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 September 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 September 30, 1995, there were outstanding 11,188,787 shares of Class A
Common Stock and 1,267,013 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 --
September 30, 1995 and December 31, 1994 3
Unaudited Condensed Consolidated
Statements of Income -- Three Months and Nine
Months Ended September 30, 1995 and 1994 4
Unaudited Condensed Consolidated Statements
of Cash Flow -- Nine Months Ended September
30, 1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Results 7
of Operations and Financial Condition.
Part II. Other Information 10
Signatures 10
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30, December 31,
1995 1994
(Unaudited) *
ASSETS
CURRENT ASSETS
Cash and cash equivalents 978 10,514
Accounts receivable 48,042 23,857
Inventories 96,961 93,916
Prepaid expenses & other current assets 6,417 2,510
Deferred income taxes 10,540 11,510
TOTAL CURRENT ASSETS 162,938 142,307
Property, plant & equipment 118,785 119,950
Less accumulated depreciation and 51,917 50,121
amortization
NET PROPERTY, PLANT AND EQUIPMENT 66,868 69,829
OTHER ASSETS 5,863 5,075
TOTAL ASSETS 235,669 217,211
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt 229 240
Accounts payable 11,931 9,436
Accrued expenses 40,836 30,168
TOTAL CURRENT LIABILITIES 52,996 39,844
LONG TERM DEBT 17,798 517
DEFERRED INCOME TAXES 2,199 2,869
EMPLOYEE BENEFIT PLAN LIABILITIES 13,692 15,167
SHAREHOLDERS' EQUITY
Preferred stock -- --
Common stock:
Class A 112 122
Class B 13 13
Retained earnings 148,869 158,933
Cumulative foreign currency translation
adjustments (10) (254)
TOTAL SHAREHOLDERS' EQUITY 148,984 158,814
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 235,669 217,211
* Condensed from audited financial
statements.
See notes to condensed consolidated
financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30
1995 1994 1995 1994
NET SALES 142,952 118,397 326,372 271,949
COST OF PRODUCTS SOLD 94,721 83,363 221,603 195,070
GROSS PROFIT 48,231 35,034 104,769 76,879
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 32,347 27,154 89,171 69,999
PLANT CLOSINGS 2,700 -- 2,700 --
OPERATING INCOME 13,184 7,880 12,898 6,880
OTHER INCOME (EXPENSE):
Interest expense (701) (433) (1,252) (758)
Interest income 308 253 971 721
Royalty income 1,561 1,295 2,983 2,399
Other 403 255 605 276
OTHER INCOME -- NET 1,571 1,370 3,307 2,638
INCOME BEFORE TAXES 14,755 9,250 16,205 9,518
INCOME TAXES 6,359 3,978 6,968 4,093
NET INCOME 8,396 5,272 9,237 5,425
AVERAGE NUMBER OF SHARES
OUTSTANDING 12,689 13,887 13,003 14,338
NET INCOME PER COMMON SHARE 0.66 0.38 0.71 0.38
CASH DIVIDENDS PER COMMON
SHARE
Class A 0.07 0.1025 0.21 0.3075
Class B 0.06 0.09 0.18 0.27
See notes to condensed consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in thousands)
(Unaudited)
Nine Months Ended
September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period 9,237 5,425
Depreciation 7,836 7,261
Other items in income not affecting
cash (449) 2,190
Changes in current assets (31,137) (19,941)
Changes in current liabilities 13,163 149
NET CASH USED IN OPERATING ACTIVITIES (1,350) (4,916)
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions (7,700) (8,030)
Other (1,095) (243)
Proceeds from disposal of assets 2,650 1,321
NET CASH USED IN INVESTING ACTIVITIES (6,145) (6,952)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in long-term borrowings 17,454 12,872
Payments of long-term debt (184) (305)
Cash dividends paid (2,705) (4,366)
Repurchase of common stock (16,606) (11,302)
NET CASH USED IN FINANCING ACTIVITIES (2,041) (3,101)
NET DECREASE IN CASH AND CASH EQUIVALENTS (9,536) (14,969)
See notes to condensed consolidated
financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Preparation
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 September 30, 1995 and the results of operations
for the three-month and nine-month periods ended September 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:
September 30, December 31,
1995 1994
(Dollars in thousands)
Finished goods 68,037 75,187
Work in process 19,709 7,410
Raw materials 9,215 11,319
Total 96,961 93,916
The replacement cost of inventory exceeds the above LIFO costs by $17,652
and $16,122 at September 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 September 30, 1995 , were
$143.0 million, an increase of $24.6 million (20.7%) over 1994 third
quarter sales of $118.4 million. Consolidated net sales for the nine
months ended September 30, 1995, were $326.4 million, an increase of $54.4
million (20.0%) over the first nine months of 1994 sales of $271.9 million.
The Company's domestic wholesale business of $83.6 million for the third
quarter of 1995 was 13.0% more than 1994 third quarter domestic wholesale
sales of $74.0 million, with a corresponding increase in unit shipments of
approximately 16.5%. For the nine month period ended September 30, 1995,
sales of domestic wholesale product were $201.4 million, a 9.8% increase
from the comparable period sales in 1995 of $183.5 million, with a
corresponding increase in unit shipments of approximately 12.9%. The
increase in the third quarter and 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 (shipped primarily during the Company's first quarter) and Fall Back-
to-School (shipped primarily during the Company's third quarter) children's
fashion shipments. In addition, Company initiatives undertaken during
1994, and continuing in 1995, resulted in significantly improved shipping
performance to customers on Spring and Fall Back-to-School orders.
The Company has recently experienced some difficulties in coordinating the
transition of its sourcing strategy (which calls for increasing sourcing of
its product from offshore contractors). These difficulties have resulted
in the inability of the Company to make timely deliveries on certain
holiday orders to its customers. With a relatively weak apparel market in
general, the Company is experiencing some order cancellations. The Company
currently anticipates that unit shipments in the fourth quarter of 1995
will exceed the fourth quarter of 1994 by over 5%. The Company's
preliminary outlook for 1996 indicates that unit shipments of domestic
wholesale product will be generally flat as compared with 1995. Company
management is in the process of implementing adjustments to its sourcing
plan and anticipates improved shipping performance in early 1996.
Company retail sales at its OshKosh B'Gosh branded outlet stores and
Genuine Kids stores were approximately $45.1 million for the third quarter
of 1995, a 34.6% increase over 1994 third quarter retail sales of
approximately $33.5 million. For the nine month period ended September 30,
1995, Company retail sales were $93.8 million, a 45.7% increase over the
first nine months of 1994 retail sales of $64.4 million. Retail sales
increases were primarily driven by the opening of an additional forty-six
retail stores during 1994 and thirty-one store openings during the first
nine months of 1995. Comparable store sales for the three and nine month
periods ended September 30, 1995 were down 1.1% and up 4.3%, respectively.
The Company anticipates the opening of an additional four stores during the
remainder of 1995. The Company anticipates further increases in its retail
sales through the balance of 1995 as compared to 1994. Preliminary plans
for 1996 call for the opening of approximately fourteen new retail stores
and the closing of eight to ten unprofitable stores. Accordingly, the
Company anticipates a slowdown in its retail sales growth rate for 1996 as
compared to 1995 and 1994.
The Company's gross profit margin as a percent of sales improved to 33.7%
in the third quarter of 1995, compared with 29.6% in the third quarter of
1994. For the nine months ended September 30, 1995, gross margin as a
percent of sales was 32.1% compared to 28.3% for the first nine months of
1994. The Company's gross margin improvement for the three and nine month
periods ended September 30, 1995, was due primarily to both the impact of
the Company's increased retail sales at higher gross margins along with
improvement in the domestic wholesale business gross profit margin. With
the anticipated growth of the Company's retail business during the
remainder of 1995, manufacturing capacity reduction initiatives during 1994
and 1995 combined with increased utilization of contract manufacturing
resources outside of the United States, the Company anticipates further
improvement in its gross margins for the fourth quarter of 1995. The
Company anticipates that its continued focus on manufacturing capacity
reduction (including the Company's recently announced closure of its
Hermitage Springs and McEwen, Tennessee manufacturing facilities currently
scheduled to be closed in early 1996) should result in continued
improvement in its gross margins during 1996.
Selling, general and administrative expenses for the three month and nine
month periods ended September 30, 1995 (excluding the $2.7 million charge
for plant closures announced in September) increased $5.2 million and $19.2
million over the three month and nine month periods ended September 30,
1994, respectively. These expenses, as a percent of sales, were 22.6% and
27.3% for the three month and nine month periods ended September 30, 1995,
as compared to 22.9% and 25.7% in the same periods of 1994. The primary
reason for increases in the Company's selling, general and administrative
expenses is the Company's expansion of its retail business. In addition,
the Company's continued focus on the expansion of its international
operations have added to these costs. During the third quarter of 1995,
the Company recorded a $2.7 million provision for the closing of its
Hermitage Springs and McEwen, Tennessee sewing facilities. As a percent of
sales, this provision added 1.9% to the Company's third quarter, 1995 total
selling, general and administrative costs. Planned expansion of the
Company's retail business for the remainder of 1995 will result in higher
selling, general and administrative expenses in relation to its net sales
for the fourth quarter of 1995 as compared to 1994.
The Company's other income for the third quarter of 1995 was $.2 million
higher than the third 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 nine months of 1995 and 1994 was
43.0%.
During the third quarter of 1995, the Company suspended operation of its
catalog division which was initiated in 1993. The Company does not
anticipate any material adverse impact on its results of operations for the
remainder of 1995 as a result of the wind-down of this business.
Anticipated net sales from the catalog operations during 1995 are less than
$5 million.
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 wholesale shipments and relatively modest retail
outlet store sales during this period. Results of operations for the
Company's three months and nine months ended September 30, 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
September 30, 1995 was $109.9 million, as compared to $102.5 million at the
end of 1994 and $117.2 million at September 30, 1994. The Company's
current ratio was 3.1 to 1 at September 30, 1995 compared to 3.6 to 1 at
the end of 1994 and 3.9 to 1 at September 30, 1994.
The Company's accounts receivable at September 30, 1995 of $48.0 million,
were $4.0 million over the accounts receivable balance of $44.0 million at
September 30, 1994. This increase relates directly to the Company's
increased wholesale shipments during the third quarter of 1995 as compared
to 1994. Company inventories were $97 million at September 30, 1995 as
compared to $96.9 million at September 30, 1994.
The Company's long-term debt at September 30, 1995 was $17.8 million as
compared to $13.6 million at September 30, 1994. This increase results
from the Company's repurchase of its stock during 1994 and 1995. At
September 30, 1995, the Company has completed its 2,150,000 Class A common
stock repurchase program for approximately $31.8 million. The Company's
long-term debt as a percentage of total capitalization (long-term debt plus
shareholders' equity) was 10.7% and 7.7% at September 30, 1995 and 1994,
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: 10/24/95 /S/DOUGLAS W. HYDE
Chairman of the Board, President,
Chief Executive Officer and Director
Date: 10/24/95 /S/DAVID L. OMACHINSKI
Vice President-Finance, Treasurer,
Chief Financial Officer and Director
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