<PAGE>
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 September 2, 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
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 _______
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 October 9, 1995
------------------------- ------------------------------
Common Stock 3,331,431
Par Value $1.00 per share
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KLEINERT'S, INC.
INDEX
Part I. Financial information Page
Item 1. Financial statements
Consolidated statements of operations 3
for the three months and nine months
ended September 2, 1995 and September 3, 1994
Consolidated balance sheets at 4
September 2, 1995, December 3, 1994
and September 3, 1994
Consolidated statements of cash flows 6
for the nine months ended September 2,
1995 and September 3, 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
<PAGE>
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 Nine Months Ended
Sept. 2, Sept. 3, Sept. 2, Sept. 3,
1995 1994 1995 1994
------- ------- ------- -------
Net sales $26,451 $25,157 $44,296 $40,979
Cost of goods sold 22,131 20,942 35,447 32,868
------- ------- ------- -------
Gross profit 4,320 4,215 8,849 8,111
------- ------- ------- -------
Selling, general and
administrative expenses 1,272 1,425 3,668 3,656
Interest expense 569 461 1,254 984
------- ------- ------- -------
1,841 1,886 4,922 4,640
------- ------- ------- -------
Income before income
taxes and cumulative
effect of change in
accounting principle 2,479 2,329 3,927 3,471
Provision for income taxes 890 843 1,416 1,231
------- ------- ------- -------
Income before cumulative
effect of change in
accounting principle 1,589 1,486 2,511 2,240
Cumulative effect on prior
years of change in
accounting for income
taxes -- -- -- 210
------- ------- ------- -------
Net income $ 1,589 $ 1,486 $ 2,511 $ 2,450
======= ======= ======= =======
Earnings per share:
Income before change in
accounting principle $ .42 $ .40 $ .67 $ .61
Cumulative effect on prior
years of change in
accounting for income taxes -- -- -- .06
------- ------- ------- -------
Net income .42 .40 .67 .67
======= ======= ======= =======
Weighted average shares
outstanding 3,745 3,684 3,755 3,684
======= ======= ======= =======
See accompanying notes
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(000's Omitted)
ASSETS
------
Sept. 2, Dec. 3, Sept. 3,
1995 1994 1994
------- ------- -------
Current assets:
Cash $ 84 $ 132 $ 74
Accounts receivable (net) 21,580 18,036 21,213
Inventories:
Raw materials 5,371 4,077 5,109
Work-in-process 3,694 2,942 3,401
Finished goods 15,249 5,677 11,811
------- ------- -------
Total inventories 24,314 12,696 20,321
------- ------- -------
Other current assets 1,941 1,613 1,451
------- ------- -------
Total current assets 47,919 32,477 43,059
------- ------- -------
Property, plant & equipment, at cost 11,328 10,569 10,456
Less: accumulated depreciation and
amortization 5,879 5,427 5,267
------- ------- -------
net property, plant and
equipment 5,449 5,142 5,189
------- ------- -------
Other assets 3,556 2,843 2,993
------- ------- -------
$56,924 $40,462 $51,241
======= ======= =======
See accompanying notes
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(000's Omitted)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Sept. 2, Dec. 3, Sept. 3,
1995 1994 1994
-------- -------- --------
Current liabilities:
Notes payable and current portion
of long-term debt $ 22,835 $ 10,695 $ 20,901
Accounts payable 5,508 3,585 5,971
Accrued expenses 2,324 1,686 1,090
-------- -------- --------
Total current liabilities 30,667 15,966 27,962
-------- -------- --------
Deferred income taxes 123 123 49
Long-term debt 3,874 4,624 5,113
-------- -------- --------
Total liabilities 34,664 20,713 33,124
-------- -------- --------
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 3,798,398
shares issued as of September 2, 1995,
December 3, 1994, and September 3, 1994,
respectively 3,798 3,798 3,798
Capital in excess of par value 10,626 10,626 10,626
Retained earnings 11,052 8,541 6,909
-------- -------- --------
25,476 22,965 21,333
-------- -------- --------
Less:
Treasury stock, at cost, 466,967
common shares (3,216) (3,216) (3,216)
-------- -------- --------
Total shareholders' equity 22,260 19,749 18,117
-------- -------- --------
$ 56,924 $ 40,462 $ 51,241
======== ======== ========
See accompanying notes
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
Nine Months Ended
Sept. 2, Sept. 3,
1995 1994
-------- --------
Cash flows from operating activities:
Net income $ 2,511 $ 2,450
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 500 511
Cumulative effect of change in accounting
principle -- (210)
Loss on sale of fixed assets -- 29
Provision for losses on accounts receivable 60 60
Change in assets and liabilities:
(Increase) in accounts receivable (3,586) (3,567)
(Increase) in inventory (11,617) (8,568)
(Increase) in other current assets (328) (213)
(Increase) in other assets (312) (23)
Increase in accounts payable, and
accrued expenses 2,559 261
Increase in deferred income taxes -- 15
-------- --------
Total adjustments (12,724) (11,705)
-------- --------
Net cash (used in) operating activities (10,213) (9,255)
-------- --------
Cash flows from (used in) investing activities:
Capital expenditures (795) (507)
Note receivable related party (Note 2) (500) --
Proceeds from sale of non-operating property -- 135
Additions to other assets -- (534)
Proceeds from note receivable 70 22
-------- --------
Net cash (used in) investing activities $ (1,225) $ (884)
======== ========
See accompanying notes
<PAGE>
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
Nine Months Ended
Sept. 2, Sept. 3,
1995 1994
-------- --------
Cash flows from financing activities:
Net borrowings and repayments under revolving
line-of-credit agreement $ 12,140 $ 11,595
Principal payments on debt (750) (900)
Proceeds from long-term debt -- 544
Principal payments on capital leases -- (18)
Proceeds from exercise of stock options -- 69
Cash portion of dividend paid -- (1,300)
Payments to acquire treasury stock -- (544)
-------- --------
Net cash provided by financing activities 11,390 9,446
-------- --------
Net (decrease) in cash (48) (693)
Cash at beginning of period 132 767
-------- --------
Cash at end of period $ 84 $ 74
======== ========
See accompanying notes
<PAGE>
KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 2, 1995 and September 3, 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 a Plan of
Reorganization on November 27, 1993. The loan bears interest, payable annually,
at 8 1/2% per annum and the principal is due in full on December 4, 1997. Scott
Mills, which has operated independently of the Company since November 27, 1993,
continues to be a principal supplier of fabric to the Company.
The Company provides certain third party services on behalf of Scott
Mills including data processing and account payable check processing functions.
Funds disbursed on behalf of Scott Mills are subsequently reimbursed to the
Company. As a consequence, the balance due to Kleinert's, Inc. fluctuates based
on the timing of the disbursements on behalf of Scott Mills and reimbursement.
The balance reflected in accounts receivable, net, due to the Company at
September 2, 1995 was $963,000 and consisted primarily of the unreimbursed
balance of disbursements made on behalf of Scott Mills.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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The Company's apparel business is highly seasonal. Consequently the
sales and operating results for the three and nine month periods ended
September 2, 1995 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending December 2, 1995.
Three Months Ended Nine Months Ended
------------------ -----------------
($000's) ($000's)
Sept. 2, Sept. 3, Sept. 2, Sept. 3,
1995 1994 1995 1994
------- ------- ------- -------
Net Sales $26,451 $25,157 $44,296 $40,979
======= ======= ======= =======
Gross Profit $ 4,320 $ 4,215 $ 8,849 $ 8,111
======= ======= ======= =======
Selling,
general and
administrative
expenses $ 1,272 $ 1,425 $ 3,668 $ 3,656
======= ======= ======= =======
Net sales increased by $3,317,000, or 8%, in the nine months ended
September 2, 1995 principally due to increased sales of knit sets and separates
offset in part by reduced sales of blanket sleepers.
Gross profit increased by $738,000 or 9%. This improvement was
primarily driven by the higher sales. Gross profit as a percentage of net sales
increased from 19.8% in the first nine months of fiscal year 1994 to 20% in the
first nine months of fiscal year 1995.
Interest expense in the first nine months of fiscal year 1995 was
$1,254,000 compared to $984,000 in the first nine months of fiscal year 1994,
due to increased short-term borrowings required to support higher production
levels and to higher interest rates.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
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Net cash used by operating activities increased from $9,255,000 in the
first nine months of fiscal year 1994 to $10,213,000 in the first nine months of
fiscal year 1995. This change resulted from increases in inventory levels during
the nine months ended September 2, 1995. The higher inventory levels reflect
higher production levels in anticipation of increased sales expected for the
balance of fiscal year 1995.
Cash flows used in investing activities increased by $341,000 from
$884,000 to $1,225,000 reflecting a note receivable from Scott Mills, Inc. for
$500,000 issued in the first quarter of 1995 (See Note 2) and increased capital
expenditures.
The total net cash used in operations and used in investing activities
was $11,438,000 and $10,139,000 for the first nine months of fiscal year 1995
and fiscal year 1994, respectively. Funds necessary to support this higher level
of activity were provided primarily from increased borrowings under revolving
credit lines.
The Company uses its short-term borrowings to build inventory levels
for shipment in the fall season. Due to "Quick Response" delivery programs,
customer shipment patterns have shifted somewhat closer to the retailer's
selling season. This trend has impacted the Company's short-term borrowing
requirements in the third quarter of 1995 when compared to 1994. 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
fiscal year.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>
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: October 16, 1995 By:
- ---------------------- --------------------------
Gerald E. Monigle
Vice President-Finance
(Principal Accounting Officer)
<PAGE>
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: October 16, 1995 By:/s/ Gerald E. Monigle
- ---------------------- --------------------------
Gerald E. Monigle
Vice President-Finance
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-02-1995
<PERIOD-END> SEP-02-1995
<CASH> 84
<SECURITIES> 0
<RECEIVABLES> 21,580<F1>
<ALLOWANCES> 0
<INVENTORY> 24,314
<CURRENT-ASSETS> 47,919
<PP&E> 11,328
<DEPRECIATION> 5,879
<TOTAL-ASSETS> 56,924
<CURRENT-LIABILITIES> 30,664
<BONDS> 0
<COMMON> 3,798
0
0
<OTHER-SE> 18,465<F2>
<TOTAL-LIABILITY-AND-EQUITY> 56,924
<SALES> 44,296
<TOTAL-REVENUES> 44,296
<CGS> 35,447
<TOTAL-COSTS> 35,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F3>
<INTEREST-EXPENSE> 1,254
<INCOME-PRETAX> 3,927
<INCOME-TAX> 1,416
<INCOME-CONTINUING> 2,511<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,511
<EPS-PRIMARY> .67
<EPS-DILUTED> 0
<FN>
<F1>1. Accounts receivable (net)
<F2>2. Capital in excess of par value
Retained earnings
Treasury stock, at cost
<F3>3. Not disclosed separately in interim reports
<F4>4. Net income
</FN>
</TABLE>
