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, 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 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, 1996, there were outstanding 11,189,387 shares
of Class A Common Stock and 1,266,413 shares of Class B Common
Stock.
<PAGE>
FORM 10-Q
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
INDEX
Page
Part I.Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- 3
March 31, 1996 and December 31, 1995
Unaudited Condensed Consolidated 4
Statements of Income -- Three Months ended
March 31, 1996 and 1995
Unaudited Condensed Consolidated Statements 5
of Cash Flow -- Three Months Ended March 31,
1996 and 1995
Notes to Condensed Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis 7
of Results of Operations and Financial
Condition.
Part II. Other Information 10
Signatures 10
<PAGE>
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
March 31, December 31,
1996 1995
(Unaudited) *
Current assets
Cash and cash equivalents $ 2,084 $ 2,418
Accounts receivable 46,991 24,691
Inventories 84,825 95,743
Prepaid expenses & other current assets 7,743 3,127
Deferred income taxes 9,400 11,400
Total current assets 151,043 137,379
Property, plant & equipment 113,546 116,357
Less accumulated depreciation and
amortization 51,635 51,346
Net property, plant and equipment 61,911 65,011
Other assets 5,848 6,189
Total assets $ 218,802 $ 208,579
Liabilities and shareholders equity
Current liabilities
Accounts payable $ 10,787 $ 13,910
Accrued expenses 31,031 28,055
Total current liabilities 41,818 41,965
Long term debt 9,875 --
Deferred income taxes 2,400 2,700
Employee benefit plan liabilities 11,909 13,836
Shareholders equity
Preferred stock -- --
Common stock:
Class A 112 112
Class B 13 13
Retained earnings 152,237 149,720
Cumulative foreign currency
translation adjustments 438 233
Total shareholders equity 152,800 150,078
Total liabilities and shareholders
equity $218,802 $208,579
* Condensed from audited financial statements.
See notes to condensed consolidated financial statements.
<PAGE>
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
1996 1995
Net sales $ 120,876 $ 108,486
Cost of products sold 84,319 76,882
Gross profit 36,557 31,604
Selling, general and administrative expenses 31,466 28,154
Operating income 5,091 3,450
Other income (expense):
Interest expense (265) (205)
Interest income 333 326
Royalty income 804 1,044
Other 120 174
Other income -- net 992 1,339
Income before taxes 6,083 4,789
Income taxes 2,707 2,069
Net income $ 3,376 $ 2,720
Average number of shares outstanding 12,456 13,314
Net income per common share $ 0.27 $ 0.20
Cash dividends per common share
Class A $ 0.07 $ 0.07
Class B $ 0.06 $ 0.06
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,
1996 1995
Cash flows from operating activities
Net income for the period $ 3,376 $ 2,720
Depreciation 2,595 2,644
Other items in income not affecting
cash 402 733
Changes in current assets (15,998) (13,892)
Changes in current liabilities (147) (2,334)
Net cash used in operating activities (9,772) (10,129)
Cash flows from investing activities
Property, plant and equipment
additions (891) (1,613)
Other 349 (444)
Proceeds from disposal of assets 964 1,423
Net cash provided by (used in)
investing activities 422 (634)
Cash flows from financing activities
Net increase in long-term borrowings 9,875 7,400
Cash dividends paid (859) (923)
Repurchase of common stock --- (4,858)
Net cash provided by financing activities9,016 (1,435)
Net decrease in cash and cash
equivalents $ (334) $ (9,144)
See notes to condensed consolidated financial statements.
<PAGE>
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 March 31, 1996 and December 31, 1995, the results of
operations for the three-month periods ended March 31, 1996
and 1995, and cash flows for the three month periods ended
March 31, 1996 and 1995.
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 1995
Annual Report.
Note 2. Inventories
A summary of inventories follows:
March 31, December 31
1996 1995
(Dollars in thousands)
Finished goods $ 59,683 $ 70,837
Work in process 15,789 15,462
Raw materials 9,353 9,444
Total $ 84,825 $ 95,743
The replacement cost of inventory exceeds the above LIFO costs
by $16,668 and $16,158 at March 31, 1996 and December 31,
1995.
<PAGE>
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,
1996 were $120.9 million, an increase of $12.4 million (11.4%)
over 1995 first quarter sales of $108.5 million. The
Company s domestic wholesale business of approximately $78.2
million for the first quarter of 1996 was 4.5% more than 1995
first quarter sales of approximately $74.8 million, with a
corresponding increase in unit shipments of approximately
8.4%. The increase in domestic wholesale unit shipments
resulted primarily from increased sales of Holiday 1995
closeout merchandise. Difficulties experienced by the Company
in coordinating the transition of its sourcing strategy (which
calls for increasing sourcing of its product from offshore
contractors) resulted in the inability of the Company to make
timely deliveries on certain Holiday 1995 orders to customers.
Shipments of Spring 1996 first quality fashion garments were
flat during the first quarter of 1996 when compared to 1995.
The Company currently anticipates that second quarter unit
shipments as well as unit shipments of its Fall 1996 wholesale
product offering (shipped primarily during the third quarter
of 1996) will be flat compared to 1995 shipments.
The Company's retail sales at its OshKosh B'Gosh branded
outlet stores and Genuine Kids stores were approximately $29.1
million for the first quarter of 1996, a 28.2% increase over
1995 first quarter sales of approximately $22.7 million. This
retail sales increase was primarily generated by the sales of
35 retail stores opened during 1995. The Company s comparable
store sales for the first quarter of 1996 were up
approximately 9.1%. The Company anticipates opening
approximately 14 new stores during 1996, and closing 8 to 10
unprofitable stores. This slow down in the rate of growth in
new retail stores compared to prior years will result in
modest retail sales growth through the balance of 1996 as
compared to the growth experienced in 1995.
The Company's gross profit margin as a percent of sales
improved to 30.2% in the first quarter of 1996, compared to
29.1% in the first quarter of 1995. This 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, along with improvement in the
domestic wholesale business gross profit margin. The
Company s sourcing strategy, along with relatively stable raw
material costs and more efficient manufacturing plant
utilization, contributed to the Company's first quarter 1996
gross profit margin improvement. The Company's anticipated
retail growth during the remainder of 1996, combined with
increased use of contract manufacturing resources outside of
<PAGE>
the United States, should result in further improvement in its
gross profit margins for the remainder of 1996 as compared to
the last three quarters of 1995.
Selling, general and administrative expenses for the first
quarter of 1996 increased $3.3 million over the first quarter
of 1995. As a percentage of net sales, selling, general and
administrative expenses were 26.0% for the first quarter of
1996 and 1995. The primary reason for the increased selling,
general and administrative expenses in dollars is the
Company s continued expansion of its retail business.
However, the Company s sales growth in its retail and
wholesale businesses have resulted in stable selling, general
and administrative expenses as a percentage of net sales. The
increased number of retail stores opened in the second half of
1995, along with additional store openings in 1996 will result
in higher total selling, general and administrative expenses
for the remainder of 1996 as compared to the last three
quarters of 1995.
The Company's net other income for the first quarter of 1996
was $1.0 million, compared to $1.3 million in the first
quarter of 1995. This reduction was caused by a modest
reduction in domestic royalty income, net of expenses, and an
increase in net interest expense due to the completion of a
stock repurchase program in 1995. The Company's effective tax
rate was 44.5% for the first quarter of 1996 compared to 43.2%
for the comparable period in 1995.
In 1995, the Company recorded a $2.7 million pre-tax charge
for plant closings that included approximately $1.9 million of
severance and related costs pertaining to work force
reductions as well as $750,000 for facility closings and the
write-down of related assets. In January 1996, the Company
closed and sold its Hermitage Springs facility and closed its
McEwen facilitiy. These activities required cash expenditures
of approximately $500,000 in the first quarter of 1996. The
Company does not anticipate any material changes in cost to
complete its 1995 plan to close certain plants.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121 entitled "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
of." This standard requires impairment losses to be recorded
on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the
assets carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be
disposed of. The Company initially adopted Statement No. 121
in the first quarter of 1996. The effect of applying this
new standard to the Company's long-lived assets is not
material.
<PAGE>
SEASONALITY
The Company's business is increasingly seasonal, with highest
sales and income in the third quarter which is the Company's
peak wholesale shipping period and a major retail selling
season at its retail stores. The Company's second quarter
sales and income are lowest, both because of relatively low
domestic wholesale unit shipments and relatively modest retail
outlet store sales during this period. The Company
anticipates this seasonal trend to continue to impact 1996
quarterly sales and net income. As a result of this
seasonality of business, the Company currently anticipates
incurring a net loss in the second quarter of 1996 which may
be in excess of the net loss incurred during the second
quarter of 1995. First quarter 1996 operating results are not
necessarily indicative of anticipated quarterly results
through the balance of the year.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
The Company's financial condition remains strong. Net working
capital at March 31, 1996 was $109.2 million, as compared to
$95.4 million at the end of 1995 and $109.3 million at March
31, 1995. The Company's current ratio was 3.6 to 1 at March
31, 1996, compared to 3.3 to 1 at the end of 1995 and 4.0 to 1
at March 31, 1995. Accounts receivable at March 31, 1996 were
$47.0 million compared to $42.8 million at March 31, 1995.
This increase in accounts receivable relates primarily to
increased wholesale sales for the quarter. Management
believes that at March 31, 1996 inventory levels are generally
appropriate for anticipated business activity for the
remainder of 1996.
At March 31, 1996 the Company had approximately $9.9 million
of long-term debt outstanding as compared to $7.7 million at
March 31, 1995. The increase in long-term indebtedness
outstanding at March 31, 1996 is the result of the Company
borrowing under its revolving credit arrangement in
conjunction with its daily cash management needs. The Company
believes that its credit facilities, along with cash generated
from operations, will be sufficient to finance the Company's
seasonal working capital needs for the remainder of 1996.
<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: April 23, 1996 /S/ DOUGLAS W HYDE
Douglas W. Hyde
Chairman of the Board,
President, Chief Executive
Officer and Director
Date: April 23, 1996 /S/ DAVID L OMACHINSKI
David L. Omachinski
Vice President-Finance,
Treasurer, Chief Financial
Officer and Director
<PAGE>
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