After such payment, the
holders of such series of Preferred Stock will be entitled to no other
payments. If, in the case of any such liquidation, dissolution or winding up
of the Company, the assets of the Company or proceeds thereof shall be
insufficient to make the full liquidation payment in respect of such series of
Preferred Stock and liquidating payments on any other series of Preferred
Stock ranking as to liquidation on a parity with such series, then those
assets and proceeds will be distributed among the holders of such series of
Preferred Stock and any such other series of Preferred Stock ratably in
accordance with the respective amounts which would be payable on such shares
of such series of Preferred Stock and such other series of Preferred Stock if
all amounts thereon were paid in full. A sale of all or substantially all of
the Company's assets or a consolidation or merger of the Company with one or
more corporations shall not be deemed to be a liquidation, dissolution or
winding up of the Company.
Depositary Shares
General. The Company may, at its option, elect to issue fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. In the event
such option is exercised, the Company may elect to have a Depositary (as
defined below) issue receipts for Depositary Shares, each receipt representing
a fraction (to be set forth in the Prospectus Supplement relating to a
particular series of Preferred Stock) of a share of a particular series of
Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement ("Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 ("Depositary"). Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock
represented by such Depositary Share, to all the rights and preferences of the
Preferred Stock represented thereby (including dividend, voting, redemption
and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of an offering of the Preferred
Stock. In connection with the issuance of any series of Preferred Stock
represented by Depositary Shares, the forms of Deposit Agreement and
Depositary Receipt will be filed as exhibits to the Registration Statement of
which this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such exhibits.
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Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts
but not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will
be exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to
the terms thereof, a holder of Depositary Receipts is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Stock relating
to the surrendered Depositary Receipts. Holders of Depositary Shares will be
entitled to receive whole shares of the related series of Preferred Stock on
the basis set forth in the related Prospectus Supplement for such series of
Preferred Stock, but holders of such whole shares will not thereafter be
entitled to receive Depositary Shares therefor. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of
the number of Depositary Shares representing the number of whole shares of the
related series of Preferred Stock to be withdrawn, the Depositary will deliver
to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distribution received in respect of the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the numbers of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed. If less than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary.
Voting the Preferred Shares. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder
of such Depositary Shares on the record date (which will be the same date as
the record date for the Preferred Stock) will be entitled to instruct the
Depositary as to the exercise of the voting rights pertaining to the amount of
the Preferred Stock represented by such holder's Depositary Shares. The
Depositary will endeavor, insofar as practicable, to vote the amount of the
Preferred Stock represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all action which may be
deemed necessary by the Depositary in order to enable the Depositary to do so.
The Depositary will abstain from voting shares of the Preferred Stock to the
extent it does not receive specific instructions from the holders of
Depositary Shares representing such Preferred Stock.
Amendment and Termination of the Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary. However, any amendment which materially and adversely alters the
rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement may be terminated by
the Company or the Depositary only if (i) all outstanding Depositary Shares
have been redeemed
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or (ii) there has been a final distribution in respect to the Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company
and such distribution has been distributed to the holders of Depositary
Receipts.
Charges of Depositary. The Company will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay charges of the Depositary in connection
with the initial deposit of the Preferred Stock and any redemption of the
Preferred Stock. Holders of Depositary Receipts will pay other transfer and
other taxes and governmental charges and such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
Miscellaneous. The Depositary will forward to the record holders of the
Depositary Shares relating to such Preferred Stock all reports and
communications from the Company which are delivered to the Depositary.
Neither the Depositary or the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder, and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares
or Preferred Stock unless satisfactory indemnity is furnished. They may rely
upon written advice of counsel or accountants, or information provided by
persons presenting Preferred Stock for deposit, holders of Depositary Receipts
or other persons believed to be competent and on documents believed to be
genuine.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its
acceptance of such appointment. Such successor Depositary must be appointed
within 60 days after delivery of the notice of resignation or removal and must
be a bank or trust company having its principal office in the United States
and having a combined capital and surplus of at least $50,000,000.
Certain Provisions of the Certificate of Incorporation
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation") provides for a classified Board of Directors
with two-year staggered terms. It also provides that shareowners may remove an
incumbent director only for "cause", and then only upon the affirmative vote
of at least 75% of the outstanding shares entitled to vote on the election of
directors. "Cause" is defined as conviction of a felony which is no longer
subject to direct appeal or adjudication of liability for negligence or
misconduct in the performance of a director's duty to the Company which is no
longer subject to direct appeal.
The Company's Certificate of Incorporation also requires the affirmative
vote of 75% of each class of the Company's outstanding shares of capital stock
to amend the Certificate of Incorporation or the Bylaws of the Company.
Shareowners may not act by written consent without a meeting.
Certain business combinations and other significant corporate transactions
involving the Company and any beneficial owner of more than 25% of the
outstanding voting shares of the Company (a "Substantial Stockholder") must be
approved by at least 75% of the Company's outstanding shares entitled to vote
thereon, and also by a majority of all votes entitled to be cast in respect of
shares held by shareowners other than the Substantial Stockholder, unless such
transaction has been approved by the Company's Board of Directors or unless
the shareowners of the Company shall receive consideration for the transaction
not less than the highest per share price paid by the Substantial Stockholder
in acquiring any shares of stock of the Company.
Description of Preferred Stock Purchase Rights
A dividend of one Series A Junior Preferred Stock purchase right (a
"Right") per share of Common Stock was distributed to shareowners in June 1986
so that each share of Common Stock now also represents a Right
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(expiring June 11, 2006) to buy 1/100th of a share of Series A Junior
Preferred Stock from the Company for $100. The Rights were issued pursuant to
a Rights Agreement, dated as of June 11, 1986, as amended as of August 21,
1990, and as further amended as of May 31, 1996, between the Company and
Centerre Trust Company of St. Louis, as Rights Agent.
Rights are not exercisable or transferable apart from the Common Stock
until the earlier of (i) ten days following the public announcement that a
person or group of affiliated or associated persons (other than the Company,
its subsidiaries or any employee benefit plan of the Company) (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date") or (ii) ten days following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer if,
upon consummation thereof, such person or group (other than the Company, its
subsidiaries or any employee benefit plan of the Company) would be the
beneficial owner of 15% or more of the outstanding shares of Common Stock (the
earlier of such dates being the "Distribution Date").
In the event that, on or after a Distribution Date, an Acquiring Person
becomes a 15% or more holder, each Right holder, except the Acquiring Person,
has the right to receive, upon exercise at the then current exercise price,
shares of Common Stock (or, under certain circumstances, cash, property or
other Company securities) valued at twice the then applicable exercise price
of the Right. Similarly, on or after the Distribution Date, the Rights may be
exercisable at the then current exercise price for the other party's stock (or
assets) having a value of twice the exercise price if the Company is acquired
in a merger or other business combination where it does not survive or
survives with a change or exchange of its shares of Common Stock or if 50
percent or more of its assets, earning power or cash flow is sold or
transferred. Generally, Rights may be redeemed by the Company for five cents
each prior to the Stock Acquisition Date (subject to extension by the
Company).
The exercise price and the number of units of Series A Junior Preferred
Stock or other securities or property issued upon exercise of the Rights are
subject to adjustment to prevent dilution in the event of (i) a stock
dividend, subdivision, combination or reclassification of the Series A Junior
Preferred Stock, (ii) the grant to Series A Preferred Stockholders of certain
rights or warrants, or (iii) the distribution to Series A Junior Preferred
Stockholders of debt or assets, other than regular quarterly cash dividends,
or of certain rights or warrants. With certain exceptions, no adjustments will
be made until cumulative adjustments equal or exceed a 1% adjustment.
The rights plan exempts from its application any acquisition by an
underwriter for the purpose of resale in a public distribution. The Rights
will attach to shares of Common Stock sold as Offered Securities or delivered
upon conversion or exchange of any convertible or exchangeable Offered
Securities.
PLAN OF DISTRIBUTION
General
The Company may sell the Securities (i) through underwriters or dealers;
(ii) directly to one or more other purchasers; (iii) through agents; or (iv)
to both investors and/or dealers through a specific bidding or auction process
or otherwise. The Prospectus Supplement with respect to the Offered Securities
will set forth the terms of the offering of such Offered Securities, including
the name or names of any underwriters, dealers or agents, the purchase price
of such Offered Securities and the proceeds to the Company from such sale, any
underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts, commissions
or concessions allowed or reallowed or paid to dealers, and any bidding or
auction process. Any initial offering price and any discounts, concessions or
commissions allowed or reallowed or paid to dealers may be changed from time
to time.
If underwriters are used in an offering, the Offered Securities will be
acquired by the underwriters for their own account. The Offered Securities may
be sold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The
19
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Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more of such firms. The specific managing underwriter or underwriters, if
any, will be set forth in the Prospectus Supplement relating to the Offered
Securities together with the members of the underwriting syndicate, if any.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase the Offered Securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all
such Offered Securities if any are purchased.
Offered Securities may be sold directly by the Company or through agents
designated by the Company from time to time. The Prospectus Supplement will
set forth the name of any agent involved in the offer or sale of the Offered
Securities in respect of which the Prospectus Supplement is delivered and any
commissions payable by the Company to such agent. Unless otherwise indicated
in the Prospectus Supplement, any such agent is acting on a best efforts basis
for the period of its appointment.
Any underwriters, dealers, or agents participating in the distribution of
the Offered Securities may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of the Offered Securities
may be deemed to be underwriting discounts and commissions under the
Securities Act. Agents, dealers or underwriters may be entitled, under
agreements entered into with the Company, to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act,
and to contribution with respect to payments which the agents, dealers or
underwriters may be required to make in respect thereof. Agents, dealers and
underwriters may engage in transactions with or perform services for the
Company in the ordinary course of business.
The Offered Securities, other than the Common Stock, will be a new issue or
issues of securities with no established trading market. Any Common Stock
issued by the Company pursuant to this Registration Statement will be listed.
Unless otherwise indicated in a Prospectus Supplement, the Company does not
currently intend to list any Offered Debt Securities on any securities
exchange. No assurance can be given that the underwriters, dealers or agents,
if any, involved in the sale of the Offered Securities will make a market in
such Offered Securities. Whether or not any of the Offered Securities are
listed on a national securities exchange or the underwriters, dealers or
agents, if any, involved in the sale of the Offered Securities make a market
in such Offered Securities, no assurance can be given as to the liquidity of
the trading market for such Offered Securities.
Delayed Delivery Arrangements
If so indicated in the Prospectus Supplement, the Company may authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Offered Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases will be
subject to the approval of the Company. The obligations of any purchaser under
any such contract will be subject to the condition that the purchase of the
Offered Securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject. The underwriters
and such agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon for the
Company by McDermott, Will & Emery, Chicago, Illinois, special securities
counsel for the Company. The Company is advised that McDermott, Will & Emery
attorneys indirectly own 4,400 shares of the Company's Common Stock. Certain
legal matters relating to this offering will be passed upon for the
Underwriters by Mayer, Brown & Platt, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
for the year ended April 30, 1997, have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
20
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$150,000,000
[LOGO OF KELLWOOD COMPANY]
7 7/8% Senior Notes Due 2009
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
Cautionary Note Regarding Forward-Looking Statements...................... S-2
Kellwood Company.......................................................... S-3
The Offering.............................................................. S-5
Use of Proceeds........................................................... S-6
Dividends................................................................. S-6
Capitalization............................................................ S-7
Selected Financial Data................................................... S-8
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... S-10
Business.................................................................. S-18
Description of the Notes.................................................. S-23
Underwriting.............................................................. S-27
Legal Opinions............................................................ S-28
Experts................................................................... S-28
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 3
Use of Proceeds........................................................... 4
Ratio of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................ 4
Description of Common Stock and Preferred Stock........................... 15
Plan of Distribution...................................................... 19
Legal Opinions............................................................ 20
Experts................................................................... 20
</TABLE>
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PROSPECTUS SUPPLEMENT
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Bear, Stearns & Co. Inc.
Banc of America Securities LLC
Banc One Capital Markets, Inc.
Chase Securities Inc.
Lazard Freres & Co. LLC
July 21, 1999
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