Kellwood (NYSE) Reports Fourth Quarter and Fiscal Year 2003 Results
Fourth Quarter Sales Flat, Net Earnings Up 33 Percent Versus Last
Year Fiscal Year Sales Up 8 Percent, Net Earnings Up 43 Percent
Versus Last Year Regular Quarterly Dividend Declared ST. LOUIS,
March 4 /PRNewswire-FirstCall/ -- Kellwood Company reported sales
and earnings today for both the fourth quarter and fiscal year
ended January 31, 2004, according to Hal J. Upbin, chairman and
chief executive officer. Sales from continuingoperations for the
fourth quarter were flat with prior year at $521 million. As
previously announced in November, Kellwood completed the sale of
its Domestic and European Hosiery operations. During the fourth
quarter, the Company also made the decision to discontinue the True
Beauty by Emme(R) operation including the termination of the
related license agreement. Accordingly, both the Hosiery and True
Beauty businesses are treated as discontinued operations. (Logo:
http://www.newscom.com/cgi-bin/prnh/20011220/CGTH038LOGO ) Fourth
quarter net earnings from continuing operations were strong;
increasing $3.1 million, or 33 percent to $12.8 million, or $0.46
per diluted share, versus $9.7 million, or $0.38 per diluted share
last year, before business and facilities realignment costs. Net
earnings from continuing operations in the fourth quarter of last
year including business and facilities realignment costs were $8.4
million, or $0.33 per diluted share. Net earnings in the fourth
quarter this year including discontinued operations increased $4.9
million, or 58 percent, to $13.3 million, or $0.48 per diluted
share, versus $8.4 million, or $0.33 per diluted share last year.
Sales from continuing operations of Women's Sportswear increased
$17 million, or 6 percent, due to the acquisition of Briggs. Men's
Sportswear sales from continuing operations increased $3 million,
or 3 percent. Finally, Other Soft Goods sales decreased $19
million, or 16 percent, due to loss of certain low margin private
label programs. The improvement in net earnings from continuing
operations for the fourth quarter came principally from the
acquisition of Briggs and a 1.9 percentage point improvement in
gross profit as a percent of sales. The fourth quarter increase in
gross margin is the seventh consecutive quarter in which Kellwood
has been able to post a year-to-year improvement in its gross
profit percent. This is especially noteworthy given the current
economic conditions, and continued sales price deflation at both
retail and wholesale. The Company has been able to improve its
gross margin due to more competitive sourcing resulting from
shifting more contract production from the Western to Eastern
Hemisphere, and running more contractor production through
Kellwood's recently established trading company in the Far East.
Gross margins were also bolstered by the retailers carrying less
inventory this year and the performance of Kellwood's brands, which
resulted in less end of season markdowns. Finally, margins were
enhanced by improved sales mix, and having less surplus and
obsolete inventory to liquidate as a result of the Company's focus
on reducing inventory levels. Selling, general and administrative
expense for the fourth quarter increased $9.5 million due to
increased spending to underwrite several new marketing growth
initiatives and SG&A expense attendant with the acquisition of
Briggs. Spending on the remaining business was essentially flat
with last year. Sales from continuing operations for the year were
$2,346 million, up $180 million, or 8 percent, from $2,167 million
last year. Sales of Women's Sportswear were up 7 percent, Men's
Sportswear up 19 percent, and Other Soft Goods up 2 percent. Net
earnings from continuing operations for the year increased 43
percent to $72.6 million, or $2.68 per share on a diluted basis,
versus $51.0 million, or $2.05 per diluted share last year, before
business and facilities realignment costs. Net earnings from
continuing operations for lastyear including business and
facilities realignment costs were $41.3 million, or $1.66 per
diluted share. Net earnings for the year including discontinued
operations increased $29.1 million, or 69 percent, to $71.1
million, or $2.62 per diluted share, versus $42.0 million, or $1.69
per diluted share last year. Kellwood ended the year with a very
strong balance sheet. Total debt at January 31, 2004 was $275
million, down $31 million from last year and represented 29.9
percent of total capital versus35.3 percent last year. Strong free
cash flow and excellent working capital management enabled the
Company to end the year with $179 million of cash and time
deposits. Subsequent to this year-end, Kellwood acquired Phat
Fashions and exercised their option to buy back the Phat Farm men's
sportswear license for a total cash purchase price of $140 million.
For fiscal year 2004, which ends in January 2005, sales are planned
to be approximately $2.6 billion -- up $255 million, or 11 percent.
The increase is made up of significant organic growth along with
approximately $65 million from the Phat Fashions and Phat Farm(R)
acquisition. The organic growth will be driven by several new and
exciting branded marketing initiatives. The new marketing
initiatives include Calvin Klein(R), IZOD(R), XOXO(R), O Oscar(TM),
Lucy Pereda(TM) sportswear, Liz Claiborne(R) dresses and suits,
Dockers(R) Tops for women, Run Athletics(TM) and Def Jam
University(TM) men's sportswear. The year-to-year sales growth from
theexciting new branded marketing initiatives will accelerate as
the year unfolds with the majority of the growth coming in the
second half of the year. Additionally, the revenue from Phat
Farm(R) men's sportswear will not commence until the Fall
sellingseason. Each year the Company examines the need to eliminate
certain brands, private label programs and products from its broad
and diversified portfolio due to volume levels, pricing, and
margins that are no longer acceptable. Additionally, Kellwood's
customers may change their merchandising strategies which can
result in the loss of business. These factors collectively will
result in a planned $75 million drop in volume in 2004, which will
largely impact the first half of 2004. Because of these factors,
sales growth driven by the new marketing initiatives, will
accelerate in excess of 10 percent in the second quarter with
year-to-year growth of approximately 15 percent in the second half
of the year. Net earnings from continuing operations infiscal year
2004 are expected to increase by approximately $17 million, or 23
percent, and be in the range of $88-$90 million, or $3.15 - $3.25
per diluted share, versus $72.6 million, or $2.68 per diluted
share, reported in fiscal year 2003. The year-to-year improvement
in net earnings and earnings per share in fiscal year 2004 is
expected to come from sales growth of $255 million, continued
improvement in gross profit as a percent of sales due largely to a
change in sales mix to higher priced branded business replacing
lower priced and lower margin private label business, licensing
income from Phat Fashions, and sourcing more product through
Kellwood's recently established trading company (Kellwood Trading
Limited) in the Far East. These factors should result in over one
half of one percent improvement in Kellwood's EBITDA as a percent
of sales. All of the improvement will come from gross margin as
selling, general and administration expense as a percent of sales
will increase due principally to the new marketing initiatives and
the acquisition. The year-to-year gain in (EBITDA) as a percent of
sales is expected to occur in each quarter of the year driven by an
improvement in gross profit as a percent of sales. The increase in
EBITDA dollars will be partially offset by an estimated $5 million
increase in amortization of intangible assets resulting from the
acquisition of Phat Fashions and Phat Farm(R), a $5 million
increase in depreciation expense, and a $6 million increase in
interestexpense as the Company plans to do a long- term financing
sometime during the first half of the year. Finally, average
diluted outstanding shares will increase by approximately 800,000
shares in 2004 to 27.9 million shares. Kellwood's first quarter
ends in April and largely encompasses the Spring shipping season.
The outlook for the first quarter calls for sales to be essentially
flat with last year and in the range of $675 million. Growth from
the new branded marketing initiatives will be offsetby a planned
reduction in low margin private label business and Wal-Mart's
decision to no longer carry the Kathie Lee(R) brand of sportswear
and dresses. Net earnings from continuing operations are expected
to increase by $3-$4 million, or 16 percent,to $24-$25 million, or
approximately $0.85-$0.88 per diluted share, versus $21.1 million,
or $0.80 per diluted share last year. The growth in net earnings in
the first quarter will come from nearly a full percentage point
improvement in EBITDA as a percent of sales. This improvement will
be driven by higher gross margin branded business partially offset
by an increase in SG&A expense in relation to sales. Average
diluted shares are expected to increase by 1.0 million shares to
27.6 million shares in the first quarter of 2004. The Board of
Directors declared a regular quarterly dividend of $0.16 per common
share, payable March 26, 2004 to shareholders of record March 15,
2004. The Company will conduct a conference call on March 5 at
10:00 a.m. EST. If you wish to participate, you may do so by
dialing 212-346-6606. You may also access Kellwood's website at
http://www.kellwood.com/ to view an updated version of Kellwood's
analyst presentation. ABOUT KELLWOOD COMPANY Kellwood (NYSE:KWD) is
a $2.3 billion marketer of apparel and consumer soft goods.
Kellwood specializes in branded as well private label products, and
markets to all channels of distribution with product specific to a
particular channel. Kellwood brands include Phat Farm(R), Baby
Phat(R), Sag Harbor(R), Koret(R), Jax(R), David Dart(R),
Democracy(R), David Meister(TM), Dorby(TM), My Michelle(R), Briggs
New York(R), Northern Isles(R), David Brooks(R), Kelty(R), and
Sierra Designs(R). Calvin Klein(R), XOXO(R), IZOD(R), Dockers(R),
Liz Claiborne(R) Dresses and Suits, Gerber(R), Slates(R) and Bill
Burns(R) are produced under licensing agreements. For more
information, visit http://www.kellwood.com/ . Statements in this
press release that are not strictly historical are
"forward-looking" statements within the meaning of the safe harbor
provisions of the federal securities laws. Actual results may
differ materially due to risks and uncertainties that are described
in the Company's Form 10-K and other filing with the SEC. KELLWOOD
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF
EARNINGS (Amounts in thousands, except per share data) Three Months
Ended Twelve Months Ended 1/31/2004 2/1/2003 1/31/2004 2/1/2003 Net
sales by segment: Women's Sportswear $308,192 $291,217 $1,406,296
$1,313,407 Men's Sportswear 110,231 107,360 472,442 395,452 Other
Soft Goods 102,721 122,057 467,743 457,695 Total net sales 521,144
520,634 2,346,481 2,166,554 Costs and expenses: Cost of products
sold 405,408 415,040 1,845,202 1,733,560 Selling, general and
administrative expenses 91,034 81,552 357,639 324,438 Provision for
realignment - 1,727 - 12,086 Amortization of intangible assets
2,222 1,777 9,532 5,775 Interest expense 6,180 6,414 25,051 27,884
Interest (income) and other, net (3,160) 1,720 (1,418) (50)
Earnings before income taxes 19,460 12,404 110,475 62,861 Income
taxes 6,665 4,038 37,838 21,598 Net earnings from continuing
operations 12,795 8,366 72,637 41,263 Net earnings (loss) from
discontinued operations 526 76 (1,552) 747 Net earnings $13,321
$8,442 $71,085 $42,010 Weighted average shares outstanding: Basic
26,762 25,570 26,499 24,564 Diluted 27,562 25,869 27,100 24,872
Earnings (loss) per share: Basic: Continuing operations $.48 $.33
$2.74 $1.68 Discontinued operations .02 .00 (.06) .03 Net earnings
$.50 $.33 $2.68 $1.71 Diluted: Continuing operations $.46 $.33
$2.68 $1.66 Discontinued operations .02 .00 (.06) .03 Net earnings
$.48 $.33 $2.62 $1.69 KELLWOOD COMPANY AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEET (Amounts in thousands) As of 1/31/2004
2/1/2003 ASSETS Current assets: Cash and time deposits $179,155
$210,323 Receivables, net 321,455 318,832 Inventories 315,935
350,386 Prepaid taxes and expenses 66,328 40,236 Current assets of
discontinued operations - 22,354 Total current assets 882,873
942,131 Property, plant and equipment, net 96,798 99,354 Intangible
assets, net 116,102 57,975 Goodwill 165,518 102,224 Other assets
30,783 44,519 Long-term assets of discontinued operations - 8,376
Total assets $1,292,074 $1,254,579 LIABILITIES AND SHAREOWNERS'
EQUITY Current liabilities: Notes payable and current portion of
long-term debt $2,743 $27,232 Accounts payable 179,024 179,731
Accrued expenses 120,986 131,030 Current liabilities of
discontinued operations 2,333 14,692 Total current liabilities
305,086 352,685 Long-term debt 271,877 278,115 Deferred income
taxes and other 71,729 61,975 Long-term liabilities of discontinued
operations - 2,685 Shareowners' equity 643,382 559,119 Total
liabilities & shareowners' equity $1,292,074 $1,254,579
KELLWOOD COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS (Amounts in thousands) Twelve Months Ended 1/31/2004
2/1/2003 OPERATING ACTIVITIES Net earnings $71,085 $42,010
Add/(deduct) items not affecting operating cash flows: Depreciation
and amortization 35,938 32,008 Non-cash portion of restructuring
charge - 6,064 401(k) contribution previously funded 4,403 5,173
Deferred income taxes and other 19,364 4,314 Changes in working
capital components: Receivables, net 31,563 17,205 Inventories
58,158 51,167 Prepaid taxes and expenses (24,718) (3,082) Accounts
payable and accrued expenses (37,967) 64,114 Net cash from
operating activities 157,826 218,973 INVESTING ACTIVITIES Additions
to property, plant and equipment (24,074) (14,510) Acquisitions,
net of cash acquired (142,975) (18,150) Dispositions of fixed
assets 5,693 5,238 Subordinated note receivable 2,062 (11,000) Net
cash from investing activities (159,294) (38,422) FINANCING
ACTIVITIES Reduction of notes payable (636) (6,976) Reduction of
long-term debt (30,891) (22,968) Stock transactions under
incentiveplans 18,809 6,028 Dividends paid (16,982) (15,551) Net
cash from financing activities (29,700) (39,467) Net increase
(decrease) in cash and time deposits (31,168) 141,084 Cash and time
deposits, beginning of period 210,323 69,239 Cash and time
deposits, end of period $179,155 $210,323 Significant non-cash
investing and financing activities: Issuance of stock for
acquisitions $11,891 $68,185 Supplemental cash flow Information:
Interest paid $27,436 $26,411 Income taxes paid $41,339 $13,597
KELLWOOD COMPANY AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED) (Amounts in thousands, except per share data) The
following sets forth selected quarterly financial data for fiscal
2003 and 2002 restated fromprevious filings to reflect the Hosiery
and True Beauty businesses as discontinued operations. Quarter
First Second Third Fourth Fiscal 2003: Net sales $672,345 $508,861
$644,131 $521,144 Gross profit 137,564 106,830 141,149 115,736 Net
earnings from continuing operations 21,123 7,850 30,869 12,795 Net
earnings (loss) from discontinued operations (295) (1,164) (619)
526 Net earnings $20,828 $6,686 $30,250 $13,321 Diluted earnings
(loss) per share: Continuing operations $.80 $.29 $1.13 $.46
Discontinued operations (.02) (.04) (.02) .02 Net earnings (loss)
$.78 $.25 $1.11 $.48 Fiscal 2002: Net sales $570,680 $452,614
$622,626 $520,634 Gross profit 106,886 90,124 130,390 105,594
Provision for facilities realignment 7,244 - 3,115 1,727 Net
earnings from continuing operations 8,547 3,665 20,685 8,366 Net
earnings (loss) from discontinued operations - 261 410 76 Net
earnings $8,547 $3,926 $21,095 $8,442 Diluted earnings (loss) per
share: Continuing operations $.37 $.15 $.80 $.33 Discontinued
operations - .01 .02 - Net earnings (loss) $.37 $.16 $.82 $.33 Note
Regarding Discontinued Operations (Amounts in thousands, except per
share data) On October 30, 2003, the Company finalized an agreement
to sell their domestic and European hosiery (Hosiery) operations
for $7,500 plus reimbursement of $2,800 for costs incurred by the
Company in connection with the closure of certain facilities. In
addition, during the fourth quarter of 2003, the Company decided to
discontinue their True Beauty by Emme(R) (True Beauty) operations.
This included the termination of the related license agreement
before its expiration. The operations of True Beauty ceased in the
fourth quarter of 2003. Accordingly, both the Hosiery and True
Beauty businesses have been accounted for as discontinued
operations. As such, their operating results and assets and
liabilities are segregated in the accompanying consolidated
statement of earnings and consolidated balance sheet. Prior to
being classified as discontinued, the Hosiery operations were
included in the Men's Sportswear segment, and True Beauty was
included in the Women's Sportswear segment. The financial results
for the discontinued Hosiery and True Beauty businesses are as
follows: Three months ended 1/31/2004 2/1/2003 Net sales $1,133
$16,655 Earnings (loss) before income taxes (9,388) 638 Income
taxes (9,914) 562 Net earnings (loss) $526 $76 Fiscal year ended
1/31/2004 2/1/2003 Net sales $51,122 $38,155 Earnings (loss) before
income taxes (12,552) 1,849 Income taxes (11,000) 1,102 Net
earnings (loss) $(1,552) $747 Recorded in income taxes is the
benefit of a higher tax basis in the Hosiery operation's assets
than that recorded for book purposes. RECONCILIATION OF NON-GAAP
MEASURES TO REPORTED GAAP AMOUNTS Net earnings from continuing
operations Before business and facilities realignment costs Three
Months Ended Twelve Months Ended 2/1/2003 2/1/2003 $000 Diluted EPS
$000 Diluted EPS Net earnings from continuing operations $8,366
$.33 $41,263 $1.66 Add back: Business and facilities realignment
costs, net of tax 1,287 .05 9,697 .39 Net earnings from continuing
operations and before business and facilities realignment costs
$9,653 $.38 $50,960 $2.05
http://www.newscom.com/cgi-bin/prnh/20011220/CGTH038LOGO
http://photoarchive.ap.org/ DATASOURCE: Kellwood Company CONTACT:
Financial, Roger D. Joseph, VP Treasurer & IR, +1-314-576-3437,
or Fax, +1-314-576-3325, , or W. Lee Capps III, Executive VP
Finance & CFO, +1-314-576-3486, or Fax, +1-314-576-3439, ; or
Media, Donna Weaver, VP Corp. Comm., +1-212-575-7467, or Fax,
+1-212-575-5339, , all of Kellwood Co. Web site:
http://www.kellwood.com/
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