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, 2000
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.
A Delaware Corporation 39-0519915
(I.R.S. ID)
112 Otter Avenue
Oshkosh, Wisconsin 54901
Telephone number: (920) 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 October 16, 2000, there were outstanding 9,937,017 shares
of Class A Common Stock and 2,232,177 shares of Class B Common
Stock.
FORM 10-Q
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
INDEX
Page
Part I. Financial Information 3
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets-
September 30, 2000 and January 1, 2000 3
Unaudited Condensed Consolidated Statements
of Income-Three Month and Nine Month Periods
Ended September 30, 2000 and October 2, 1999 4
Unaudited Condensed Consolidated Statements
of Cash Flow-Nine Month Periods Ended
September 30, 2000 and October 2, 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
Part II. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures
Part 1. Financial Information
Item 1. Financial Statements
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
September 30, 2000 January 1, 2000*
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 972 $ 9,093
Investments 511 511
Accounts receivable 39,407 16,514
Inventories 55,051 48,495
Prepaid expenses & other
current assets 2,544 774
Deferred income taxes 12,700 14,200
Total current assets 111,185 89,587
Property, plant & equipment 68,545 67,118
Less accumulated depreciation
and amortization 37,820 35,470
Net property, plant & equipment 30,725 31,648
Non-current deferred income taxes 5,900 5,400
Other assets 1,909 3,064
Total assets $ 149,719 $ 129,699
Liabilities and shareholders' Equity
Current liabilities
Borrowings under revolving
credit agreement $ 125 $ --
Current portion of long-term debt -- 15,000
Accounts payable 6,258 10,269
Accrued liabilities 47,792 36,976
Total current liabilities 54,175 62,245
Long-term debt 44,000 29,000
Employee benefit plan liabilities 15,535 15,015
Shareholders' equity
Preferred stock -- --
Common stock: Class A 99 104
Class B 22 23
Retained earnings 35,888 23,312
Total shareholders' equity 36,009 23,439
Total liabilities and shareholders'
equity $ 149,719 $ 129,699
*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 Month Period Ended Nine Month Period Ended
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
Net sales $142,339 $140,831 $324,890 $325,280
Cost of products sold 81,360 82,892 185,887 192,823
Gross profit 60,979 57,939 139,003 132,457
Selling, general and
administrative expenses 36,461 36,073 104,707 99,047
Royalty income, net (2,668) (2,249) (6,344) (5,911)
Operating income 27,186 24,115 40,640 39,321
Other income (expense):
Interest expense (1,697) (193) (4,102) (571)
Interest income 131 212 554 708
Miscellaneous 1,105 (52) 1,160 (131)
Other income (expense) -
net (461) (33) (2,388) 6
Income before income taxes 26,725 24,082 38,252 39,327
Income taxes 10,423 9,388 14,918 15,338
Net income $ 16,302 $ 14,694 $ 23,334 $ 23,989
Net income per common
share
Basic $ 1.34 $ 0.90 $ 1.89 $ 1.43
Diluted $ 1.33 $ 0.89 $ 1.86 $ 1.41
Weighted average common
shares outstanding
Basic 12,169 16,280 12,369 16,825
Diluted (including share
equivalents) 12,304 16,486 12,526 17,056
Cash dividends per common
share
Class A $ 0.0500 $ 0.0500 $ 0.1500 $ 0.1500
Class B $ 0.0425 $ 0.0425 $ 0.1275 $ 0.1275
See notes to condensed consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flow
(In thousands)
(Unaudited)
Nine Month Period Ended
September 30, October 2,
2000 1999
Cash flows from operating activities
Net income for the period $ 23,334 $ 23,989
Depreciation and amortization 5,978 5,588
Deferred income taxes 1,000 1,500
Income tax benefit from stock
option exercises 325 530
Items in net income not affecting
cash and cash equivalents (503) 741
Changes in current assets (31,219) 6,021
Changes in current liabilities 6,805 4,596
Net cash provided by operating activities 5,720 42,965
Cash flows from investing activities
Additions to property, plant and
equipment (4,896) (5,604)
Proceeds from disposal of assets 1,591 635
Sale of short-term investments, net -- 2,015
Changes in other assets 428 (616)
Net cash used in investing activities (2,877) (3,570)
Cash flows from financing activities
Borrowings under revolving credit agreement 125 --
Dividends paid (1,805) (2,488)
Net proceeds from issuance of common shares 579 635
Repurchase of common shares (9,863) (32,717)
Net cash used in financing activities (10,964) (34,570)
Net increase (decrease) in cash and
cash equivalents $ (8,121) $ 4,825
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 consolidated 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, 2000, the results of operations for
the three-month and nine-month periods ended September 30, 2000
and October 2, 1999, and cash flows for the nine-month periods
ended September 30, 2000 and October 2, 1999.
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
consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's
1999 Annual Report.
Note 2. Inventories
A summary of inventories follows:
September 30, 2000 January 1, 2000
(Dollars in thousands)
Finished goods $ 42,457 $ 37,262
Work in process 11,502 9,352
Raw materials 1,092 1,881
Total $ 55,051 $ 48,495
The replacement cost of inventory exceeds the above LIFO costs by
$11,831 and $11,381 at September 30, 2000 and January 1, 2000,
respectively.
Note 3. Credit Agreements
In May 2000, the Company amended its credit agreement with a
number of banks. As amended, the unsecured credit agreement
provides a $60 million term loan for the repurchase of shares of
its common stock and a three year $75 million revolving credit
facility available for general corporate purposes, including cash
borrowings, commercial paper and issuances of letters of credit.
The revolving credit facility expires November 3, 2002.
The Company had $44.1 million of outstanding debt at September
30, 2000, including $44 million on the term loan and $.1 million
on the revolving credit facility. The revolving credit facility
must be reduced to zero for at least thirty consecutive days each
year, and the term loan requires an initial payment of $10
million in November 2001.
Note 4. Segment Reporting
The Company designs, sources, and markets apparel products using
primarily the OshKosh B'Gosh brand. The apparel products are
primarily marketed in two distinct distribution channels:
domestic wholesale and through Company owned retail stores. The
Company designs and sources product to meet the needs of these
distribution channels through a single procurement business unit.
In conjunction with a realignment of the Company's management
reporting system at the beginning of 2000, certain operations
have been segregated into segments as defined by Statement of
Financial Accounting Standards, No. 131, "Disclosures about
Segments of an Enterprise and Related Information". The Company
manages its business operations by periodic analysis of business
unit operating results. For this purpose, domestic wholesale,
retail, and procurement are separately identified for management
reporting and are considered segments as defined by SFAS #131.
Management evaluates the operating performance of each of its
business units based on income from operations as well as return
on net assets. For this purpose, product is transferred to the
domestic wholesale and retail business units at cost. However,
procurement receives a markup on product transferred to the
Company's marketing business units. Accounting policies used for
segment reporting are consistent with the Company's overall
accounting policies, except that inventories are valued on a
first-in first-out basis. In addition, interest income, interest
expense, certain corporate office expenses, and the effects of
the last-in, first-out (LIFO) inventory valuation method are not
allocated to individual business units, and are included in the
All Other/Corporate column below.
Segment assets include all assets used in the operation of each
business unit, including accounts receivable, inventories, and
property, plant and equipment. Certain other corporate assets
that cannot be specifically identified with the operation of a
business unit are not allocated. Financial information for the
Company's reportable segments follows:
Domestic All Other/
Wholesale Retail Procurement Corporate Total
For the three months
ended September 30,
2000
Net sales $ 70,107 $ 71,140 $ -- $ 1,092 $142,339
Segment income
before taxes 12,109 11,848 1,120 1,648 26,725
Segment assets 71,330 40,795 23,068 14,526 149,719
Depreciation expense 410 888 281 192 1,771
For the three months
ended October 2, 1999
Net sales $ 72,029 $ 66,918 $ -- $ 1,884 $140,831
Segment income
before taxes 11,157 8,118 3,783 1,024 24,082
Segment assets 66,098 38,623 19,845 33,135 157,701
Depreciation expense 398 777 284 276 1,735
For the nine months
ended September 30,
2000
Net sales $156,291 $163,215 $ -- $ 5,384 $324,890
Segment income
before taxes 18,147 16,215 945 2,945 38,252
Segment assets 71,330 40,795 23,068 14,526 149,719
Depreciation expense 1,206 2,369 1,013 664 5,252
For the nine months
ended October 2, 1999
Net sales $169,795 $149,177 $ -- $ 6,308 $325,280
Segment income
before taxes 16,990 10,362 8,724 3,251 39,327
Segment assets 66,098 38,623 19,845 33,135 157,701
Depreciation expense 1,160 2,154 912 916 5,142
For the twelve months
ended January 1, 2000
Net sales $212,371 $210,350 $ -- $ 7,065 $429,786
Segment income
before taxes 21,896 18,278 10,556 2,457 53,187
Segment assets 52,580 31,922 19,796 25,401 129,699
Depreciation expense 1,570 3,107 1,222 1,194 7,093
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated,
selected Company income statement data expressed as a percentage
of net sales.
As a Percentage of Net Sales for the
Three Month Period Ended Nine Month Period Ended
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 57.2% 58.9% 57.2% 59.3%
Gross profit 42.8% 41.1% 42.8% 40.7%
Selling, general and
administrative expenses 25.6% 25.6% 32.2% 30.4%
Royalty income, net (1.9%) (1.6%) (1.9%) (1.8%)
Operating income 19.1% 17.1% 12.5% 12.1%
Other income (expense)-net (.3%) -- (.7%) --
Income before income taxes 18.8% 17.1% 11.8% 12.1%
Income taxes 7.3% 6.7% 4.6% 4.7%
Net income 11.5% 10.4% 7.2% 7.4%
Net Sales
Consolidated net sales for the three month period ended September
30, 2000 were $142.3 million, a $1.5 million increase (1.1%) over
1999 third quarter net sales of $140.8 million. Consolidated net
sales for the nine month period ended September 30, 2000 were
$324.9 million, a $.4 million decrease (.1%) from net sales of
$325.3 million for the first nine months of 1999. The Company's
net sales for the three month and nine month periods ended
September 30, 2000 and October 2, 1999 are summarized as follows:
Net Sales
(in millions)
Domestic
Wholesale Retail International Total
Three month period ended:
September 30, 2000 $ 70.1 $ 71.1 $ 1.1 $ 142.3
October 2, 1999 72.0 66.9 1.9 140.8
Increase (decrease) $ (1.9) $ 4.2 $ (.8) $ 1.5
Percent increase (decrease) (2.6%) 6.3% (42.1%) 1.1%
Nine month period ended:
September 30, 2000 $ 156.3 $163.2 $ 5.4 $ 324.9
October 2, 1999 169.8 149.2 6.3 325.3
Increase (decrease) $ (13.5) $ 14.0 $ (.9) $ (.4)
Percent increase (decrease) (8.0%) 9.4% (14.3%) (.1%)
The Company's domestic wholesale unit shipments for the three
month period ended September 30, 2000 were up approximately 6.5%
over the corresponding three month period of 1999. This increase
was primarily due to an increase in the number of "close-out"
units sold. The 2.6% decrease in net sales dollars was impacted
by lower average unit selling prices and higher customer sales
allowances.
Domestic wholesale unit shipments for the nine month period
ending September 30, 2000 decreased 1.5% as compared to 1999.
The nine month decrease in unit shipments resulted primarily from
slightly lower customer orders. Net sales dollars for the first
nine months of 2000 were also impacted by a combination of lower
average selling prices and product mix (i.e. a higher mix of
lighter weight, lower unit cost garments). As a result of a
combination of movement of customer orders to October 2000 (as
compared to September in 1999) and higher customer demand, the
Company currently anticipates a 10-15% increase in domestic
wholesale sales dollars in the fourth quarter of 2000 as compared
to 1999's fourth quarter.
The Company's third quarter 2000 retail sales increase resulted
primarily from sales volume from stores opened subsequent to
October 2, 1999. Third quarter 2000 comparable stores sales were
down approximately 1.0% as compared to a 6.8% increase in the
third quarter of 1999. The Company's increase in retail sales
for the first nine months of 2000 resulted from a combination of
a .7% comparable store sales gain (as compared to 6.2% for the
first nine months of 1999) and sales volume from newly opened
stores. For the remainder of 2000, the Company currently
anticipates comparable store sales gains in the low single digit
range.
At September 30, 2000 the Company operated 130 domestic OshKosh
retail stores, including 125 outlet stores, three showcase stores
and two strip mall stores. During the third quarter of 2000, the
Company opened one store and closed two existing stores. At
October 2, 1999, the Company operated 128 domestic OshKosh retail
stores. Current Company plans for the remainder of 2000 call for
the addition of approximately six retail stores including three
strip mall stores.
Gross Profit
The Company's gross profit margin as a percent of net sales
improved to 42.8% in the third quarter of 2000, compared to 41.1%
in the third quarter of 1999. For the nine month period ended
September 30, 2000, gross profit margin as a percent of net sales
improved to 42.8%, compared to 40.7% for the first nine months of
1999. This gross profit margin improvement was due primarily to
continued implementation and execution of the Company's global
sourcing strategy, continuing focus on product design and
development activities, and increasing proportion of sales from
the Company's retail stores. The Company's current 2000 sourcing
plan indicates that approximately 74% of units will be produced
at off shore venues as compared to approximately 64% in 1999.
Substantially all of the Company's inventories are stated at the
lower of cost or market using the last-in, first-out (LIFO)
basis. As a result of a substantial reduction of the Company's
inventory levels, the fourth quarter 1999 gross profit margin was
favorably impacted by an approximate $2.2 million benefit related
to the liquidation of certain LIFO layers. The Company does not
currently anticipate any significant liquidation of LIFO layers
in the fourth quarter of 2000. Accordingly, the Company's fourth
quarter gross profit margin as a percent of sales may be
significantly less in 2000 as compared to 1999's fourth quarter.
Selling, General, and Administrative Expenses (S,G&A)
S,G&A expenses for the three month and nine month periods ended
September 30, 2000 increased $.4 million and $5.7 million over
the three and nine month periods ended October 2, 1999,
respectively. As a percentage of net sales, S,G,&A expenses were
25.6% and 32.2% for the three month and nine month periods ended
September 30, 2000 as compared to 25.6% and 30.4% in the
comparable periods of 1999. The increase in S,G,&A expenses
relates primarily to a combination of continued expansion of the
Company's retail operations and higher product distribution
expenses associated with the Company's transition to an updated
distribution system and related processes. Third quarter and
year-to-date distribution expenses were $.6 million and $2.0
million higher, respectively, as compared to 1999.
Royalty Income
The Company licenses the use of its trade name to selected
licensees in the U.S. and in foreign countries. Royalty income
for the three month period ended September 30, 2000 was $2.7
million compared to $2.2 million in the third quarter of 1999.
Royalty income for the nine month period ended September 30, 2000
of $6.3 million was $.4 million greater than royalty income of
$5.9 million for the nine month period ending October 2, 1999.
Operating Income
As a result of the factors described above, the Company's
operating income for the three month and nine month periods ended
September 30, 2000 amounted to $27.2 million and $40.6 million as
compared to $24.1 million and $39.3 million for the comparable
periods in 1999.
Other Income (Expense) - Net
The Company's third quarter 2000 net other income (expense) was a
$.5 million expense compared to $33,000 in 1999. Interest
expense increased by approximately $1.5 million in the third
quarter of 2000 and $3.5 million in the nine months ended
September 30, 2000, primarily as a result of borrowings to help
finance the Company's Dutch Auction tender offer in November 1999
and subsequent stock repurchase transactions along with higher
seasonal borrowings for working capital requirements. The
Company also recognized a gain on the sale of a previously closed
manufacturing facility in the third quarter of 2000 of
approximately $1.1 million.
Income Taxes
The Company's effective tax rate for the three month and nine
month periods ended September 30, 2000, as well as 1999, was
approximately 39%. The Company currently anticipates an
effective income tax rate of approximately 39% for the remainder
of 2000.
Net Income
Net income for the three months ended September 30, 2000 of $16.3
was a $1.6 million increase compared to net income for the three
months ended October 2, 1999 of $14.7 million. Of this increase,
$.7 million ($.06 per diluted common share) is attributable to
the after tax gain on sale of a manufacturing facility. Net
income for the nine months ended September 30, 2000 of $23.3
million was a $.7 million decrease compared to net income for the
nine months ended October 2, 1999. The Company's ongoing stock
repurchase programs and November 1999 Dutch Auction tender offer
resulted in a significant reduction in its weighted-average
diluted shares outstanding for the first nine months of 2000
compared to the first nine months of 1999. The increase in net
income, combined with the decrease in weighted-average diluted
shares outstanding, resulted in a 49.4% increase in diluted
earnings per share for the third quarter of 2000 of $1.33 as
compared to $.89 in 1999.
SEASONALITY OF BUSINESS
The Company's business is 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
outlet stores. The Company's second quarter sales and income are
the lowest, both because of relatively low domestic wholesale
unit shipments and relatively modest retail store sales during
this period. The Company anticipates this seasonality trend to
continue to impact 2000 quarterly sales and income. Third
quarter 2000 operating results are not necessarily indicative of
anticipated quarterly results throughout the balance of the year.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
At September 30, 2000, the Company's cash, cash equivalents and
short-term investments were $1.5 million, compared to $9.6
million at the end of 1999 and $19.6 at October 2, 1999. This
reduction is attributable to the Company's stock repurchases and
increased inventory buildup. Net working capital at September 30,
2000 was $57.0 million compared to $27.3 million at January
1,2000, and $67.5 million at October 2, 1999. Accounts receivable
at September 30, 2000 were $39.4 million compared to $16.5
million at January 1, 2000 and $39.2 million at October 2, 1999.
Cash provided by operations amounted to approximately $5.7
million in the first nine months of 2000, compared to $43.0
million in the first nine months of 1999. The change in cash
provided by operating activities in the first nine months of 2000
compared to 1999 is primarily attributable to substantially lower
inventory levels at January 1, 2000, as compared to January 2,
1999. Inventories at September 30, 2000 were $55.1 million,
compared to $48.5 million at January 1, 2000, $43.2 million at
October 2, 1999 and $65.6 million at January 2, 1999. Management
believes that September 30, 2000 inventory levels are generally
appropriate for anticipated ongoing 2000 business activities.
Investing activities used $2.9 million in the first nine months
of 2000, compared to $3.6 million in 1999. Capital expenditures
were $4.9 million in the first nine months of 2000, compared with
$5.6 million in 1999 and are currently budgeted at $7 million for
all of 2000. Capital expenditures in both years relate primarily
to expansions and upgrades of the Company's retail stores.
Depreciation and amortization are currently budgeted at $8
million for 2000.
Cash used in financing activities totaled $11.0 million in the
first nine months of 2000, compared to a use of $34.6 million in
the first nine months of 1999. The Company's primary financing
activities consisted of stock repurchase transactions and cash
dividends in both periods.
On December 6, 1999, the Company's Board of Directors authorized
a 1.5 million share repurchase program of the Company's Class A
common stock. During the first nine months of 2000, the Company
repurchased 565,700 shares of its Class A common stock under this
program for approximately $9.9 million. The Company has
repurchased a total of 819,600 shares of its Class A common stock
under its current repurchase programs for approximately $14.7
million.
The Company's credit agreement, as amended, provides a $60
million term loan for the repurchase of shares of its common
stock and a three year $75 million revolving credit facility
available for general corporate purposes, including cash
borrowings, commercial paper and issuances of letters of credit.
The revolving credit facility expires November 3, 2002. The term
loan requires an initial repayment of $10.0 million in November
2001.
The Company had $44.1 million of outstanding debt at September
30, 2000, including $44 million on the term loan and $.1 million
on the revolving credit facility compared to $44 million on the
term loan at January 1, 2000, and no outstanding debt at October
2, 1999. The Company believes that the new credit facilities,
along with cash generated from operations, will be sufficient to
finance the Company's seasonal working capital needs as well as
its capital expenditures required debt payments and business
development needs.
INFLATION
The effects of inflation on the Company's operating results and
financial condition were not significant.
FORWARD-LOOKING STATEMENTS
This report contains certain "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, including statements regarding future sales, planned
store expansions and store closings, future comparable store net
sales, future inventory levels and valuation implications, future
growth in royalty income, future effective income tax rate,
planned capital expenditures and depreciation and amortization
expenses, and future cash needs. In addition, from time to time,
the Company may issue press releases and other written
communications, and representatives of the Company may make oral
statements which contain forward-looking information. Except for
historical information, matters discussed in such oral and
written communications, including this report, are forward-
looking statements. Such forward-looking statements are based on
current assumptions and expectations that involve risks and
uncertainties. Actual results may differ materially.
The Company's future results of operations and financial position
can be influenced by such factors as the level of consumer
spending for apparel, particularly in the children's wear
segment, overall consumer acceptance of the Company's product
styling, the financial strength of the retail industry,
including, but not limited to, business conditions and the
general economy, natural disasters, competitive factors, risk of
non-payment of accounts receivable, the unanticipated loss of a
major customer, failure of Company suppliers to timely deliver
needed raw materials, as well as risk associated with foreign
operations. In addition, the inability to ship Company products
within agreed timeframes due to unanticipated manufacturing
and/or distribution system delays or the failure of Company
contractors to deliver products within scheduled timeframes, are
risk factors in ongoing business. As a part of the Company's
product sourcing strategy, it routinely contracts for apparel
products produced by contractors in Asia, Mexico and Central
America. If financial, political or other difficulties were to
adversely impact the Company's contractors in these regions, it
could disrupt the supply of products contracted for by the
Company.
The forward-looking statements included herein are only made as
of the date of this report. The Company undertakes no obligation
to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The Company's credit agreement, as amended, provides for $60
million to finance repurchases of the Company's common stock and
a $75 million revolving credit facility available for general
corporate purposes. Borrowings under this agreement bear
interest at a variable rate, based on the London Interbank
Offered Rates. Accordingly, the Company is affected by interest
rate changes on its long-term debt. Management monitors this
risk by carefully analyzing the short-term rates on its long-term
debt portfolio and comparable long-term interest rates. The
Company does not presently hedge its interest rate risk. With
respect to this debt, a 1% change in interest rates would not
have a material impact on the Company's interest expense for
fiscal 2000.
Foreign Currency Risk
The Company contracts for the manufacture of apparel with
contractors in Asia, Central America, and Mexico. While these
contracts are stated in terms of U.S. dollars, there can be no
assurance that the cost for the production of the Company's
products will not be affected by exchange fluctuations between
the United States and the local currencies of these contractors.
Due to the number of currencies involved, the Company cannot
quantify the potential impact of future currency fluctuations on
net income in future years. The Company does not hedge its
exchange rate risk.
Inflation Risk
The Company manages its inflation risks by ongoing review of
product selling prices and production costs. Management does not
believe that inflation risks are material to the Company's
business, its consolidated financial position, results of
operations, or cash flows.
Investment Risk
The Company does not believe it has material exposure to market
risk with respect to any of its investments as the Company does
not utilize market rate sensitive instruments for trading or
other purposes.
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: 10/24/2000 /S/DOUGLAS W. HYDE
Chairman of the Board, President
Chief Executive Officer and Director
Date: 10/24/2000 /S/DAVID L. OMACHINSKI
Vice President-Finance, Treasurer
Chief Financial Officer and Director
