<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
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 June 3, 1995
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
--- ---
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 July 7, 1995
- ------------------------------- ---------------------------
Common Stock 3,333,431
Par Value $1.00 per share
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2
KLEINERT'S, INC.
INDEX
Part I. Financial information PAGE
----
Item 1. Financial statements
Consolidated statements of operations 3
for the three months and six months
ended June 3, 1995 and May 28, 1994
Consolidated balance sheets at 4
June 3, 1995, December 3, 1994 and
May 28, 1994
Consolidated statements of cash flows 6
for the six months ended June 3, 1995
and May 28, 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
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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 Six Months Ended
------------------ ----------------
June 3, May 28, June 3, May 28,
1995 1994 1995 1994
------ ------ ------ ------
Net sales $10,132 $9,093 $17,845 $15,822
Cost of goods sold 7,641 6,864 13,316 11,926
------- ------ ------- -------
Gross profit 2,491 2,229 4,529 3,896
------- ------ ------- -------
Selling, general and
administrative expenses 1,227 1,130 2,396 2,231
Interest expense 416 296 685 523
------- ------ ------- -------
1,643 1,426 3,081 2,754
------- ------ ------- -------
Income before income
taxes and cumulative
effect of change in
accounting principle 848 803 1,448 1,142
Provision for income taxes 308 275 526 388
------- ------ ------- -------
Income before cumulative
effect of change in
accounting principle 540 528 922 754
Cumulative effect on prior
years of change in
accounting for income
taxes -- -- -- 210
------- ------ ------- -------
Net income $ 540 $ 528 $ 922 $ 964
------- ------ ------- -------
Earnings per share:
Income before change in
accounting principle $ .14 $ .14 $ .25 $ .20
Cumulative effect on prior
years of change in
accounting for income taxes -- -- -- .06
------- ------ ------- -------
Net income $ .14 $ .14 $ .25 $ .26
------- ------ ------- -------
Weighted average shares
outstanding 3,761 3,680 3,759 3,683
------- ------ ------- -------
See accompanying notes
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4
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(000's Omitted)
ASSETS
------
June 3, Dec. 3, May 28,
1995 1994 1994
------ ------ ------
Current assets:
Cash $ 205 $ 132 $ 148
Accounts receivable (net) 10,429 18,036 9,322
Inventories:
Raw materials 6,112 4,077 4,436
Word-in-process 4,128 2,942 3,324
Finished goods 20,093 5,677 17,274
------- ------- -------
Total inventories 30,333 12,696 25,034
------- ------- -------
Other current assets 1,740 1,613 1,789
------- ------- -------
Total current assets 42,707 32,477 36,293
------- ------- -------
Property, plant & equipment, at cost 10,998 10,569 10,263
Less: accumulated depreciation and
amortization 5,732 5,427 5,168
------- ------- -------
net property, plant and
equipment 5,266 5,142 5,095
------- ------- -------
Non-operating property -- -- 489
Other assets 3,278 2,843 2,284
------- ------- -------
$51,251 $40,462 $44,161
------- ------- -------
See accompanying notes
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5
KLEINERT'S, INC.
CONSOLIDATED BALANCE SHEETS
(000's Omitted)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
June 3, Dec. 3, May 28,
1995 1994 1994
------ ------ ------
Current liabilities
Notes payable and current portion
of long-term debt $17,955 $10,695 $14,825
Accounts payable 6,977 3,585 5,669
Accrued expenses 792 1,686 1,151
Accrued dividends payable -- -- --
Income taxes payable 606 -- 73
------- ------- -------
Total current liabilities 26,330 15,966 21,718
------- ------- -------
Deferred income taxes 123 123 49
Long-term debt 4,124 4,624 5,739
------- ------- -------
Total liabilities 30,577 20,713 27,506
------- ------- -------
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 shares issued as of June 3,
1995, 3,798,398 as of December 3, 1994,
and 3,798,398 as of May 28, 1994 3,798 3,798 3,798
Capital in excess of par value 10,626 10,626 10,626
Retained earnings 9,466 8,541 5,423
------- ------- -------
23,890 22,965 19,847
------- ------- -------
Less:
Treasury stock, at cost, 466,967,
466,967 and 464,967 common shares,
respectively (3,216) (3,216) (3,192)
------- ------- -------
Total shareholders' equity 20,674 19,749 16,655
------- ------- -------
$51,251 $40,462 $44,161
======= ======= =======
See accompanying notes
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KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
Six Months Ended
----------------
June 3, May 28,
1995 1994
------ ------
Cash flows from operating activities:
Net income $ 922 $ 964
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 326 351
Cumulative effect of change in accounting
principle -- (210)
Provision for losses on accounts receivable 2 (100)
Change in assets and liabilities:
Decrease in accounts receivable 7,620 8,484
(Increase) in inventory (17,636) (13,281)
(Increase) decrease in other current assets (127) (674)
Increase in accounts payable and
accrued expenses 2,601 41
Increase in income taxes payable 505 125
(Increase) in other assets 3 (100)
Increase in deferred income taxes -- 15
-------- -------
Total adjustments (6,706) (5,349)
-------- -------
Net cash (used in) operating activities (5,784) (4,385)
-------- -------
Cash flows from (used in) investing activities:
Capital expenditures (443) (256)
Note receivable related party (Note 2) (500) --
Proceeds from note receivable 40 --
-------- -------
Net cash (used in) investing
activities $ (903) $ (256)
-------- -------
See accompanying notes
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7
KLEINERT'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
(CONTINUED)
Six Months Ended
----------------
June 3, May 28,
1995 1994
------ ------
Cash flows from financing activities:
Net borrowings under revolving
line-of-credit agreement $7,260 $ 5,521
Principal payments of debt (500) (250)
Proceeds from long-term debt -- 520
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 -- (520)
------ -------
Net cash provided by financing activities 6,760 4,022
------ -------
Net increase(decrease) in cash 73 (619)
Cash at beginning period 132 767
------ -------
Cash at end of period $ 205 $ 148
====== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 612 $ 301
Income taxes $ 75 $ 241
Tax benefit of exercise of stock options $ -- $ 52
See accompanying notes
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KLEINERT'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 3, 1995 and May 28, 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.
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9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The Company's apparel business is highly seasonal. Consequently the
sales and operating results for the three and six month periods ended June 3,
1995 are not necessarily indicative of the results that may be expected for the
entire fiscal year ending December 2, 1995.
Three Months Ended Six Months Ended
------------------ ----------------
($000's) ($000's)
June 3, May 28, June 3, May 28,
1995 1994 1995 1994
------ ------ ------ ------
Net Sales $10,132 $9,093 $17,845 $15,822
======= ====== ======= =======
Gross Profit $ 2,491 $2,229 $ 4,529 $ 3,896
======= ====== ======= =======
Selling,
general and
administrative
expenses $ 1,227 $ 1,130 $ 2,396 $ 2,231
======= ====== ======= =======
Net sales increased by $2,023,000, or 13%, in the six months ended June
3, 1995 principally due to increased sales of knit sets and separates offset in
part by reduced sales of blanket sleepers. The first six months generally
represents a relatively small percentage of annual sales volume and cannot be
used as an indication of the results to be expected for the entire year. Based
upon bookings to date, the Company expects, but cannot assure, that sales volume
for the remainder of fiscal year 1995 will be greater than for the comparable
prior year period.
Gross profit increased by $633,000 or 16%. This improvement was driven
by substantially higher sales which permitted more efficient operations and
greater absorption of fixed overhead costs. Gross profit as a percentage of net
sales increased from 24.6% in the first six months of fiscal year 1994 to 25.4%
in the first six months of fiscal year 1995. Due to the seasonality of the
business, sales volume changes in the first six months of the year 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 7.4% or
$165,000 during the first six months of fiscal year 1995 due to normal increases
in salary and increased fringe benefit costs.
Interest expense in the first six months of fiscal year 1995 was
$685,000 compared to $523,000 in the first six months of fiscal year 1994, due
to increased short-term borrowings required to support higher production levels
and higher interest rates.
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10
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 $4,385,000 in the
first six months of fiscal year 1994 to $5,784,000 in the first six months of
fiscal year 1995. This change resulted from increases in inventory levels during
the six months ended June 3, 1995. The higher inventory levels reflect higher
production levels in anticipation of increased sales expected for the entire
year 1995.
Cash flows used in investing activities increased by $647,000 from
$256,000 to $903,000 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 $6,687,000 and $4,641,000 for the first six 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 used 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 fiscal year.
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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
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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: July 17, 1995 By: /s/ Gerald E. Monigle
- ------------------- ----------------------------
Gerald E. Monigle
Vice President-Finance
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-02-1995 DEC-02-1995
<PERIOD-END> MAR-04-1995 JUN-03-1995
<CASH> 22 205
<SECURITIES> 0 0
<RECEIVABLES> 8,283<F1> 10,429<F1>
<ALLOWANCES> 0 0
<INVENTORY> 21,817 30,333
<CURRENT-ASSETS> 31,831 42,707
<PP&E> 10,667 10,998
<DEPRECIATION> 5,585 5,732
<TOTAL-ASSETS> 40,227 51,251
<CURRENT-LIABILITIES> 15,596 26,330
<BONDS> 0 0
<COMMON> 3,798 3,798
0 0
0 0
<OTHER-SE> 16,336<F2> 16,876<F2>
<TOTAL-LIABILITY-AND-EQUITY> 40,227 51,251
<SALES> 7,713 17,845
<TOTAL-REVENUES> 7,713 17,845
<CGS> 5,675 13,316
<TOTAL-COSTS> 5,675 13,316
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0<F3> 0<F3>
<INTEREST-EXPENSE> 269 685
<INCOME-PRETAX> 600 1,448
<INCOME-TAX> 218 526
<INCOME-CONTINUING> 382<F4> 922<F4>
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 382 922
<EPS-PRIMARY> .10 .25
<EPS-DILUTED> 0 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 interim reports
<F4>4. Net income
</FN>
</TABLE>
