Kellwood (NYSE: KWD) Reports First Quarter Results Sales Up 2
Percent - Net Earnings Up 19 Percent ST. LOUIS, MO., June 3
/PRNewswire-FirstCall/ -- Kellwood Company reported operating
results for the first quarter ended May 1, 2004, according to Hal
J. Upbin, chairman and chief executive officer. (Logo:
http://www.newscom.com/cgi-bin/prnh/20011220/CGTH038LOGO ) Sales
for the first quarter increased $14 million to $686 million, versus
$672 million last year due to a combination of organic growth of $5
million, or approximately 1 percent, and the acquisition of Phat
Fashions which provided $9 million of revenue. Phat Fashions was
acquired on February 3, 2004, and is being reported within the
Men's Sportswear segment. The organic growth was driven by the new
marketing initiatives put in place during the last nine months of
fiscal year 2003 which includes Calvin Klein(R), IZOD(R), XOXO(R),
and Lucy Pereda(TM) women's sportswear, Liz Claiborne(R) dresses
and suits, and Def Jam University(TM) urban sportswear. Nearly
two-thirds of this growth was offset by the planned elimination of
certain low margin business. All of the organic growth for the
quarter came from the Women's Sportswear segment, up 6 percent, and
the Men's Sportswear segment, up 1 percent. Sales of Other Soft
Goods were down 16 percent from last year due principally to
sourcing and logistical challenges in Intimate Apparel. These
issues are being addressed and should be resolved during the second
half. Net earnings from continuing operations for the quarter were
strong, increasing $3.9 million, or 19 percent to $25.0 million, or
$0.90 per diluted share, versus $21.1 million, or $0.80 per share
last year. The increase in earnings was driven by a 2.2 percentage
point increase in gross profit as a percent of sales, which was
partially offset by an increase in SG&A spending attendant with
the new marketing initiatives. The improvement in gross profit as a
percent of sales came from the acquisition of Phat Fashions, a mix
of higher margin branded business, improved sourcing, less markdown
pressure, and lower surplus and obsolete inventory. This is the
eighth consecutive quarter in which Kellwood has reported a
significant year-to-year improvement in gross profit as a percent
of sales reflecting the continued underlying strengthening of
operations, quality of inventory, and improving mix of business.
Kellwood ended the quarter with an exceptionally strong balance
sheet. Total debt continues to drop and represented 30 percent of
total capital at the end of the first quarter, versus 34 percent at
the same time last year. Total inventory was $27 million below last
year and represented 56 days supply, versus 68 days at the end of
the first quarter last year. As Kellwood looks ahead to the second
quarter and total year, the Company is encouraged by the improving
economy and improving same store sales being reported by the
retailers. In spite of these favorable and encouraging trends, the
retailers are continuing to place orders closer to the selling
season and are not stepping up with big increases in open-to-buy.
Cautious optimism continues to be the mindset at retail which is
good for the entire supply chain - retail and wholesale. More
emphasis is being placed on gross margin, inventory turnover and
return on investment which benefits everyone. As a result, the
Company expects sales in the second quarter to increase 10 to 12
percent and to be in the range of $560 to $570 million, versus $509
million reported last year. Net earnings from continuing operations
are forecasted to increase by approximately 20 percent and to be in
the range of $9-$10 million, or $0.32-$0.35 per diluted share,
versus $7.9 million, or $0.29 per share last year. The Company
expects to be on target with its financial plan through the first
six months. At this time, Kellwood remains comfortable in staying
with its original financial plan and guidance for the year which
calls for sales to increase by 11 percent to approximately $2.6
billion, versus $2.35 billion last year. Net earnings from
continuing operations for the year are planned to increase by
$15-$17 million, or approximately 23 percent to $88-$90 million, or
$3.15-$3.25 per diluted share, versus $72.6 million, or $2.68 per
share reported last year. The Company held its forty-second Annual
Shareowners' meeting today at its headquarters in St. Louis.
Approximately 90 percent of the outstanding shares were represented
either in person or by proxy. Robert C. Skinner, Jr., Kellwood
president and chief operating officer, was elected a new Board
member. Other Directors standing for election this year were Martin
Bloom, Martin J. Granoff and Hal J. Upbin. All were elected. The
Board of Directors declared a regular quarterly dividend of $0.16
per common share, payable June 25, 2004 to shareholders of record
June 14, 2004. The Company will conduct a conference call on June 4
at 10:00 a.m. EDT. Interested parties who wish to participate, may
do so by dialing 646-862-1100. An updated version of Kellwood's
analyst presentation is accessible on its website at
http://www.kellwood.com/ . Kellwood (NYSE:KWD), a $2.35 billion
marketer of apparel and consumer soft goods. Kellwood specializes
in branded as well as 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), Liz Claiborne(R) Dresses and
Suits, IZOD(R), Dockers(R), Gerber(R), Slates(R) and Bill Burns(R)
are produced under licensing agreements. For more information,
visit http://www.kellwood.com/ . SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This press
release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. The words
"believe", "expect", "will", "estimate", "project", "forecast",
"should", "anticipate" and similar expressions may identify
forward-looking statements. These forward-looking statements
represent the Company's expectations concerning future events, are
based on various assumptions and are subject to a number of risks
and uncertainties. These risks include, without limitation: changes
in the retail environment; an economic downturn in the retail
market, including deflationary pressures; economic uncertainty due
to the elimination of quotas on Chinese imports; a decline in the
demand for the Company's products; the lack of customer acceptance
of the Company's new designs and/or product lines; the increasingly
competitive and consolidating retail environment; financial or
operational difficulties of customers or suppliers; disruptions to
transportation systems used by the Company or its suppliers;
continued satisfactory relationships with licensees and licensors
of trademarks and brands; ability to generate sufficient sales and
profitability related to licenses containing minimum royalty
payments; the economic impact of uncontrollable factors, such as
terrorism and war; the effect of economic conditions and trade,
legal social and economic risks (such as import, licensing and
trade restrictions); stable governments and business conditions in
the countries where the Company's products are manufactured; the
impact of acquisition activity and the ability to effectively
integrate acquired operations; and changes in the Company's
strategies and expectations. These risks are more fully described
in the Company's periodic filings with the SEC. Actual results
could differ materially from those expressed or implied in
forward-looking statements. The Company disclaims any obligation to
publicly update or revise any of its forward-looking statements.
KELLWOOD COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT
OF EARNINGS (UNAUDITED) (Amounts in thousands, except per share
data) Three Months Ended 5/1/2004 5/3/2003 Net sales by segment:
Women's Sportswear $437,977 $411,926 Men's Sportswear 128,157
117,214 Other Soft Goods 119,969 143,206 Total net sales 686,103
672,346 Costs and expenses: Cost of products sold 531,538 536,043
Selling, general and administrative expenses 106,908 94,078
Amortization of intangible assets 3,466 2,818 Interest expense, net
6,288 6,443 Other (income) and expense, net (180) 178 Earnings
before income taxes 38,083 32,786 Income taxes 13,044 11,663 Net
earnings from continuing operations 25,039 21,123 Net earnings
(loss) from discontinued operations - (295) Net earnings $25,039
$20,828 Weighted average shares outstanding: Basic 27,090 26,174
Diluted 27,832 26,554 Earnings (loss) per share: Basic: Continuing
operations $.92 $.81 Discontinued operations - (.01) Net earnings
$.92 $.80 Diluted: Continuing operations $.90 $.80 Discontinued
operations - (.02) Net earnings $.90 $.78 KELLWOOD COMPANY AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Amounts in thousands) As of 5/1/2004 5/3/2003 ASSETS Current
assets: Cash and cash equivalents $72,672 $94,419 Receivables, net
388,317 380,251 Inventories 247,384 274,129 Prepaid taxes and
expenses 70,506 41,759 Current assets of discontinued operations -
24,144 Total current assets 778,879 814,702 Property, plant and
equipment, net 97,388 97,824 Intangible assets, net 227,298 129,847
Goodwill 186,597 150,196 Other assets 28,568 37,673 Long-term
assets of discontinued operations - 8,206 Total assets $1,318,730
$1,238,448 LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities:
Notes payable and current portion of long-term debt $18,153 $28,629
Accounts payable 152,353 155,357 Accrued expenses 116,797 106,627
Current liabilities of discontinued operations 2,120 14,840 Total
current liabilities 289,423 305,453 Long-term debt 271,875 278,022
Deferred income taxes and other 73,435 59,444 Long-term liabilities
of discontinued operations - 2,500 Shareowners' equity 683,997
593,029 Total liabilities & shareowners' equity $1,318,730
$1,238,448 KELLWOOD COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS (UNAUDITED) (Amounts in thousands) Three
Months Ended 5/1/2004 5/3/2003 OPERATING ACTIVITIES Net earnings
$25,039 $20,828 Add/(deduct) items not affecting operating cash
flows: Depreciation and amortization 10,247 9,451 Deferred income
taxes and other 2,674 4,280 Changes in working capital components:
Receivables, net (65,665) (40,614) Inventories 68,697 86,954
Prepaid taxes and expenses (3,934) (615) Accounts payable and
accrued expenses (20,864) (59,492) Net cash from operating
activities 16,194 20,792 INVESTING ACTIVITIES Additions to
property, plant and equipment (4,442) (4,705) Acquisitions, net of
cash acquired (143,473) (132,517) Dispositions of fixed assets 692
1,629 Net cash from investing activities (147,223) (135,593)
FINANCING ACTIVITIES Proceeds from notes payable and short-term
borrowings, net 15,657 1,408 Reduction of long-term debt - (303)
Stock transactions under incentive plans 13,230 1,989 Dividends
paid (4,341) (4,197) Net cash from financing activities 24,546
(1,103) Net increase (decrease) in cash and cash equivalents
(106,483) (115,904) Cash and cash equivalents, beginning of period
179,155 210,323 Cash and cash equivalents, end of period $72,672
$94,419 Significant non-cash investing and financing activities:
Issuance of stock for acquisitions $- $11,891 Supplemental cash
flow Information: Interest paid $6,197 $7,593 Income taxes paid
(refunded), net $(2,552) $10,925 Note Regarding Discontinued
Operations (Amounts in thousands, except per share data) On October
30, 2003, the Company finalized an agreement to sell its 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 its 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 condensed
consolidated statement of earnings and condensed 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. For
the three months ended May 1, 2004, there was no operating activity
for the discontinued operations. For the three months ended May 3,
2003, the operating results for the discontinued Hosiery and True
Beauty businesses are as follows: Three-months ended May 3, 2003
Hosiery True Beauty Total Net sales $12,979 $3,898 $16,877 Earnings
(loss) before income taxes (920) 462 (458) Income taxes (327) 164
(163) Net earnings (loss) $(593) $298 $(295)
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, ;
Media, Donna Weaver, VP Corp. Comm., +1-314-576-3391, or fax,
+1-314-576-3434, , all of Kellwood Co. Web site:
http://www.kellwood.com/
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