<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 4, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission file number 1-6454
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KLEINERT'S, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 13-0921860
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 West Germantown Pike, Suite 100
Plymouth Meeting, Pennsylvania 19462
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(610) 828-7261
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date:
Class Outstanding at April 1, 1995
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Common Stock 3,331,431
Par Value $1.00 per share
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KLEINERT'S, INC.
INDEX
PAGE
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Part I. Financial information
Item 1. Financial statements
Consolidated statements of operations 3
for the three months ended March 4, 1995
and February 26, 1994
Consolidated balance sheets at 4
March 4, 1995, December 3, 1994
and February 26, 1994
Consolidated statements of cash flows 6
for the three months ended March 4, 1995
and February 26, 1994
Notes to consolidated financial statements 8
Item 2. Management's discussion and analysis of 9
the financial condition and results of
operations
Part II. Other information
Item 6. Exhibits and Reports on Form 8-K 11
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's Omitted, except per share amounts)
Three Months Ended
----------------------
March 4, February 26,
1995 1994
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Net sales $7,713 $6,729
Cost of goods sold 5,675 5,062
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Gross profit 2,038 1,667
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Selling, general and administrative expenses 1,169 1,101
Interest expense 269 227
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1,438 1,328
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Income before income taxes and cumulative
effect of change in accounting
for income taxes 600 339
Provision for income taxes 218 113
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Income before cumulative effect of change
in accounting principle 382 226
Cumulative effect of change in accounting for
income taxes -- 210
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Net income $ 382 $ 436
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Earnings per share:
Income before change in accounting
for income taxes $ .10 $ .06
Cumulative effect of change in accounting
for income taxes -- .06
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Net income $ .10 $ .12
====== ======
Weighted average shares outstanding 3,756 3,685
====== ======
See accompanying notes
3
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KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(000's Omitted)
ASSETS
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<TABLE>
<CAPTION>
March 4, December 3, February 26,
1995 1994 1994
-------- ----------- ------------
<S> <C> <C> <C>
Current assets:
Cash $ 22 $ 132 $ 104
Accounts receivable (net) 8,283 18,036 7,902
Inventories:
Raw materials 6,185 4,077 3,832
Work-in-progress 3,860 2,942 2,806
Finished goods 11,772 5,677 10,257
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Total inventories 21,817 12,696 16,895
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Net assets of discontinued
operations -- -- 2,701
Other current assets 1,709 1,613 2,021
------- ------- -------
Total current assets 31,831 32,477 29,623
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Property, plant and equipment, at cost 10,667 10,569 10,542
Less: Accumulated depreciation and
amortization 5,585 5,427 5,504
------- ------- -------
Net property, plant and
equipment 5,082 5,142 5,038
------- ------- -------
Non-operating property -- -- 508
Other assets 3,314 2,843 2,210
------- ------- -------
$40,227 $40,462 $37,379
======= ======= =======
</TABLE>
See accompanying notes
4
<PAGE> 5
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(000's Omitted)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 4, December 3, February 26,
1995 1994 1994
-------- ----------- ------------
<S> <C> <C> <C>
Current liabilities:
Notes payable and current
portion of long-term debt $ 7,395 $10,695 $ 6,813
Accounts payable 7,507 3,585 4,729
Accrued expenses 390 1,686 932
Accrued dividends payable -- -- 2,701
Income taxes payable 304 -- 39
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Total current liabilities 15,596 15,966 15,214
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Deferred income taxes 123 123 49
Long-term debt 4,374 4,624 5,526
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Total liabilities 20,093 20,713 20,789
------- ------- -------
Shareholders' equity:
Preferred stock - par value $1.00
per share, 2,000,000 shares
authorized, none issued -- -- --
Common stock - par value $1.00 per
share, 10,000,000 shares
authorized, 3,798,398, 3,798,398
and 3,790,065 shares issued,
respectively 3,798 3,798 3,798
Capital in excess of par value 10,626 10,626 10,626
Retained earnings 8,926 8,541 4,895
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23,350 22,965 19,319
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Less:
Treasury stock, at cost, 466,967,
466,967 and 427,467 common shares,
respectively (3,216) (3,216) (2,729)
------- ------- -------
Total shareholders' equity 20,134 19,749 16,590
------- ------- -------
$40,227 $40,462 $37,379
======= ======= =======
</TABLE>
See accompanying notes
5
<PAGE> 6
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
Three Months Ended
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March 4, February 26,
1995 1994
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Cash flows from operating activities:
Net income $ 382 $ 436
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 163 180
Cumulative effect of change in accounting
principle -- (210)
Provision for losses on accounts receivable (20) (2)
Change in assets and liabilities:
Decrease in accounts receivable 9,781 9,806
Increase in inventory (9,120) (5,142)
Increase in other current assets (96) (906)
Increase (decrease) in accounts payable
and accrued expenses 2,729 (1,118)
Increase in income taxes payable 203 91
Increase in other assets -- (21)
Increase in deferred income taxes -- 15
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Total adjustments 3,640 2,693
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Net cash provided by
operating activities 4,022 3,129
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Cash flows from investing activities:
Capital expenditures (98) (50)
Note receivable related party (Note 2) (500) --
Proceeds from note receivable 16 --
------ ------
Net cash used in investing
activities $ (582) $ (50)
====== ======
See accompanying notes
6
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KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
Three Months Ended
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March 4, February 26,
1995 1994
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Cash flows from financing activities:
Net repayments under revolving
line-of-credit agreements $(3,300) $(2,497)
Principal payments on debt (250) --
Proceeds from long-term debt -- 57
Principal payments on capital leases -- (14)
Proceeds from exercise of stock options -- 69
Dividends paid -- (1,300)
Payments to acquire treasury stock -- (57)
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Net cash used in
financing activities (3,550) (3,742)
Net decrease in cash (110) (663)
Cash at beginning of period 132 767
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Cash at end of period $ 22 $ 104
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Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 238 $ 184
Income taxes $ 16 $ 90
Tax benefit of exercise of stock options $ -- $ 52
See accompanying notes
7
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KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 4, 1995 and February 26, 1994
(1) Basis of presentation:
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
information furnished reflects all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the results for the
interim periods. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures presented are adequate
for a fair presentation of the financial statements. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K.
(2) Related Party Transaction
On December 5, 1994 the Company loaned Scott Mills, Inc. ("Scott
Mills") $500,000. Scott Mills, formerly an indirect wholly-owned subsidiary of
the Company, is the successor in interest to the Company's textile division, the
assets of which were transferred to Scott Mills pursuant to the Plan of
Reorganization on November 27, 1993. Under the terms of the promissory note,
interest is payable annually at 8 1/2% and the principal is due in full on
December 4, 1997. Scott Mills, which has operated independently since
November 27, 1993, continues to be a principal supplier of fabric to the
Company.
8
<PAGE> 9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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The Registrant's apparel business is highly seasonal. Consequently the
sales and operating results for the three months ended March 4, 1995 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending December 2, 1995.
Three Months Ended
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(000's)
March 4, February 26, Increase
1995 1994 (Decrease)
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Net sales $7,713 $6,729 $ 984
====== ====== ======
Gross profit $2,038 $1,667 $ 371
====== ====== ======
Selling, general and
administrative expenses $1,169 $1,101 $ 68
====== ====== ======
Net sales increased by $984,000, or 15%, principally due to increased
sleepwear sales. Orders booked in the first quarter of 1995 were significantly
higher than in the previous year's first quarter. While the increase in orders
is encouraging, the first quarter generally represents a relatively small
percentage of annual sales volume and cannot be used as a predictor for the
entire year.
Gross profit increased by $371,000 or 22%. This improvement was driven
by substantially higher sales which permitted more efficient operations and
absorption of fixed overhead costs. Gross profit as a percentage of net sales
increased from 24.7% in the first quarter of fiscal year 1994 to 26.4% in the
first quarter of fiscal year 1995. Due to the seasonality of the business, sales
volume changes in the first quarter can disproportionately impact the margin
percentage and are not reflective of expected margin percentages on an annual
basis.
Selling, general and administrative expenses increased by 6% or $68,000
during the first quarter of 1995 reflecting primarily normal increases in salary
and fringe benefit costs.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest expense in the first quarter of 1995 was $269,000 compared to
$227,000 in the first quarter of 1994, due to increased short-term borrowings
and higher market rates of interest.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash provided by operating activities increased $893,000 from
$3,129,000 in the first quarter of 1994 to $4,022,000 in the first quarter of
1995. Contributing to this increase, net income adjusted for non-cash charges
increased by $121,000 from $404,000 to $525,000. Changes in working capital
components positively impacted cash flow by $772,000 from $2,725,000 to
$3,497,000.
Cash required for seasonal build-up of inventories in the first quarter
of 1995 was offset by the favorable cash flow impacts of changes in accounts
payable and other current assets.
Cash flows used in investing activities increased by $532,000 from
$50,000 to $582,000 reflecting a note receivable from Scott Mills, Inc. for
$500,000 issued in the first quarter of 1995 (See Note 2).
The totals of net cash provided by operations and used in investing
activities were $3,440,000 and $3,079,000 for the first quarters of 1995 and
1994, respectively. These funds were used to paydown term debt and reduce
borrowings under revolving credit lines by $3,550,000 in the first quarter of
1995 and $2,497,000 in 1994. An additional $1,300,000 in the form of a dividend
was contributed to Scott Mills, Inc. during the first quarter of 1994.
Cash balances at March 4, 1995 and February 26, 1994 decreased by
$110,000 and $663,000, respectively.
The Registrant uses its short-term borrowings to build inventory levels
for shipment in the fall season. The Registrant expects that available cash and
existing short-term lines-of-credit will be sufficient to meet its normal
operating requirements for the balance of the year.
10
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KLEINERT'S, INC.
Date: April 18, 1995 By: /s/ Gerald E. Monigle
- --------------------- ----------------------
Gerald E. Monigle
Vice President-Finance
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-04-1995
<PERIOD-END> MAR-04-1995
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 8,283<F1>
<ALLOWANCES> 0
<INVENTORY> 21,817
<CURRENT-ASSETS> 31,831
<PP&E> 10,667
<DEPRECIATION> 5,585
<TOTAL-ASSETS> 40,227
<CURRENT-LIABILITIES> 15,596
<BONDS> 0
<COMMON> 3,798
0
0
<OTHER-SE> 16,336<F2>
<TOTAL-LIABILITY-AND-EQUITY> 40,227
<SALES> 7,713
<TOTAL-REVENUES> 7,713
<CGS> 5,675
<TOTAL-COSTS> 5,675
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F3>
<INTEREST-EXPENSE> 269
<INCOME-PRETAX> 600
<INCOME-TAX> 218
<INCOME-CONTINUING> 382<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 382
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
<FN>
1. Accounts receivable (net)
2. Capital in excess of par value
Retained earnings
Treasury stock, at cost
3. Not disclosed seperately in interim reports
4. Net income
</FN>
</TABLE>
