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 March 31, 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 March 31, 1995, there were outstanding 11,895,787 shares of Class A
Common Stock and 1,267,513 shares of Class B Common Stock.
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FORM 10-Q
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
INDEX
Page
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 3
Unaudited Condensed Consolidated Statements
of Income - Three Months Ended March 31, 1995
and 1994 4
Unaudited Condensed Consolidated Statements
of Cash Flow - Three Months Ended March 31, 1995
and 1994 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 10
Signatures 10
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OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
March 31,December 31,
1995 1994
(Unaudited) *
ASSETS
Current assets
Cash and cash equivalents $ 1,370 $ 10,514
Accounts receivable 42,808 23,857
Inventories 81,544 93,916
Prepaid expenses and other current assets 9,823 2,510
Deferred income taxes 10,782 11,510
Total current assets 146,327 142,307
Property, plant and equipment 115,733 119,950
Less accumulated depreciation and
amortization 48,691 50,121
Net property, plant and equipment 67,042 69,829
Other assets 5,778 5,075
Total assets $219,147 $217,211
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 229 240
Accounts payable 7,699 9,436
Accrued expenses 29,068 30,168
Total current liabilities 36,996 39,844
Long-term debt 7,744 517
Deferred income taxes 2,141 2,869
Employee benefit plan liabilities 16,132 15,167
Shareholders' equity
Preferred stock -- --
Common stock:
Class A 119 122
Class B 13 13
Retained earnings 155,875 158,933
Cumulative foreign currency translation adjustments 127 (254)
Total shareholders' equity 156,134 158,814
Total liabilities and shareholders' equity $219,147 $217,211
* Condensed from audited financial statements.
See notes to condensed consolidated financial statements.
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OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Net sales $ 108,486 $ 87,394
Cost of products sold 76,882 64,987
Gross profit 31,604 22,407
Selling, general and
administrative expenses 28,154 21,983
Operating income 3,450 424
Other income (expense):
Interest expense (205) (158)
Interest income 326 235
Royalty income 1,044 919
Other 174 150
Net other income 1,339 1,146
Income before taxes 4,789 1,570
Income taxes 2,069 675
Net income $ 2,720 $ 895
Average number of shares outstanding 13,314 14,586
Net income per common share $ .20 $ .06
Cash dividends per common share
Class A $ .07 $ .1025
Class B $ .06 $ .09
See notes to condensed consolidated financial statements.
<PAGE>
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flow
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities
Net income for the period $ 2,720 $ 895
Items in income not affecting cash 3,377 2,490
Changes in current assets (13,892) (9,315)
Changes in current liabilities (2,150) 578
Net cash used in operating activities (9,945) (5,352)
Cash flows from investing activities
Property, plant and equipment additions (1,613) (1,876)
Other (444) (376)
Proceeds from disposal of assets 1,423 976
Net cash used by investing activities (634) (1,276)
Cash flows from financing activities
Net increase in long-term borrowings 7,400 --
Net increase in short-term borrowings -- 6,500
Payments of long-term debt (184) (34)
Cash dividends paid (923) (1,478)
Repurchase of common stock (4,858) --
Net cash provided by financing activities 1,435 4,988
Net decrease in cash and cash equivalents $(9,144) $(1,640)
See notes to condensed consolidated financial statements.
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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 March 31, 1995 and December 31, 1994, the results of operations
for the three-month periods ended March 31, 1995 and 1994 and cash flows for
the three-month periods ended March 31, 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:
March 31, December 31,
1995 1994
(Dollars in thousands)
Finished goods $62,393 $75,187
Work in process 6,411 7,410
Raw materials 12,740 11,319
Total $81,544 $93,916
The replacement cost of inventory exceeds the above LIFO costs by $16,632 and
$16,122 at March 31, 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 March 31, 1995 were $108.5
million, an increase of $21.1 million (24.1%) over 1994 first quarter sales of
$87.4 million. The Company's domestic wholesale business of approximately
$74.8 million for the first quarter of 1995 was 15.4% more than 1994 first
quarter sales of approximately $64.8 million, with a corresponding increase in
unit shipments of approximately 17.7%. The increase in 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 our Spring 1995 children's fashion
<PAGE>
offering being well received. In addition, Company initiatives undertaken
during 1994 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 10%. Early indications of acceptance of
the Company's Holiday 1995 children's fashion offering have also been
promising. Accordingly, the Company anticipates that its domestic wholesale
unit shipments for the remaining three quarters of 1995 (primarily the second
half 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 $22.7 million for the first quarter of 1995, a
58.7% increase over 1994 first quarter sales of approximately $14.3 million.
This retail sales increase was primarily driven by the opening of an
additional 46 retail stores during 1994 and 8 store openings during the first
quarter of 1995. The Company's comparable store sales for the first quarter
of 1995 were up approximately 1%. The Company anticipates continued expansion
in its retail business during 1995 and is currently on target with its planned
opening of an additional 35 retail stores in all of 1995. 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 29.1% in
the first quarter of 1995, compared with 25.6% in the first quarter of 1994.
This gross margin improvement 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. In addition, the Company's gross
margin during the first quarter of 1994 was adversely affected by poor weather
conditions during the months of January and February which were disruptive to
production schedules. With the anticipated continued growth of the Company's
retail business during 1995, capacity reduction initiatives implemented during
1994 and early 1995 combined with increased utilization of contracted
manufacturing resources outside of the United States, the Company anticipates
further improvement in its gross profit margins for the remainder of 1995 as
compared to the last three quarters of 1994.
Selling, general and administrative expenses for the first quarter of 1995
increased $6.2 million over the first quarter, 1994. As a percent of net
sales, selling, general and administrative expenses were 26.0% in the first
quarter of 1995, up from 25.2% in the first quarter of 1994. The primary
reason for the increased selling, general and administrative expenses is the
Company's continuing expansion of its retail business. In addition, the
Company's increasing focus on its international operations and development of
its catalog division have added selling, general and administrative costs.
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 three quarters of
1994.
The Company's net other income for the first quarter of 1995 was $1.3 million,
compared to $1.1 million in the first quarter of 1994. This increase resulted
primarily from increased royalty income, net of expenses, related primarily to
higher royalty payments from foreign licensees. The Company's effective tax
rate was 43.2% for the first quarter of 1995 and 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. The Company's second quarter sales and income are the
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lowest both because of relatively low domestic wholesale unit shipments and
relatively modest retail outlet store sales during this period. The Company
anticipates this seasonality trend to continue to impact the remaining three
quarters of 1995 sales and income. As a result of this increased seasonality
of business, the Company currently anticipates incurring a net loss in the
second quarter of 1995 in excess of the net loss incurred during the second
quarter of 1994. Results of operations of the first quarter of 1995 are not
necessarily 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
March 31, 1995 was $109.3 million, as compared to $102.5 million at the end of
1994 and $113.2 million at March 31, 1994. The Company's current ratio was
4.0 to 1 at March 31, 1995, compared to 3.6 to 1 at the end of 1994 and 3.4 to
1 at March 31, 1994.
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. Through March 31, 1995, the Company has repurchased
1,442,500 shares of its Class A common stock for approximately $20 million.
At March 31, 1995, the Company had approximately $7.7 million of long-term
debt outstanding as compared to $.5 million at year end 1994 and $.8 million
at March 31, 1994. The increase in long-term indebtedness outstanding at
March 31, 1995 is the result of Company borrowings under its revolving credit
arrangement being used primarily for the stock repurchase program. The
Company's long-term debt as a percentage of total capitalization (long-term
debt plus shareholders' equity) was 4.7% and 0.4% at March 31, 1995 and 1994,
respectively.
<PAGE>
<PAGE>
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: 4/24/95 /S/DOUGLAS W. HYDE
Chairman of the Board, President,
Chief Executive Officer, and Director
Date: 4/24/95 /S/DAVID L. OMACHINSKI
Vice President-Finance, Treasurer,
Chief Financial Officer, and Director
<PAGE>
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