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SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C. 20549
FORM 10-K
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM MAY 1, 1999 TO JANUARY 31, 2000
----------- ----------------
COMMISSION FILE NUMBER: 1-7340
KELLWOOD COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-2472410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 KELLWOOD PARKWAY, P.O. BOX 14374, ST. LOUIS, MO 63178
(Address, including Zip Code, of registrant's principal executive offices)
(314) 576-3100
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ----------------------
Common Stock, par value $.01 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
At March 13, 2000, Kellwood Company had 24,568,718 shares of Common
Stock, par value $.01, outstanding. While it is difficult to determine
the number of shares owned by nonaffiliates, the Company estimates that
the aggregate market value of the Common Stock on March 13, 2000 (based
upon the closing price of these shares on the New York Stock Exchange)
held by nonaffiliates was approximately $414,597,000.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
ITEM 1. BUSINESS
(a) Kellwood Company and its subsidiaries (the "Company") manufacture
and market apparel and related soft goods. Kellwood Company was founded
in 1961 as the successor by merger of fifteen independent suppliers to
Sears.
Beginning in 1985, the Company implemented a business strategy to expand
its branded label products, broaden its customer base, increase its
channels of distribution and further develop its global product sourcing
capability. Since 1985, Kellwood has acquired 17 domestic companies.
Following are those acquired since 1993:
Company Name Date of Acquisition
- ----------------------------------------------- -------------------
* Goodman Knitting Co., Inc. July 1993
* Halmode Apparel, Inc. September 1994
* David Dart, Inc. and Force One, Inc. November 1994
* Fritzi California (excluding real estate) December 1998
* Koret, Inc. April 1999
* Biflex International, Inc. January 2000
The companies are principally marketers of branded apparel except for
American Recreation Products, Inc. and Slumberjack, Inc. which are
manufacturers and marketers of branded camping soft goods and Crowntuft
Manufacturing Corp., which is a vertically integrated manufacturer of
chenille robes.
In addition to its domestic acquisitions, in the early 1980's, the
Company acquired Smart Shirts Limited of Hong Kong, a leading shirt and
blouse manufacturer in the Far East. Smart Shirts, since its
acquisition, continued to diversify its manufacturing capabilities from
its principal base of Hong Kong to the People's Republic of China, Sri
Lanka, Saipan and Costa Rica. During fiscal year 1996, the Company shut
down the facilities in Saipan and Costa Rica.
As a result of the above business strategy, the Company has redirected
its focus from primarily the manufacturing of private label apparel and
home fashions for Sears to a marketing-driven emphasis on branded
apparel and related soft goods. The Company's acquisition strategy has
further diversified its customer base and has broadened its channels of
distribution. As a result of these efforts, sales to Sears declined to
7% of total sales in the "Transition Period," compared to 50% in fiscal
year 1985. References to the "Transition Period" throughout this report
refer to the nine month period ended January 31, 2000.
(b) The information required by this Item is set forth on page 30 of
this Form 10-K under the caption "Industry Segment and Geographic Area
Information."
(c) The Company manufactures and markets apparel and other soft goods
products made from cloth or fabric or knitted from yarn. These products
are manufactured primarily domestically and in the Far East.
(i) The Company's products include diversified lines of men's, women's
and children's clothing, sleeping bags, and other soft goods. Products
are mainly sold to retailers under either the Company's or customer's
brands and labels.
(ii) The Company anticipates no significant change in products or new
industry segments, which would require a material investment. However,
business acquisitions within the apparel and related soft goods industry
are continually being considered, and it is anticipated that external
and internal demands will generate increasing requirements for capital.
(iii) The Company purchases the majority of its raw materials directly
from numerous textile mills and yarn producers and converters. The
Company has not experienced difficulty in obtaining raw materials
essential to its business.
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(iv) The Company holds patents covering various aspects of its
products. The Company is a licensee of certain trade names. The
expiration, or invalidation, of any of the patents would not, in the
opinion of management, have a material effect upon the continuation of
business.
(v) Although specific styles are seasonal, the Company's various
product lines are manufactured and sold on a year-round basis. Products
are primarily manufactured and sold prior to each of the principal
retail selling seasons including spring, summer, fall and holiday.
(vi) Consistent with the seasonality of specific product offerings, the
Company carries necessary levels of inventory to meet the anticipated
delivery requirements of its customers.
(vii) Approximately $175 million (11%) of the Company's sales in the
Transition Period were to J.C. Penney, Inc. No other customer accounts
for more than 10% of the Company's revenues. Other information relating
to J.C. Penney, Inc. is set forth on page 29 of this Form 10-K under the
caption "Significant Customers" in the Notes to Consolidated Financial
Statements. The Company's management believes that the relationship
with J.C. Penney will continue into the foreseeable future.
(viii) The Company does not believe that backlog is a meaningful
and material indicator of sales that can be expected for any period.
All of the Company's backlog is expected to be filled within 12 months,
but there can be no assurance that the backlog at any point in time will
translate into sales in any particular subsequent period.
(ix) Government contracts or subcontracts with the Company are not
material.
(x) The Company has substantial competition from numerous
manufacturers and marketers, but accurate statistics relative to the
competitive position of the Company are not available.
(xi) The Company has a continuing program for the purpose of improving
its products and production machinery. The Company is not engaged in
any material customer-sponsored research and development programs.
Approximately $821,000, $248,000 and $359,000 were spent on research and
development activities during the Transition Period and fiscal years
1999 and 1998, respectively.
(xii) In the opinion of management, there will be no material effect on
the Company resulting from compliance with any federal, state or local
provisions which have been enacted or adopted regulating the discharge
of materials into the environment or otherwise relating to the
protection of the environment.
(xiii) At the end of the Transition Period, there were approximately
20,100 people employed by the Company. Substantially all of the work
force is non-union, and the Company considers its relations with its
employees to be satisfactory.
(d) Except for its Smart Shirts operations, the Company's foreign
activities including foreign manufacturing operations and customers have
not been material. The Company owns all of the outstanding shares of
Smart Shirts Limited, a Hong Kong corporation engaged in apparel
manufacturing, and other Asian companies under Smart Shirts' management.
The sales, operating profit, and identifiable assets attributable to
each segment are set forth in this Form 10-K at page 30 under the
caption "Industry Segment and Geographic Area Information" in the Notes
to Consolidated Financial Statements. The risk attendant to the
Company's Smart Shirts operations is slightly greater than that of
domestic operations primarily due to quota allocations and political
instability. Utilization of existing quota rights and diversification
of Smart Shirts manufacturing capacity to various countries help to
mitigate these risks.
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ITEM 2. PROPERTIES
At January 31, 2000, the Company operated 37 production plants and
various distribution facilities. Domestic businesses operated:
* 13 plants in 7 states,
* two plants in the Dominican Republic,
* two plants in Honduras,
* one plant in El Salvador, Mexico, Philippines, Puerto Rico,
and
* three plants in Canada.
As the Company continues to reduce sourcing costs by using its worldwide
network of contractors, the domestic business units now source
approximately 87% of their goods outside of Kellwood operated plants.
Kellwood's domestically managed plants aggregated to approximately 2.1
million square feet. They include the 5 domestic plants scheduled to
close during fiscal 2000 (as discussed in Note 2 to the Consolidated
financial statements on page 21 of this Form 10-K) which aggregate to
approximately 700,000 square feet and are operating at approximately 49%
of capacity at January 31, 2000. The remaining 19 plants aggregate 1.3
million square feet and were operating at an estimated 84% of capacity
at January 31, 2000.
The Company's Smart Shirts subsidiaries operated 13 plants which
aggregated to approximately 954,000 square feet and were operating at an
estimated 90% of capacity. Smart Shirts' subsidiaries manage operations
in Hong Kong, Sri Lanka and China.
As Kellwood's product sourcing continues to shift from products
manufactured in the Company's domestic facilities to foreign-sourced
product, warehousing and distribution facilities assume increasing
importance. The Company's major Warehousing and Distribution facilities
include the following:
* The Kellwood Western Region Distribution Center in the Los
Angeles area. This facility serves as the headquarters for
five divisions in a multi-tiered 630,000 square foot
facility;
* A multi-tiered 880,000 square foot warehouse and distribution
center in Trenton, Tennessee;
* A 294,000 square foot facility in Brockton, Massachusetts;
and
* A 240,000 square foot facility in Roanoke, Virginia.
These facilities are generating new economies of scale in warehousing
and distribution activities while eliminating the redundant costs of
smaller, inefficient facilities.
In management's opinion, current facilities generally are well
maintained and provide adequate production capacity for future
operations. However, management continues to evaluate the need to
reposition the Company's portfolio of businesses and facilities to meet
the needs of the changing markets it serves and reflect the
international business environment.
The Company's operating facilities are primarily leased under long-term
capital leases with renewal options at decreasing rentals. Certain
facilities are leased under operating leases that generally contain
renewal options. The Company also leases its corporate space in St.
Louis County, Missouri and major showrooms in New York City, New York;
Atlanta, Georgia; Dallas, Texas; and Los Angeles, California.
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in several routine lawsuits incidental to the
Company's business. Management and general counsel are of the opinion
that the ultimate disposition of the litigation should have no material
adverse effect on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SEURITY HOLDER MATTERS
Common stock of Kellwood Company is traded on the New York Stock
Exchange, tickler symbol KWD. At March 13, 2000, there were
approximately 1,424 shareowners of record and 2,858 shareowners in the
Dividend Reinvestment Plan. The current annual dividend rate per year
is $.64.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item 6 is located on page 32 of this
Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL REVIEW ($ IN MILLIONS EXCEPT PER SHARE DATA)
The following discussion is a summary of the key factors management
considers necessary in reviewing the Company's results of operations,
liquidity, capital resources and operating segment results. This
discussion should be read in conjunction with the Consolidated Financial
Statements and related notes.
RESULTS OF OPERATIONS
- ---------------------
OVERVIEW
- --------
Sales for the nine months ended January 31, 2000 increased 3% to a
record $1,565 from $1,523 in the comparable nine-month period in the
prior year. Net earnings of $41 ($1.48 per diluted share) were up 24%
vs. $33.0 ($1.20 per share) last year. Reported results for all periods
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.
SEASONALITY: Kellwood's businesses are quite seasonal. The Company
generally sells its products prior to the principal retail selling
seasons: spring, summer, fall, and holiday. Sales and earnings for the
quarter ended April 30 have historically been higher than for the other
quarters of the fiscal year. In recent years the April quarter's
results represented approximately 30% of the year's sales and gross
profit and over 40% of net earnings before unusual items.
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NET SALES, OPERATING EARNINGS, AND EARNINGS BEFORE UNUSUAL ITEMS
- ----------------------------------------------------------------
TRANSITION PERIOD (NINE MONTHS ENDED JANUARY 31, 2000) VS. PRIOR YEAR
- ---------------------------------------------------------------------
In August 1999, the Company changed its fiscal year-end from April 30 to
January 31 to bring Kellwood more in line with the operating cycle of
our business and the fiscal year-ends of our customers and other apparel
companies. We have decided to identify the twelve-month period ending
January 31, 2001 as "fiscal 2000" in keeping with the custom of many
retail and apparel companies. Summarized comparative financial data for
the nine-month Transition Period ended January 31, 2000 and the nine
months ended January 31, 1999 (including Koret), are as follows
(percentages are calculated based on actual data, but columns may not
add due to rounding):
<TABLE>
<CAPTION>
Nine months ended
January 31 % of Sales
------------------- % change ------------------
2000 1999<F*> 99-00 2000 1999
------ -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Net Sales $1,565 $1,523 2.8% 100.0% 100.0%
Cost of products sold 1,238 1,200 3.1% 79.1% 78.8%
S, G & A 234 227 3.2% 15.0% 14.9%
------ ------ ------ ------ ------
Operating earnings 93 95 -2.2% 6.0% 6.3%
Amortization of intangibles 5 12 -58.2% .3% .8%
Interest expense 23 26 -12.3% 1.4% 1.7%
Interest income & other (3) - n/a -.2% -
Koret merger costs - 1 - - .1%
------ ------ ------ ------ ------
Earnings before tax 69 57 21.0% 4.4% 3.7%
Income Taxes 28 24 16.4% 1.8% 1.6%
------ ------ ------ ------ ------
Net Earnings $ 41 $ 33 24.4% 2.6% 2.2%
====== ====== ====== ====== ======
Income Tax rate 40.2% 41.8%
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<FN>
<F*> - Unaudited.
</TABLE>
SALES increased 3% in the nine-month Transition Period ended January 31,
2000 compared to the comparable period in the prior year. Sales
benefited from:
- Double-digit growth in contemporary/updated brands including
Ivy(R), David Dart(R), Melrose(R), Vintage Blue(TM), Bice(R),
David Meister(TM) and My Michelle(R);
- Strong growth in dresses including Kathie Lee(R), Studio Ease(R),
M.H.M.(R) and Sag Harbor(R) dresses;
- The acquisition of Fritzi and Biflex which added $70 more in sales
during the Transition Period as compared to the prior year;
- Continued growth in the men's shirt business through increased
capacity and expanded private label programs; and
- Growth in the recreation products business as a result of the
introduction of new products and product lines to leverage
brand equity.
These developments were partially offset by a change in fashion
direction away from some of Kellwood's traditional-styled structured
blazers and other garments to more contemporary softer looks. This
shift from heavier weight fabrics and structured garments to less
expensive lighter weight garments also resulted in lower unit selling
prices. Other factors negatively impacting sales in the Transition
Period included continued weak demand for private label outerwear and
basic denim jeans, and delivery problems in the January quarter with a
number of contractors, primarily in Mexico.
COST OF PRODUCTS SOLD as a percent of sales increased to 79.1% in the
Transition Period compared to the prior year level of 78.8%. Improved
sourcing and savings generated from the Vision 2000 supplier management
initiative and improved margins at Smart Shirts worked to lower the cost
of products sold as a percent of sales. These improvements were offset
by the impact of the startup of the new distribution center in Trenton,
Tennessee, the startup of a new plant in Mexico, and the phasing out of
most of our domestic sewing operations which resulted in unabsorbed
burden and labor inefficiency. In addition, late deliveries in the
January quarter resulting from the contractor problems discussed above
caused higher mark downs and freight costs which exerted upward pressure
on cost of products sold as a percent of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (S,G&A) in the Transition
Period increased generally in line with sales. The acquisition of
Fritzi in December 1998 and start-up costs for the Slates(R) line also
added modestly to S,G&A.
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OPERATING EARNINGS (defined as net sales less cost of products sold and
S,G&A) declined to 6.0% of sales from 6.3% in the prior year as a result
of the changes in cost of products sold margin and S,G&A margin
discussed above.
INTEREST EXPENSE decreased $2.6 in the Transition Period compared to the
comparable period in the prior year. This was due primarily to the
decrease in average debt as a result of better working capital
management. Lower average interest rates on short-term debt
(principally due to the replacement of Koret's factor borrowings with
borrowings at the lower Kellwood rates) also decreased interest expense
by approximately $1.7. These factors were partially offset by the $1.1
of additional interest expense due to the issuance of the 7.875%
debentures in July 1999.
OTHER INCOME for the Transition Period included $2 (pretax; $1.2 after-
tax) of unusual non-recurring financial items including a gain on the
sale of a building.
THE EFFECTIVE TAX RATE declined to 40.2% in the Transition Period
compared to 41.8% during the comparable period in the prior year. This
was due primarily to the reduction of goodwill amortization as a result
of the goodwill impairment charge taken in the fourth quarter of 1999.
1999 VS. 1998
- -------------
Summarized comparative financial data for 1999 and 1998, with historical
results for 1998 revised to include Koret, are as follows (percentages
are calculated based on actual data, but columns may not add due to
rounding):
<TABLE>
<CAPTION>
Year ended
April 30, % of Sales
------------------ % change ------------------
1999 1998 98-99 1999 1998
------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C>
Net Sales $2,151 $2,094 2.7% 100.0% 100.0%
Cost of products sold 1,685 1,655 1.8% 78.3% 79.0%
S, G & A 315 301 4.8% 14.6% 14.4%
------ ------ ----- ------ ------
Operating earnings 151 138 8.9% 7.0% 6.6%
Amortization of intangibles 16 17 -4.3% .7% .8%
Interest, net & other 33 34 -2.5% 1.6% 1.6%
Koret merger costs 7 -
Facilities shut-down 7 -
Goodwill impairment 49 -
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Earnings before tax 39<F*> 88
Income Taxes 37 38
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Net Earnings $ 2<F*> $ 50
====== ======
Income Tax rate 95% 43%
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<FN>
<F*>- 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).
</TABLE>
SALES increased 3% in fiscal 1999 after increasing 17% in 1998 vs. the
prior year. Fiscal 1999 sales benefited from:
- The continued growth of the Sag Harbor(R) line including the new
Sag Harbor(R) Sport weekendwear;
- The acquisition of Fritzi which added $48 in sales during the
third and fourth quarters;
- The Studio Ease(R) line of casual dresses sold to department
stores;
- Private label intimate apparel programs with major discounters and
national chains; and
- Continued growth in the men's shirt business through private label
programs.
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These developments were partially offset by:
- Decreases of approximately $93 related to exiting certain
businesses, including Counterparts (a division of Koret),
Brittania(R) pants, and a nurse's uniforms and a maternitywear
business;
- Disappointing 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.
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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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (S,G&A) in fiscal 1999
increased $14 million or 4.8% to $315 (14.6% of sales) as compared to
$301 (14.4%) in fiscal 1998. 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.
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. 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 EFFECTIVE TAX RATE for 1999 of 95% was a consequence primarily of
the non-deductible Goodwill impairment charge or $48.9 and non-
deductible Koret merger costs of $2.4.
SEGMENT RESULTS:
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Sales and Operating Earnings by Segment for the nine-month Transition
Period ended January 31, 2000 and for the comparable period in the prior
year as well as for the years ended April 30, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
Nine months ended year ended % change
January 31, April 30, ---------------------
------------------ ------------------ 9 months 12 months
Net sales 2000 1999 1999 1998 99-2000 98-99
--------- ------ ------ ------ ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Popular-to-Moderate $ 993 $ 961 $1,382 $1,296 3.3% 6.6%
Better-to-Bridge 104 123 167 198 (15.6%) (15.5%)
Private Label Apparel 204 197 256 289 3.6% (11.5%)
Smart Shirts 169 154 203 173 9.3% 17.0%
Recreation Products 96 87 144 138 10.0% 4.2%
------ ------ ------ ------ ------ ------
Kellwood total $1,565 $1,523 $2,151 $2,094 2.8% 2.7%
====== ====== ====== ====== ====== ======
<CAPTION>
Nine months ended year ended % change
January 31, April 30, ---------------------
------------------ ------------------ 9 months 12 months
Operating earnings 2000 1999 1999 1998 99-2000 98-99
------------------ ------ ------ ------ ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Popular-to-Moderate $ 70.8 $ 75.7 $123.2 $105.2 (6.5%) 17.1%
Better-to-Bridge (1.4) 2.0 4.5 5.4 nmf (16.7%)
Private Label Apparel 17.6 22.4 28.1 34.2 (21.5%) (17.9%)
Smart Shirts 18.2 12.9 16.6 14.8 41.0% 12.7%
Recreation Products 4.8 4.8 11.5 10.5 (.3%) 9.4%
------ ------ ------ ------ ------ ------
Total segment
operating earnings $110.0 $117.9 $183.9 $170.1 (2.2%) 8.1%
====== ====== ====== ====== ====== ======
</TABLE>
POPULAR-TO-MODERATE. Sales of this segment were up 3% for the nine-
month Transition Period as compared to the prior year. The Transition
Period included the benefit of a $67 increase in sales of Fritzi, which
was acquired in December 1998. This increase was partially offset by
the fashion shift away from traditional wool and constructed garments to
lighter weight less constructed and therefore less expensive garments.
Consolidations at retail, the repositioning of certain brands, and
contractor delivery problems in the January quarter (primarily in
Mexico) also exerted downward pressure on sales. Operating earnings
(defined as net sales less cost of products sold and selling, general
and administrative expenses) declined to 7.1% in the Transition Period
from 7.9% in the prior year. Pressure on operating earnings margin came
as a result of the shift to less expensive lighter weight garments as
well as the continuing competitive environment at retail and additional
mark-down expenses required by the contractor delivery problems
discussed above.
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The acquisition of Fritzi in the third quarter of fiscal 1999 added $48
to sales for the year ended April 30, 1999 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 (a
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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 business, and improved sourcing of Koret
products.
BETTER-TO-BRIDGE. The Better-to-Bridge Women's Sportswear business
continues to struggle. Sales, which were planned down, declined 16% in
the Transition Period from the prior year. Kellwood's new Perry
Ellis(R) and Burns lines are expected to attract a more contemporary,
younger customer and increase department store penetration for this
segment. Other marketing and merchandising initiatives are underway to
address styling issues and lost market share in our better category
brands in this segment. Additionally, some office, warehousing and
distribution functions have been consolidated to reduce overhead.
Segment sales declined 16% in 1999, and operating earnings margin
remained constant at 2.7% in 1998 and 1999.
PRIVATE LABEL. Private Label sales in the Transition Period were up 4%
vs. the prior year. Sales increased primarily as a result of the
introduction of the new Slates(R) line of woven and knit shirts,
sweaters and outerwear. This improvement was partially offset by
reduced outerwear shipments, lower sales of activewear to the major
footwear companies, and reduced sales of nightwear. Operating earnings
declined due to start-up spending for the launch of the Slates(R) line,
the start-up of a new lingerie facility in Mexico, as well as unabsorbed
burden and lower productivity as certain domestic manufacturing plants
scheduled to be closed are wound-down.
Sales for fiscal 1999 year were down 12% due to weak demand for private
label outerwear and basic denim jeans. Operating earnings margins in the
Private Label segment declined to 11.0% in 1999 from 11.8% in 1998 due
to the impact of the eliminated Brittania business in 1998.
SMART SHIRTS. Smart Shirts sales were up 9.3% due to increased business
with department stores, specialty stores and catalog houses. Smart
Shirts also expanded its knit shirt capability by implementing
contractor and joint venture arrangements in the Philippines and other
countries. Operating earnings margins improved to 10.8% in the
Transition Period from 8.4% in the prior year due to the resolution of
Sri Lankan quota constraints which had caused Smart Shirts to incur
additional air freight and temporary quota expenses in the prior year.
Sales were up 17.0% in 1999 and 13.1% 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. Operating profit margins
at Smart remained stable at 8.2% in 1999 and 8.5% in 1998.
RECREATION PRODUCTS. Recreation Products reported a 10% increase in
sales as a result of strong demand for new products and a new line of
sleeping bags and outerwear as well as a growing international business.
The segment's operating earnings margin declined slightly as compared to
the prior year as a result of higher S,G&A spending related to the
launch of several new products including child carriers, apparel,
camping furniture and travel gear.
Recreation Products sales were up 4% in 1999 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.
UNUSUAL ITEMS
- -------------
THE KORET MERGER. Effective April 30, 1999 the Company completed a
merger with Koret, Inc. (Koret), issuing approximately 5.2 million
shares of Kellwood common stock in exchange for all of the outstanding
shares and options of Koret. The transaction was accounted for as a
pooling-of-interests. Accordingly, the consolidated financial
statements and this Management's Discussion and Analysis give
retroactive effect to the Merger with all periods presented as if the
two companies had always been combined. One-time costs of the Koret
merger ($6.6) decreased 1999 reported earnings per share by $.18.
RESTRUCTURING AND PROVISION FOR GOODWILL IMPAIRMENT. As part of its
Vision 2000 program, Kellwood developed and began implementing a plan to
reorganize and restructure several operating units that were
experiencing operating losses or performing below expectations. Key
components of the plan include the consolidation of similar types of
operating units, relocation and consolidation of distribution facilities
in the northeast, midwest and west coast, and
9
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elimination of redundancies between operating units. These activities
are currently in process and will continue through fiscal 2000.
During fiscal 1999, Kellwood closed a number of its domestic
manufacturing facilities as their work was transferred to Kellwood
facilities in Mexico, the Caribbean and Central America and the
Company's network of contractors around the world. These moves, in
concert with certain other planned plant closings scheduled to be
completed in fiscal 2000, will enhance Kellwood's cost competitiveness
and sourcing flexibility in fiscal 2000 and beyond. These plant
closures and the related shift in manufacturing to offshore contractors
relate primarily to the Private Label segment and are not expected to
impact future sales. Cost reductions resulting from these moves will
have a minimal impact on margins, as it is expected to be necessary to
pass much of the savings on to customers in order to retain these
businesses. These activities are currently in process and will continue
through fiscal 2000. In connection with this restructuring, in the
fourth quarter of 1999 the Company recorded a provision for facilities
shut-down of $6.8 (pretax). This provision consisted of termination
benefits of $4, vacant facilities costs of $1.4, other cash costs of
$.3, and non-cash charges of $1.1. The non-cash charges represent
primarily a write-down of obsolete or abandoned fixed assets to their
net realizable value. Of the total non-cash provision of $5.6, $.5 was
paid during fiscal 1999. The total provision of $6.8 reduced 1999 net
earnings and earnings per diluted share by $3.9 and $.14, respectively.
A summary of activity during the Transition Period related to this
provision and the remaining accrual at January 31, 2000 is included in
the financial statements at Note 2.
As a consequence of the changes discussed above and changing market
conditions, Kellwood conducted a review and analysis of the projected
cash flows for certain underperforming operating units and assessed the
reliability of the carrying value of the intangible assets of these
units. During the fourth quarter of fiscal 1999 the Company completed
this review and identified an impairment of $48.9, primarily related to
business units in the Better-to-Bridge segment. The provision for this
impairment reduced 1999 net earnings and earnings per diluted share by
$48.9 and $1.77, respectively for the year.
FINANCIAL CONDITION
- -------------------
Cash flow from operations is the Company's primary source of liquidity.
Kellwood uses financial leverage to minimize the overall cost of capital
and maintain adequate operating and financial flexibility. Management
monitors leverage through its debt-to-capital ratio. Working capital
management is monitored primarily by analysis of the Company's
investment in accounts receivable and inventories.
LEVERAGE. Kellwood's debt-to-capital ratio was 44.8% at January 31,
2000, approximately equal to the 44.9% as of January 31, 1999. This was
in spite of capital spending of $23, the acquisition of Biflex, $30
spent during the Transition Period on the stock buyback program, and a
$58 reduction in equity resulting from the unusual charges taken in the
fourth quarter of fiscal 1999 discussed above. These investments were
financed by better performance in the management of working capital in
addition to operating earnings and other sources of cash flow, allowing
the company to maintain the financial flexibility inherent in a 45%
leverage ratio.
WORKING CAPITAL. The Company's working capital requirement for
inventories and receivables is 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 increased to 3.3 to 1 at January 31, 2000 vs. 2.4 to 1
at April 30, 1999 and at January 31, 1999, largely as a result of the
refinancing of short-term debt by the July 1999 issuance of the 10-year
debentures discussed below.
Accounts receivable increased $47 (17%) vs. January 31, 1999,
significantly ahead of the 3% increase in sales. This increase was due
principally to the inclusion of $29 of Koret receivables in the January
31, 2000 balance sheet (compared to $0 at January 31, 1999) as a result
of Kellwood's debt capacity replacing the factor borrowing previously
used by Koret. The acquisition of Biflex in January 2000 also
contributed modestly to the increase in accounts receivable.
Inventory levels declined $21 (20%) to $395 at January 31, 2000 compared
to $416 at January 31, 1999 as a result of improved working capital
management. Sales, however, for the next three months are forecast up
5% vs. last
10
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year. Overall, the Company now has only 64 days supply in inventory, a
10-day improvement compared to the comparable period in the prior year.
INVESTING ACTIVITIES. Capital spending was $23 for the nine-month
Transition Period, $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 the coming year is planned to be in the $30 range.
About half of this is to be invested in computer hardware and software
projects (including additional investments in the IBS, and purchase and
modification of a Warehouse Management System), and the other half is to
be invested in new domestic warehousing and distribution facilities, new
in-store shops and selling facilities, and manufacturing facilities in
Asia.
On January 4, 2000 the Company purchased Biflex International, Inc.
(Biflex), including intangible assets of $12.4. The purchase price
included cash of $29.0 and the assumption of certain liabilities
totaling $9.7. The transaction was accounted for as a purchase.
In the third quarter of fiscal 1999 the Company purchased substantially
all of the non-real estate assets of Fritzi. The purchase price included
0.84 million shares of Kellwood common stock valued at $22.3 and the
assumption of certain liabilities totaling $14.5. The transaction was
accounted for as a purchase.
FINANCING ACTIVITIES. Long-term financings are arranged as necessary to
meet the Company's anticipated capital requirements, with the timing,
principal amount and terms depending on the prevailing securities
markets generally and the market for the Company's debt in particular.
In July 1999 the Company completed a 10-year public debt offering
totaling $150. These debentures carry a 7.875% coupon rate. They
received investment grade ratings from Moody's and S&P of Baa3/BBB.
In January 2000 the Company entered into an interest rate swap agreement
with a bank to convert the interest rate on $150 of 7.875% debentures
from fixed to variable. In connection with this transaction, the
Company also entered into an option agreement, which entitles the bank
to effectively cancel this interest rate swap agreement on January 15,
2001. As consideration for these agreements the Company received a
payment of $3.3 which is recorded as a deferred option premium at
January 31, 2000; these agreements are being marked to market and did
not have a material impact on the results of operations of the Company
from the date of execution through January 31, 2000.
* The Company expects the bank to exercise its option to cancel the
swap if fixed swap rates are lower on the cancellation date than
7.32%. If the option is exercised to cancel the swap, Kellwood will
retain the entire $3.3 deferred option premium, and the Company will
continue to pay the fixed coupon rate on the related debt. In this
case, excluding the impact of any acquisitions during the upcoming
year, the Company would have approximately 1% of debt at floating
interest rates at January 31, 2001 as compared to the Company's
objective of approximately 50%.
* If the option is not exercised on January 15, 2001, the interest
rate swap will remain in effect, and the Company will continue to pay
interest on the $150 notional amount of the swap at variable rates
based on LIBOR through July 15, 2009. If the option is not
exercised, the swap would have the effect of converting $150 of
debentures to variable rates at 56 basis points above six-month
LIBOR. In this case, excluding the impact of any acquisitions during
the upcoming year, the Company would have approximately 45% of debt
at floating interest rates at January 31, 2001 as compared to the
Company's objective of approximately 50%.
The Company maintains informal, uncommitted lines of credit with several
banks, which totaled $140 at January 31, 2000. There were no
outstanding borrowings under these uncommitted lines at January 31,
2000.
Kellwood maintains a three-year $350 committed bank credit facility to
ensure the liquidity necessary to support planned internal growth as
well as to provide the capacity for additional acquisitions. Management
believes that the combined operating, cash and equity position of the
Company will continue to provide the capital flexibility necessary to
fund future opportunities and to meet existing obligations.
11
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On November 23, 1999 the Board of Directors authorized the Company to
repurchase up to ten percent of the outstanding shares of its Common
Stock (up to approximately 2.8 million shares) in the open market or
through privately negotiated transactions at management's discretion and
depending on market conditions. Pursuant to this authorization, on
December 9, 1999 the Company purchased 1.68 million shares through a
privately negotiated transaction with an institutional holder at $18.00
per share, which was below the market price. Additionally, during
February 2000 the Company purchased 1.11 million shares in open market
transactions at an average price of $16.32 per share, completing the
buyback authorized by this authorization.
On March 2, 2000 the Board of Directors authorized the Company to
repurchase up to ten percent of the outstanding shares of its Common
Stock (up to approximately 2.5 million shares) in the open market or
through privately negotiated transactions at management's discretion and
depending on market conditions. Purchases will be financed out of the
Company's cash resources. As of March 28, 2000 the Company had
purchased 1.17 million shares pursuant to this authorization at an
average cost of $17.07 per share. As discussed in Note 6 to the
financial statements, certain debt covenants may limit purchases under
this authorization.
MARKET RISK SENSITIVITY AND INFLATION RISKS
- -------------------------------------------
FOREIGN CURRENCY RISK. The company does not believe that it has
significant foreign currency transactional exposures. The impact of a
ten percent unfavorable change in the exchange rate of the U.S. dollar
against the prevailing market rates of the foreign currencies in which
the Company does have transactional exposures would be immaterial.
INTEREST RATE RISK. Interest rate risk is managed through the
maintenance of a portfolio of variable- and fixed-rate debt composed of
short-and long-term instruments. The objective is to maintain a cost-
effective mix that management deems appropriate. At January 31, 2000,
the Company's debt portfolio was composed of approximately 43% variable-
rate debt (including the amount of debt subject to the swap and option
discussed above) and 57% fixed-rate debt. Kellwood's strategy regarding
management of its exposure to interest rate fluctuations did not change
significantly during the Transition Period. Except for the outcome of
the option to cancel the interest rate swap discussed above, management
does not expect any significant changes in its exposure to interest rate
fluctuations or in how such exposure is managed the coming year.
Various financial instruments issued by the Company are sensitive to
changes in interest rates. Market interest rate changes would result in
increases or decreases in the market value of the Company's fixed-rate
debt. With respect to the Company's fixed-rate debt outstanding at
January 31, 2000, a 10% increase in interest rates would have resulted
in approximately an $11 decrease in the market value of Kellwood's
fixed-rate debt; a 10% decrease in interest rates would have resulted in
approximately a $20 increase in the market value of Kellwood's fixed-
rate debt. With respect to the Company's variable-rate debt, a 10%
change in interest rates would have had an immaterial impact on the
Company's interest expense for the Transition Period.
COMMODITY PRICE RISK. Kellwood is subject to commodity price risk
arising from price fluctuations in the market prices of sourced garments
or the various raw materials that comprise its manufactured products
(synthetic fabrics, woolens, denim, etc.). The Company is subject to
commodity price risk to the extent that any fluctuations in the market
prices of its purchased garments and raw materials are not reflected by
adjustments in selling prices of its products or if such adjustments
significantly trail changes in these costs. Kellwood does not use
derivative instruments in the management of these risks.
INFLATION RISK. Kellwood's inflation risks are managed by each business
unit through selective price increases when possible, productivity
improvements, and cost-containment measures. Management does not
believe that inflation risk is material to the Company's business or its
consolidated financial position, results of operations or cash flows.
OUTLOOK AS OF APRIL 13, 2000
- ----------------------------
CHANGE IN THE FISCAL YEAR FROM APRIL 30 TO JANUARY 31, 2000. In August
1999, the Company changed its fiscal year-end from April 30 to January
31 to bring Kellwood more in line with the operating cycle of our
business and the fiscal year-ends of our customers and other apparel
companies. We have decided to identify the twelve-month period ending
January 31, 2001 as "fiscal 2000" in keeping with the custom of many
retail and apparel companies.
12
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As we address the outlook for fiscal 2000, management will change the
way the company's results are reported and analyzed. In the past the
Company was managed, and results were reported, by the five business
segments: Popular-to-moderately-priced women's sportswear, Better-to-bridge
priced women's sportswear, Private Label apparel, Smart Shirts, and
Recreation products. Going forward, the Company will be focusing on three
business segments:
* Women's Sportswear;
* Men's Sportswear; and
* Other soft goods (which will include the intimate apparel and
recreation products business units).
Management expects Kellwood's sales in the first half of fiscal 2000 to
be up approximately 5%, with growth picking up in the second half as a
result of the introduction of new product lines and brands; sales for
the year are expected to be up approximately 6-7%. Operating earnings
margins for fiscal 2000 are expected to be approximately 7% for the
year, and the income tax rate is expected to be approximately 40%.
CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS
- -----------------------------------------------------------------
This Annual Report contains statements which, to the extent they are not
statements of historical or present fact, constitute "forward-looking
statements" within the meaning of the Securities Act of 1933, the
Securities Exchange Act of 1934, and the Private Securities Litigation
Reform Act of 1995. These forward-looking statements represent the
Company's expectations or beliefs concerning future events and are based
on various assumptions and subject to a wide variety of risks and
uncertainties. Although the Company believes that its expectations
reflected in the forward-looking statements are reasonable, it cannot
and does not give any assurance that such expectations will prove to be
correct.
The Company's forward-looking statements are based on certain
assumptions, and the Company's operations are subject to various risks
and uncertainties. Any one of these factors or any combination of these
factors could materially affect the results of the Company's operations
and cause actual results to differ materially from the Company's
expectations. These factors include but are not limited to:
* changes in trends in the market segments in which the Company
competes;
* the performance of the Company's products within the prevailing
retail environment;
* customer acceptance of both new designs and newly introduced
product lines;
* actions of competitors that may impact the Company's business;
* financial difficulties encountered by customers;
* the impact of economic changes such as:
* the overall level of consumer spending for apparel,
* national and regional economic conditions,
* inflation or deflation,
* currency exchange fluctuations, and
* changes in interest rates and other capital market conditions;
13
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<PAGE>
* the timing and magnitude of spending on and savings realized from
our Vision 2000 initiative;
* stable governments and business conditions in the nations where
the Company's products are manufactured;
* the scope, nature or impact of acquisition activity; and
* changes in the Company's plans, strategies, objectives,
expectations and intentions that may happen at any time at the
discretion of the Company.
The reader is also directed to the Company's periodic filings with the
Securities and Exchange Commission for additional factors that may
impact the Company's results of operations and financial condition.
The words "believe", "expect", "will", "estimate", "project",
"forecast", "should", "anticipate" and similar expressions may identify
forward-looking statements. Additionally, all statements other than
statements of historical facts included in this Form 10-K including
without limitation, the statements under "Financial Review" and
"Outlook", are also forward-looking statements.
Forward-looking statements are not guarantees, as actual results could
differ materially from those expressed or implied in forward-looking
statements. The Company specifically disclaims any obligation to
publicly update, modify, retract or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. All forward-looking statements contained herein, the entire
contents of the Company's website, and all subsequent written and oral
forward-looking statements attributable to the Company or persons acting
on its behalf, are expressly qualified in their entirety by this
cautionary statement.
YEAR 2000 ISSUE
- ---------------
In July 1996 the Company outsourced its Information Systems function to
Electronic Data Systems Corporation (EDS). Together, EDS and Kellwood
employees completed an assessment and implemented plans to make key
operational and financial systems year 2000 compliant and to ensure
uninterrupted functionality through the year 2000. The Company also
completed its assessment of its year 2000 risks related to key trading
partners such as customers, suppliers, banks, and shipping companies.
The Company is monitoring the situation and believes its year 2000 plans
were successfully implemented. As a result, there were no significant
year 2000-related problems, and the Company does not anticipate that any
significant year 2000-related problems will occur in the future.
Kellwood's cost of remediation and replacement of non-year 2000
compliant systems was approximately $3. The Company utilized cash flow
from operations to fund year 2000 expenditures.
14
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORTS OF MANAGEMENT AND INDEPENDENT ACCOUNTANTS
REPORT OF MANAGEMENT
- --------------------
The management of Kellwood Company is responsible for the fair
presentation of the financial statements and other financial information
included in this report. The financial statements have been prepared in
conformity with generally accepted accounting principles applying
estimates and management's best judgments as required to present fairly
Kellwood Company's financial position, results of operations and cash
flows.
The accounting systems and internal accounting controls of Kellwood are
designed to provide reasonable assurance that the financial records are
reliable for preparing financial statements and maintaining accountability
for assets and that, in all material respects, assets are safeguarded
against loss from unauthorized use or disposition. Qualified personnel
throughout the organization maintain and monitor these internal accounting
controls on an ongoing basis, and internal auditors systematically review
the adequacy and effectiveness of the controls. PricewaterhouseCoopers LLP
also studies and evaluates internal controls for the purpose of establishing
a basis for reliance thereon relative to the scope of their audits of the
financial statements. It is management's opinion that the Company has an
effective system of internal accounting controls.
The Board of Directors, through its Audit Committee consisting solely of
non-management directors, meets periodically with management, the
internal auditors and PricewaterhouseCoopers LLP to discuss audit and
financial reporting matters. Both the internal auditors and
PricewaterhouseCoopers LLP have direct access to the Audit Committee.
Hal J. Upbin
Chairman, President and Chief Executive Officer
Gerald M. Chaney
Chief Financial Officer
- ---------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, of cash flows and of
shareowners' equity present fairly, in all material respects, the
financial position of Kellwood Company and its subsidiaries at January
31, 2000 and at April 30, 1999, and the results of their operations and
their cash flows for the nine months ended January 31, 2000 and for each
of the two years in the period ended April 30, 1999, in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of Kellwood's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in
the United States which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
St. Louis, Missouri
March 1, 2000
15
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<CAPTION>
(Dollars in thousands except per share data)
- -----------------------------------------------------------------------------------------------
NINE MONTHS Year ended April 30,
ENDED -------------------------
JANUARY 31, 2000 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $1,565,261 $2,151,147 $2,094,389
Costs and Expenses:
Cost of products sold 1,237,683 1,685,281 1,655,370
Selling, general and administrative expenses 234,346 315,139 300,601
Amortization of intangible assets 4,865 15,855 16,562
Interest expense 22,654 33,883 35,142
Interest income and other, net (2,887) (502) (920)
Costs of Koret merger - 6,600 -
Provision for facilities shut-down - 6,793 -
Provision for Goodwill impairment - 48,945 -
---------- ---------- ----------
Earnings Before Income Taxes 68,600 39,153 87,634
Income Taxes 27,600 37,200 37,500
---------- ---------- ----------
Net Earnings $ 41,000 $ 1,953 $ 50,134
========== ========== ==========
Earnings Per Share:
Basic $ 1.49 $ .07 $ 1.92
========== ========== ==========
Diluted $ 1.48 $ .07 $ 1.85
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
16
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
(Dollars in thousands except per share data)
- -----------------------------------------------------------------------------------------------
AS OF
- -----------------------------------------------------------------------------------------------
JANUARY 31, 2000 April 30, 1999
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash, including time deposits of $41,067 ($19,216 in 1999) $ 54,501 $ 25,482
Receivables, net 326,868 392,628
Inventories 394,988 340,778
Prepaid taxes and expenses 47,921 38,392
---------- ----------
Total Current Assets 824,278 797,280
Property, Plant and Equipment 253,524 252,286
Less accumulated depreciation and amortization (149,850) (149,988)
---------- ----------
Property, Plant and Equipment, net 103,674 102,298
Intangible Assets, net 68,220 60,207
Other Assets 101,681 94,427
---------- ----------
Total Assets $1,097,853 $1,054,212
========== ==========
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 10,992 $ 16,504
Notes payable 4,083 93,963
Accounts payable 151,637 117,014
Accrued expenses 81,446 104,264
---------- ----------
Total Current Liabilities 248,158 331,745
Long-Term Debt 346,479 227,659
Deferred Income Taxes and Other 57,346 48,620
Shareowners' Equity:
Common stock, par value $.01 per share, authorized
50,000,000 shares; issued and outstanding 26,173,218
shares (27,737,032 in 1999) 166,312 163,097
Retained earnings 361,000 333,340
Accumulated other comprehensive income (9,378) (9,330)
---------- ----------
517,934 487,107
Less treasury stock, at cost (72,064) (40,919)
---------- ----------
Total shareowners' equity 445,870 446,188
---------- ----------
Total Liabilities and Shareowners' Equity $1,097,853 $1,054,212
========== ==========
See notes to consolidated financial statements.
</TABLE>
17
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(Dollars in thousands)
- -------------------------------------------------------------------------------------------------------
NINE MONTHS Year ended April 30,
ENDED -----------------------
JANUARY 31, 2000 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 41,000 $ 1,953 $ 50,134
Add (deduct) items not affecting operating cash flows:
Depreciation and amortization 19,106 33,358 33,727
Increase in prepaid pension costs (4,326) (4,780) (7,860)
Deferred income taxes 10,330 (4,790) (2,031)
Non-cash portion of facilities shut-down provision - 1,146 -
Provision for goodwill impairment - 48,945 -
Other (3,584) 2,307 3,903
Changes in working capital components:
Receivables, net 72,475 (49,224) (54,378)
Inventories (36,139) 101,553 (78,066)
Prepaid expenses (9,188) 3,397 (6,134)
Accounts payable and accrued expenses 6,527 (2,397) (7,202)
-------- -------- --------
Net cash provided by (used for) operating activities 96,201 131,468 (67,907)
-------- -------- --------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (22,819) (51,472) (21,640)
Investment in subsidiaries (84) (4,892) (6,810)
Acquisitions (28,983) - -
Dispositions of fixed assets 7,225 - -
Other investing activities (31) 7,667 417
-------- -------- --------
Net cash (used for) investing activities (44,692) (48,697) (28,033)
-------- -------- --------
FINANCING ACTIVITIES:
Net proceeds from (reduction of) notes payable (94,255) (50,680) (17,393)
Proceeds from issuance of long-term debt 149,207 - 148,327
Reduction of long-term debt (35,899) (28,278) (20,333)
Stock transactions under incentive plans 1,971 5,928 7,609
Purchase of treasury stock (30,174) - -
Dividends paid (13,340) (13,970) (13,698)
-------- -------- --------
Net cash provided by (used for) financing activities (22,490) (87,000) 104,512
-------- -------- --------
Net increase (decrease) in cash and time deposits 29,019 (4,229) 8,572
Cash and time deposits - beginning of year 25,482 29,711 21,139
-------- -------- --------
Cash and time deposits - end of year $ 54,501 $ 25,482 $ 29,711
======== ======== ========
Supplemental cash flow information:
Interest paid $ 20,422 $ 34,361 $ 35,360
Income taxes paid 37,108 42,708 41,275
Significant non-cash investing and financing activities:
Issuance of stock for the acquisition of Fritzi - $ 22,340 -
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
18
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<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
<CAPTION>
(Dollars in thousands except per share data)
- ------------------------------------------------------------------------------------------------------------------------
Accumulated Total
Common Stock Treasury Other Compre-
---------------------- Stock Retained Comprehensive hensive
Shares Amount Amount Earnings Income Income
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 30, 1997 25,743,327 $123,002 $(36,969) $308,921 $(8,737)
Net earnings 50,134 $50,134
Currency translation adjustment (870) (870)
-------
Comprehensive income $49,264
=======
Cash dividends declared, $.64 per share (13,698)
Shares issued under stock plans 658,469 10,740 261
Treasury stock acquired in conjunction
with incentive plans (98,329) (3,277)
Debentures converted 24,151 153
---------- -------- -------- -------- -------
BALANCE, APRIL 30, 1998 26,327,618 $133,895 $(39,985) $345,357 $(9,607)
Net earnings 1,953 $1,953
Currency translation adjustment 277 277
-------
Comprehensive income $2,230
=======
Cash dividends declared, $.64 per share (13,970)
Shares issued under stock plans 231,857 6,284 239
Treasury stock acquired in conjunction
with incentive plans (34,857) (1,173)
Debentures converted 4,414 28
Purchase of Fritzi 844,000 22,340
Warrants exercised 364,000 550
---------- -------- -------- -------- -------
BALANCE, APRIL 30, 1999 27,737,032 $163,097 $(40,919) $333,340 $(9,330)
Net earnings 41,000 $41,000
Currency translation adjustment (48) (48)
-------
Comprehensive income $40,952
=======
Cash dividends declared, $.48 per share (13,340)
Shares issued under stock plans 121,933 2,942 197
Treasury stock acquired in conjunction
with incentive plans (52,696) (1,168)
Purchase of treasury stock (1,676,307) (30,174)
Debentures converted 43,256 273
---------- -------- -------- -------- -------
BALANCE, JANUARY 31, 2000 26,173,218 $166,312 $(72,064) $361,000 $(9,378)
========== ======== ======== ======== =======
See notes to consolidated financial statements.
</TABLE>
19
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KELLWOOD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of the Company and all majority-owned subsidiaries.
Substantially all foreign subsidiaries are consolidated based upon a
fiscal year ending December 31. All significant intercompany accounts
and transactions have been eliminated.
CHANGE IN YEAR END: In August 1999 the company changed its fiscal year-
end from April 30 to January 31. This change resulted in a short fiscal
year covering the nine month transition period from May 1, 1999 to
January 31, 2000. References to the Transition Period and to fiscal
1999 and 1998 throughout these consolidated financial statements refer
to the nine months ended January 31, 2000 and the years ended April 30,
1999 and 1998, respectively.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires that management
make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results may differ
from those estimates and assumptions.
INVENTORIES AND REVENUE RECOGNITION: Inventories are stated at the
lower of cost or market. The first-in, first-out (FIFO) method is used
to determine the value of 65% of domestic inventories, primarily
inventories purchased from the Kellwood worldwide network of
contractors. The last-in, first-out (LIFO) method is used to value the
inventories of domestic manufacturing operations. Inventories of
foreign subsidiaries are valued using the specific identification
method. Sales are recognized when goods are shipped.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated
at cost. A significant portion of domestic manufacturing facilities and
some machinery and equipment are leased under long-term capital leases
which are recorded at the beginning of the lease term at the present
value of the minimum lease payments.
Depreciation is computed generally on the declining balance method over
estimated useful lives of 15 to 40 years for buildings and of 3 to 10
years for machinery and equipment. Leasehold improvements are amortized
principally on the straight-line basis over the shorter of their
estimated useful lives or the remaining lease term.
INTANGIBLE ASSETS: The excess costs over net tangible assets of
businesses acquired are recorded as intangible assets. These
intangibles are amortized using the straight-line method over their
estimated useful lives, which range from 1 to 20 years.
IMPAIRMENT OF ASSETS: The Company reviews long-lived assets, goodwill
and other intangibles to assess recoverability from future operations
using expected undiscounted future cash flows whenever events and
circumstances indicate that the carrying values may not be recoverable.
Impairment losses are recognized in operating results when expected
undiscounted future cash flows are less than the carrying value of the
asset.
INCOME TAXES: Income taxes are based upon income for financial
reporting purposes. Deferred income taxes are recognized for the effect
of temporary differences between financial and tax reporting in
accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 109.
FOREIGN CURRENCY TRANSLATION: Foreign currency financial statements are
translated into United States dollars using period-end rates of exchange
for assets and liabilities and monthly average rates of exchange for
income and expenses. Adjustments resulting from translation are
accumulated in the Cumulative Translation Adjustment component of
Shareowners' Equity. Gains or losses from foreign currency transactions
are included in income in the period in which they occur. The net
foreign currency gains and losses recognized in the Transition Period,
1999 and 1998 were not significant.
STOCK-BASED COMPENSATION: Kellwood Company uses the intrinsic value
method for measuring stock-based compensation cost. Under this method,
compensation cost is the excess, if any, of the quoted market price of
Kellwood's common stock at the grant date over the amount the employee
must pay for the stock. Kellwood's policy is to grant stock options at
fair market value at the date of grant.
CASH FLOWS: For purposes of the Consolidated Statement of Cash Flows,
all highly liquid short-term time deposits maintained under cash
management activities are considered cash equivalents. The effect of
foreign currency exchange rate fluctuations on cash and time deposits
was not significant for the nine months ended January 31, 2000 or for
the years ended April 30, 1999 and 1998.
FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS: The Company's financial
instruments consist of cash, investments, short-term receivables and
payables, and debt. Based on quoted market prices obtained through
independent
20
<PAGE>
<PAGE>
pricing sources for the same or similar types of borrowing arrangements,
the Company believes the major components of its long-term debt have a
market value of approximately $342,000 which compares to their book
value of $355,000. Management believes that the current carrying
amounts for the company's other financial instruments approximate fair
market value.
NEW ACCOUNTING STANDARDS: In 1998 SFAS 133, Accounting for Derivative
Instruments and Hedging Activities, was issued. This standard
establishes new accounting and reporting standards for derivative
financial instruments. The Company will adopt SFAS 133 on February 1,
2001, and the Company does not expect it to have a material impact on
consolidated financial position, results of operations or cash flows.
NOTE 2. BUSINESS IMPROVEMENT AND OTHER PROGRAMS:
As part of its Vision 2000 program, Kellwood developed and began
implementing a plan to reorganize and restructure several operating
units that were experiencing operating losses or performing below
expectations. Key components of the plan include the consolidation of
similar types of operating units, relocation and consolidation of
distribution facilities in the northeast, midwest and west coast, and
elimination of redundancies between operating units.
Restructuring actions taken and planned include closing 5 domestic
production facilities. This action relates to current and future shifts
in the Company's business to foreign sourced product and resulted from
the uncompetitive cost structures of the plants being closed. These
plant closures and the related shift in manufacturing to offshore
contractors are not expected to impact future sales. These activities
are currently in process and will continue through the fiscal year
ending January 31, 2001.
FACILITY CONSOLIDATIONS: In connection with the restructuring described
above, in the fourth quarter of 1999, the Company recorded, as a
separate line item in the consolidated statement of operations, a
provision for facilities shut-down of $6.8 million (pretax). This
provision reduced net earnings and earnings per diluted share by $3.9
million and $.14, respectively. On a pre-tax basis, charges for
restructuring consisted of termination benefits of $3,969, vacant
facilities costs of $1,418, other cash costs of $260, and non-cash
charges of $1,146. The non-cash charges represent primarily a write-
down of obsolete or abandoned fixed assets to their net realizable
value.
Details of this provision and the accrual balances remaining are as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Amounts utilized during
4th Quarter ----------------------- Amount to
1999 4th Quarter Transition be Utilized
Provision 1999 Period in 2000
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee severance $3,969 $ 374 $297 $3,298
Vacant facilities / lease termination 1,418 85 166 1,167
Other cash restructuring costs 260 0 71 189
------ ------ ---- ------
Total restructuring, excluding non-cash 5,647 $ 459 534 $4,654
Asset impairments 1,146 1,146 0 0
------ ------ ---- ------
Total provision $6,793 $1,605 534 4,654
====== ====== ==== ======
</TABLE>
These charges provide for a reduction of domestic employment by
approximately 1,500, primarily in production and production-support
capacities; during 1999 approximately 100 employees were terminated or
retired in connection with this charge. Facility consolidations
represented by the remaining accrual balance are expected to be
substantially completed in fiscal 2000.
PROVISION FOR GOODWILL IMPAIRMENT: During the fourth quarter of 1999,
the Company completed a review of the intangible assets related to
certain underperforming business units to determine if the intangible
assets were impaired. Based on a comparison of the expected future cash
flows to the carrying value of the intangibles, it was determined that
certain of the intangibles, primarily goodwill, were impaired. Once
impairment was identified, the Company utilized discounted cash flows
for each operating unit to determine the amount of the impairment. The
impairment charge, which is presented as a separate line item in the
consolidated statement of operations, totaled $48.9 million and reduced
1999 net earnings and earnings per diluted share by $48.9 million and
$1.77, respectively.
<PAGE>
NOTE 3. BUSINESS COMBINATIONS:
On January 4, 2000 the Company purchased Biflex International, Inc.
(Biflex), including goodwill and other intangible assets of $12.4
million. The purchase price included cash of $29.0 million and the
assumption of certain liabilities totaling $9.7 million. The
transaction was accounted for as a purchase. Accordingly, the results
of operations of Biflex are included in the consolidated financial
statements from the acquisition date. This acquisition was not
significant to the results of operations or the financial position
of the Company.
21
<PAGE>
<PAGE>
Effective April 30, 1999 the Company completed a merger with Koret, Inc.
(Koret), issuing approximately 5.2 million shares of Kellwood common
stock in exchange for all of the outstanding shares and options of
Koret. The transaction was accounted for as a pooling-of-interests for
financial reporting purposes. Accordingly, the consolidated financial
statements give retroactive effect to the merger with all periods
presented as if the two companies had always been combined. Fees and
expenses related to the Koret transaction aggregating $6.6 million were
incurred in 1999. These costs reduced Kellwood's 1999 Consolidated Net
Earnings by $4,840.
On December 11, 1998 the Company purchased substantially all of the non-
real estate assets of Fritzi California (Fritzi), including intangible
assets of $5.2 million. The purchase price included 0.84 million shares
of Kellwood common stock valued at $22.3 million and the assumption of
certain liabilities totaling $14.5 million. The transaction was
accounted for as a purchase. Accordingly, the results of operations of
Fritzi are included in the consolidated financial statements from the
acquisition date. This acquisition was not significant to the results
of operations or the financial position of the Company.
NOTE 4. SUPPLEMENTAL BALANCE SHEET INFORMATION:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Year-end amounts, 2000 1999
- ------------------------------------------------------------------
<S> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS $ 12,142 $ 11,281
INVENTORIES:
- ------------
Finished goods $ 221,765 $ 196,214
Work in process 96,086 77,992
Raw materials 77,137 66,572
--------- ---------
Total inventories $ 394,988 $ 340,778
========= =========
Includes inventories valued under LIFO of $ 120,171 $ 128,003
Value of LIFO inventories at current costs 122,153 133,299
PROPERTY, PLANT & EQUIPMENT:
- ----------------------------
Land $ 1,907 $ 3,460
Buildings and improvements 96,738 95,002
Machinery and equipment 134,245 142,471
Capitalized software 20,634 11,353
--------- ---------
253,524 252,286
Less accumulated depreciation
and amortization (149,850) (149,988)
--------- ---------
Property, Plant & Equipment, net $ 103,674 $ 102,298
========= =========
Includes assets under capital leases
(primarily buildings) of:
Cost $ 15,343 $ 15,393
Accumulated amortization (14,877) (14,463)
</TABLE>
22
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Year-end amounts, 2000 1999
- -------------------------------------------------------------------
<S> <C> <C>
INTANGIBLE ASSETS:
- ------------------
Goodwill $ 63,886 $ 65,477
Less accumulated amortization (20,509) (19,479)
-------- --------
Net goodwill 43,377 45,998
-------- --------
Other identifiable intangibles 52,722 40,229
Less accumulated amortization (27,879) (26,020)
-------- --------
Net other identifiable intangibles 24,843 14,209
-------- --------
Net intangible assets $ 68,220 $ 60,207
======== ========
ACCRUED EXPENSES:
- -----------------
Salaries and employee benefits $ 39,095 $ 49,114
Provision for facilities shut-down 4,654 5,188
Income taxes - 8,847
Other accrued expenses 37,697 41,115
-------- --------
Total accrued expenses $ 81,446 $104,264
======== ========
</TABLE>
NOTE 5. LEASES:
Certain machinery and equipment are leased under operating leases having
remaining terms ranging up to 6 years. Rent expense under all operating
leases for the nine months ended January 31, 2000 totaled $21,412
($26,959 for the year ended April 30, 1999 and $23,802 for 1998).
The future minimum lease payments under capital and operating leases at
January 31, 2000 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Years ending January 31, Capital Operating
- ------------------------------------------------------------------
<S> <C> <C>
2001 $ 992 $17,021
2002 350 14,515
2003 296 11,033
2004 296 8,569
2005 44 7,345
Later years 0 10,889
------ -------
Total minimum lease payments 1,978 $69,372
=======
Less amount representing interest (146)
------
Present value of net minimum lease payments $1,832
======
</TABLE>
Minimum lease payments were not reduced for future minimum sublease
rentals of $3,393.
NOTE 6. NOTES PAYABLE AND LONG-TERM DEBT:
NOTES PAYABLE: On August 31, 1999 the Company executed a $350,000
Senior Credit Facility with Bank of America and other participating
banks (the "Credit Agreement"). In connection with the execution of the
Credit Agreement the Company paid various fees and costs totaling
approximately $750. Facility fees range from .15% to .20% of the
committed amount. The Credit Agreement comprises a $100,000 364 day
revolving credit facility and a $250,000 three-year revolving credit
facility. The $250,000 three-year revolving credit facility can also be
used for letters of credit. Borrowings under the Credit Agreement will
bear interest at a spread of approximately .6% over LIBOR. At
January 31, 2000, outstanding short-term loans and letters of credit
under the agreement were $0 and $136,841, respectively. Covenants are
less restrictive than those currently existing for Kellwood's notes due
insurance companies.
The Company maintains informal, uncommitted lines of credit with several
banks, which totaled $140,000 at January 31, 2000. Borrowings under
these uncommitted lines totaled $0 at January 31, 2000.
During the nine months ended January 31, 2000, the highest level of
borrowings under all lines was $98,243 ($196,500 for the year ended
April 30, 1999). The average daily short-term borrowings for the nine
months ended January 31, 2000 were $20,594 ($153,913 for fiscal 1999)
and the weighted average interest rate was 5.8% (5.8% for 1999).
23
<PAGE>
<PAGE>
LONG-TERM DEBT:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Year-end amounts, 2000 1999
- ------------------------------------------------------------------
<S> <C> <C>
7.625% Debentures due October 15, 2017 $137,626 $148,455
7.875% Debentures due July 15, 2009 139,725 -
Notes due insurance companies, 6.90% - 10.77% 77,883 92,291
Capital lease obligations, 4.9% - 10.2% 1,832 2,487
Other 405 930
-------- --------
357,471 244,163
Less current maturities (10,992) (16,504)
-------- --------
$346,479 $227,659
======== ========
</TABLE>
Aggregate maturities on long-term debt for the next five years are as
follows: 2001 - $10,992; 2002 - $15,407; 2003 - $19,067; 2004 - $26,307;
2005 - $6,126; 2006 & thereafter - $279,572.
The Company issued $150,000 of 20 year senior unsecured debentures in a
public debt offering on October 27, 1997. The debentures, due October
15, 2017, have a coupon rate of 7.625% payable semi-annually. The
Company issued $150,000 of 10 year senior unsecured debentures in a
public debt offering on July 26, 1999. The debentures, due July 15,
2009, have a coupon rate of 7.875% payable semi-annually. Restrictive
covenants of these debentures are less restrictive than the covenants
associated with the notes due insurance companies discussed below.
In January 2000 the Company entered into an interest rate swap agreement
with a bank to convert the interest rate on $150,000 of 7.875%
debentures from fixed to variable. In connection with this transaction,
the Company also entered into an option agreement, which entitles the
bank to effectively cancel this interest rate swap agreement on January
15, 2001. As consideration for these agreements the Company received a
payment of $3,257 which is recorded as a deferred option premium at
January 31, 2000; these agreements are being marked to market and did
not have a material impact on the results of operations of the company
from the date of execution through January 31, 2000. The company
expects the bank to exercise its option to cancel the swap if fixed swap
rates are lower on the cancellation date than 7.32%. If the option is
not exercised on January 15, 2001, the interest rate swap will remain in
effect, and the Company will continue to pay interest on the $150,000
notional amount of the swap at variable rates based on LIBOR through
July 15, 2009. If the option is not exercised, the swap would have the
effect of converting $150,000 of debentures to variable rates at 56
basis points above six-month LIBOR. In this case, excluding the impact
of any acquisitions during the upcoming year, the company would have
approximately 45% of debt at floating interest rates at January 31, 2001
as compared to the Company's objective of approximately 50%.
Notes payable to insurance companies are due in quarterly and semiannual
installments from June 1998 through September 2005. Restrictive
covenants of these notes include the maintenance of minimum working
capital and certain key ratios as well as a limitation on the payment of
dividends and the repurchase of Company stock. Under the most
restrictive covenants, future dividends and purchases of Company stock
are limited to $29,929 plus 45% of net earnings after January 31, 2000,
excluding gains and losses on the disposal of capital assets.
NOTE 7. RETIREMENT BENEFITS:
Various contributory and noncontributory retirement plans cover
substantially all domestic and certain foreign employees. Total
retirement benefits expense included the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Fiscal period (Note 1) ended in, 2000 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Single-employer defined benefit plans $(4,037) $(4,443) $(7,756)
Multi-employer plan 233 585 1,426
Defined contribution plans 2,612 3,731 4,153
------- ------- -------
Total retirement benefits expense/(credit) (1,192) (127) (2,177)
------- ------- -------
</TABLE>
24
<PAGE>
<PAGE>
SINGLE-EMPLOYER DEFINED BENEFIT PLANS. Summarized information on the
Company's single-employer defined benefit plans is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Fiscal period (Note 1) ended in, 2000 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Components of Net Periodic Pension Credit:
Current Service Cost $ 2,019 $ 2,649 $ 2,085
Interest cost on projected benefit obligation 3,510 4,591 4,456
Assumed return on assets (9,578) (11,637) (10,576)
Amortization of transition asset and
prior service costs 12 (46) (3,721)
------- -------- --------
Net pension (credit) $(4,037) $ (4,443) $ (7,756)
======= ======== ========
Weighted average key actuarial assumptions:
Discount rate 7.5% 7.5% 8.0%
Long-term rate of return on plan assets 8.0% 8.0% 8.0%
Compensation increases 4.5% 4.5% 5.0%
<CAPTION>
- ------------------------------------------------------------------------------------------
Year-end amounts 2000 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of funded status to prepaid pension cost:
Funded Status - Plan assets in excess of
projected benefit obligation $138,275 $113,729
Unamortized prior service costs 568 (15)
Unrecognized actuarial gains (49,342) (29,303)
-------- --------
Prepaid pension costs included in other assets $ 89,501 $ 84,411
======== ========
Change in Projected Benefit Obligation:
Projected benefit obligation, beginning of year $ 63,879 $62,612
Service cost 2,019 2,649
Interest cost 3,510 4,591
Employee contributions (302) (356)
Plan amendments 595 -
Actuarial gain / (loss) (170) (259)
Benefits paid (3,720) (5,358)
-------- --------
Projected benefit obligation, end of year $ 65,811 $ 63,879
======== ========
Change in Plan Assets:
Fair market value, beginning of year $177,607 $170,256
Actual return on plan assets 29,447 12,286
Employer contributions 450 67
Employee contributions 302 356
Benefits paid (3,720) (5,358)
-------- --------
Fair market value, end of year $204,086 $177,607
======== ========
</TABLE>
Plan assets consist primarily of marketable equity securities, U.S.
Government obligations, corporate debt obligations and short-term
marketable debt securities.
MULTI-EMPLOYER DEFINED BENEFIT PLAN. One of the Company's subsidiaries
makes contributions to a multi-employer defined benefit plan on behalf
of certain employees. The plan administrator estimates that if the
Company were to withdraw from the plan, its potential liability for
unfunded plan benefits would be approximately $3.2 million as of
December 31, 1998, the date of the most recent actuarial valuation
report.
OTHER. The Company provides health care insurance benefits to certain
employees upon retirement, with the majority of the cost paid by
employee contributions. The annual costs of these benefits in the
Transition Period, 1999 and 1998 and the accrued benefits at January 31,
2000 and April 30, 1999 were not significant.
25
<PAGE>
<PAGE>
NOTE 8. STOCK PLANS:
The amended Restricted Stock Compensation Plan of 1969 and the Corporate
Development Incentive Plan of 1986 provide for the granting of common
stock to key employees as performance and incentive bonuses. The shares
granted may not be transferred, sold, pledged or otherwise disposed of
prior to the lapse of certain restrictions. Under the plans, $700 was
charged to earnings for the Transition Period ($1,400 for 1999, and
$2,129 for 1998). At January 31, 2000 there were 213,096 shares
available to be granted under these plans to qualified employees.
Options to purchase common stock have been granted to key employees
under various plans at option prices not less than the fair market value
on the date of the grant. At January 31, 2000, 178 officers and other
key employees held options to purchase shares. The options expire 10
years after grant on dates ranging from June 2000 to August 2009 and are
exercisable in cumulative installments only after stated intervals of
time and are conditional upon active employment, except for periods
following disability or retirement.
The Company uses the intrinsic value method in accounting for its stock
option plans. Had compensation cost for the Company's stock options
been recognized based upon the fair value on the grant date under the
methodology prescribed by SFAS 123, "Accounting for Stock-based
Compensation," the Company's net earnings and earnings per share for the
nine months ended January 31, 2000 and the years ended April 30, 1999,
and 1998 would have been impacted as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Fiscal period (Note 1) ended in, 2000 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Reported net earnings $41,000 $1,953 $50,134
Pro forma net earnings $39,250 $ 613 $49,219
Reported diluted earnings per share $ 1.48 $ .07 $ 1.85
Pro forma diluted earnings per share $ 1.42 $ .02 $ 1.82
</TABLE>
The fair value of options granted (which is recorded as expense over the
option vesting period in determining the pro forma impact), is estimated
on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Fiscal period (Note 1) ended in, 2000 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected option life 5 YEARS 5 years 5 years
Risk-free interest rate 5.6% 5.1% 5.8%
to 5.8% to 5.6% to 6.6%
Expected volatility of
Kellwood stock 36% 34% 35%
Expected dividend yield
on Kellwood stock 2.7% 2.0% 2.5%
</TABLE>
The weighted-average grant date fair value of options granted was $6.93
to $7.32 for the Transition Period, $8.33 to $10.82 for 1999, and $8.42
to $11.36 for 1998. The pro forma effect on net earnings for the
Transition Period, 1999 and 1998 is not representative of the pro forma
effect on net earnings in future years because it does not take into
consideration pro forma compensation related to grants made prior to
1996. Presented below is a summary of stock option plans' activity for
the years and as of the dates shown:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Fiscal period ended in, 2000 1999 1998
------------------------ ------------------------ ------------------------
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance 1,982,132 $22.34 1,796,911 $19.57 1,931,765 $16.59
Granted 533,604 $23.66 339,950 $32.18 377,800 $26.40
Exercised (107,834) $ 9.07 (151,829) $11.69 (429,755) $14.45
Canceled (28,210) $25.87 (2,900) $22.26 (82,899) $ 7.80
--------- --------- ---------
Ending Balance 2,379,692 $22.63 1,982,132 $22.34 1,796,911 $19.57
========= --------- ---------
</TABLE>
26
<PAGE>
<PAGE>
Options outstanding and exercisable at January 31, 2000 include the
following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Options Outstanding Options exercisable
--------------------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Range of Remaining Number Exercise Number Exercise
Prices Life (000's) Price (000's) Price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 6.04 - 9.92 1 years 15.9 $ 7.39 15.9 $ 7.39
$12.29 - 12.75 1 years 46.0 $12.35 46.0 $12.35
$16.13 - 19.96 5 years 635.3 $17.78 483.1 $18.30
$20.31 - 27.44 7 years 1,312.9 $22.75 589.0 $21.49
$32.28 - 36.00 8 years 369.6 $32.51 87.5 $32.85
------- -------
$ 6.04 - 36.00 7 years 2,379.7 $22.63 1,221.5 $20.51
======= =======
</TABLE>
NOTE 9. CAPITAL STOCK:
The reported outstanding shares of common stock have been reduced by
treasury stock totaling 5,300,655 shares at January 31, 2000 (3,589,395
at April 30, 1999, and 3,575,572 at April 30, 1998).
Warrants for the right to purchase Koret common stock equivalent to
approximately 364,000 shares of Kellwood Company common stock were
issued on June 30, 1992. These warrants were exercised in April 1999 at
an aggregate price of $550.
Authorized capital includes 500,000 shares of preferred stock, none of
which have been issued. Nonvoting share purchase rights, exercisable
only upon satisfaction of certain conditions, entitle the holder to
purchase Series A Junior Preferred Stock (160,000 shares reserved) or,
under certain conditions, common shares at prices specified in the
rights agreement. None of the rights were exercisable as of January 31,
2000.
On November 23, 1999 the Board of Directors authorized the Company to
repurchase up to ten percent of the outstanding shares of its Common
Stock (up to approximately 2.8 million shares) in the open market or
through privately negotiated transactions at management's discretion and
depending on market conditions. Pursuant to this authorization, on
December 9, 1999 the Company purchased 1.68 million shares through a
privately negotiated transaction with an institutional holder at $18.00
per share, which was below the market price. Additionally, during
February 2000 the Company purchased 1.11 million shares in open market
transactions at an average price of $16.32 per share.
On March 2, 2000 the Board of Directors authorized the Company to
repurchase up to ten percent of the outstanding shares of its Common
Stock (up to approximately 2.5 million shares) in the open market or
through privately negotiated transactions at management's discretion and
depending on market conditions. Purchases will be financed out of the
Company's cash resources. As of March 28, 2000, the Company had
purchased 1.17 million shares pursuant to this authorization at an
average cost of $17.07 per share. As discussed in Note 6, certain debt
covenants may limit purchases under this authorization.
NOTE 10. INCOME TAXES:
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Fiscal period (Note 1) ended in, 2000 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Domestic:
Federal $13,708 $33,508 $31,144
State 2,184 6,873 5,677
Foreign 1,378 1,609 2,710
------- ------- -------
17,270 41,990 39,531
Deferred (primarily federal) 10,330 (4,790) (2,031)
------- ------- -------
$27,600 $37,200 $37,500
======= ======= =======
</TABLE>
27
<PAGE>
<PAGE>
Current income taxes are the amounts payable under the respective tax
regulations on each year's earnings and on foreign earnings remitted
during the year. A reconciliation of the federal statutory income tax
rate to the effective tax rate (provision for taxes) was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fiscal period (Note 1) ended in, 2000 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
Foreign tax differences 1.7 (1.7) (1.8)
Amortization of intangible assets 1.4 3.6 3.9
State tax 2.3 5.0 4.0
Unusual items - 53.9 -
Other (0.2) (0.8) 1.7
---- ---- ----
40.2% 95.0% 42.8%
==== ==== ====
</TABLE>
Deferred income tax liabilities and assets consisted of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fiscal period (Note 1) ended in, 2000 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee related costs $ 26,837 $ 24,629 $ 22,976
Depreciation and amortization 6,828 7,016 7,955
Allowance for asset valuations (18,391) (21,600) (20,754)
Other (1,357) (6,458) (1,800)
-------- -------- --------
$ 13,917 $ 3,587 $ 8,377
======== ======== ========
Included in:
(Prepaid taxes and expenses) $(28,344) $(35,563) $(31,308)
Deferred income taxes and other 42,261 39,150 39,685
-------- -------- --------
$ 13,917 $ 3,587 $ 8,377
======== ======== ========
</TABLE>
Earnings before income taxes included $15,809, $15,368 and $10,773 of
Smart Shirts, Ltd. earnings in the Transition Period, 1999 and 1998
respectively.
Federal income taxes are provided on earnings of foreign subsidiaries
except to the extent that such earnings are expected to be indefinitely
reinvested abroad. Undistributed foreign earnings considered to be
indefinitely reinvested abroad totaled $45,000 through January 31, 2000.
NOTE 11. EARNINGS PER SHARE
A reconciliation of basic earnings per common share and diluted earnings
per common share follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Basic Earnings Per Share Computation 2000<F*> 1999 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net earnings $41,000<F*> $ 1,953<F**> $50,134
Denominator (000's):
Average common
shares outstanding 27,505 26,765 26,096
------- ------- -------
Basic Earnings Per Share $ 1.49<F*> $ .07 $ 1.92
======= ======= =======
</TABLE>
28
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Diluted Earnings Per Share Computation 2000<F*> 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net earnings $41,000<F*> $ 1,953<F**> $50,134
Impact of assumed conversions:
debenture interest after-tax 14 27 37
------- ------- -------
$41,014<F*> $ 1,980 $50,171
------- ------- -------
Denominator (000's):
Average common
shares outstanding 27,505 26,765 26,096
Impact of debenture conversions 43 75 93
Impact of stock options 200 765 926
------- ------- -------
27,748 27,605 27,115
------- ------- -------
Diluted Earnings Per Share $ 1.48<F*> $ .07 $ 1.85
======= ======= =======
<FN>
<F*> - Nine-month transition period (see Note 1).
<F**> - 1999 Net earnings and Earnings per share are net of unusual
charges for merger costs, facilities shut-down, and goodwill impairment
totaling $62,338 (pretax)
</TABLE>
NOTE 12. SIGNIFICANT CUSTOMERS:
During the nine-month period ended January 31, 2000 one customer (J. C.
Penney Company, Inc.) accounted for 11.2% of the Company's consolidated
net sales (as compared to 10.1% in the comparable period in the prior
year). Accounts receivable included $33,548 due from this customer at
January 31, 2000. No single customer provided 10% or more of
consolidated net sales in either of the fiscal years ended April 30,
1999 or April 30, 1998.
NOTE 13. COMMITMENTS AND CONTINGENCIES:
There are various lawsuits and other legal proceedings against the
Company. Management and general counsel are of the opinion that the
ultimate disposition of such litigation will have no material adverse
effect on the Company's financial position or results of operations.
NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Quarter ended July October January April
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSITION PERIOD:
Net sales $470,575 $633,456 $461,230
Gross profit 100,716 137,799 89,063
Net earnings 9,557 26,066 5,377<F1>
Earnings per share - Basic .34 .94 .20
Earnings per share - Diluted .34 .93 .20
FISCAL 1999:
Net sales $483,283 $600,540 $438,880 $628,444
Gross profit 98,462 132,542 91,369 143,493
Net earnings 8,652 22,352 1,960<F2> (31,011)<F3>
Earnings per share - Basic .33 .83 .07 (1.13)
Earnings per share - Diluted .32 .82 .07 (1.13)
<FN>
<F1> Other income for the year and for the quarter ended January 31,
2000 included $1,968 (pretax; $1,181 after-tax) of unusual non-
recurring financial items including a gain on the sale of a
building.
<F2> January quarter 1999 Net earnings include the impact of Merger
costs (pretax) of $1,112.
<F3> April quarter 1999 Net earnings include the impact of Merger costs
(pretax) of $5,289, as well as provisions for facilities shut-down
of $6.8 million and goodwill impairment of $48.9 million,
respectively.
</TABLE>
29
<PAGE>
<PAGE>
NOTE 15. INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION:
The Company and its subsidiaries are principally engaged in the apparel
and related soft goods industry. The Company's business units are
organized by product line. For purposes of SFAS 131, these have been
aggregated into the following five reportable segments:
* WOMEN'S BRANDED SPORTSWEAR: POPULAR-TO-MODERATE, which
includes blazers, dresses, sweaters, blouses, vests, other
tops, skirts, pants, skorts, and other bottoms with "out the
door" prices below $50.
* WOMEN'S BRANDED SPORTSWEAR: BETTER-TO-BRIDGE, which includes
upper price point women's sportswear sold principally to
small specialty stores, regional department stores and
catalog houses.
* PRIVATE LABEL APPAREL, which covers a broad range of product
from intimate apparel and loungewear to outerwear,
activewear, pants and jeans, workwear and sweaters. The
Private Label business partners with retailers in the design
and delivery of floor ready merchandise and programs to meet
targeted price points.
* SMART SHIRTS, which is a leading manufacturer of woven dress
and sport shirts in Hong Kong and China, with additional
capacity in Sri Lanka, Maldives, Indonesia and Singapore.
* RECREATION PRODUCTS. American Recreation Products is a
leading company in the camping products industry. Major
products include tents, sleeping bags, backpacks and
technical apparel and accessories under the Wenzel(R),
ROKK(R), Slumberjack(R), Kelty(R) and Sierra Designs(R)
brands.
Management evaluates the performance of its operating segments
separately to individually monitor the different factors affecting
financial performance. Segment Operating Earnings includes
substantially all of the segment's costs of production (on a FIFO
basis), distribution and administration. Kellwood manages the following
expenses at the corporate level. Accordingly, they are not allocated to
the Segments:
* Corporate general and administrative expenses,
* Amortization of intangible assets,
* Merger and acquisition costs, including costs of the Koret
merger,
* Provisions for facilities shut-down (primarily plants
serving the Private Label segment),
* Provision for goodwill impairment (which pertained to the
goodwill of businesses in the Better-to-bridge (70%) and
Popular-to-moderate (30%) segments, and
* Interest income and expense, and Income taxes.
Segment net assets measures net working capital, net fixed assets and
other noncurrent operating assets and liabilities of the segment.
Depreciation and amortization excludes amortization of intangible assets
accounted for at the corporate level. Debt is not allocated to the
segments. Capital expenditures exclude the cost of long lived assets
included in acquisitions accounted for under purchase accounting.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Fiscal period (Note 1) ended in: 2000 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
Popular-to-Moderate $ 992,893 $1,381,688 $1,296,100
Better-to-Bridge 104,246 167,279 197,991
Private Label Apparel 203,728 255,939 289,199
Smart Shirts 168,620 202,662 173,284
Recreation Products 95,774 143,579 137,815
---------- ---------- ----------
Kellwood total $1,565,261 $2,151,147 $2,094,389
========== ========== ==========
Operating earnings:
Popular-to-Moderate $ 70,797 $ 123,197 $ 105,202
Better-to-Bridge (1,442) 4,485 5,381
Private Label Apparel 17,582 28,129 34,244
Smart Shirts 18,249 16,634 14,759
Recreation Products 4,835 11,504 10,515
---------- ---------- ----------
Total segments 110,021 183,949 170,101
Amortization of Intangible assets (4,865) (15,855) (16,562)
Interest expense (22,654) (33,883) (35,142)
Impairment, restructuring, & merger - (62,338) --
General corporate and other (13,902) (32,720) (30,763)
---------- ---------- ----------
Earnings before income taxes $ 68,600 $ 39,153 $ 87,634
========== ========== ==========
</TABLE>
30
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Fiscal period (Note 1) ended in: 2000 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Assets at end of year:
Popular-to-Moderate $438,605 $485,615 $510,368
Better-to-Bridge 36,811 51,843 82,572
Private Label Apparel 126,646 106,910 96,303
Smart Shirts 71,396 66,152 75,541
Recreation Products 53,663 51,364 54,266
Corporate and Other 80,303 22,429 24,307
-------- -------- --------
Kellwood total $807,424 $784,314 $843,357
======== ======== ========
Capital expenditures:
Popular-to-Moderate $ 4,270 $ 13,008 $ 8,407
Better-to-Bridge 1,050 4,803 1,343
Private Label Apparel 4,111 21,659 7,361
Smart Shirts 3,571 2,829 3,314
Recreation Products 524 666 431
Corporate and Other 9,293 8,507 784
-------- -------- --------
Kellwood total $ 22,819 $ 51,472 $ 21,640
======== ======== ========
Depreciation expense:
Popular-to-Moderate $ 4,804 $ 5,699 $ 5,169
Better-to-Bridge 1,283 1,769 2,190
Private Label Apparel 4,958 4,822 4,492
Smart Shirts 2,028 3,350 3,117
Recreation Products 508 612 604
Corporate and Other 660 1,251 1,593
-------- -------- --------
Kellwood total $ 14,241 $ 17,503 $ 17,165
======== ======== ========
</TABLE>
Substantially all sales are to U.S. customers. Sales and transfers
between segments were not significant. Substantially all of the assets
of Smart Shirts are located in Asia.
NOTE 16. COMPARATIVE RESULTS (UNAUDITED):
In August 1999 the Company changed its fiscal year-end from April 30 to
January 31. This change resulted in a short fiscal year covering the
nine month transition period from May 1, 1999 to January 31, 2000. The
following unaudited consolidated financial information for the nine
months ended January 31, 1999 is presented to provide comparative
interim results to those for the nine months ended January 31, 2000
which are included in the accompanying Consolidated Statement of
Earnings:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Nine months ended January 31, 2000 1999
AUDITED Unaudited
- ------------------------------------------------------------------
<S> <C> <C>
Net Sales $1,565,261 $1,522,703
Gross Profit 327,578 322,373
Earnings before income taxes 68,600 56,673
Income taxes 27,600 23,709
---------- ----------
Net Income $ 41,000 $ 32,964
========== ----------
Earnings per share - diluted $ 1.48 $ 1.20
========== ----------
</TABLE>
31
<PAGE>
<PAGE>
<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
FIVE YEAR FINANCIAL SUMMARY
(Dollars in thousands except per share data)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Period ended or as of 1/31/2000 4/30/1999 4/30/1998 4/30/1997 4/30/1996
Net sales $1,565,261<F*> $2,151,147 $2,094,389 $1,787,530 $1,741,799
Net earnings 41,000<F*> 1,953<F**> 50,134 34,558 31,857
Earnings per share:
Basic 1.49<F*> .07<F**> 1.92 1.34 1.24
Diluted 1.48<F*> .07<F**> 1.85 1.29 1.20
Cash dividends declared
per share .48<F*> .64 .64 .60 .60
Working capital 576,120 465,535 454,625 279,036 278,710
Total assets 1,097,853 1,054,212 1,103,890 956,368 886,690
Long-term debt 346,479 227,659 252,508 122,980 149,328
Total debt 361,554 338,126 413,697 303,096 302,168
Shareowners' Equity 445,870 446,188 429,660 386,257 366,722
Equity per Share 17.04 16.09 16.32 15.00 14.19
<FN>
<F*> - Nine Months.
<F**> - 1999 Net earnings and earnings per share are net of unusual
charges for merger costs, facilities shut-down, and goodwill impairment
totaling $62,338 (pretax)
</TABLE>
All data have been adjusted to reflect the 1999 merger with Koret, Inc
which was accounted for as a pooling of interests.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
32
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) DIRECTORS OF THE REGISTRANT AS OF JANUARY 31, 2000
Raymond F. Bentele, Age 63
- --------------------------
Director of the Company since 1993. Director, Mallinckrodt Inc.
(manufacturer of medical products), since 1990. Director, IMC Global,
Inc. (food crop mineral nutrients), since 1994. Director, Leggett &
Platt, Inc. (manufacturer of engineered products for the home and
commercial furnishings industry), since 1995.
Edward S. Bottum, Age 66
- ------------------------
Director of the Company since 1981. Managing Director, Chase Franklin
Corporation (broker dealer), since 1991. Trustee, The Time Horizon
Funds (mutual funds family), 1995 to 1999. Chairman, Learning Insights,
Inc. (publisher of interactive multimedia training products), since
1996. Trustee, Pacific Innovations Trust (mutual fund for variable
annuities), 1996 to 2000. Director, CNA Income Shares, Inc. (closed end
fixed income fund), since 1999. Director, Alleghany Asset Management,
Inc. (asset manager), since 1999. Director, PetMed Express.com, Inc.
(catalog and web distributor of pet pharmaceuticals and accessories),
since 1999. Director, Pacific Horizon Fund (mutual fund family), 1998
to 1999. Senior Advisor, American International Group (AIG) (commercial
insurance), since 1994.
Kitty G. Dickerson, Ph.D., Age 59
- ---------------------------------
Director of the Company since 1991. Professor and Chair of the
Department of Textile and Apparel Management, University of Missouri,
Columbia, Missouri from 1986 to Present. President, International
Textile and Apparel Association, 1990-1991.
Leonard A. Genovese, Age 65
- ---------------------------
Director of the Company since 1995. President, Genovese Drug Stores,
Inc. 1974 to 1999. Chairman of the Board of Genovese Drug Stores, Inc.
(retail chain drug stores), 1978 to 1999. Director of Eckerd Drug Corp.
since 1999. Director, TR Financial Corp. (banking), 1993 to 1999.
Director, Aid Auto Stores, Inc. (automotive parts supply), 1995 to 1998.
Director, The Stephan Company (hair care), since 1997. Director, Roslyn
Bancorp Inc. (banking), since February, 1999.
Martin J. Granoff, Age 63
- -------------------------
Director of the Company since 1999. Chairman of Val d'or Inc. (men's
and women's knitwear), since 1959. Chairman and Chief Executive Officer
of Koret, Inc., 1997 to 1999. Chairman of the American Apparel
Manufacturer's Association, 1998 to 1999. Director, National Textiles
(spinning and knitting), since 1997. Director, Manive Investment, LLC
(biotechnology), since 1998.
Jerry M. Hunter, Age 47
- -----------------------
Director of the Company since 1994. Partner at Bryan Cave (law firm)
from December 1993 to present.
James C. Jacobsen, Age 64
- -------------------------
Director of the Company since 1975. Vice Chairman since 1994.
33
<PAGE>
<PAGE>
James S. Marcus, Age 70
- -----------------------
Director of the Company since 1965. Limited Partner, The Goldman Sachs
Group, L.P. (investment bankers), 1989 to 1999. Director of American
Biltrite, Inc. (industrial flooring products and fashion jewelry).
Director, Insight Communications Company, since 1999.
William J. McKenna, Age 72
- --------------------------
Director of the Company since 1982. Chairman Emeritus of the Company
since 1999. Chairman of the Board of the Company, 1991 to 1999.
Chairman and Chief Executive Officer from 1994 to 1997. Chairman,
President and Chief Executive Officer from 1991 to 1994. Chief Executive
Officer since 1984. President from 1982 to 1994. Director of Genovese
Drug Stores, Inc. from 1979 to 1999. Director of United Missouri
Bancshares, Inc. since 1984.
Hal J. Upbin, Age 61
- --------------------
Director of the Company since 1995. Chairman of the Board, President
and Chief Executive Officer since 1999. Chief Executive Officer of the
Company since 1997. President and Chief Operating Officer of the
Company from 1994 to 1997.
(b) EXECUTIVE OFFICERS OF THE REGISTRANT AS OF JANUARY 31, 2000
<TABLE>
<CAPTION>
Name of Officer Age Office and Employment During the Last Five Fiscal Years
- --------------- --- ---------------------------------------------------------
<C> <C> <S>
Hal J. Upbin 61 Chairman of the Board, President and Chief Executive
Officer since 1999; President and Chief Executive Officer
(1997-1999); President and Chief Operating Officer
(1994-1997)
James C. Jacobsen 64 Vice Chairman since 1994;
Enoch Harding, Jr. 68 Executive Vice President Operations since 1995;
W. Lee Capps III 52 Vice President Corporate Development since 1998;
Director of Corporate Development (1996-1998);
Chief Financial Officer of American Recreation Products,
Inc. (subsidiary) (1987-1996).
Gerald M. Chaney 53 Vice President Finance and Chief Financial Officer since
1998; Executive Vice President of Administration and
Chief Financial Officer, Petrie Retail, Inc. (1996-1998);
Executive Vice President and Chief Operating Officer,
Canadians Corp. (1995-1996); Executive Vice President
Operations and Chief Financial Officer, Crystal Brands
(1985-1995)
John R. Henderson 51 Vice President Merchandising since 1995;
Director of Merchandising (1993-1995);
Lawrence E. Hummel 57 Vice President Controller since 1992;
Roger D. Joseph 58 Vice President Treasurer since 1992;
Leon M. McWhite 57 Vice President Human Resources since 1995;
Vice President (1994-1995)
Thomas H. Pollihan 50 Vice President, Secretary and General Counsel since 1993
John A. Turnage 54 Vice President Manufacturing since 1997;
Vice President Manufacturing and Sourcing (1989-1997)
</TABLE>
34
<PAGE>
<PAGE>
(c) The information called for with respect to the identification of
certain significant employees is not applicable to the registrant.
(d) There are no family relationships between the directors and
executive officers listed above. There are no arrangements or
understandings between any named officer and any other person
pursuant to which such person was selected as an officer.
(e) Provided in (a) and (b) above.
(f) There are no legal proceedings involving directors, nominees for
directors, or officers.
(g) The information called for with respect to this item is not
applicable to the registrant.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Securities Exchange Act of 1934 requires all executive officers
and directors to report any changes in the ownership of common stock of
the Company to the Securities and Exchange Commission, the New York Stock
Exchange and the Company.
Based solely upon a review of these reports and written
representations that no additional reports were required to be filed
in the Transition Period, the Company believes that all reports were
filed on a timely basis, with the exception of Fred W. Wenzel,
Advisory Director and Chairman Emeritus, who filed a Form 4 subsequent
to the deadline.
35
<PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the amount of all compensation earned for
services in all capacities to the Company for the last three fiscal
years for (i) the Chief Executive Officer, (ii) the other four most
highly paid executive officers, and (iii) an additional individual for
whom disclosure would have been provided but for the fact that the
individual was not serving as an executive officer at the end of the
fiscal year (the "Named Officers") at January 31, 2000.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ------------------------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Annual Restricted All Other
Principal Compensation Stock Options LTIP Compensation
Position Year Salary ($) Bonus ($) ($) Award(s) ($)<F1> (#) Payouts ($) ($) <F2>
-------- ---- ---------- --------- --- ---------------- --- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hal J. Upbin
Chairman, President
And Chief Executive
Officer<F3> 2000<F*> $662,500 0 0 0 47,000 0 $2,290<F4>
1999 725,000 $500,000 0 278,662 50,000 0 4,608<F4>
1998 570,833 400,000 0 343,332 79,000 0 4,608<F4>
William J. McKenna
Director <F5> 2000<F*> $525,000 0 0 0 47,000 0 10,762<F6>
1999 900,000 $590,000 0 $229,345 61,900 0 $17,482<F7>
1998 900,000 450,000 0 582,384 76,000 0 969,478<F8>
Enoch Harding, Jr.
Executive
Vice President
Operations <F9> 2000<F*> $301,333 0 0 0 13,000 0 $2,835<F4>
1999 360,000 $375,000 0 $113,248 13,600 0 4,550<F4>
1998 327,000 350,000 0 144,804 16,000 0 4,992<F4>
James C. Jacobsen
Vice Chairman
and Director 2000<F*> $288,750 0 0 0 20,000 0 $2,693<F4>
1999 370,000 $188,100 0 $128,223 18,200 0 4,608<F4>
1998 370,000 175,000 0 198,660 23,000 0 4,474<F4>
Gerald M. Chaney
Vice President Finance
And Chief Financial<F10>
Officer 2000<F*> $232,500 0 0 0 11,000 0 $5,575<F4>
1999 110,385 67,800 0 0 0 0 0
John R. Henderson
Vice President
Merchandising 2000<F*> $195,133 0 0 0 0 $3,458<F4>
1999 250,000 $104,300 0 $46,875 9,800 0 4,762<F4>
1998 240,000 60,000 0 64,020 10,000 0 4,963<F4>
<FN>
- ------------------
<F*> This refers to the Transition Period of May 1, 1999 through January 31,
2000.
<F1> The Corporate Development Incentive Plan which provides a restricted stock
award contingent on the achievement of predetermined performance criteria
based on the Company's fiscal year performance, vests over a three-year
period. Dividends are paid on the restricted stock. The amounts shown in
the table represent the dollar value based on the stock price at the award
date. The restricted awards attributable to the Named Executives for
prior fiscal years and in escrow as of January 31, 2000, which are still
subject to restrictions under the Corporate Development Incentive Plan,
valued at the closing price of $17.625 on January 31, 2000, are as
follows: H. J. Upbin, 16,930 shares at $298,391; E. Harding, Jr., 7,354
shares at $129,614; J. C. Jacobsen, 9,425 shares at $166,116, and J. R.
Henderson, 3,200 shares at $56,400. William J. McKenna and Gerald M.
Chaney did not hold any shares in escrow as of January 31, 2000.
<F2> Excludes income accrued for Executive Deferred Compensation Plan because
at prime plus 1% it is not above market rate.
<F3> H. J. Upbin has a contract of employment through January 31, 2004.
Effective December 1, 1999, his salary was increased to $1,000,000.
<F4> Employer matching 401(k) plan contribution.
36
<PAGE>
<PAGE>
<F5> W. J. McKenna was also Chairman until November 30, 1999. He has a
consulting contract to serve in an advisory capacity through November 30,
2001.
<F6> W. J. McKenna retired from Kellwood Company on November 30, 1999 and
received his final payment from the Kellwood Company Pension Plan.
<F7> W.J. McKenna received a lump sum payment under the required minimum
distribution rules of the Kellwood Company Pension Plan for his 16.9 years
of service. This number includes $12,874 lump sum payable April 1, 1999
and $4,608 employer matching 401(k) plan contribution.
<F8> At the age of 70-1/2, W. J. McKenna was eligible for a lump sum payment
under the required minimum distribution rules of the Kellwood Company
Pension Plan for his 15.9 years of service. This number includes $964,870
lump sum payable April 1, 1998 and $4,608 employer matching 401(k) plan
contribution.
<F9> By agreement with the Company, E. Harding will be paid a deferred
compensation benefit under a straight-life annuity of $1,032 per month
upon retirement, continuing during his lifetime.
<F10> G.M. Chaney became employed by the Company on December 21, 1998.
</TABLE>
37
<PAGE>
<PAGE>
The following two tables contain information covering stock options
granted during the transitional fiscal year ended January 31, 2000, to
the Named Officers and the number and value of unexercised stock options
held by those officers at the end of the last fiscal year. No SARs were
granted in conjunction with the options.
<TABLE>
OPTION GRANTS TABLE
OPTION GRANTS DURING TRANSITIONAL 2000 FISCAL YEAR
<CAPTION>
Individual Grants
----------------- Potential Realizable Value
at Assumed Annual Rates of
% of Total Stock Price Appreciation
Options for Option Term
Granted to Exercise or ---------------
Options Employees in Base Price
Name Granted (#) Fiscal Year<F1> ($/Share) Expiration Date 5% ($) 10% ($)
---- ----------- --------------- --------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
William J. McKenna 47,000 8.91 $23.68 05/27/09 $699,935 $1,773,772
Hal J. Upbin 43,500 8.25 23.68 05/27/09 647,812 1,641,683
3,500 .66 23.68 05/27/09 52,123 132,089
------ ---- -------- ----------
47,000 8.91 699,935 1,773,772
====== ==== ======== ==========
Enoch Harding, Jr. 8,000 1.52 23.68 05/27/09 119,138 301,919
5,000 .95 23.68 05/27/09 74,461 188,699
------ ---- -------- ----------
13,000 2.47 193,599 490,618
====== ==== ======== ==========
James C. Jacobsen 15,600 2.96 23.68 05/27/09 232,319 588,741
4,400 .83 23.68 05/27/09 65,526 166,055
------ ---- -------- ----------
20,000 3.79 297,845 754,796
====== ==== ======== ==========
John R. Henderson 4,500 .85 23.68 05/27/09 67,015 169,829
1,500 .29 23.68 05/27/09 22,338 56,610
------ ---- -------- ----------
6,000 1.14 89,353 226,439
====== ==== ======== ==========
Gerald M. Chaney 7,000 1.33 23.68 05/27/09 104,246 264,179
4,000 .76 23.68 05/27/09 59,569 150,959
------ ---- -------- ----------
11,000 2.09 163,815 415,138
====== ==== ======== ==========
<FN>
- -------------------
<F1> Total options granted during transitional fiscal year 2000 were 527,604
shares to the Named Officers and all other employees.
</TABLE>
38
<PAGE>
<PAGE>
<TABLE>
OPTION EXERCISES IN TRANSITIONAL 2000 FISCAL YEAR
AND FY-END 1/31/00 VALUE TABLE
<CAPTION>
(a) (b) (c) (d) (e)
Value of Unexercised
Number of In-the-Money
Options Options
at FY-End (#) at FY-End ($)
01/31/00 01/31/00
Shares Acquired on
Name Exercise (#) Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
William J. McKenna 0 0 351,181 / 203,766 74,755 / 76,827
Hal J. Upbin 0 0 137,036 / 157,024 45,134 / 30,089
Enoch Harding, Jr. 0 0 20,920 / 44,880 7,602 / 15,204
James C. Jacobsen 0 0 1,590 / 67,660 36,110 / 24,073
John R. Henderson 0 0 26,560 / 26,240 10,860 / 7,240
Gerald M. Chaney 0 0 0 / 11,000 0 / 0
</TABLE>
RETIREMENT PROGRAM
PENSION PLAN
The Kellwood Company Pension Plan is a defined benefit plan
covering a substantial number of all domestic employees of the Company
and its subsidiaries. The basic annual pension benefit under the Plan
for service after April 30, 1989 is equal to 12 times 0.5% of average
monthly earnings times credited service after April 30, 1989, plus 12
times 0.5% of average monthly earnings, in excess of covered
compensation, multiplied by years of credited service commencing on or
after May 1, 1989 up to 35 years. Covered compensation is defined as
the average social security wage base for the 35 years before an
employee reaches social security retirement age. Average monthly
earnings under the Plan is the average of an employee's monthly earnings
defined under the Plan paid during the highest five consecutive full
calendar years within an employee's credited service. The amount of
final benefits is not and cannot readily be calculated for each
individual by the Plan's regular actuaries.
Plan participants as of April 30, 1989, who continued as employees
after April 30, 1989, will receive their accrued benefits as of April
30, 1989 plus benefits earned after that date. For employees earning
$150,000 per year or more, an amended accrued monthly benefit as of
April 30, 1994 was calculated. The amended accrued monthly benefits at
April 30, 1994 for the persons listed in the Summary Compensation Table
other than W. J. McKenna were as follows: H. J. Upbin, President and
Chief Operating Officer, $615.06; E. Harding, Jr., Executive Vice
President Operations, $1,766.95; J. C. Jacobsen, Vice Chairman,
$5,560.28; and John R. Henderson, Vice President Merchandising, $245.79.
Upon retirement, Mr. Harding will also be paid during his lifetime a
deferred compensation benefit under a straight-life annuity of $1,032
per month in recognition of his previous employment between 1972 and
1977. As of April 30, 1999, of the officers listed in the Summary
Compensation Table, Mr. Upbin, Mr. Harding, Mr. Jacobsen and Mr.
Henderson have approximately five years of credited service subsequent
to May 1, 1994. The table below is indicative of annual benefits for
service after April 30, 1989, using covered compensation for employees
retiring at normal retirement age in calendar 2000. Benefits for
employees who retire in subsequent years will be lower reflecting
increases in the average social security wage base.
39
<PAGE>
<PAGE>
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Years of Service
--------------------------------------------------------------------
Remuneration 5 10 15 20 30
------------ --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 1,623 $ 3,245 $ 4,868 $ 6,490 $ 9,735
100,000 4,123 8,245 12,368 16,490 24,735
125,000 5,373 10,745 16,118 21,490 32,235
150,000 6,623 13,245 19,868 26,490 39,735
170,000 7,623 15,245 22,868 30,490 45,735
200,000 7,267 14,535 21,802 29,070 43,604
250,000 7,267 14,535 21,802 29,070 43,604
350,000 7,267 14,535 21,802 29,070 43,604
500,000 7,267 14,535 21,802 29,070 43,604
750,000 7,267 14,535 21,802 29,070 43,604
1,000,000 7,267 14,535 21,802 29,070 43,604
1,300,000 7,267 14,535 21,802 29,070 43,604
</TABLE>
Section 401(a)(17) of the Internal Revenue Code limits annual
earnings for purposes of calculating benefits under Kellwood's pension
plan to $170,000. Section 415 of the Internal Revenue Code limits
annual benefits payable from the plan at age 65 to $130,000. However,
benefits accrued prior to the enactment of these limitations were not
reduced accordingly.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no compensation
for their services as directors. Non-employee directors were
compensated for their services as the rate of $23,000 per annum. In
addition, each non-employee director receives $1,000 for each Board
Meeting and $1,000 for each Committee meeting attended, not to exceed
$2,000 for any one day, and is reimbursed for expenses incurred in
attending those meetings.
Under the 1995 Stock Option Plan for Nonemployee Directors, each
person who remains or becomes a Nonemployee Director of the Company is
granted an option to purchase 1,000 shares of Common Stock on the first
business day after the date of the first annual meeting to which the
person was elected or remained a Nonemployee Director. The option price
for each share granted to a Nonemployee Director is 100% of the fair
market value of the shares subject to option on the date of the option
grant. The option price may be paid by check or by the delivery of
shares of Common Stock then owned by the participant. On May 28, 1998,
the Board of Directors approved a grant of 100 shares of restricted
common stock to each Nonemployee Director to be issued out of shares
held in its treasury effective immediately following the Annual Meeting
each year.
Mr. William McKenna retired as an employee on November 30, 1999.
A Consulting Agreement engages his services through November 30, 2001,
in a consulting and advisory capacity at the annual rate of $200,000.
Mr. McKenna continues to serve as a Director of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no interlocks or insider participation with any
executive officers of the Company or with the members of the Committee.
The Company's Board of Directors has established a three member
Compensation and Stock Option Committee (the "Committee"). Each member
of the Committee is a non-employee director. The Committee's
responsibilities include approving salaries of executives of the
Company, administering and interpreting compensation plans, and granting
cash bonuses, stock bonuses and other benefits under such plans. The
Compensation and Stock Option Committee met two times during the the
Transition Period. The members of the Compensation and Stock Option
Committee were J.S. Marcus, Chairman, R.F. Bentele and L.A. Genovese.
40
<PAGE>
<PAGE>
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE ON
EXECUTIVE COMPENSATION
This Report and the following Performance Graph shall not be
deemed to be incorporated by reference by any general statement which
incorporates by reference this Form 10-K into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, and they
shall not otherwise be deemed filed under such Acts.
OVERVIEW
The Securities and Exchange Commission has adopted rules that are
designed to enhance disclosure of the policies of companies regulated by
the Commission in regard to executive compensation. In response to
these rules the Committee has prepared a report, as outlined below, on
the Company's policies and practices with respect to executive
compensation.
The Company's executive officer compensation program consists of
base salary, annual cash incentive compensation, long-term incentive
compensation in the form of stock options and stock awards, and various
benefits including medical, pension, and 401(k) savings plans generally
available to employees of the Company.
COMPENSATION POLICIES
The Committee's executive compensation policies are designed to
provide competitive levels of compensation which integrate pay with the
Company's annual and longer term performance goals, reward above average
performance, recognize individual initiative and achievements, assist
the Company in attracting and retaining qualified executives and build
the ownership of Company stock by key managers. The Committee is of the
view that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning the interests of
management with the interests of the Company's shareowners which
ultimately enhances shareowner value. The Committee further believes
that bonus and other forms of incentive-based compensation encourage
management to attain preset commercial goals for the Company.
BASE SALARY
The Committee reviews each executive officer's salary annually
(usually in May) and considers recommendations submitted by the Chief
Executive Officer. In determining appropriate salary levels, the
Committee considers a variety of sources, including industry surveys,
proxy statements, and outside consultants. The Committee also considers
the level and scope of responsibility, experience, Company and
individual performance, and internal equity. The Committee uses its
discretion to set executive compensation where in its judgment external,
internal, or an individual's circumstances warrant. By design, the
Committee strives to set executives' salaries at competitive market
levels. Increases are based on comparable companies' practices, the
Company's achievement of its financial plan, and the individual's
performance. The salary increases in the Transition Period were based
on the Committee's review of the return on equity, net earnings as a
percent of sales and earnings per share growth over the prior five
years.
ANNUAL CASH INCENTIVES
A Performance Management and Incentive Compensation Plan is
extended to executives, managers and professionals whose positions have
a significant impact on the Company's operating results. Annual cash
incentive compensation awards are made to participants to recognize and
reward corporate, business unit and individual performance. Goals for
Company, business unit and individual executive's performance are set at
the beginning of each fiscal year. In determining whether to award cash
bonuses, the Committee compares the Company's financial performance
against its annual financial plan, considers business unit and
individual performance, and Company performance against that of peer
companies. The amount of any award is determined by the combined
financial results of the Company and the business unit, and the
achievement of the individual's personal objectives. In considering
bonuses for executives other than Mr. Upbin, the Committee considers
bonus recommendations submitted by the Chief Executive Officer. The
Committee also receives an assessment of the performance of each
executive from Mr. Upbin and discusses the assessments with him. When
assessing the performance of Mr. Upbin, the Committee meets privately.
Cash bonuses were awarded within the policy guidelines of the annual
cash bonus program. See column (d) of the Summary Compensation Table.
41
<PAGE>
<PAGE>
ANNUAL STOCK INCENTIVES
The Committee administers the Company's Restricted Stock
Compensation Plan and the Corporate Development Incentive Plan, both of
which award shares of the Company's common stock. Under the Restricted
Stock Compensation Plan, restricted shares are granted to qualified
employees and are released from restrictions ratably over five years.
Awards are limited to an aggregate of 25,000 shares for any Plan year.
No awards were made to any executive officers during the Transition
Period.
The Committee selects key executives to be participants in the
Corporate Development Incentive Plan based upon its judgment of the
executive's ability to significantly affect major decisions and actions
which influence the continued profitable growth and development of the
Company, the value of the executive's continuing service and the
probable detriment of his or her employment by competitors. The
Committee selects participants and sets the performance goals, which
must be achieved during the measurement period. The measures and
objectives may be based on earnings per share, earnings before tax and
gains on sale of assets and before adjustments for non-recurring and
extraordinary items, or other criteria, which the Committee establishes.
Payment of awards under the Plan are made in common stock. An award, if
any, is made to a participant by the Company at the time the Committee
determines that performance goals have been met. Restrictions on the
shares lapse and shares are transferred to the participants in
installments over approximately three years, provided the shares have
not been forfeited. Awards granted to qualified employees under the
Plan are limited to an aggregate of 157,500 shares for any Plan year.
The shares covered by the awards may not be transferred, sold, pledged
or otherwise disposed of prior to the lapse of restrictions. A target
award level is established for each executive officer based on his or
her level of responsibility. Based on Company earnings, a participant
may have the opportunity to earn awards in excess of the targeted
amounts for the Company's outstanding performance. Threshold standards
required to be met before any stock bonus award is made are also
established. No awards were made to any executive officers during the
Transition Period. See column (f) of the Summary Compensation Table.
STOCK OPTIONS
The Committee administers the Company's 1995 Omnibus Incentive
Stock Plan that provides for awards of incentive stock options, non-
qualified stock options and stock appreciation rights. These awards
directly relate the amounts earned by the executives to the amount of
appreciation realized by the Company's shareowners over comparable
periods. Stock options also provide executives with the opportunity to
acquire and build a meaningful ownership interest in the Company. While
the Company encourages stock ownership by executives, it has not
established any target levels for executive stock holdings. Awards are
generally made at a level calculated to be competitive. See the Option
Grants During Transitional 2000 Fiscal Year Table.
The Committee considers stock option awards on an annual basis.
These are normally awarded in May. In determining the amount of options
awarded, the Committee generally establishes a level of award based on
the position held by the individual and his or her level of
responsibility, both of which reflect the executive's ability to
influence the Company's long-term performance. The number of options
previously awarded to and held by executives are also reviewed but are
not an important factor in determining the size of the current award.
The number of options actually awarded in any year is based on an
evaluation of the individual's performance.
OTHER BENEFIT PROGRAMS
The Company has adopted an unfunded, unqualified deferred
compensation plan known as the Executive Deferred Compensation Plan (the
"Plan") to provide deferred compensation for a select group of
management or highly-compensated employees. The Plan allows employees
to voluntarily defer compensation until termination or retirement.
Under the Plan, any employee whose base salary exceeds a level set by
the Plan Administrator may enroll in the Plan. The Plan is administered
by the Retirement Savings Plan Committee.
For any calendar year, a Participant may defer up to $84,000 in
salary as well as up to $84,000 in cash bonus. The Employer shall
credit the deferred amount to a separate bookkeeping account (the
"Account") maintained by the Plan Administrator in the name of the
Participant. The Account shall be increased monthly by an amount equal
to one-twelfth of the sum of the prime rate plus 1%.
The executive officers participate in various health, life and
disability insurance programs, pension plan and a retirement savings
401(k) plan, that are generally made available to all salaried
employees. Executive officers also receive certain traditional
perquisites that are customary for their positions.
42
<PAGE>
<PAGE>
The Committee believes that the overall program it has adopted,
with its emphasis on long term compensation, serves to focus the efforts
of the Company's executives on the attainment of a sustained high rate
of Company growth and profitability for the benefit of the Company and
its stockholders.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
H. J. Upbin has an Employment Agreement with the Company for a
term extending to January 31, 2004 and effective December 1, 1999, his
salary was increased to $1,000,000.
In approving the salary increase for fiscal year ending January
31, 2000, the Committee took into account the level and scope of his
responsibilities and contributions to the Company.
COMPANY POLICY ON QUALIFYING COMPENSATION
Internal Revenue Code Section 162(m), adopted in 1993, provides
that publicly-held companies may not deduct in any taxable year
compensation in excess of $1,000,000 paid to the CEO and other executive
officers which is not "performance based" as defined in Section 162(m).
The Committee will continue to monitor the effect of this new provision
on the Company's existing compensation plans and will take appropriate
action if warranted in the future to maintain the deductibility of
payments under the plan.
COMMITTEE COMPOSITION
This Report is submitted by the members of the Committee as of
January 31, 2000.
Raymond F. Bentele
Leonard A. Genovese
James S. Marcus, Chairman
OTHER OFFICER AGREEMENTS
The Company has agreements with Messrs. Upbin, Jacobsen, Harding,
and several of the other officers providing for compensation in
connection with termination of employment following a Change in Control,
as well as if all or substantially all of the Company's assets are sold
by the Company, or the Company is liquidated or ceases to function as a
going concern. These agreements provide for the payment of a lump sum
within five days of the date of termination equal to the sum of (a) two
times the officer's highest base salary in effect during the fiscal year
in which the date of termination occurs, (b) two times the officer's
average annual incentive awards during the last three full fiscal years,
(c) the incentive award which, pursuant to any benefit plan of the
Company, had accrued or would have accrued to the officer during the
last full fiscal year, and (d) the last bonus award earned by the
officer under the Company's annual bonus program.
43
<PAGE>
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of Kellwood common
shares with that of the S&P 500 and S&P Apparel Indices. The graph plots
the growth in value of an initial $100 investment over the indicated
time periods, with dividends reinvested.
FIVE YEAR TOTAL RETURN COMPARISON
[GRAPH]
<TABLE>
------------------------------------------------------------------------------------------------------------
<CAPTION>
4/95 4/96 4/97 4/98 4/99 1/00
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kellwood Co. $100 $94 $142 $195 $161 $112
S&P 500 Index $100 $130 $163 $230 $280 $295
S&P Apparel Index $100 $122 $157 $192 $147 $91
------------------------------------------------------------------------------------------------------------
Note: Total return assumes reinvestment of dividends
</TABLE>
44
<PAGE>
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At the close of business on January 31, 2000 (the "transitional fiscal
year end"), the Company had 26,173,218 shares outstanding. The table
listed below contains information concerning each person who is known by
the Company to be the beneficial owner of more than five percent of the
Company's common stock. To the best of the Company's knowledge, no
other persons are beneficial owners of five percent or more of the
Company's shares.
Name Amount
and Address and Nature
Title of of Beneficial of Beneficial Percent
Class Owner Ownership of Class
----- ----- --------- --------
Common Stock The Prudential Insurance
Company of America
751 Broad Street
Newark, NJ 07102-3777 1,791,011<F1> 6.83%
[FN]
- --------------------------
<F1> As reported on their Schedule 13G dated January 31, 2000, The
Prudential Insurance Company of America, a registered insurance company
and investment advisor, was the beneficial owner of 1,791,011 shares
representing 6.83% of the total shares outstanding on that day, and The
Prudential Insurance Company of America has sole voting power for
110,700 shares, shared voting power for 1,791,011 shares, sole
dispositive power for 110,700 shares, and shared dispositive power for
1,791,011 shares.
45
<PAGE>
<PAGE>
MANAGEMENT OWNERSHIP
OF THE COMPANY'S STOCK
Under regulations of the Securities and Exchange Commission,
persons who have power to vote or to dispose of shares of the Company,
either alone or jointly with others, are deemed to be beneficial owners
of those shares. The following table shows, as of January 31, 2000, the
beneficial ownership of each present director and each nominee for
director, and of all present directors and executive officers as a
group, of shares of the Company's common stock. This information has
been furnished to the Company by the individuals named. As shown in the
last column, in some cases a significant number of the shares indicated
in the center column as being beneficially owned are actually unissued
shares attributable to unexpired options for the Company's common stock
which are presently exercisable or first become exercisable within 60
days after January 31, 2000. With the exception of Mr. Granoff who owns
approximately 2.9% and Mr. McKenna who owns approximately 1.6% of the
outstanding common stock of the Company, no nominee or present director
owns more than 1% thereof. All executive officers and directors as a
group own approximately 7.1% of the outstanding common stock.
Number of Shares
Number of Included in Previous
Shares Column Attributable
Name of Individual Beneficially to Unexpired
or Number in Group Owned Options to Purchase
- ------------------ ------------ -------------------
R. F. Bentele 5,950 5,000
E. S. Bottum 8,350 5,000
G.M. Chaney 0 0
K. G. Dickerson 5,600 4,500
L. A. Genovese 7,177 4,000
M. J. Granoff 758,382<F1> 0
E. Harding, Jr. 36,585 20,920
J. R. Henderson 31,887 26,560
J. M. Hunter 5,200 5,000
J. C. Jacobsen 145,591 81,590
J. S. Marcus 6,100 5,000
W. J. McKenna 427,157<F2> 351,181
H. J. Upbin 179,889 137,036
All directors and 1,857,051 821,707
executive officers as a group
(19 persons including those named)
[FN]
- -------------------
<F1> Does not include 60,253 shares owned by Mr. Granoff's wife, 30,126
shares held in trust for the benefit of his daughter, and 30,126 shares
held in trust for the benefit of his son. Mr. Granoff disclaims
beneficial ownership of these shares.
<F2> Does not include 202 shares owned by Mr. McKenna's wife, 3,317
shares owned by his daughter, and 3,317 shares owned by his son. Mr.
McKenna disclaims beneficial ownership of these shares.
46
<PAGE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James M. Marcus has been a director of the Company since 1965.
Mr. Marcus was a Limited Partner of the Goldman Sachs Group, L.P. during
1999. On December 9, 1999, the Company repurchased 1.68 million shares
through a privately negotiated transaction with Goldman Sachs at $18.00
per share, which was below the market price. Mr. Marcus was not
involved in the negotiations or execution of this transaction, and did
not have any material or monetary interest in the transaction.
Jerry M. Hunter was elected a director at the Annual Meeting of
Shareowners held on August 25, 1994. Mr. Hunter is a partner in the law
firm of Bryan Cave in St. Louis, Missouri. The services of the law firm
have been retained during the last fiscal year and during the current
fiscal year. Fees paid by the Company to Bryan Cave did not exceed five
percent of the law firm's gross revenues for that firm's last fiscal
year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1) Financial Statements:
Report of Independent Accountants
Consolidated Statement of Earnings
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareowners' Equity
Notes to Consolidated Financial Statements
2) Report of Independent Accountants on Financial Statement Schedule:
Financial Statement Schedule for the fiscal years ended
January 31, 2000, April 30, 1999 and 1998:
Valuation and Qualifying Accounts (Schedule VIII)
3) Exhibits filed as part of this report are listed below. Certain
exhibits have been previously filed with the Commission and are
incorporated herein by reference.
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- -------------- -----------
2.1 - Agreement and Plan of Merger, dated December 1, 1998, as
amended among Kellwood Company and Koret, Inc., incorporated
herein by reference to Form S-4 dated March 25, 1999,
SEC File No. 333-74967.
3.1 - Restated Certificate of Incorporation of Kellwood Company,
as amended, incorporated herein by reference to Form
10-Q for the quarter ended July 31, 1987, SEC File
No. 1-7340.
3.2 - By-Laws, as amended November 23, 1999, filed herewith.
[FN]
<F*> Denotes management contract or compensatory plan.
<F**> Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential portions of Exhibit 10.6 have been deleted and filed
separately with the Commission pursuant to a request for confidential
treatment.
47
<PAGE>
<PAGE>
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- -------------- -----------
4.1 - Note Purchase Agreement dated December 29, 1986, with
exhibits, incorporated herein by reference to Form
10-Q for the quarter ended January 31, 1987, SEC File
No. 1-7340.
4.2 - Indenture between the Registrant and Centerre Trust
Company of St. Louis, and the 9% Convertible
Subordinated Debentures due 1999, incorporated herein
by reference to Registration Statement on Form S-2,
Registration No. 2-93522, effective October 18, 1984.
4.3 - Note Agreement dated July 1, 1993, incorporated herein
by reference to Form 10-Q for the quarter ended July
31, 1993, SEC File No. 1-7340.
4.4 - Rights to Acquire Series A Junior Preferred Stock,
pursuant to a Rights Agreement between the registrant
and Centerre Trust Company of St. Louis, incorporated
herein by reference to Registration Statement on Form
8-A, effective June 24, 1986 and Amendment dated
August 21, 1990, incorporated herein by reference to
Form 10-Q for the quarter ended October 31, 1990, and
Amendment dated May 31, 1996 incorporated herein by
reference to Form 8-A/A effective June 3, 1996, SEC
File No. 1-7340.
4.5 - Note Purchase Agreement dated December 1, 1987, with
exhibits, incorporated herein by reference to Form
10-Q for the quarter ended January 31, 1988, SEC File
No. 1-7340.
4.6 - Note Purchase Agreement dated December 15, 1989, with
exhibits, incorporated herein by reference to the Form
10-Q for the quarter ended January 31, 1990, SEC File
No. 1-7340.
4.7 - Credit Agreement dated as of May 31, 1996 among
Kellwood Company, certain commercial lending
institutions, and The Bank of Nova Scotia, as
Administrative Agent and Syndication Agent, and Bank
of America National Trust and Savings Association, as
documentation Agent, incorporated herein by reference
to Form 10-K for the fiscal year ended April 30, 1996,
SEC File No. 1-7340.
10.3<F*> - Form of Employment Agreement dated November 30, 1984,
between Kellwood Company and executive officers,
incorporated herein by reference to Form 10-K for the
fiscal year ended April 30, 1985, SEC File No. 1-7340.
10.4<F*> - 1995 Stock Option Plan For Nonemployee Directors and
1995 Omnibus Incentive Stock Option Plan, incorporated
herein by reference to Appendixes A & B to the
Company's definitive Proxy Statement dated July 13,
1995, SEC File No. 1-7340.
10.5<F*> - Executive Deferred Compensation Plan, adopted and
effective as of January 1, 1997; and Executive
Deferred Compensation Plan Amendment, adopted March
18, 1997, incorporated herein by reference to Form
10-K for the fiscal year ended April 30, 1997, SEC
File No. 1-7340.
10.6<F**> - Agreement for Services Between Kellwood Company and
Electronic Data Systems Corporation, dated June 21,
1996; and Amendment Regarding Use of Kellwood Purchase
Card by EDS Employees, dated April 29, 1997,
incorporated herein by reference to Form 10-K for the
fiscal year ended April 30, 1997, SEC File No. 1-7340.
[FN]
<F*> Denotes management contract or compensatory plan.
<F**> Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential portions of Exhibit 10.6 have been deleted and filed
separately with the Commission pursuant to a request for confidential
treatment.
48
<PAGE>
<PAGE>
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- -------------- -----------
10.7<F*> - Corporate Development Incentive Plan of 1986 (As
Amended), formerly the Key Executive Long-Term
Incentive Plan of 1983, incorporated herein by
reference to Form 10-K for the fiscal year ended April
30, 1994, SEC File No. 1-7340; and Amendment dated May
29, 1997, incorporated herein by reference to Exhibit
A to the Company's definitive Proxy Statement dated
July 17, 1997, SEC File No. 1-7340.
10.8<F*> - Employment Agreement dated December 1, 1999, between
Kellwood Company and Hal J. Upbin, filed herewith.
10.9<F*> Consulting Agreement dated December 1, 1999, between
Kellwood Company and William J. McKenna, filed
herewith.
21 - Subsidiaries of the Company, appearing at page 53 of
this report.
22 - Joint Proxy Statement/Prospectus dated March 25, 1999,
incorporated herein by reference to Form S-4 dated
March 25, 1999, SEC File No. 333-74967.
23 - Consent of Independent Accountants, appearing at page
51 of this report.
24 - Powers of Attorney: Ms. Dickerson and Messrs.
Bentele, Bottum, Genovese, Granoff, Hunter, Jacobsen,
Marcus and McKenna; filed herewith.
27 - Financial Data Schedule, filed herewith.
[FN]
<F*> Denotes management contract or compensatory plan.
<F**> Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential portions of Exhibit 10.6 have been deleted and filed
separately with the Commission pursuant to a request for confidential
treatment.
(b) REPORTS ON FORM 8-K:
* No reports were filed on Form 8-K during the three months
ended January 31, 2000.
49
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
KELLWOOD COMPANY
Dated: April 13, 2000 /s/ Thomas H. Pollihan
-----------------------------
Thomas H. Pollihan
Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following on behalf of Kellwood
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Hal J. Upbin Director, Chairman of the Board, April 13, 2000
- --------------------- President and Chief Executive Officer
Hal J. Upbin
/s/ Gerald M. Chaney Vice President Finance and April 13, 2000
- --------------------- Chief Financial Officer
Gerald M. Chaney (principal financial and accounting officer)
James C. Jacobsen Director, Vice Chairman
<S> <C> <C>
Raymond F. Bentele Director
/s/ Thomas H. Pollihan
Edward S. Bottum Director ------------------------
Thomas H. Pollihan
Kitty G. Dickerson Director Attorney-in-fact
April 13, 2000
Leonard A. Genovese Director
Martin J. Granoff Director
Jerry M. Hunter Director
James S. Marcus Director
William J. McKenna Director
</TABLE>
50
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Kellwood Company
Our audits of the consolidated financial statements referred to in our
report dated March 1, 2000 which appears in this Form 10-K also included
an audit of the financial statement schedules listed in Item 14(a)(2) of
this Form 10-K. In our opinion, these financial statement schedules
present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PricewaterhouseCoopers LLP
St. Louis, Missouri
March 1, 2000
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 033-64847) of Kellwood Company of our report
dated March 1, 2000 relating to the financial statements which appears
in this Form 10-K. We also consent to the incorporation by reference of
our report dated March 1, 2000 relating to the financial statement
schedules which appears in this Form 10-K.
PricewaterhouseCoopers LLP
St. Louis, Missouri
March 1, 2000
51
<PAGE>
<PAGE>
<TABLE>
KELLWOOD COMPANY AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- --------------------------- -------- --------
Additions
---------------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
----------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
TRANSITION PERIOD
ENDED JANUARY 31, 2000:
Allowance for
doubtful accounts $11,281 $5,119 -- $(4,258)<FA> $12,142
YEAR ENDED APRIL 30, 1999:
Allowance for
doubtful accounts 11,803 3,868 -- (4,390)<FA> 11,281
YEAR ENDED APRIL 30, 1998:
Allowance for
doubtful accounts 6,191 3,751 -- 1,861 <FA> 11,803
<FN>
<FA> <Write-off>/recoveries of bad debts, net.
</TABLE>
52
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<PAGE>
EXHIBIT 21
PARENTS AND SUBSIDIARIES
The Company and its subsidiaries<F*> as of January 31, 2000 are as follows:
State (Country) of Percentage of Voting
Name of Company Incorporation Securities Owned
- ------------------ -------------------- ----------------
Kellwood Company Delaware Parent
American Recreation Products, Inc. Delaware 100%
Kellwood Asia Limited Hong Kong 100%
Smart Shirts Limited Hong Kong 100%
South Asia Garment Limited Hong Kong 100%
KWD Holdings, Inc. Delaware 100%
Robert Scott & David Brooks
Outlet Stores, Inc. Delaware 100%
Tri-W Corporation North Carolina 100%
Halmode Apparel, Inc. Delaware 100%
Fritzi California, Inc. Delaware 100%
Koret, Inc. Delaware 100%
Biflex International, Inc. New York 100%
Kellwood Financial Resources, Inc. Tennessee 100%
Kellwood Shared Services, Inc. Delaware 100%
[FN]
<F*> Some of the above subsidiaries also have subsidiaries that are not
listed because, in the aggregate, they are not considered to be
significant.
53
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<PAGE>
EXHIBIT INDEX
-------------
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- -------------- -----------
2.1 - Agreement and Plan of Merger, dated December 1, 1998, as
amended among Kellwood Company and Koret, Inc., incorporated
herein by reference to Form S-4 dated March 25, 1999, SEC
File No. 333-74967.
3.1 - Restated Certificate of Incorporation of Kellwood Company, as
amended, incorporated herein by reference to Form 10-Q for the
quarter ended July 31, 1987, SEC File No. 1-7340.
3.2 - By-Laws, as amended through November 21, 1995, incorporated
herein by reference to Form 10-K for the fiscal year ended
April 30, 1996, SEC File No. 1-7340; and Amendment dated
November 23, 1999, filed herewith.
4.1 - Note Purchase Agreement dated December 29, 1986, with exhibits,
incorporated herein by reference to Form 10-Q for the quarter
ended January 31, 1987, SEC File No. 1-7340.
4.2 - Indenture between the Registrant and Centerre Trust Company of
St. Louis, and the 9% Convertible Subordinated Debentures due
1999, incorporated herein by reference to Registration
Statement on Form S-2, Registration No. 2-93522, effective
October 18, 1984.
4.3 - Note Agreement dated July 1, 1993, incorporated herein by
reference to Form 10-Q for the quarter ended July 31, 1993,
SEC File No. 1-7340.
4.4 - Rights to Acquire Series A Junior Preferred Stock, pursuant to
a Rights Agreement between the registrant and Centerre Trust
Company of St. Louis, incorporated herein by reference to
Registration Statement on Form 8-A, effective June 24, 1986
and Amendment dated August 21, 1990, incorporated herein by
reference to Form 10-Q for the quarter ended October 31, 1990,
and Amendment dated May 31, 1996 incorporated herein by
reference to Form 8-A/A effective June 3, 1996, SEC File
No. 1-7340.
4.5 - Note Purchase Agreement dated December 1, 1987, with exhibits,
incorporated herein by reference to Form 10-Q for the quarter
ended January 31, 1988, SEC File No. 1-7340.
4.6 - Note Purchase Agreement dated December 15, 1989, with exhibits,
incorporated herein by reference to the Form 10-Q for the
quarter ended January 31, 1990, SEC File No. 1-7340.
4.7 - Credit Agreement dated as of May 31, 1996 among Kellwood
Company, certain commercial lending institutions, and The Bank
of Nova Scotia, as Administrative Agent and Syndication Agent,
and Bank of America National Trust and Savings Association,
as documentation Agent, incorporated herein by reference to
Form 10-K for the fiscal year ended April 30, 1996, SEC File
No. 1-7340.
10.3<F*> - Form of Employment Agreement dated November 30, 1984, between
Kellwood Company and executive officers, incorporated herein
by reference to Form 10-K for the fiscal year ended
April 30, 1985, SEC File No. 1-7340.
10.4<F*> - 1995 Stock Option Plan For Nonemployee Directors and 1995
Omnibus Incentive Stock Option Plan, incorporated herein by
reference to Appendixes A & B to the Company's definitive
Proxy Statement dated July 13, 1995, SEC File No. 1-7340.
[FN]
<F*> Denotes management contract or compensatory plan.
<F**> Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential portions of Exhibit 10.6 have been deleted and filed separately
with the Commission pursuant to a request for confidential treatment.
54
<PAGE>
<PAGE>
S.E.C. EXHIBIT
REFERENCE NO. DESCRIPTION
- -------------- -----------
10.5<F*> - Executive Deferred Compensation Plan, adopted and effective
as of January 1, 1997; and Executive Deferred Compensation
Plan Amendment, adopted March 18, 1997, incorporated herein
by reference to Form 10-K for the fiscal year ended
April 30, 1997, SEC File No. 1-7340.
10.6<F**> - Agreement for Services Between Kellwood Company and
Electronic Data Systems Corporation, dated June 21, 1996;
and Amendment Regarding Use of Kellwood Purchase Card by
EDS Employees, dated April 29, 1997, incorporated herein by
reference to Form 10-K for the fiscal year ended
April 30, 1997, SEC File No. 1-7340.
10.7<F*> - Corporate Development Incentive Plan of 1986 (As Amended),
formerly the Key Executive Long-Term Incentive Plan of 1983,
incorporated herein by reference to Form 10-K for the fiscal
year ended April 30, 1994, SEC File No. 1-7340; and Amendment
dated May 29, 1997, incorporated herein by reference to
Exhibit A to the Company's definitive Proxy Statement dated
July 17, 1997, SEC File No. 1-7340.
10.8<F*> - Employment Agreement dated December 1, 1999, between
Kellwood Company and Hal J. Upbin, filed herewith.
10.9<F*> - Consulting Agreement dated December 1, 1999, between
Kellwood Company and William J. McKenna, filed herewith.
21 - Subsidiaries of the Company, appearing at page 53 of this
report.
22 - Joint Proxy Statement/Prospectus dated March 25, 1999,
incorporated herein by reference to Form S-4 dated
March 25, 1999, SEC File No. 333-74967.
23 - Consent of Independent Accountants, appearing at page 51 of
this report.
24 - Powers of Attorney: Ms. Dickerson and Messrs. Bentele,
Bottum, Genovese, Granoff, Hunter, Jacobsen, Marcus and
McKenna; filed herewith.
27 - Financial Data Schedule, filed herewith.
[FN]
<F*> Denotes management contract or compensatory plan.
<F**> Pursuant to the Securities Exchange Act of 1934, Rule 24b-2,
confidential portions of Exhibit 10.6 have been deleted and filed separately
with the Commission pursuant to a request for confidential treatment.
55
<PAGE>
EXHIBIT 3.2
-----------
As amended through
November 23, 1999
KELLWOOD COMPANY
-------------------
BY-LAWS
----------
OFFICES
----------
Section 1.1. Principal Office. The principal office shall be in
----------------
the City of Wilmington, County of New Castle, State of Delaware, and the
name of the resident agent in charge thereof is The Prentice Hall
Corporation System, Inc. (As amended February 22, 1994, by Executive
Committee Resolution.)
Section 1.2. Other Offices. The Corporation may also have an
-------------
office in the City of Chicago, State of Illinois, and also offices at
such other places as the Board of Directors may from time to time
determine or the business of the Corporation may require.
STOCKHOLDERS' MEETINGS
----------------------
Section 2.1. Place of Meetings. All meetings of stockholders for
-----------------
the election of directors shall be held at such place, within or without
the State of Delaware as the Board of Directors may fix by resolution,
or if no place is so fixed, then at the general office of the Company at
600 Kellwood Parkway in St. Louis County, Missouri. All meetings of
stockholders, other than meetings for the election of directors, shall
be held at such place, within or without the State of Delaware as may
from time to time be fixed by the Board and specified in the respective
notices or waivers of notice thereof. (As amended May 30, 1974, by Board
Resolution.)
Section 2.2. Annual Meetings. An annual meeting of stockholders,
---------------
commencing with the meeting during the fiscal year 1995, shall be held
on the fourth Thursday after the first Thursday in May in each year,
with the first such meeting to be held in the calendar year 2001 if not
a legal holiday, and if a legal holiday then on the next secular day
following, at 10:00 A.M.; at which time they shall elect by a plurality
vote, a Board of Directors, and transact such other business as may
properly be brought before the meeting. (As amended May 31, 1978,
November 23, 1993, and November 23, 1999 by Board Resolution.)
Section 2.3. Notice of Meeting. Written notice of the annual meeting
-----------------
shall be served upon or mailed to each stockholder entitled to vote
thereat at the stockholder's address as appears on the books of the
Corporation, at least ten days prior to the meeting, and shall state the
place, date and hour of the meeting. The notice must be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at the meeting. (As amended February 26,
1991, by Board Resolution.)
Section 2.4. Stockholders' List. At least ten days before every
------------------
meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address
of each stockholder as shown on the records of the Corporation and the
number of voting shares held by each stockholder, shall be prepared by
the Secretary. The list shall be kept, either at a place within the city
where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the
meeting is to be held for a period of at least ten days prior to the
meeting. During the ten day period, the list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours. The list shall
56
<PAGE>
<PAGE>
also be produced and kept at the time and place of the meeting the whole
time thereof, and subject to the inspection of any stockholder who may be
present. (As amended February 26, 1991, by Board Resolution.)
Section 2.5. Special Meetings. Special meetings of the
----------------
stockholders, for any purpose or purposes, unless otherwise prescribed
by statute or by the certificate of incorporation, may be called by the
Chairman of the Board or Secretary at the request in writing of a
majority of the Board of Directors. Such request shall state the purpose
or purposes of the proposed meeting. (As amended May 29, 1986, by Board
Resolution.)
Section 2.6. Notice of Special Meetings. Written notice of a special
--------------------------
meeting of stockholders, stating the time and place and object thereof,
shall be served upon or mailed to each stockholder entitled to vote
thereat at such address as appears on the books of the Corporation, at
least five days before such meeting.
Section 2.7. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum
at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute, by the Certificate of
Incorporation or by these By-Laws. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented
by proxy, shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted
which might have been transacted at the meeting as originally notified.
Section 2.8. Voting. When a quorum is present at any meeting, the vote
------
of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before
such meeting, unless the question is one upon which by express provision
of the statutes or of the Certificate of Incorporation or of these By-
Laws, a different vote is required in which case such express provision
shall govern and control the decision of such question. Each stockholder
shall have one vote for each share of stock having voting power,
registered in his name on the books of the corporation. Except where the
transfer books of the corporation shall have been closed or a date shall
have been fixed as a record date for the determination of its
stockholders entitled to vote, no share of stock shall be voted on at
any election of directors which shall have been transferred on the books
of the corporation twenty days next preceding such election of
directors.
Section 2.9. Proxies. At any meeting of the stockholders every
-------
stockholder having the right to vote shall be entitled to vote in
person, or by proxy appointed by an instrument in writing subscribed by
the stockholder and bearing a date not more than three years prior to
the meeting, unless the proxy provides for a longer period.
Without limiting the manner in which a stockholder may authorize another
person or persons to act for him as proxy, a stockholder may validly
authorize another person or persons to act for or him as proxy by: (a)
executing a writing to that effect, which execution may be accomplished
by the stockholder or his authorized officer, director, employee or
agent signing the writing or causing his signature to be affixed to the
writing by any reasonable means including, but not limited to, by
facsimile signature; or (b) transmitting or authorizing the transmission
of the telegram, cablegram, or other means of electronic transmission to
the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive
such transmission, provided that any telegram, cablegram or other means
of electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram, cablegram
or other electronic transmission was authorized by the stockholder. If
it is determined that any telegram, cablegram or other electronic
transmission submitted pursuant to clause (b) above is valid, the
inspectors shall specify the information upon which they relied. Any
copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission created pursuant to the preceding sentence may
be substituted or used in lieu of the original writing or transmission
for any and all purposes for which the original writing or transmission
could be used, provided that such copy, facsimile telecommunication or
other reproduction shall be a complete reproduction of the entire
original writing or transmission. (As amended February 26, 1991, by
Board Resolution.)
Section 2.10. Stockholder Nominations and Proposals.
-------------------------------------
(a) At any meeting of the stockholders, no business shall be conducted
which has not been properly brought before the meeting. To be properly
brought before a meeting, business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (ii) otherwise properly brought before the
57
<PAGE>
<PAGE>
meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a stockholder.
(b) For business to be properly brought before a meeting by a
stockholder, the Secretary of the Corporation must have received written
notice not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided, however, that in the event that less
than seventy (70) days' notice or prior public disclosure is given or
made to stockholders, notice by the stockholder to be timely must be
received no later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the meeting was
mailed or the public disclosure was made.
(c) In the case of stockholder nominations for election to the Board of
Directors, the notice shall set forth (i) the name, age, business
address and, if known, residence address of each nominee proposed in
such notice, (ii) the principal occupations or employment of each such
nominee for the past five (5) years, (iii) the number of shares of the
Corporation which are beneficially owned by each such nominee, (iv)
other directorships held by each nominee, (v) the names of business
entities of which each such nominee owns a ten percent (10%) or more
beneficial interest, and (vi) all other information with respect to the
nominees required by the Federal proxy rules in effect at the time the
notice is submitted. In addition, the notice shall be accompanied by a
statement, over the signature of each proposed nominee, that he consents
to being a nominee, if elected he intends to serve as a director, and
confirming the information with respect to him set forth in the notice.
(d) In the case of stockholder proposals other than the election of
directors, the notice shall set forth (i) a brief description of the
business to be brought before the meeting, (ii) the name, age, business
and residence address of the stockholder submitting the proposal, (iii)
the principal occupation or employment of that stockholder, (iv) the
number of shares of the corporation which are beneficially owned by the
stockholder, and (v) any material interest of the stockholder in the
business. The chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a stockholder nomination or
proposal was not made in accordance with the foregoing procedure and the
defective nomination or proposal shall be disregarded and the inspectors
of election shall not count any votes cast in favor thereof.
Notwithstanding anything in these By-Laws to the contrary, no elections
or other business shall be conducted at any meeting of the stockholders
except in accordance with the procedures set forth in this Section 2.10.
(Added by Board Resolution on May 29, 1986.) (As amended February 26,
1991, by Board Resolution.)
Section 2.11. Voting Procedures and Inspectors of Elections.
---------------------------------------------
(a) The Corporation, by action of the Secretary, shall, in advance of
any meeting of stockholders, appoint one or more inspectors to act at
the meeting of and make a written report thereof. The Corporation may
designate one or more persons as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act
at a meeting of stockholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a
meeting and the validity of proxies and ballots, (iii) count all votes
and ballots, (iv) determine and retain for a reasonable period a record
of the disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist
the inspectors in the performance of the duties of the inspectors.
(c) The date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting. No ballot, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the
inspectors after the closing of the polls unless the Court of Chancery
upon application by a stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots,
the inspectors shall be limited to an examination of the proxies, any
information provided in accordance with clause (b) of Section 2.9 of
these By-Laws, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable
information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is
authorized by the record owner to cast or more votes
58
<PAGE>
<PAGE>
than the stockholder, holds of record. If the inspectors consider other
reliable information for the limited purpose permitted herein, the
inspectors at the time they make their certification pursuant to
subsection (b)(v) of this Section shall specify the specific information
considered by them including the person or persons from whom they
obtained the information, when the information was obtained, the means
by which the information was obtained and the basis for the inspectors'
belief that the information is accurate and reliable. (Added by Board
Resolution on February 26, 1991.)
DIRECTORS
---------
Section 3.1. Number of Directors. The number of directors of the
-------------------
corporation shall be ten. Directors need not be stockholders of the
corporation. The Board of Directors shall be divided into two classes as
nearly equal in number as may be, with the term of office of one class,
after the initial classification at the 1983 annual stockholders'
meeting, to expire in each year. When the number of directors is
changed, any newly created directorships or any decrease in
directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as possible. Subject to the foregoing
and to Section 3.3 below, at each annual meeting of stockholders the
successors to the class of directors whose term shall then expire shall
be elected to hold office for a term expiring at the second succeeding
annual meeting. (As amended by the Stockholders on August 2, 1983, and
by Resolution on May 31, 1989, by Resolution on May 27, 1993, by
Resolution on June 1, 1995 and by Resolution on November 21, 1995.)
Section 3.2. Place of Meeting. The directors may hold their meetings
----------------
outside of Delaware, at the office of the corporation or at such other
places as they may be from time to time to determine, or as shall be
fixed in the respective notices or waivers of notice of such meetings.
Section 3.3. Vacancies. If the office of any director or directors
---------
becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, or a new
directorship is created, a majority of the remaining directors, though
less than a quorum, shall choose a successor or successors, or a
director to fill the newly created directorship. If a vacancy in the
Board of Directors occurs by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, the director
elected to fill the vacancy shall have the same term as his predecessor.
If the vacancy is as a result of an increase in the number of directors,
the director elected to fill the newly created directorship shall have
the same term as that of the other directors of the class of which he
shall be a member. (As amended by the Stockholders on August 2, 1983.)
Section 3.4. General Powers. The property and business of the
--------------
corporation shall be managed by its Board of Directors which may
exercise all such powers of the corporation and do all such lawful acts
and things as are not by statute or by the Certificate of Incorporation
or by these By-Laws directed or required to be exercised or done by the
stockholders.
Section 3.5. Committees of Directors. The Board of Directors may, by
-----------------------
resolution or resolutions passed by a majority of the whole Board,
designate one or more committees, each committee to consist of two or
more of the directors of the corporation, which, to the extent provided
in said resolution or resolutions, shall have and may exercise the
powers of the Board of Directors in the management of the business and
affairs of the corporation, and may have power to authorize the seal of
the corporation to be at fixed to all papers which may require it. Such
committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of
Directors. The committees shall keep regular minutes of their
proceedings and report the same to the Board when required.
Section 3.6. Compensation of Directors. By resolution of the Board, an
-------------------------
annual or other periodic fee for members of the Board may be established
and expenses of attendance at Board meetings, if any, may be allowed.
Nothing herein contained shall be construed to preclude any director
from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 3.7. Annual Meeting. The first meeting of the Board of
--------------
Directors held after the annual meeting of the shareholders in each year
shall constitute the annual meeting of the Board, and officers shall be
elected at this meeting. Notice of such meeting, unless waived, shall be
given by mail or telegram to each director elected at such annual
meeting, at his address as the same may appear on the records of the
corporation, or in the absence of such address, at his residence or
usual place of business, at least three (3) days before the day on which
such meeting is to be
59
<PAGE>
<PAGE>
held. Said meeting may be held at such place as the Board may fix from
time to time or as may be specified or fixed in such notice or waiver
thereof.
Section 3.8. Special Meetings. Special meetings of the Board of
----------------
Directors may be held at any time on the call of the Chairman of the
Board or at the request in writing of any two (2) directors. Notice of
any such meeting, unless waived, shall be given by mail or telegram to
each director at his address as the same appears on the records of the
corporation not less than one (1) day prior to the day on which such
meeting is to be held if such notice is by telegram, and not less than
two (2) days prior to the day on which the meeting is to be held if such
notice is by mail. If the Secretary shall fail or refuse to give such
notice, then the notice may be given by the officer or any one of the
directors making the call. Notwithstanding the foregoing, for purposes
of dealing with an emergency situation, as conclusively determined by
the directors or officer calling the meeting, notice may be given in
person, by telegram or cable, by telephone or wireless, or by any other
means that reasonably may be expected to provide similar notice, not
less than two (2) hours prior to the meeting. Any such meeting may be
held at such place as the Board may fix from time to time or as may be
specified or fixed in such notice or waiver thereof. Notice may be
waived in writing by any director, either before or after the meeting.
Any meeting of the Board of Directors shall be a legal meeting without
any notice thereof having been given, if all the directors shall be
present thereat, and no notice of a meeting shall be required to be
given to any director who shall attend such meeting. (As amended by
Board Resolution, May 29, 1986.)
Section 3.9. Action Without Meeting. Any action required or permitted
----------------------
to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the Board or of such
committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board or committee.
Section 3.10. Quorum and Manner of Action. Except as otherwise
---------------------------
provided in the Certificate of Incorporation or in these By-Laws, a
majority of the total number of directors as at the time specified by
the By-Laws shall constitute a quorum at any regular or special meeting
of the Board of Directors. Except as otherwise provided bylaw or by the
Certificate of Incorporation, as amended, or by these By-Laws, the act
of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the Board of Directors. In the absence of
a quorum, a majority of the directors present may adjourn the meeting
from time to time until a quorum be had. Notice of any adjourned meeting
need not be given. Any director may require the "ayes" and "noes" to be
taken on any questions and recorded in the minutes. (As amended by the
Stockholders on August 2, 1983.)
Section 3.11. Notices. Whenever, under the pro-visions of the statutes
-------
or of the Certificate of Incorporation or of these By-Laws, notice is
required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in
writing, by mail, by depositing the same in a post office or letter box,
in a post-paid sealed wrapper, or by delivery to a telegraph company,
addressed to such director or stockholder at such address as appears on
the books of the corporation, or, in default of other address, to such
director or stockholder at the General post office in the City of Dover,
Delaware, and such notice shall be deemed to be given at the time when
the same shall be thus mailed or delivered by a telegraph company.
Section 3.12. Waivers of Notice. Whenever any notice is required to be
-----------------
given under the provisions of the statutes or of the Certificate of
Incorporation, or of these By-Laws, a waiver thereof in writing signed
by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
OFFICERS
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Section 4.1. Executive Officers. The executive officers of the
------------------
corporation shall be a Chairman of the Board, President, such number of
Vice Presidents as the Board of Directors may determine, a Secretary and
a Treasurer. One person may hold any two of said offices except the office
of President and Secretary. Additional officers may from time to time
be appointed by the Board of Directors.
Section 4.2. Election, Term of Office and Eligibility. The executive
----------------------------------------
officers of the corporation shall be elected annually by the Board of
Directors at its annual meeting or at a special meeting held in lieu
thereof. Each officer, except such officers as may be appointed in
accordance with the provisions of Section 4.3 shall hold office until
his successor shall have been duly chosen and qualified or until his
death, resignation or removal. The Chairman of the
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Board and the President shall be and remain members of the Board of
Directors. None of the other officers need be members of the Board.
Section 4.3. Subordinate Officers, etc. The Board of Directors may
-------------------------
appoint such Assistant Secretaries, Assistant Treasurers, Auditor and
other officers, such committees in addition to the Executive Committee,
and such agents as the Board may determine, to hold office for such
period, and with such authority and to perform such duties as the Board
may from time to time determine. The Board may, by specific resolution,
empower the President or the Executive Committee to appoint any such
subordinate officers or agents.
Section 4.4. Removal. The Chairman of the Board, the President, any
-------
Vice President, the Secretary and/or the Treasurer may be removed at any
time, either with or without cause, but only by the affirmative vote of
the majority of the total number of directors as at the time specified
by the By-Laws. Any subordinate officer appointed pursuant to Section
4.3 may be removed at anytime, either with or without cause, by the
majority vote of the directors present at any meeting of the Board or by
any committee or officer empowered so to do by resolution of the Board.
Section 4.5. Resignations. Any officer may resign at any time by giving
------------
written notice to the Board of Directors or to the Chairman of the Board
or the Secretary of the corporation. Any such resignation shall take
effect at the time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.6. Vacancies. A vacancy in any Office because of death,
---------
resignation, removal, disqualification, or any other cause shall be
filled for the unexplored portion of the term in the same manner in
which an officer to fill said office may be chosen pursuant to Section
4.2 and/or 4.3.
Section 4.7A. The Chairman of the Board. The Chairman of the Board
-------------------------
shall be the chief executive officer of the corporation. He shall have
executive authority to see that all orders and resolutions of the Board
of Directors are carried into effect, and, subject to the control vested
in the Board of Directors by statute, by the Certificate of
Incorporation, as amended, or by these By-Laws, shall administer and be
responsible for the overall management of, the business and affairs of
the corporation. He shall preside at all meetings of the stockholders
and of the Board of Directors; and in general shall perform all duties
incident to the office of the Chairman of the Board and such other
duties as from time to time may be assigned to him by the Board of
Directors. (Amended July 28, 1964.)
Section 4.7B. The President. The President shall perform such duties
-------------
as may from time to time be assigned by the Board of Directors, or the
Chairman of the Board, and in the absence or disability of the Chairman
of the Board, shall perform the duties of the Chairman of the Board.
Section 4.8. The Vice Presidents. In the event of the absence or
-------------------
disability of the Chairman of the Board and the President, each Vice
President, in the order of his seniority, which shall be in the order of
his election, shall perform the duties of the President. The Vice
President shall also perform such other duties as from time to time may
be assigned to him by the Board of Directors.
Section 4.9. The Secretary. The Secretary shall:
-------------
(a) Keep the minutes of the meetings of the stockholders and of the
Board of Directors in books provided for that purpose;
(b) See that all notices are duly given in accordance with the
provisions of these By-Laws or as required by law;
(c) Be custodian of the records and of the seal of the corporation and
see that the seal or a facsimile or equivalent thereof is affixed to or
impressed or reproduced on all stock certificates prior to their issue,
and on all documents, the execution of which on behalf of the
corporation under its seal is duly authorized;
(d) Have charge of the stock record books of the corporation and keep or
cause to be kept the stock record and transfer books in such manner as
to show at any time the number of shares of each class of the capital
stock of the corporation issued and outstanding, the names and addresses
of the holders of record thereof, and the number of shares held by each;
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and exhibit or cause to be exhibited at all reasonable times to any
officer or director, upon application, the original or duplicate stock
ledger;
(e) See that the books, reports, statements, certificates, and all other
documents and records required by law are properly made, kept and filed;
(f) In general, perform all duties incident to the office of Secretary,
and such other duties as are provided by these By-Laws and as from time
to time are assigned to him by the Board of Directors or by the Chairman
of the Board.
Section 4.10. The Assistant Secretaries. If one or more Assistant
-------------------------
Secretaries shall be appointed pursuant to the provisions of this
Article respecting subordinate officers, then, at the request of the
Secretary, or in his absence or disability, the Assistant Secretary
designated by the Secretary (or in the absence of such designations,
then any one of such Assistant Secretaries) shall perform the duties of
the Secretary, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Secretary.
Section 4.11. The Treasurer. The Treasurer shall:
-------------
(a) Receive, have charge and custody of, and be responsible for all
funds of, and securities owned or held by the corporation, and in
connection therewith, among other things: keep or cause to be kept full
and accurate records and accounts of receipts and disbursements in books
belonging to the corporation; deposit or cause to be deposited to the
credit of the corporation, all monies, funds and securities so received
in such bank or other depository as the Board of Directors or an officer
designated by the Board may from time to time establish; and disburse or
supervise the disbursement of the funds of the corporation as may be
properly authorized and take or cause to be taken proper vouchers for
such disbursements;
(b) Render to the Board of Directors at any meeting thereof, or from
time to time whenever the Board of Directors or the President may
require, an account of all transactions as Treasurer and an account of
the financial condition of the corporation, and render or cause to be
rendered a full financial report at the annual meeting of the
shareholders, if called upon to do so;
(c) In general, perform all the duties incident to the Office of
Treasurer and such other duties as from time to time may be assigned to
him by the Board of Directors or by the Chairman of the Board.
Section 4.12. The Assistant Treasurers. If one or more Assistant
------------------------
Treasurers shall be appointed pursuant to the provisions of this Article
respecting subordinate officers, then, at the request of the Treasurer,
or in his absence or disability, the Assistant Treasurer designated by
the Treasurer (or in the absence of such designation, then any one of
such Assistant Treasurers), shall perform all the duties of the
Treasurer and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Treasurer.
Section 4.13. Salaries. The salaries of the officers shall be fixed
--------
from time to time by the Board of Directors, and no officer shall be
prevented from receiving such salary by reason of the fact that he is
also a director of the corporation.
Section 4.14. Bonds. If the Board of Directors shall so require, the
-----
Treasurer, and any Assistant Treasurer and/or any other officer or agent
of the corporation shall give bond to the corporation in such amount and
with such surety as the Board of Directors may deem sufficient,
conditioned upon the faithful performance of their respective duties and
offices.
Section 4.15. Delegation of Duties. In case of the absence of any
--------------------
officer of the corporation or for any other reason which may seem
sufficient to the Board, the Board of Directors may, for the time being,
delegate his powers and duties, or any of them, to any other officer or
to any director.
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SHARES OF STOCK
---------------
Section 5.1. Regulation. Subject to the terms of any contract of
----------
the corporation, the Board of Directors may make such rules and
regulations as it may deem expedient concerning the issue, transfer, and
registration of certificates for share of the stock of the corporation,
including the issue of new certificates for lost or destroyed
certificates, and including the appointment of transfer agents and
registrars.
Section 5.2. Stock Certificates. Certificates for shares of stock of
------------------
the corporation shall be respectively numbered serially for each class
of shares, or series thereof, as they are issued, shall be impressed
with the corporate seal or a facsimile thereof, and shall be signed by
the Chairman of the Board or President or a Vice President, and by the
Secretary or Treasurer, or an Assistant Secretary or an Assistant
Treasurer. Any or all of the signatures on any certificate, including
those of transfer agents and registrars, may be a facsimile. Each
certificate shall exhibit the name of the corporation, the class (or
series of any class) and number of shares represented thereby, the name
of the holder, the par value of the shares represented thereby or that
such shares are without par value. Each certificate shall be otherwise
in such form as may be prescribed by the Board of Directors. (Amended
May 29, 1973.)
Section 5.3. Transfer of Shares. The corporation may from time to
------------------
time enter into an agreement or agreements with one or more if its
stockholders restricting the transferability of its stock in accord with
the general corporate purpose to have its stock owned by persons
actively engaged in the corporate business. Subject to the terms of any
such agreement, shares of the capital stock of the corporation shall be
transferable on the books of the corporation by the holder thereof in
person or by his duly authorized attorney, upon the surrender and
cancellation of a certificate or certificates for a like number of
shares. As against the corporation a transfer of shares can be made only
on the books of the corporation and in the manner hereinabove provided,
and the corporation shall be entitled to treat the registered holder of
any share as the owner thereof and shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any
other person, whether or not it shall have express or other notice
thereof, save as expressly provided by the statutes of the State of
Delaware.
Section 5.4. Closing of Transfer Books. The Board of Directors shall
-------------------------
have the power to close the stock transfer books of the corporation for
a period of not more than 60 or less than 10 days preceding the date of
any meeting of stockholders, or the date for payment of any dividends,
or the date for the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, or for a
period of not more than 60 or less than 10 days in connection with
obtaining the consent of stockholders for any purpose; provided,
however, that in lieu of closing the stock transfer books as aforesaid,
the Board of Directors may fix, in advance, a date not more than 60 or
less than 10 days preceding the date of any meeting of stockholders or
the date for any payment of dividend, or the date for the allotment of
rights, or the date when any change or conversion or any exchange of
capital stock shall go into effect, or a date in connection with
obtaining such consent of stockholders for any purpose as a record date
for the determination of the stockholders entitled to notice of, and to
vote at, any such meeting and any adjournment thereof, or entitled to
receive payment of any such dividend, or to receive any such allotment
or rights, or to exercise the rights in respect of any such change,
conversion, or exchange of capital stock, or to give such consent, and
in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or
to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case
may be, notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid. (As amended
by Board Resolution January 30, 1973.)
Section 5.5. Lost Certificates. Any stockholder claiming that a
-----------------
certificate representing shares of stock has been lost or destroyed may
make an affidavit or affirmation of the fact and if the Board of
Directors so requires, advertise the same in a manner designated by the
Board, and give the corporation a bond of indemnity in form and with
security for an amount satisfactory to the Board, but not exceeding
double the value of the shares represented by said certificate;
whereupon a new certificate may be issued of the same tenor and
representing the same number, class and/or series of shares as were
represented by the certificate alleged to have been lost or destroyed.
<PAGE>
BOOKS AND RECORDS
-----------------
Section 6.1. Location. The books, accounts and records of the
--------
corporation may be kept at such place or places within or without the
State of Delaware as the Board of Directors may from time to time
determine. In case the
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original stock ledger and transfer books of the corporation are kept
without said State, a duplicate of each thereof shall be kept at its
principal office in the State of Delaware.
Section 6.2. Inspection. Except as otherwise provided by statute, the
----------
books, accounts, and records of the corporation shall be open to
inspection by any member of the Board of directors during usual business
hours for any purpose reasonably related to his position as director;
and open to inspection by the stockholders, in person or by attorney or
other agent, upon their written demand under oath directed to the
corporation at its registered office or at its principal place of
business, stating the purpose thereof, during usual business hours, for
any proper purpose reasonably related to such person's interest as a
stockholder, and subject to such regulations as the Board of Directors
may prescribe. If an attorney or other agent shall be the person who
seeks the right of inspection, the demand under oath shall be
accompanied by a power of attorney or other writing authorizing the
attorney or agent to act on behalf of the stockholder. (As amended
February 26, 1991, by Board Resolution.)
Section 6.3. Corporate Seal. The corporate seal shall contain two
--------------
concentric circles between which shall be the name of the corporation
and the word "Delaware" and in the center shall be inscribed the words
"Corporate Seal" and the year in which the Certificate of Incorporation
was issued.
DIVIDENDS AND RESERVES
----------------------
Section 7.1. Dividends. Subject to the provisions of the
---------
Certificate of Incorporation, as amended and other lawful commitments of
the corporation, dividends upon the shares of any class of stock, or
series thereof, of the corporation may be declared by the Board of
Directors out of the net assets of the corporation in excess of its
capital or out of its net profits at any regular or special meeting of
the Board of Directors. However, no dividend shall be declared or paid
which would impair the capital stock of the corporation.
Section 7.2. Reserves. Before declaring any dividend or 'making any
--------
distribution of net assets in excess of capital or any distribution of
net profits, the Board of Directors, from time to time in their absolute
discretion, may set apart out of any funds of the corporation available
for dividends, a reserve or reserves for working capital, or to meet
contingencies, or for repairs or maintenance, or for any other lawful
purpose, and also, from time to time, may abolish or decrease any such
reserve or reserves.
MISCELLANEOUS PROVISIONS
------------------------
Section 8.1. Fiscal Year. The fiscal year of the corporation shall
-----------
end on the 31st day of January in each year or on such other date as the
Board of Directors may from time-to-time determine. (As amended by Audit
Committee of Board of Directors Resolution January 4, 1973, pursuant to
Board of Directors Resolution December 3, 1972 and as amended August 26,
1999, by the Board Resolution.)
Section 8.2. Depositaries. The Board of Directors or an officer
------------
designated by the Board shall appoint banks, trust companies, or other
depositaries in which shall be deposited from time to time the money or
securities of the corporation.
Section 8.3. Checks, Drafts, Notes, etc. All checks, drafts, or other
--------------------------
orders for the payment of money, and all notes or other evidences of
indebtedness issued in the name of the corporation, shall be signed by
such officer or officers or agent or agents as shall from time to time
be designated by resolution of the Board of Directors or by an officer
appointed by the Board.
Section 8.4. Contracts, etc., How Executed. Except as in the By-Laws
-----------------------------
otherwise provided, the Board of Directors may authorize any officer,
agent or agents, to enter into any contract or execute and deliver any
instrument in the name and on behalf of the corporation, and such
authority may be general or confined to specific instances.
<PAGE>
Section 8.5. Stock in Other Corporations. Any shares of stock in any
---------------------------
other corporation which may from time to time be held by this
corporation may be represented and voted at any meeting of the
shareholders of such corporation by the Chairman of the Board, the
President or a Vice President, or by any other person or persons
thereunto authorized by the Board of Directors, or by any proxy
designated by written instrument of appointment executed in the name of
this corporation by its Chairman of the Board, the President or a Vice
President and attested by the Secretary or
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an Assistant Secretary. Shares of stock belonging to the corporation need
not stand in the name of the corporation, but may be held for the benefit
of the corporation in the individual name of the Treasurer or of any other
nominee designated for the purpose by the Board of Directors. Certificates
for shares so held for the benefit of the corporation shall be endorsed in
blank or have proper stock powers attached so that said certificates are
at all times in due form for transfer, and shall be held for safekeeping
in such manner as shall be determined from time to time by the Board of
Directors.
Section 8.6. Indemnification of Directors and Officers.
-----------------------------------------
(a) Right to Indemnification. Each person who was or is a party or is
------------------------
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person
of whom he is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
shall be indemnified and held harmless by the Corporation to the fullest
extent permitted by the laws of Delaware against all costs, charges,
expenses, liabilities and losses (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of his heirs, executors and administrators. The right to
indemnification conferred in this paragraph (a) shall be a contract
right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its
final disposition upon receipt by the Corporation of an undertaking, by
or on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that the director or
officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of its Board of Directors,
provide indemnification to employees and agents of the Corporation with
the same scope and effect as the foregoing indemnification of directors
and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
-------------------------------
this Section is not paid in full by the Corporation within thirty days
after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover
the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expense of
prosecuting such claim. It shall be a defense to any action (other than
an action brought to enforce a claim for expenses incurred in defending
any proceeding in advance of its final disposition where the required
undertaking has been tendered to the Corporation) that the claimant has
failed to meet a standard of conduct which makes it permissible under
Delaware law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is permissible in the circumstances
because he has met such standard of conduct, nor an actual determination
by the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such
standard of conduct, nor the termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall be a defense to the action or create a presumption
that the claimant has failed to meet the required standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
-------------------------
payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, By-Law,
agreement, vote of stockholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense,
---------
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against
such expense, liability or loss under Delaware law.
(e) Expenses as a Witness. To the extent that any director, officer,
---------------------
employee or agent of the Corporation is by reason of such position, or a
position with another entity at the request of the Corporation, a
witness in any proceeding, he shall be indemnified against all costs and
expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
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(f) Indemnity Agreements. The Corporation may enter into indemnity
--------------------
agreements with the persons who are members of its Board of Directors
from time to time, and with such officers, employees and agents as the
Board may designate, providing in substance that the Corporation shall
indemnify such persons to the fullest extent permitted by Delaware law.
(g) Effect of Amendment. Any amendment, repeal or modification of any
-------------------
provision of this Section by the stockholders or the directors of the
Corporation shall not adversely affect any right or protection of a
director or officer of the Corporation existing at the time of such
amendment, repeal or modification. (As amended May 28, 1987.)
Section 8.7. Amendment of By-Laws. In accordance with authority
--------------------
expressly contained in the Certificate of Incorporation, these By-Laws
may be added to, altered, amended, or repealed, and new or other By-Laws
may be made and adopted by vote of a majority of the Board of Directors,
at any regular or special meeting of the Board, and without prior
notices of intent so to do. These By-Laws may also be added to, altered,
amended or repealed, and new or other By-Laws may be made and adopted by
vote of at least 75% of the shares entitled to vote thereon at any
regular or special meeting, and without prior notices of intent so to
do. (As amended by Stockholders on August 2, 1983.)
Section 8.8. Validity of Contracts, etc. No contract or other
--------------------------
transaction between the corporation and any other corporation shall be
affected or invalidated by the f act that any one or more of the
directors of this corporation is or are interested in, or is a director
or officer, or are directors or officers of such other corporation, and
any director or directors, individually or jointly may be a party or
parties to or may be interested in any contract or transaction of this
corporation or in which this corporation is interested; and no contract,
actor transaction of this corporation with any person or persons, firms
or corporation, shall be affected or invalidated by the fact that any
director or directors of this corporation is a party, or are parties to,
or interested in, such contract, act or transaction, or in anyway
connected with such person or persons, firm or association, and each and
every person who may become a director of this corporation is hereby
relieved from any liability that may otherwise exist from contracting
with the corporation for the benefit of himself or any firm or
corporation in which he may be in any way interested; provided, however,
that in any such case the fact of such interest shall be disclosed to
other directors acting upon or in reference to such contract or
transaction.
Section 8.9. Selection of Public Accountants. Each year the Board of
-------------------------------
Directors shall select independent public accountants to audit the books
and accounts of the corporation. (As amended by Board Resolution
October 21, 1970.)
GROUPS AND GROUP PERSONNEL
--------------------------
Section 9.1. Establishment of Groups. The Board of Directors of
-----------------------
this Corporation may cause all or a portion of the business and
operations of this Corporation to be divided into one or more
semiautonomous groups. Each group shall operate according to a charter
adopted by the Board of Directors which shall set out the basic
responsibilities, functions, and such other characteristics of that
group as the Board of Directors deems appropriate. The Chief Executive
Officer of this Corporation may make such minor or temporary amendments
of group charters as he deems necessary and appropriate for the
efficient operation of a group. Each group may operate under a group
name approved for such purpose by the Chief Executive Officer. The
Chief Executive officer may inter-change manufacturing or other
facilities among the several groups. Not less frequently than annually,
the Chief Executive Officer shall report to the Board of Directors
regarding all changes made in group charters and all inter-changes of
facilities among the groups.
Section 9.2. Group Personnel. The head of each group shall be a group
---------------
president appointed by the Board of Directors to serve at the pleasure
of the Board of Directors. A group president shall have the same
authority with respect to the affairs of the group as the president of
an independent corporation has with respect to the affairs of that
corporation. The authority of a group president shall be exercised in
accordance with the limits defined by the Board of Directors or
delegated by the Chief Executive officer. A group president may sign
contracts and other documents in the name of the group in the
furtherance of the approved and regular course of business of the group,
may cause the manufacturing and other facilities of the group to be
arranged or rearranged into divisions, and may appoint all personnel for
the group provided, however, that the Chief Executive officer of this
Corporation shall approve the divisional arrangement or re-arrangement
of the group and the persons appointed to the executive staff of the
group and as the head of any division within the group.
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If one or more subsidiaries of this Corporation (or subsidiaries of a
corporation owned by this corporation) comprise a part of a group, the
group president of the group shall be the Chairman of the Board or
President of each such subsidiary and shall recommend to the Board of
Directors of each such subsidiary persons to be the officers of that
subsidiary.
At least annually the Chief Executive Officer shall report to the Board
of Directors regarding the appointment of all group executive staff
personnel, group division heads and the election of all officers of
subsidiaries. (As amended October 29, 1969.)
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EXHIBIT 10.8
------------
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 1st day of December, 1999, between KELLWOOD
COMPANY, a Delaware corporation, hereinafter called (the "Corporation"),
and HAL J. UPBIN residing at 625 South Skinker Boulevard, Clayton,
Missouri 63105-2301, hereinafter called (the "Executive").
NOW, THEREFORE, IT IS AGREED:
1. Employment. (a) The Corporation hereby employs Executive in an
----------
executive capacity as President and Chief Executive Officer, for the
period (the "Employment Period") commencing as of December 1, 1999, and
ending on January 31, 2004. Executive hereby accepts such employment in
St. Louis, Missouri, and agrees to devote his full time and effort to
the services of the Corporation in such executive capacity, and as a
Director, if elected, with such other duties as may be reasonably
assigned to him by the Board of Directors of the Corporation, and to act
in an executive capacity and/or as a Director without additional
compensation for any of its subsidiaries, affiliated companies or others
as the Board of Directors shall require. Any outside directorships
shall be agreed upon and approved in advance by the Board of Directors.
(b) In the event Executive shall become disabled during the Employment
period, the Corporation shall continue to pay his salary at the same
rate and times as in effect on the date of disability. The Corporation
shall also continue to provide Executive with all benefits to which he
is entitled hereunder. If such disability continues for a continuous
period of one year, the Board of Directors of the Corporation, at its
option, may thereafter terminate the employment of Executive. For
purposes of this Employment Agreement, disability shall mean a mental or
physical illness or condition which in the reasonable judgment of the
Board of Directors renders Executive incapable of performing his duties
as required hereunder.
(c) If Executive dies during the Employment Period, the Corporation
shall continue to pay his salary, at the same rate and times as in
effect on the date of his death, to the representative of Executive's
estate, or otherwise as Executive may by will direct, for a period of
one year after his death.
2. Base Salary. During the Employment Period, the Corporation
-----------
shall pay to Executive for all services rendered by him to the
Corporation in any capacity a minimum annual salary at the rate of One
Million Dollars ($1,000,000.00) to be paid in twelve equal monthly
payments. Executive's salary shall be reviewed yearly,
contemporaneously with the January 31 year end. The first such review
will be as of January 31, 2001.
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3. Other Compensation. During the Employment Period, the Executive
------------------
shall be entitled to participate in all compensation and benefit
programs (including but not limited to life, medical and disability
insurance, retirement, vacation, automobile, St. Louis Club membership,
cash and stock bonus, and stock options) as the Corporation may from
time to time offer or make available to other officers employed by the
Corporation and its subsidiaries. The Corporation also shall provide
Executive and his family medical and major medical insurance coverage on
the same basis as provided to other officers of the Corporation. The
Corporation shall also provide Executive the special Retirement and
Death Benefit he is now entitled to under that certain "Death Benefit
Agreement" dated June 2, 1994; as well as coverage under the
Corporation's Directors and Officers Liability Policy.
4. Expenses. The Corporation agrees to reimburse Executive for all
--------
travel, entertainment and other expenses reasonably incurred by
Executive in rendering the services called for by this Agreement,
provided that Executive shall submit vouchered expenditures in
reasonable detail to the Corporation. Corporation shall issue credit
cards to Executive on the same basis as other officers of the Company
for this purpose.
5. Vacation. Executive shall be entitled each year to a vacation
--------
of four weeks, during which time his salary shall be paid in full, to be
taken at such time or times that Executive may reasonably select.
6. Confidential Information. Executive agrees not to disclose or
------------------------
use at any time except in pursuit of the business of the Corporation,
any confidential information of the Corporation, whether Executive has
such information in his memory or embodied in writing or other physical
form. For purposes of this Agreement the phrase "confidential
information" means all information relating to the Corporation which (a)
is known only to the Corporation's employees including former employees
of the Corporation or employees of affiliated companies, or others in a
confidential relationship with the Corporation, and (b) relates to
specific business matters, such as operational procedures of the
Corporation or customers or accounting procedures of the Corporation.
7. NonCompete. Executive agrees that, while payments are being
----------
made to him hereunder, he will not, directly or indirectly, engage in or
have a substantial interest in any business (except for ownership of
less than 5% of the outstanding publicly traded stock of any class of
any corporation) which at the time shall be in whole or substantial part
competitive with any part of the business carried on by the Corporation
or its subsidiaries now or at any time until the end of the Employment
Period, either for his own or family's benefit or with any person, firm
or corporation whatsoever other than the Corporation and its
subsidiaries. Executive further agrees that he will report to the Board
of Directors of the Corporation any substantial business dealings
between himself or his family and
69
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<PAGE>
Corporation or any of its subsidiaries including dealings between the
Corporation and a company in which he or any of his family has a
substantial financial interest. Executive agrees to immediately
terminate the business dealing if the Board of Directors of the
Corporation determines in good faith that a conflict exists.
8. Corporation's Successor. In the event that the Corporation
-----------------------
shall at any time be liquidated or dissolved (either in whole or in
substantial part), be merged with or consolidated into any other
corporation or corporations, or in the event that all or substantially
all of the assets of the Corporation shall be sold or otherwise
transferred to another corporation, the provisions of this Agreement
shall be binding upon and inure to the benefit of the successor of the
Corporation to which such assets shall be sold or transferred (the
"Corporation's Successor"). The term "Corporation" wherever used in
this Agreement shall include the Corporation's Successor.
9. Severance. If at any time during the Employment Period the
---------
Corporation terminates the Executive's employment without Cause, then
Executive shall, (a) be entitled to receive monthly base salary at the
annual rate then in effect for the balance of the Employment Period, and
(b) provided that Executive has been employed for at least the first
three months of the fiscal year, be entitled to receive a prorated
portion of the year end cash bonus Executive would have earned based on
full fiscal year results with said bonus payable at the normal time.
Proration examples would be: two months = 0%; six months = 50%; nine
months = 75%; etc. If at any time during the employment period, (a)
this Agreement terminates as a result of the death of the Executive, (b)
this Agreement terminates as a result of the Executive voluntarily
quitting, (c) the Corporation terminates the Executive for disability in
accordance with paragraph 1(b), or (d) the Corporation terminates the
Executive for Cause in accordance with this paragraph, then all of the
Executive's rights under this Agreement which would accrue following the
date of that termination shall cease. For these purposes "Cause" shall
mean (i) the continued failure by the Executive to substantially perform
his duties with the Corporation (other than any such failure resulting
from his incapacity due to physical or mental illness - which is
addressed in paragraph 1(b)) after a written demand for substantial
performance is delivered to him by the Board of Directors of the
Corporation, which demand specifically identifies the manner in which
the Board believes that the Executive has not substantially performed
his duties or (ii) the engaging by the Executive in misconduct which is
demonstrably and materially injurious to the Corporation monetarily or
otherwise and the existence of Cause is determined in good faith by the
Corporation's Board of Directors.
10. Mitigation. Executive shall not be obligated to seek other
----------
employment in mitigation of the amounts payable under any provision of
this Agreement. However, should he commence other employment, any
70
<PAGE>
<PAGE>
compensation received from such employment and related to services he
performs prior to January 31, 2004, shall offset and reduce the
Corporation's obligations to make the payments under this Agreement.
11. Waiver. No waiver of any breach or failure to perform the
------
terms, covenants and conditions of this Agreement shall be binding upon
the parties hereto unless the same shall be in writing. Any such waiver
shall be for one time only and shall not be for any future breach of
failure to perform under the terms of this Agreement.
12. Inventions. Any and all inventions, designs and the like
----------
created by Executive during the term of this Agreement, which relate to
or are connected with the business then being conducted by the
Corporation, shall be the sole and exclusive property of the
Corporation. The Corporation shall have the right, at its sole cost and
expense, to take out copyrights or obtain letters patent on any such
inventions, designs and the like, and such copyrights and renewals
thereof shall likewise be the sole and exclusive property of the
Corporation. Executive shall, at no cost or expense to him, cooperate
in effectuating the registration of any claim to copyright or patent or
any other proceedings to afford protection thereunder.
13. Notices. All notices, requests, offers, demands and other
-------
communications hereunder shall be in writing and shall be effectively
given or made when mailed by registered or certified mail, return
receipt requested, and when directed to the party at the address given
herein, or to such other address as either party may hereafter designate
in writing.
71
<PAGE>
<PAGE>
If to Executive:
To Executive's current address as shown
on the Company's records
If to the Corporation:
Kellwood Company
600 Kellwood Parkway
P.O. Box 14374
St. Louis, MO 63178
Attention: Secretary
14. Choice of Law. The Agreement shall be construed in accordance
-------------
with and governed under the laws of the State of Missouri.
15. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto, their heirs, executors,
successors and assigns.
16. Entire Agreement. This Agreement constitutes the entire
----------------
understanding between the parties hereto and may not be modified,
amended, altered or changed except in writing signed by the parties.
17. Partial Invalidity. If any provision or portion of this
------------------
Agreement shall, to the extent, be invalid or unenforceable, the
remainder of this Agreement or the application of such portion or
provision in circumstances other than those to which it is held invalid
or unenforceable shall not be effected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
KELLWOOD COMPANY
/s/
- ------------------------- ----------------------------------------
SECRETARY James S. Marcus
Chairman of the Compensation and Stock
Option Committee
EXECUTIVE
/s/
- ------------------------- ----------------------------------------
72
<PAGE>
EXHIBIT 10.9
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT, made as of the 1st day of December, 1999, by and
between Kellwood Company, a Delaware corporation (hereinafter called the
"Company"), and William J. McKenna (hereinafter called "Consultant"),
WITNESSETH:
----------
WHEREAS, Consultant has heretofore been the Chairman, President
and Chief Executive Officer of the Company; and
WHEREAS, The Company desires to assure the continuation of
Consultant's services to the Company in a consultant capacity, to obtain
the benefit of his 17 years of experience in the Company as an executive
officer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereby agree as follows:
1. Duties. The Company hereby engages Consultant, and Consultant
------
hereby agrees to serve the Company as a Chairman Emeritus of the Board,
and, while elected, as a Director, and in an advisory and consultive
capacity concerning the worldwide business and operations of the
Company.
2. Extent of Duties. The Company agrees that, in his performance
----------------
hereunder, Consultant shall be available to devote his time and efforts
in advisory and consultive capacities to the Company at such times and
places and by such methods as he, in his sole discretion, shall elect.
Consultant's primary interaction with the Company shall be through the
office of the Chief Executive Officer. Consultant shall be provided an
office at the Company's headquarters, with customary secretarial help as
consulting duties require, telephone access, and a car and insurance.
3. Compensation. For his services hereunder, the Company shall pay
------------
to Consultant the amount of Two Hundred Thousand Dollars ($200,000) per
year, payable in equal monthly installments beginning December 31, 1999,
and payable at the end of each month thereafter. In addition, while a
Director, Consultant shall receive all Directors fees paid by the
Company to Directors.
4. Term. The term of this Agreement shall be a period of two years
----
beginning on December 1, 1999, except that:
(a) The Company may terminate this Agreement at any time for cause,
upon written notice to Consultant, in which event this Agreement shall
terminate except for the provisions of Section 5 hereof, which shall
survive such termination. For purposes hereof, "cause" shall mean
either fraud, dishonesty or conduct materially injurious to the Company
by Consultant in connection with his activities with the Company or
violation by Consultant of the terms of this Agreement.
(b) This Agreement shall automatically terminate upon the death of
Consultant.
(c) Consultant may terminate this Agreement at any time upon written
notice to the Company, in which event this Agreement shall terminate
except for the provisions of Section 6 hereof, which shall survive such
termination.
5. Covenant Not to Compete. In consideration of the premises and
-----------------------
provisions contained herein, Consultant hereby agrees that he will not,
except in connection with his services to the Company hereunder, engage
in any business engaged in by the Company during the term of this
Agreement anywhere in the world. This covenant shall survive the
termination of this Agreement pursuant to Section 4 hereof and shall
continue until, and shall terminate and be of no further force and
effect upon, the expiration of three (3) years after termination hereof.
6. Construction. This Agreement shall be governed by the laws of
------------
the State of Missouri.
73
<PAGE>
<PAGE>
7. Assignment. This Agreement is based upon the personal services
----------
of Consultant, and the rights and obligations of Consultant hereunder
shall not be assignable. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company.
8. Non-Disclosure. In view of the foregoing, Consultant agrees that
--------------
he will not, during the term of this Agreement or after its termination,
directly or indirectly, divulge, publish, disclose or otherwise reveal
any trade secrets or other information about the Company, its business,
products, methods, suppliers or customers acquired by him or disclosed
to him during his association with the Company under this Agreement, to
any person, firm, corporation, association or other entity for any
reason or purpose whatsoever without the prior written consent of the
Company so long as such information shall not have been generally
disseminated to the public.
9. Independent Contractor. In rendering the services contemplated
----------------------
by this Agreement, Consultant is acting as an independent contractor and
not an employee or agent of the Company and has no authority to and
shall not in any way attempt to obligate or create any liability on
behalf of the Company when not operating as a Director of the Company.
10. Notices. Any notice, request or other communication to be given
-------
by any party hereunder shall be sufficient if in writing and hand
delivered to the Secretary of the Company or to the Consultant or
telexed thereto and effective upon receipt thereof.
11. Waiver. Items, sections or parts of this Agreement can be
------
subsequently waived only by a signed written agreement between duly
authorized personnel of the two parties.
12. Entire Agreement. This instrument supersedes all prior
----------------
understandings and agreements of the parties and contains the entire
agreement of the parties and may not be changed except by an agreement
in writing signed by the party against whom enforcement of any waiver,
change, modification or extension is sought.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
CONSULTANT: THE COMPANY:
/s/ /s/
- ----------------------------------- -----------------------------------
William J. McKenna
Attest:
------------------
WITNESS Hal J. Upbin
74
<PAGE>
EXHIBIT 24
----------
POWER OF ATTORNEY
The undersigned, directors of Kellwood Company (the "Company"), do
hereby constitute and appoint Thomas H. Pollihan or Donald J. Gramke
his/her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him/her and in his/her name, place
and stead, to sign the Company's Form 10-K Annual Report pursuant to
Section 13 of the Securities Exchange Act of 1934 as Amended for the
fiscal year ended January 31, 2000, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign such document on behalf of the
undersigned and to make such filing, as fully to all intents and
purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that the attorney-in-fact, or his
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: March 2, 2000
/s /s
- --------------------------- ------------------------------
Raymond F. Bentele Jerry M. Hunter
/s /s
- --------------------------- ------------------------------
Edward S. Bottum James C. Jacobsen
/s /s
- --------------------------- ------------------------------
Kitty G. Dickerson James S. Marcus
/s /s
- --------------------------- ------------------------------
Leonard A. Genovese William J. McKenna
/s
- ---------------------------
Martin J. Granoff
75
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Kellwood
Company and Subsidiaries Condensed Consolidated Balance Sheet at January 31,
2000, and from the Condensed Consolidated Statement of Earnings and Condensed
Consolidated Statement of Cash Flows for the nine months ended January 31, 2000,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 54,501
<SECURITIES> 0
<RECEIVABLES> 339,010
<ALLOWANCES> 12,142
<INVENTORY> 394,988
<CURRENT-ASSETS> 824,278
<PP&E> 253,524
<DEPRECIATION> 149,850
<TOTAL-ASSETS> 1,097,853
<CURRENT-LIABILITIES> 248,158
<BONDS> 346,479
<COMMON> 166,312
0
0
<OTHER-SE> 279,558
<TOTAL-LIABILITY-AND-EQUITY> 1,097,853
<SALES> 1,565,261
<TOTAL-REVENUES> 1,565,261
<CGS> 1,237,683
<TOTAL-COSTS> 1,237,683
<OTHER-EXPENSES> 236,324
<LOSS-PROVISION> 5,119
<INTEREST-EXPENSE> 22,654
<INCOME-PRETAX> 68,600
<INCOME-TAX> 27,600
<INCOME-CONTINUING> 41,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,000
<EPS-BASIC> 1.49
<EPS-DILUTED> 1.48
</TABLE>
