SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
(AMENDMENT NO. 1)
(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 2, 1996
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 August 26, 1996
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Common Stock 3,684,391
Par Value $1.00 per share
<PAGE>
I. Part I, Item 1 of the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 2, 1996 is hereby amended by amending and
restating in its entirety note 3 to the Notes to Consolidated Financial
Statements as follows:
3. Refinancing of Term Loan
On February 28, 1996 the Company refinanced its existing term loan and
provided for an additional term debt facility of $4,650,000 to finance the Pixie
Aquisition. The term loan is in the form of an amended and restated term loan
note with the same bank as the original term loan. Total borrowing at March 2,
1996 was $8,049,000. The interest rate is indexed by LIBOR rates plus a spread
of 1.12%.
Simultaneously, the Company entered into an intrest rate swap to convert
its floating-rate to a fixed-rate of 5.88% which effectively fixes the rate at
7.0%. This reduces the Company's risk of incurring higher interest costs due to
rising interest rates. At March 2, 1996, the interest rate swap agreement had a
notional amount of $8,049,000 which decreases by $300,000 quarterly through the
September 2002 termination date. The fair value of this agreement at March 2,
1996 was $1,323.
<PAGE>
II. Part I, Item 2 of the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 2, 1996 is hereby amended and restated
in its entirety as follows:
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 months ended March 2, 1996 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending November 30, 1996.
Three Months Ended
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(000's)
March 2, March 4, Increase
1996 1995 (Decrease)
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Net sales $11,720 $7,713 $4,007
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Gross profit $ 2,512 $2,038 $ 474
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Selling, general and
administrative expenses $ 1,426 $1,169 $ 257
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Net sales increased by $4,007,000 or 52% to $11,720,000 from $7,713,000 for
the three months ended March 2, 1996 compared to the three months ended March 4,
1995. Sales of products associated with the Pixie business accounted for an
approximately 26% increase and the remaining 26% increase related to Kleinert's
continuing business related primarily to knitsets. Test programs and good sales
results at very large retail chains during 1995 were successful and have
resulted in considerable growth for Kleinert's with these customers. Gross
profit increased by $474,000 or 23% primarily as a result of increased sales
volume.
Selling, general and administrative expenses increased 22% or $257,000
primarily reflecting expenses associated with the Pixie business.
It is Kleinert's intention to integrate many systems and functions that
are currently being performed at Pixie. It is expected that savings generated
by this integration will offset any increases in selling, general and
administrative expenses that might otherwise occur and thus, will serve to
reduce Pixie related expenses in the future.
Interest expense in the first quarter of 1996 was $336,000 compared to
$269,000 in the first quarter of 1995 reflecting increased borrowing levels
associated with the Pixie acquisition.
Net income increased 25% to $479,000 for the first quarter of 1996 when
compared to $382,000 for the first quarter of 1995. Approximately 16% of the
increase was attributable to the basic Kleinert's business, while the Pixie
acquisition accounted for the balance.
Income Taxes
The provision for income taxes is based upon the effective tax rates
expected to be recognized for the full fiscal year 1996. The rate for the first
three months of 1996 was 36.3% which was equal to the rate for the first three
months of 1995.
<PAGE>
Impact of Inflation and Changing Prices on Sales and Income from Operations
Although Kleinert's costs for raw materials, labor and equipment are
influenced by inflation, management believes that inflation has not had a
material impact on Kleinert's operations prior to fiscal year 1994. In fiscal
year 1994, Kleinert's experienced an increase in raw material prices which
continued into fiscal year 1995. The impact on margins of increased raw
material prices was offset primarily by increased sales volume that permitted
the absorption of relatively stable fixed costs. Consequently, margins remained
stable without a corresponding increase in selling prices. Raw material prices
are not expected to change significantly in 1996. Kleinert's does not expect to
be able to increase its selling prices to any great extent during fiscal year
1996; therefore, Kleinert's continues to examine all of its costs in an effort
to maintain its profit margins.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased $1,175,000 from
$4,022,000 in the first quarter of 1995 to $2,847,000 in the first quarter of
1996. This reflected lower decreases in accounts receivable when comparing the
1996 first quarter to the 1995 quarter. The funds provided were used primarily
to pay down balances on the Company's revolving line-of-credit agreements.
In consideration for the assets of Pixie and Certified and the shares of
CASH, the Company paid an aggregate purchase price of $4,650,000 in cash, of
which $500,000 has been retained by the Company pending confirmation of
inventory quantities and completion of an audit of CASH.
On February 28, 1996 the Company refinanced its existing term loan and
provided for an additional term debt facility of $4,650,000 to finance the
purchase of the Pixie assets. The term loan is in the form of an amended and
restated term loan note with the same bank as the original term loan. The total
borrowing at March 2, 1996 was $8,049,000 which is payable in quarterly
installments of $300,000 through September, 2002 with a final installment of
$249,000 due December 2002. The interest rate is based on LIBOR but has been
effectively fixed at 7.00% by an interest rate swap agreement with the same
bank.
It is expected that the acquisition will enhance the Company's earnings
and, ultimately, its cash flows; however, due to the seasonality of the
Company's business, additional working capital requirements are anticipated in
periods when production levels exceed sales.
The Company uses its short-term borrowings to build inventory levels for
shipment in the fall season.
The Company believes that cash flow generated by operations, together with
amounts available under its existing credit arrangements, should be sufficient
to fund its working capital needs in fiscal year 1996 and for the future.
Currently, Kleinert's has no material capital commitments.
<PAGE>
Kleinert's has unsecured lines of credit aggregating $42,000,000 of which
$9,800,000 was outstanding at March 2, 1996 bearing interest at rates ranging
from 6.2% to 7.0%. The following table sets forth certain information concerning
this indebtedness:
Principal
Amount
Name of Lender Outstanding
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Corestates Bank, N.A. $3,800,000
PNC Bank $3,000,000
Republic National $3,000,000
Bank of New York
<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: August 26, 1996 By: /s/ Gerald E. Monigle
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Gerald E. Monigle
Vice President-Finance
(Principal Accounting Officer)
