Page 7
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13082
KENNETH COLE PRODUCTIONS, INC.
(Exact name of registrant as specified in its charter)
New York 13-3131650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
152 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 265-1500
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 ( )
Indicate the number of shares of each of the issuer's classes of
common stock, as of the latest practicable date:
Class May 10, 2000
Class A Common Stock ( $.01 par value) 12,050,456
Class B Common Stock ( $.01 par value) 5,785,398
<PAGE>
Kenneth Cole Productions, Inc.
Index to 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999..... 3
Consolidated Statements of Income for the three months
ended March 31, 2000 and 1999............................................ 5
Consolidated Statement of Changes in Shareholders' Equity for the three
months ended March 31, 2000 ............................................ 6
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999............................................ 7
Notes to Consolidated Financial Statements................................. 8
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 12
Item 3. Quantitative and Qualitative Disclosure about Market Risk........... 15
Part II. OTHER INFORMATION
Item 1.Legal Proceedings.................................................... 15
Item 2.Changes in Securities and Use of Proceeds............................ 15
Item 3.Defaults Upon Senior Securities...................................... 15
Item 4.Submission of Matters to a Vote of Security Holders.................. 15
Item 5.Other Information.................................................... 15
Item 6.Exhibits and Reports on Form 8-K..................................... 15
Signatures.................................................................. 16
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 50,214,000 $ 71,415,000
Due from factors 44,364,000 26,925,000
Accounts receivable, net 2,094,000 6,990,000
Inventories 47,962,000 39,553,000
Prepaid expenses and other current assets 240,000 375,000
Deferred taxes 1,766,000 1,766,000
------------ ------------
Total current assets 146,640,000 147,024,000
Property and equipment - at cost, less
accumulated depreciation 18,362,000 19,431,000
Other assets:
Deposits and deferred taxes 3,331,000 3,352,000
Deferred compensation plans assets 8,425,000 7,052,000
------------ ------------
Total other assets 11,756,000 10,404,000
------------ ------------
Total assets $176,758,000 $176,859,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 25,769,000 $ 27,323,000
Accrued expenses and other current liabilities 7,398,000 10,372,000
Income taxes payable 5,848,000 3,272,000
------------ ------------
Total current liabilities 39,015,000 40,967,000
Deferred compensation 8,425,000 7,052,000
Other 3,821,000 3,509,000
Commitments and contingencies
Shareholders' equity:
Series A Convertible Preferred Stock,
par value $1.00, 1,000,000 shares
authorized, 28,927 issued in 2000 and 1999 29,000 29,000
Class A Common Stock, par value $.01,
20,000,000 shares authorized, 13,087,817
and 13,058,057 issued in 2000 and 1999 131,000 131,000
Class B Common Stock, par value $.01,
6,000,000 shares authorized, 5,785,398
outstanding in 2000 and 1999 58,000 58,000
Additional paid-in capital 53,695,000 53,140,000
Accumulated other comprehensive income 289,000 235,000
Retained earnings 88,867,000 81,093,000
------------ ------------
143,069,000 134,686,000
Class A Common Stock in treasury, at cost,
1,020,000 and 723,750 shares in 2000 and 1999 (17,572,000) (9,355,000)
------------ ------------
Total shareholders' equity 125,497,000 125,331,000
------------ ------------
Total liabilities and shareholders' equity $176,758,000 $176,859,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Net sales $ 90,291,000 $ 63,533,000
Licensing revenue 4,036,000 2,510,000
------------ ------------
Net revenue 94,327,000 66,043,000
Cost of goods sold 51,070,000 36,596,000
------------ ------------
Gross profit 43,257,000 29,447,000
Selling, general and administrative expenses 31,103,000 21,596,000
------------ ------------
Operating income 12,154,000 7,851,000
Interest income, net 802,000 99,000
------------ ------------
Income before provision for income taxes 12,956,000 7,950,000
Provision for income taxes 5,182,000 3,220,000
------------ ------------
Net income $ 7,774,000 $ 4,730,000
============ ============
Earnings per share:
Basic $.37 $ .24
Diluted $.35 $ .23
Shares used to compute earnings per share:
Basic 20,771,000 19,592,000
Diluted 22,058,000 20,277,000
<TABLE/>
<PAGE>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
<CAPTION>
Series A
Class A Class B Convertible
Common Stock Common Stock Preferred Stock
Number Number Number
of shares Amount of shares Amount of shares Amount
<S> <C> <C> <C> <C> <C> <C>
Shareholders'equity
January 1, 2000 13,058,057 $131,000 5,785,398 $58,000 29,927 $29,000
Net income
Foreign currency
translation adjustments
Comprehensive income
Exercise of stock
options, including
tax benefit 29,760
Purchase of Class A
Common Stock
------------------------------------------------------------
Shareholders'equity
March 31, 2000 13,087,817 $131,000 5,785,398 $58,000 28,927 $29,000
============================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Additional Other
Paid-in Comprehensive Retained
Capital Income Earnings
<S> <C> <C> <C>
Shareholders' equity
January 1, 2000 $ 53,140,000 $ 235,000 $ 81,093,000
Net Income 7,774,000
Foreign currency
translation adjusments 54,000
Comprehensive Income
Exercise of stock
options, including
tax benefit 555,000
Purchase of Class A
Common Stock
----------------------------------------------
Shareholders' equity
March 31, 2000 $ 53,695,000 $ 289,000 $ 88,867,000
==============================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Treasury Stock
Number of
Shares Amount Total
<S> <C> <C> <C>
Shareholders' equity
January 1, 2000 (723,000) $ (9,355,000) $125,331,000
Net Income 7,774,000
Foreign currency
translation ajustments 54,000
------------
Comprehensive Income 7,828,000
Exercise of stock
options, including
tax benefit 555,000
Purchase of Class A
Common Stock (296,250) (8,217,000) (8,217,000)
-----------------------------------------
Shareholders' equity
March 31, 2000 (1,020,000) $(17,572,000) $125,497,000
=========================================
</TABLE>
<PAGE>
See accompanying notes to consolidated financial statements.
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities
Net income $ 7,774,000 $ 4,730,000
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,439,000 803,000
Unrealized gain on deferred compensation (245,000) (766,000)
Provision for bad debts 76,000 320,000
Changes in assets and liabilities:
Increase in due from factors (17,439,000) (13,286,000)
Decrease in accounts receivable 4,820,000 819,000
Increase in inventories (8,409,000) (1,214,000)
Decrease in prepaid expenses & other current assets 135,000 682,000
Increase in other assets (1,107,000) (429,000)
Decrease in accounts payable (1,554,000) (1,164,000)
Increase in income taxes payable 2,869,000 1,373,000
Decrease in accrued expenses and other
current liabilities (2,978,000) (1,714,000)
Increase in other non-current liabilities 1,733,000 1,931,000
------------ ------------
Net cash used in operating activities (12,886,000) (7,915,000)
Cash flows from investing activities
Acquisition of property and equipment, net (370,000) (436,000)
------------ ------------
Net cash used in investing activities (370,000) (436,000)
Cash flows from financing activities
Proceeds from exercise of stock options 262,000 276,000
Purchase of treasury stock (8,217,000)
Principal payments on capital lease obligations (44,000) (41,000)
------------ ------------
Net cash (used in) provided by financing activities (7,999,000) 235,000
Effect of exchange rate changes on cash 54,000 65,000
------------ ------------
Net decrease in cash (21,201,000) (8,051,000)
Cash, beginning of period 71,415,000 13,824,000
------------ ------------
Cash, end of period $ 50,214,000 $ 5,773,000
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 16,000 $ 46,000
Income taxes $ 2,313,000 $ 1,847,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared by Kenneth Cole Productions, Inc. (the "Company")
in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. Certain
items contained in these financial statements are based on estimates.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments, consisting of only normal and
recurring adjustments, necessary for a fair presentation of the
financial position and results of operations and cash flows for the
periods presented. All significant intercompany transactions have
been eliminated.
Operating results for the three months ended March 31, 2000 are
not necessarily indicative of the results that may be expected for
the year ended December 31, 2000. These unaudited financial
statements should be read in conjunction with the financial
statements and footnotes included in the Company's annual report on
Form 10-K for the year ended December 31, 1999.
The consolidated balance sheet at December 31, 1999, as
presented, was derived from the audited financial statements as of
December 31, 1999 included in the Company's Form 10-K.
2. Comprehensive Income
Comprehensive income amounted to $7,828,000 and $4,795,000 for
the three month periods ended March 31, 2000 and 1999, respectively.
3. Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and for Hedging Activities" ("SFAS 133") which
the Company expects to adopt on January 1, 2001. The new Statement
requires all derivatives to be recorded in the balance sheet at fair
value and establishes special accounting for three different types of
hedges. The Company, based on its current hedging activities, does
not expect the adoption of SFAS 133 to have a material effect on the
earnings and financial position of the Company.
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
4. Segment Information
The Company has three reportable segments: Wholesale, Consumer Direct
and Licensing. The Company's reportable segments are business units
that offer different products and services or similar products
through different channels of distribution. The Wholesale segment is
comprised of design, sourcing and marketing a broad range of quality
footwear and handbags for wholesale distribution. The Consumer Direct
segment reflects the operations of all businesses conducting business
directly with retail consumers, including the Company's full price
retail stores, outlet stores, catalog and e-commerce sites. The
Licensing segment consists of the operations of licensing the
Company's trademarks for specific products in specified geographic
regions. The Company evaluates segment performance and allocates
resources to segments based on segment income before taxes.
Intercompany profit on intersegment sales between Wholesale and
Consumer Direct is eliminated in consolidation.
Financial information of the Company's reportable segments is as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000
Consumer
Wholesale Direct Licensing Totals
<S> <C> <C> <C> <C>
Revenues from external customers $ 61,481 $ 28,810 $ 4,036 $ 94,327
Intersegment revenues 7,183 7,183
Segment income before provision for
Income taxes 9,276 4,970 2,854 17,100
Segment assets 143,142 34,988 826 178,956
Three Months Ended
March 31, 1999
Consumer
Wholesale Direct Licensing Totals
Revenues from external customers $ 43,403 $ 20,130 $ 2,510 $ 66,043
Intersegment revenues 5,974 5,974
Segment income before provision for
Income taxes 6,353 2,682 2,025 11,060
Segment assets 73,473 29,624 820 103,917
</TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The reconciliation of the Company's reportable segment revenues,
profit and loss, and assets are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
2000 1999
<S> <C> <C>
Revenues
Revenues for external customers $ 94,327 $ 66,043
Intersegment revenues 7,183 5,974
Elimination of intersegment revenues (7,183) (5,974)
--------- ---------
Total consolidated revenues $ 94,327 $ 66,043
========= =========
Income
Total profit for reportable segments $ 17,100 $ 11,060
Elimination of intersegment profit and
Unallocated corporate overhead (4,144) (3,110)
--------- ---------
Total income before income taxes $ 12,956 $ 7,950
========= =========
Assets
Total assets for reportable segments $ 178,956 $ 103,917
Elimination of inventory profit
in consolidation (2,198) (1,781)
--------- ---------
Total consolidated assets $ 176,758 $ 102,136
========= =========
</TABLE>
Revenues from international customers are less than two percent of
the Company's consolidated revenues.
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
5. Stock Split
On February 23, 2000, the Board of Directors declared a three-
for-two stock split to be effected in the form of a stock dividend.
Shareholders of record on March 6, 2000 received, on March 27, 2000,
one additional share of common stock for each two shares held.
In order to have effectuated the stock split for the shares of
outstanding Class B Common Stock, 2,892,699 shares of Class B Common
Stock would have been required to be issued. As of March 6, 2000,
214,602 shares of authorized but unissued Class B Common Stock
remained available for future issuance. As a result, an insufficient
number of authorized and unissued shares of Class B Common Stock were
available for distribution on March 27, 2000, the distribution date
for the stock split. Therefore, the Company issued in the form of a
dividend 28,927 shares of its Series A Convertible Preferred Shares
to the holders of Class B Common Stock in lieu of shares of Class B
Common Stock. Each share of Series A Convertible Preferred Stock is
automatically convertible into 100 shares of Class B Common Stock
upon the due authorization of a sufficient number of Class B Common
Stock to permit such conversion. Accordingly, subject to shareholder
approval on May 25, 2000, the Board of Directors has approved a
resolution to increase the number of shares of Class B Common Stock
from 6.0 million to 9.0 million to permit the conversion, thereby
providing the holders of Series A Convertible Preferred Stock with
the shares of Class B Common Stock that should have been issued to
them pursuant to the stock split.
All applicable share and per share data have been adjusted for
the stock split. Earnings per share also reflects the conversion of
Series A Convertible Preferred Stock to Class B Common Stock.
6. Related Party Transaction
On March 29, 2000, the Company made a $500,000 contribution to
the Kenneth Cole Foundation, of which Mr. Cole is co-trustee. The
Kenneth Cole Foundation, a not for profit organization, fosters
programs to aid primarily in the fields of education, medical
research and arts and culture. For many years the foundation has
strived to contribute to the Company's goodwill, and management
believes it continues to serve similar interests to that of the
Company.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the Company's condensed
consolidated statements of income in thousands of dollars and as a
percentage of net revenue for the three months ended March 31, 2000
and March 31, 1999.
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
2000 1999
<S> <C> <C> <C> <C>
Net sales $ 90,291 95.7% $ 63,533 96.2%
Licensing revenue 4,036 4.3 2,510 3.8
Net revenue 94,327 100.0 66,043 100.0
Gross profit 43,257 45.9 29,447 44.6
Selling, general &
administrative expenses 31,103 33.0 21,596 32.7
Operating income 12,154 12.9 7,851 11.9
Interest income, net (802) (.9) (99) (.1)
Income before income taxes 12,956 13.8 7,950 12.0
Income tax expense 5,182 5.5 3,220 4.8
Net income 7,774 8.3 4,730 7.2
</TABLE>
Three Months Ended March 31, 2000 Compared to Three Months Ended
March 31,1999
Consolidated net revenues increased 42.8% to $94.3 million for
the three months ended March 31, 2000 compared to $66.0 million for
the three months ended March 31, 1999.
Wholesale net sales (including sales to its Consumer Direct
business segment) increased $19.3 million or 39.1% for the three
months ended March 31, 2000 to $68.7 million from $49.4 million for
the three months ended March 31, 1999. This increase is primarily
attributable to the increase in sales of Reaction Kenneth Cole
women's footwear and in sales of men's footwear across all three
brands, Kenneth Cole New York, Reaction Kenneth Cole and
Unlisted.com.
Net sales in the Company's Consumer Direct segment increased
$8.7 million or 43.1% to $28.8 million for the three months ended
March 31, 2000 compared to $20.1 million for the three months ended
March 31, 1999. The increase in net sales is due to the increase in
number of stores as well as a comparable stores sales increase of
approximately 23.0%. Of the total increase, $4.4 million was
attributable to the comparable store sales increase, and $3.6 million
was attributable to the portion of 2000 sales of stores not open for
all of 1999 and new stores opened in 2000. The Company believes that
its retail stores seamlessly showcase both the Company's and its
licensee's products and that this comprehensive presentation
reinforces the Kenneth Cole lifestyle brand, thereby increasing
consumer demand and awareness.
Licensing revenue increased 60.8% to $4.0 million for the three
months ended March 31, 2000 from $2.5 million for the three months
ended March 31, 1999. This increase primarily reflects the
incremental revenues from sales of existing licensees, with the most
significant increases from men's apparel product classifications
associated with increased sales of existing licensed products.
Consolidated gross profit as a percentage of net revenue
increased to 45.9% for the three months ended March 31, 2000 from
44.6% for the comparable period last year. This increase is due to
higher margins in the Company's wholesale and consumer direct
segments and an increase in the proportion of revenue from the
licensing division, which produces higher margins than the Company's
consolidated gross profit percentage. Sales from the Consumer Direct
Segment were 30.5% of net consolidated revenue for the three months
ended March 31, 2000 and 1999. Licensing revenue, which has no
associated cost of goods sold, increased as a percentage of net
revenues to 4.3% for the three months ended March 31, 2000 compared
to 3.8% for the comparable period last year.
Selling, general and administrative expenses, including shipping
and warehousing, increased 44.0% to $31.1 million (or 33.0% of net
revenue) for the three months ended March 31, 2000 from $21.6 million
(or 32.7% of net revenue) for the three months ended March 31, 1999.
This 30 basis point increase as a percentage of revenue is primarily
attributable to the Company's continued investment in infrastructure
as well as information systems for the Company's internet and e-
commerce initiatives.
Interest income increased to $802,000 from $99,000 in the
comparable period in 1999. The increase is the result of higher
average cash balances generated from internal operations and from the
$29 million received by the Company from the sale of 1,500,000 shares
of its Class A Common Stock to Liz Claiborne, Inc. during the third
quarter of 1999.
The Company's effective tax rate has decreased to 40.0% for the
three month period ended March 31, 2000 from 40.5% in the
corresponding period in 1999. The decrease is due to the relative
level of earnings in the various state and local taxing jurisdictions
in which the Company conducts business.
As a result of the foregoing, net income increased 64.4% for the
three months ended March 31, 2000 to $7.8 million (8.3% of net
revenue) from $4.7 million (7.2% of net revenue) for the three months
ended March 31, 1999.
Liquidity and Capital Resources
The Company uses cash from operations and borrowings under its
line of credit as the primary sources of financing for its expansion
and seasonal requirements. Cash requirements vary from time to time
as a result of the timing of the receipt of merchandise from
suppliers, the delivery by the Company of merchandise to its
customers, and the level of accounts receivable and due from factors
balances. Cash used by operating activities was $12.9 million for
the three months ended March 31, 2000 compared to $7.9 million for
the three months ended March 31, 1999. The decrease in cash flows
provided by operating activities is primarily attributable to the
timing of factor remittances and increased inventory levels to
support sales growth. At March 31, 2000 and December 31, 1999
working capital was $107.6 million and $106.1 million, respectively.
The Company currently has a line of credit, which allows for
borrowings and letters of credit up to a maximum of $25.0 million to
finance working capital requirements. Open letters of credit in the
amount of $4.3 million reduced the amount available under the line of
credit from $25.0 million to $20.7 million at March 31, 2000.
Capital expenditures totaled approximately $0.4 million for the
three months ended March 31, 2000 and 1999, respectively. Capital
expenditures relate primarily to the Company's retail and outlet
store expansion and to further development of the Company's
information and distribution systems.
In December 1998, the Company entered into a 15-year lease with
a ten year renewal option, which over the next five year period, will
provide the Company with approximately 126,000 square feet of office
space, enabling it to relocate its corporate headquarters within New
York City. The Company has commenced renovations and expects to
begin relocation in mid-2000. Currently the Company expects to incur
capital expenditures of approximatley $10-15 million over the next
one to three years, in connection with this office space.
The Company believes that it will be able to satisfy its cash
requirements for the next year, including requirements for its retail
expansion, new corporate office space and information systems
improvements, primarily with cash flow from operations, current cash
levels and, if necessary, with borrowings under its line of credit.
Year 2000
In late 1999, the Company completed its replacement, remediation
and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant
disruptions in mission critical information technology and non-
information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company
expensed approximately $1.0 million during 1999 in connection with
preparing for year 2000. The Company continues to incur handling and
other related charges from its retail customers resulting from issues
arising from the implementation of the new systems. However, the
Company believes these issues are not material and are being
corrected in a prioritized manner. In addition, the Company is not
aware of any material problems resulting from Year 2000 issues,
either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its
information systems and those of its suppliers and vendors throughout
the year 2000 to ensure any latent Year 2000 issues that may arise
are addressed promptly.
The foregoing commentary should be considered to fall within the
coverage of the "Safe Harbor Statement" under the Private Securities
Litigation reform Act of 1995 included in this report.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
Important Factors Relating to Forward Looking Statements
This report contains certain forward looking statements, as
defined in The Private Securities Litigation Reform Act of 1995, with
respect to cash flows from operation, market risks and Year 2000
issues. The forward-looking statements contained in this Form 10-Q
were prepared by management and are qualified by, and subject to,
significant business, economic, competitive, regulatory and other
uncertainties and contingencies, all of which are difficult or
impossible to predict and many of which are beyond the control of the
Company. Accordingly, there can be no assurance that the forward-
looking statements contained in this Form 10-Q will be realized or
that actual results will not be significantly higher or lower.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company does not believe it has a material exposure to
market risk. The Company is primarily exposed to currency exchange-
rate risks with respect to its inventory transactions denominated in
Italian Lira and Spanish Pesetas, both of which have been converted
to the Euro effective January 1, 1999. Business activities in
various currencies expose the Company to the risk that the eventual
net dollar cash flows from transactions with foreign suppliers
denominated in foreign currencies may be adversely affected by
changes in currency rates. The Company manages these risks by
utilizing foreign exchange forward contracts to fix its costs on
future purchases. The Company does not enter into foreign currency
transactions for speculative purposes. The Company's earnings may
also be affected by changes in short-term interest rates as a result
of borrowings under its line of credit facility. At the Company's
borrowing levels, a two percent increase in interest rates affecting
the Company's credit facility would not have a material effect on the
Company's year-to-date and projected 2000 and actual 1999 net income.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities and Use of Proceeds. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
27.01 Financial Data Schedule.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Kenneth Cole Productions, Inc.
Registrant
May 12, 2000 /s/ STANLEY A. MAYER
Stanley A. Mayer
Executive Vice President and
Chief Financial Officer
<PAGE>
INDEX OF EXHIBITS
Sequential
Exhibit Number Description Page No.
27.01 Financial Data Schedule 14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 50,214
<SECURITIES> 0
<RECEIVABLES> 47,012
<ALLOWANCES> (554)
<INVENTORY> 47,962
<CURRENT-ASSETS> 146,640
<PP&E> 18,362
<DEPRECIATION> 13,443
<TOTAL-ASSETS> 176,758
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0
29
<COMMON> 189
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<INCOME-TAX> 5,182
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<EPS-BASIC> .37
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</TABLE>
