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, 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 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, 1995, there were outstanding 11,513,287 shares of Class A Common
Stock and 1,267,513 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 3
30, 1995 and December 31, 1994
Unaudited Condensed Consolidated Statements 4
of Income -- Three Months and Six Months Ended
June 30, 1995 and 1994
Unaudited Condensed Consolidated Statements of 5
Cash Flow -- Six Months Ended June 30, 1995 and
1994
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II. Other Information 10
Signatures 10
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
1995 1994
(Unaudited) *
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 814 $ 10,514
Accounts receivable 32,499 23,857
Inventories 113,038 93,916
Prepaid expenses & other current assets 11,079 2,510
Deferred income taxes 8,087 11,510
----------- ------------
TOTAL CURRENT ASSETS 165,517 142,307
Property, plant & equipment 117,057 119,950
Less accumulated depreciation and amortization 50,447 50,121
----------- ------------
NET PROPERTY, PLANT AND EQUIPMENT 66,610 69,829
OTHER ASSETS 5,724 5,075
----------- ------------
TOTAL ASSETS $ 237,851 $ 217,211
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 229 $ 240
Accounts payable 7,320 9,436
Accrued expenses 30,194 30,168
----------- ------------
TOTAL CURRENT LIABILITIES 37,743 39,844
LONG TERM DEBT 33,996 517
DEFERRED INCOME TAXES 2,041 2,869
EMPLOYEE BENEFIT PLAN LIABILITIES 17,147 15,167
SHAREHOLDERS' EQUITY
Preferred stock -- --
Common tock:
Class A 115 122
Class B 13 13
Retained earnings 147,073 158,933
Cumulative foreign currency translation adjustments (277) (254)
------------ -------------
TOTAL SHAREHOLDERS' EQUITY 146,924 158,814
----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 237,851 $ 217,211
============ ============
* Condensed from audited financial statements.
See notes to condensed financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
NET SALES $74,934 $66,158 $183,420 $153,552
COST OF PRODUCTS SOLD 50,000 46,720 126,882 111,707
------- -------- -------- --------
GROSS PROFIT 24,934 19,438 56,538 41,845
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 28,670 20,862 56,824 42,845
------- -------- -------- --------
OPERATING INCOME (LOSS) (3,736) (1,424) (286) (1,000)
------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (346) (167) (551) (325)
Interest income 337 233 663 468
Royalty income 378 185 1,422 1,104
Other 28 (129) 202 21
------- -------- -------- --------
OTHER INCOME -- NET 397 122 1,736 1,268
------- -------- -------- -------
INCOME (LOSS) BEFORE TAXES (3,339) (1,302) 1,450 268
INCOME TAXES (1,460) (560) 609 115
------- ------- -------- -------
NET INCOME (LOSS) $(1,879) $ (742) $ 841 $ 153
======= ======= ======== =======
AVERAGE NUMBER OF SHARES OUTSTANDING 12,995 14,547 13,163 14,566
NET INCOME (LOSS) PER COMMON SHARE $ (0.14) $ (0.05) $ 0.06 $ 0.01
------- ------- ------- -------
CASH DIVIDEND PER COMMON SHARE
Class A $ 0.07 $0.1025 $ 0.14 $ 0.205
Class B $ 0.06 $ 0.09 $ 0.12 $ 0.18
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,
1995 1994
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period $ 841 $ 153
Items in income not affecting cash 9,808 7,396
Changes in current assets (36,333) (27,315)
Changes in current liabilities (1,552) (2,169)
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (27,236) (21,935)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions (4,090) (5,979)
Other (1,027) (360)
Proceeds from disposal of assets 1,893 1,119
------------ -------------
NET CASH USED IN INVESTING ACTIVITIES (3,224) (5,220)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in long-term borrowings 33,652 --
Net increase in short-term borrowings -- 26,638
Payments of long-term debt (184) (303)
Cash dividends paid (1,825) (2,958)
Repurchase of common stock (10,883) (8,647)
------------ -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,760 14,730
------------ -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (9,700) $ (12,425)
============ =============
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, 1995, the results of operations for the three-month and
six-month periods ended June 30, 1995 and 1994.
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 1994 Annual Report.
Note 2. Inventories
A summary of inventories follows:
June 30, December 31,
1995 1994
---------- -----------
(Dollars in thousands)
Finished goods $ 88,136 $ 75,187
Work in process 14,723 7,410
Raw materials 10,179 11,319
--------- -------
Total $113,038 $ 93,916
======== ========
The replacement cost of inventory exceeds the above LIFO costs by $17,142 and
$16,122 at June 30, 1995 and December 31, 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Consolidated net sales for the three months ended June 30, 1995, were $74.9
million, an increase of $8.7 million (13.3%) over 1994 second quarter sales of
$66.2 million. Consolidated net sales for the six months ended June, 30, 1995,
were $183.4 million, an increase of $29.8 million (19.5%) over the first six
months of 1994 sales of $153.6 million. The Company's domestic wholesale
business of approximately $43.0 million for the second quarter of 1995 was
approximately 3.8% less than 1994 second quarter domestic wholesale sales of
approximately $44.7 million, with a corresponding decrease in unit shipments of
approximately 1.2%. For the six month period ended June 30, 1995, sales of
domestic wholesale products were approximately $117.8 million, a 7.6% increase
from the comparable period sales in 1994 of approximately $109.5 million, with a
corresponding increase in unit shipments of approximately 10.1%. The slight
decrease in unit shipments during the Company's second quarter of 1995 as
compared to 1994 was due primarily to a reduction in the amount of closeout
merchandise required to be disposed of during the quarter. Shipments of first
quality fashion garments were up slightly during the second quarter of 1995 when
compared to 1994. The increase in the year-to-date domestic wholesale unit
shipments was a result of a number of factors. Improved product design during
1994 contributed to better `sell-thrus'' and margins for a majority of our
wholesale customers, and resulted in significantly higher Spring 1995 children's
fashion shipments. In addition, Company initiatives undertaken during 1994, and
continuing in 1995, resulted in significantly improved shipping performance to
customers.
The Company currently anticipates that unit shipments of its Fall 1995 wholesale
product offering, shipped primarily during the third quarter of 1995, will
exceed Fall 1994 by over 13%. The Company's Holiday 1995 children's fashion
offering, shipped from September through the fourth quarter, should also
significantly exceed Holiday 1994. Accordingly, the Company anticipates that its
domestic wholesale unit shipments for the remaining two quarters of 1995 will
exceed units shipped for the same period in 1994.
Company retail sales at its OshKosh B'Gosh branded outlet stores and Genuine
Kids stores were approximately $26.0 million for the second quarter of 1995, a
56.6% increase over 1994 second quarter retail sales of approximately $16.6
million. For the six month period ended June 30, 1995, Company retail sales
were approximately $48.7 million, a 57.6% increase over the first six months of
1994 retail sales of approximately $30.9 million. Retail sales increases were
primarily driven by the opening of an additional forty-six retail stores during
1994 and twenty-two store openings during the first half of 1995, along with an
increase in comparable store sales during the first six months of 1995 of
approximately 9%. The Company anticipates continued expansion in its retail
business during 1995 and currently anticipates the opening of an additional
thirteen stores during the remainder of the year. Accordingly, the Company
anticipates further increases in its retail sales through the balance of 1995 as
compared to 1994.
The Company's gross profit margin as a percent of sales improved to 33.3% in the
second quarter of 1995, compared with 29.4% in the second quarter of 1994. For
the six months ended June 30, 1995, gross margin as a percent of sales was 30.8%
compared to 27.3% for the first six months of 1994. The Company's gross margin
improvement for the three and six month periods ending June 30, 1995, was due
primarily to both the impact of the Company's increased retail sales at higher
gross margins relative to its domestic wholesale business, along with modest
improvement in the domestic wholesale business gross profit margin. With the
anticipated continued growth of the Company's retail business during 1995,
capacity reduction initiatives during 1994 and 1995 (including the Company's
recently announced closure of its Marrowbone, Kentucky manufacturing facility)
combined with increased utilization of contract and manufacturing resources
outside of the United States, the Company anticipates further improvement in
its gross margins for the remaining two quarters of 1995 as compared to the last
two quarters of 1994.
Selling, general and administrative expenses for the three month and six month
periods ended June 30, 1995 increased $7.8 million dollars and $14.0 million
over the three month and six month periods ended June 30, 1994, respectively.
Selling, general and administrative expenses, as a percent of net sales, were
38.3% and 31.0% for the three month and six month periods ended June 30, 1995,
up from 31.5% and 27.9% in the comparable periods of 1994. The primary reason
for this increase is the Company's expansion of its retail business. In
addition, the Company's increasing focus on it international operations and
development of its catalog division have added selling, general and
administrative cost. Continued expansion of the Company's retail business,
along with further development of its foreign operations and catalog division,
will result in higher selling, general and administrative expenses in relation
to its net sales for the remainder of 1995 as compared to the last two quarters
of 1994.
The Company's other income for the second quarter of 1995 was $.4 million,
compared to $.1 million in the second quarter of 1994. This increase resulted
primarily from increased royalty income, net of expenses, from its licensees.
The Company's effective tax rate for the first six months of 1995 was 42.0%
compared to 43.0% for the comparable period in 1994.
SEASONALITY
The Company's business is increasingly seasonal, with highest sales and income
in the third quarter which is the Company's peak retail selling season at its
retail outlet stores as well as a strong wholesale shipping period. The
Company's sales and income are lowest in the second quarter because of
relatively low domestic wholesale unit shipments and relatively modest retail
outlet store sales during this period. Accordingly, the Company has incurred
net losses during the second quarter of 1995 and 1994. Results of operations
for the Company's first quarter and second quarter of 1995 are not indicative of
anticipated quarterly results through the balance of the year.
FINANCIAL CONDITION AND LIQUIDITY
The Company's financial condition remains strong. Net working capital at June
30, 1995 was $127.8 million, as compared to $102.5 million at the end of 1994
and $102.2 million at June 30, 1994. The Company's current ratio was 4.4 to 1
at June 30, 1995, compared to 3.6 to 1 at the end of 1994 and 2.6 to 1 at June
30, 1994. The Company's long-term debt as a percentage of total capitalization
(long-term debt plus shareholders' equity) was 18.8% and 0.4% at June 30, 1995
and 1994, respectively.
The Company's substantial increase in working capital and significant increase
in long-term debt at June 30, 1995, relates directly to the Company's three
year, unsecured revolving credit line that was arranged during 1994. This
multi-year agreement results in the Company's seasonal working capital
borrowings, which are generally high at June 30, being classified as long-term
debt in 1995 as compared to short-term debt under similar, but short-term bank
arrangements in existance during 1994.
In addition, in June 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. During the second quarter of 1995, the Company announced
increases in its stock repurchase program for up to an additional 650,000 shares
of its Class A common stock. Through June 30, 1995, the Company has repurchased
1,825,000 shares of its Class A common stock for approximately $26 million.
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: 7/24/95 /S/DOUGLAS W. HYDE
Chairman of the Board, President
Chief Executive Officer and Director
Date: 7/24/95 /S/DAVID L. OMACHINSKI
Vice President-Finance, Treasurer,
Chief Financial Officer and Director
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