UNITED STATES 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 30, 1994
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 0-13365
OSHKOSH B'GOSH, INC.
(Exact name of registrant as specified in charter)
Delaware 39-0519915
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
112 Otter Avenue Oshkosh, Wisconsin 54901
(Address of principal executive offices) (Zip code)
(414)231-8800
(Registrant's telephone number)
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
As of June 30, 1994, there were outstanding 12,649,752 shares of Class A
Common Stock and 1,291,048 shares of Class B Common Stock.
FORM 10-Q
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
INDEX
Page
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 3
Unaudited Condensed Consolidated Statements
of Income - Three Months and Six Months
Ended June 30, 1994 and 1993 4
Unaudited Condensed Consolidated Statements
of Cash Flow - Six Months Ended June 30, 1994
and 1993 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information 9
Signatures 9
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
June 30, December 31,
1994 1993
(Unaudited) *
ASSETS
Current assets
Cash and cash equivalents $ 5,428 $ 17,853
Accounts receivable 34,588 19,477
Inventories 113,715 99,999
Prepaid expenses and other current assets 2,298 3,810
Deferred income taxes 10,430 10,716
Total current assets 166,459 151,855
Property, plant and equipment 116,959 114,397
Less accumulated depreciation and
amortization 45,890 42,642
Net property, plant and equipment 71,069 71,755
Other assets 6,014 5,521
Total assets $243,542 $229,131
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 26,638 $ --
Current maturities of long-term debt 239 536
Accounts payable 5,541 9,720
Accrued expenses 31,815 29,805
Total current liabilities 64,233 40,061
Long-term debt 751 757
Other liabilities 17,599 16,315
Shareholders' equity
Preferred stock -- --
Common stock:
Class A 126 133
Class B 13 13
Additional paid-in capital -- 2,971
Retained earnings 160,708 169,182
Cumulative foreign currency translation adjustments 112 (301)
Total shareholders' equity 160,959 171,998
Total liabilities and shareholders' equity $243,542 $229,131
* Condensed from audited financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $ 66,158 $ 63,306 $153,552 $156,540
Cost of products sold 46,720 45,375 111,707 112,914
Gross profit 19,438 17,931 41,845 43,626
Selling, general and
administrative expenses 20,862 16,541 42,845 36,445
Operating income (loss) (1,424) 1,390 (1,000) 7,181
Other income (expense):
Interest expense (167) (125) (325) (233)
Interest income 233 240 468 477
Royalty income 185 1,084 1,104 1,714
Other (129) (113) 21 (81)
Net other income (expense) 122 1,086 1,268 1,877
Income (loss) before taxes (1,302) 2,476 268 9,058
Income taxes (560) 1,129 115 3,774
Net income (loss) $ (742) $ 1,347 $ 153 $ 5,284
Average number of shares outstanding 14,547 14,586 14,566 14,586
Net income (loss) per common share $ (.05) $ .09 $ .01 $ .36
Cash dividends per common share
Class A $ .1025 $ .1025 $ .205 $ .205
Class B $ .09 $ .09 $ .18 $ .18
</TABLE>
See notes to condensed consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flow
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
1994 1993
Cash flows from operating activities
Net income for the period $ 153 $ 5,284
Items in income not affecting cash 7,396 5,574
Changes in current assets (27,315) (35,726)
Changes in current liabilities (2,169) (813)
Net cash used in operating activities (21,935) (25,681)
Cash flows from investing activities
Property, plant and equipment additions (5,979) (4,435)
Other (360) (32)
Proceeds from disposal of assets 1,119 137
Net cash used in investing activities (5,220) (4,330)
Cash flows from financing activities
Net increase in short-term borrowings 26,638 19,323
Payments of long-term debt (303) (7,321)
Cash dividends paid (2,958) (2,945)
Repurchase of common stock (8,647) --
Net cash provided by financing activities 14,730 9,057
Net decrease in cash and cash equivalents $(12,425) $(20,954)
See notes to condensed consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The condensed financial statements included herein have been prepared by the
Company without audit. However, the foregoing statements contain all
adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of Company management, necessary to present fairly the financial
position as of June 30, 1994, the results of operations for the three-month
and six-month periods ended June 30, 1994 and 1993 and cash flows for the six-
month periods ended June 30, 1994 and 1993.
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 the rules and
regulations of the Securities and Exchange Commission. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1993 Annual Report.
Note 2. Inventories
A summary of inventories follows:
June 30, December 31,
1994 1993
(Dollars in thousands)
Finished goods $93,581 $82,737
Work in process 5,275 5,008
Raw materials 14,859 12,254
Total $113,715 $99,999
The replacement cost of inventory exceeds the above LIFO costs by $15,289 and
$14,716 at June 30, 1994 and December 31, 1993, respectively.
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months ended June 30, 1994 were $66.2 million, an
increase of approximately $2.9 million (4.5%) over the $63.3 million in sales
for the same period in 1993. Net sales for the six months ended June 30, 1994
were $153.6 million, a decrease of approximately $2.9 million (1.9%) over the
same six month period in 1993. The Company's domestic wholesale business of
approximately $44.7 million for the second quarter of 1994 was approximately
7.5% less than 1993 second quarter domestic wholesale sales. For the six
month period ended June 30, 1994, sales of domestic wholesale products were
$109.5 million, a 13% decrease from the comparable period sales in 1993. The
Company's 1994 second quarter and year to date unit shipments were down 3.5%
and 10.5%, respectively, with comparable periods in 1993. The decrease in
domestic wholesale unit shipments related primarily to the effects of the
competitive environment in the children's wear business with decreased
wholesale sales of both fashion and basic product offerings. The Company
currently anticipates its domestic wholesale unit shipments for the remainder
of 1994 will be down slightly in comparison with unit shipments for the same
time period in 1993.
Company retail sales at its Oshkosh B'Gosh branded outlet stores and Genuine
Kids stores were approximately $16.6 million for the second quarter of 1994, a
39.5% increase over 1994 second quarter retail sales of approximately $11.9
million. For the six month period ended June 30, 1994, Company retail sales
were approximately $30.9 million, a 48.6% increase over the first six months
of 1993 retail sales of approximately $20.8 million. Retail sales increases
resulted primarily from the opening of additional retail stores during 1993
and 1994, offset in part by a decrease in comparable store sales during the
first six months of 1994 of approximately 9%. Through June 30, 1994, the
Company has opened an additional 22 retail outlets (both Oshkosh B'Gosh and
Genuine Kids stores) and is currently on target with its planned opening of 35
to 45 retail stores in all of 1994. The Company currently anticipates that
increased retail sales through the remainder of 1994 will more than offset the
reduction in the domestic wholesale business.
Gross margin as a percent of sales was 29.4% for the three months ended June
30, 1994 compared to 28.3% for the same period in 1993. For the six months
ended June 30, 1994, gross margin as a percent of sales was 27.3% compared to
27.9% for the first six months of 1993. The Company's second quarter, 1994
gross margin improvement was due primarily to the impact of the Company's
increased retail sales at higher gross margins relative to its domestic
wholesale business. The favorable impact of the Company's retail gross
margins was offset in part by the domestic wholesale business gross margin,
which was down slightly during the second quarter due primarily to reduced
unit sales and slightly lower pricing to wholesale customers. The Company's
gross margin for the first six months of 1994 was adversely affected earlier
in the year by poor weather conditions which were disruptive to production
schedules, as well as slightly lower wholesale pricing throughout the period.
The Company currently anticipates improvement in its gross margins in the
second half of 1994, primarily as a result of increased retail sales activity.
Selling, general and administrative expenses for the second quarter of 1994
increased $4.4 million over the second quarter of 1993. Selling, general and
administrative expenses for the second quarter of 1994 and year to date 1994
as a percent of sales were 31.5% and 27.9%, respectively as compared to 26.1%
and 23.3% in the same periods of 1993. The primary reason for increasing
selling, general and administrative expenses is the Company's increasing focus
on its retail business. The Company's primary retail sales periods are in the
second half of the calendar year. Accordingly, the Company anticipates that
selling, general and administrative expenses as a percent of sales should
decrease in the second half of 1994. In addition, the Company's catalog
division, initiated in the second half of 1993, added approximately $.6
million to its second quarter, 1994 selling, general and administrative
expense. The Company's increasing focus on its international operations also
resulted in an increase in second quarter, 1994 selling, general and
administrative expenses of approximately $.8 million.
Net other income for the second quarter of 1994 was $.1 million, compared to
$1.1 million in the second quarter of 1994. This decrease is the result of
significantly lower royalty payments received from the Company's domestic
licensees. The Company anticipates that royalties from domestic licensees
will be lower in the second half of 1994 than received in the second half of
1993.
Financial Condition and Liquidity
The Company's financial condition remains strong. Net working capital at June
30, 1994 was $102.2 million, as compared to $111.8 million at the end of 1993
and $114.3 million at June 30, 1993. The Company's current ratio was 2.6 to 1
at June 30, 1994, compared to 3.8 to 1 at the end of 1993 and 3.4 to 1 at June
30, 1993.
On June 14, 1994, the Company announced a stock repurchase program for up to
1,500,000 shares of its Class A Common Stock in open market transactions at
prevailing prices. Through June 30, 1994, the Company has repurchased
approximately 650,000 shares of its Class A Common Stock.
In June, 1994, the Company finalized a credit agreement with participating
banks. This arrangement provides a $60 million, three year unsecured
revolving credit line and an additional $40 million unsecured demand line.
The Company believes that these credit facilities, along with cash generated
from operations, will be sufficient to finance the Company's stock repurchase
program as well as its capital expenditures and business development needs.
At June 30, 1994, the Company had short-term borrowings outstanding of
approximately $26.6 million, as compared with $19.3 million of outstanding
short-term indebtedness at June 30, 1993. The increase is due primarily to
the repurchase of Class A Common Stock during June 1994.
The Company's long-term debt as a percentage of total capitalization (long-
term debt plus shareholders' equity) was 0.4% and 0.5% at June 30, 1994 and
1993, respectively.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OSHKOSH B'GOSH, INC.
Date: 8/08/94 /s/ DOUGLAS W. HYDE
President, Chief Executive
Officer and Director
Date: 8/08/94 /s/ DAVID L. OMACHINSKI
Vice President-Finance,
Chief Financial Officer and Treasurer
