Kellwood (NYSE: KWD) Reports Second Quarter Results Sales Up 10
Percent - Net Earnings Up 30 Percent ST. LOUIS, Aug. 26
/PRNewswire-FirstCall/ -- Kellwood Company reported operating
results for the second quarter ended July 31, 2004, according to
Hal J. Upbin, chairman and chief executive officer. (Logo:
http://www.newscom.com/cgi-bin/prnh/20011220/CGTH038LOGO ) Sales
for the second quarter increased $51 million, or 10 percent to $560
million, versus $509 million last year due to a combination of
organic growth of $34 million, or 7 percent, and the acquisition of
Phat Fashions and Phat Farm which provided $17 million of revenue.
Phat Fashions and Phat Farm were acquired on February 3, 2004, and
are 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 including 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 which collectively provided $43 million of growth
in the second quarter. This growth was partially offset by the
planned elimination of certain low margin programs, which reduced
sales by $15 million. Sales growth of the remaining businesses in
the second quarter was $6 million, or 1 percent. The year-to-year
organic sales growth for the quarter came from the Women's
Sportswear segment, up 10 percent, and the Men's Sportswear
segment, up 13 percent. These increases were partially offset by an
8 percent drop in sales of Other Soft Goods. Net earnings in the
second quarter from continuing operations were strong, increasing
$2.3 million, or 30 percent, to $10.2 million, or $0.36 per diluted
share, versus $7.9 million, or $0.29 per share last year. The
increase in earnings was driven by increased sales, a 1.5
percentage point increase in gross profit as a percent of sales
partially offset by higher SG&A spending attendant with the new
marketing initiatives and SG&A expense from the acquisition of
Phat Fashions and Phat Farm. This is the ninth 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 strength of operations, improved sourcing,
quality of inventory and improving mix of business. Kellwood ended
the quarter with an exceptionally strong balance sheet with ample
liquidity to fund acquisitions to enhance its diversification and
capability to service the needs of the Company's customers. Total
inventory at the end of the second quarter including inventory from
the acquisition increased by only $4 million versus prior year and
represented 57 days supply, versus 62 days at the end of the second
quarter last year. Sales for the first six months grew by $66
million, or 6 percent to $1.247 billion, versus $1.181 billion last
year. The increase came from organic growth of $39 million, or 3
percent and $27 million from the acquisition of Phat Fashions and
Phat Farm made earlier this year. The increase in organic sales for
the first half came from an 8 percent increase in Women's
Sportswear and a 7 percent increase in Men's Sportswear, partially
offset by a 13 percent drop in sales of Other Soft Goods. Net
earnings from continuing operations for the first six months
increased $6.3 million, or 22 percent, to $35.3 million, or $1.26
per share on a diluted basis, versus $29.0 million, or $1.08 per
share last year. The strong growth in net earnings for the first
half was driven by higher sales and by a 1.9 percentage point
year-to-year improvement in gross profit. Kellwood's investment in
launching several new brands and the acquisition of Phat Fashions
and Phat Farm has resulted in higher SG&A spending. These
initiatives are expected to generate an accelerating rate of growth
in sales and operating earnings during the second half of the year.
"As Kellwood looks ahead to the third quarter and total year, we
remain optimistic that the economy, the rate of job creation, and
consumer confidence and spending on apparel will continue to
improve albeit at a slower pace than experienced earlier this year.
We see this same sense of guarded optimism expressed by our
customers as they book orders for Fall and Holiday. Like our
customers, Kellwood would rather focus on gross margin and
inventory turnover than get too far ahead of a cautious consumer
with orders and inventory. "As a result of the recent softening in
consumer demand for apparel, as indicated by Fall orders from
customers and some delays in launching certain new marketing
initiatives from the third to the fourth quarter, we expect sales
in the third quarter to increase by 12 to 13 percent and be in the
range of $720-$730 million versus $644 million last year," said
Upbin. Net earnings from continuing operations are forecasted to
increase by approximately 5 percent and be in the range of $32.5
million, or $1.15 per diluted share, versus $30.9 million, or $1.13
per share reported last year. The Company expects to be on target
with its financial plan for the fiscal 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 $16-$18 million, or
approximately 24 percent to $89-$91 million, or $3.15-$3.25 per
diluted share, versus $72.6 million, or $2.68 per share reported
last year. The Board of Directors declared a regular quarterly
dividend of $0.16 per common share, payable September 20, 2004 to
shareholders of record September 7, 2004. The Company will conduct
a conference call on August 27 at 10:00 a.m. EDT. Interested
parties who wish to participate, may do so by dialing 888-396-2384
and entering participant code 89063521. The call will also be
broadcast live over the Internet at http://www.kellwood.com/ .
Please go to the website at least fifteen minutes prior to the call
to register, download and install any necessary audio software. An
updated version of Kellwood's analyst presentation is available at
http://www.kellwood.com/ . Kellwood (NYSE:KWD), a $2.4 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),
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),
David Meister(TM), 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," "looks ahead,"
"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 Six Months Ended 7/31/2004 8/2/2003 7/31/2004 8/2/2003
Net sales by segment: Women's Sportswear $319,555 $290,060 $757,531
$701,986 Men's Sportswear 139,613 108,204 267,770 225,418 Other
Soft Goods 101,299 110,597 221,269 253,802 Total net sales 560,467
508,861 1,246,570 1,181,206 Costs and expenses: Cost of products
sold 436,074 403,493 967,612 939,536 Selling, general and
administrative expenses 99,326 84,621 206,234 178,700 Amortization
of intangible assets 3,465 2,059 6,931 4,877 Interest expense, net
6,752 5,911 13,039 12,354 Other (income) and expense, net (694) 655
(873) 831 Earnings before income taxes 15,544 12,122 53,627 44,908
Income taxes 5,324 4,272 18,367 15,935 Net earnings from continuing
operations 10,220 7,850 35,260 28,973 Net loss from discontinued
operations, net of tax - (1,164) - (1,459) Net earnings $10,220
$6,686 $35,260 $27,514 Weighted average shares outstanding: Basic
27,585 26,432 27,336 26,303 Diluted 28,150 26,970 27,990 26,762
Earnings (loss) per share: Basic: Continuing operations $.37 $.30
$1.29 $1.10 Discontinued operations - (.05) - (.05) Net earnings
$.37 $.25 $1.29 $1.05 Diluted: Continuing operations $.36 $.29
$1.26 $1.08 Discontinued operations - (.04) - (.05) Net earnings
$.36 $.25 $1.26 $1.03 KELLWOOD COMPANY AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEET (UNAUDITED) (Amounts in thousands) As of
7/31/2004 8/2/2003 ASSETS Current assets: Cash and cash equivalents
$262,508 $111,201 Receivables, net 341,820 303,781 Inventories
346,761 343,187 Prepaid taxes and expenses 69,772 65,397 Current
assets of discontinued operations - 24,471 Total current assets
1,020,861 848,037 Property, plant and equipment, net 98,603 96,423
Intangible assets, net 223,833 114,821 Goodwill 185,508 163,071
Other assets 34,199 33,587 Long-term assets of discontinued
operations - 8,065 Total assets $1,563,004 $1,264,004 LIABILITIES
AND SHAREOWNERS' EQUITY Current liabilities: Notes payable and
current portion of long-term debt $252 $26,576 Accounts payable
207,334 174,394 Accrued expenses 112,864 98,532 Current liabilities
of discontinued operations 1,813 15,225 Total current liabilities
322,263 314,727 Long-term debt 469,653 276,024 Deferred income
taxes and other 77,315 69,214 Long-term liabilities of discontinued
operations - 2,426 Shareowners' equity 693,773 601,613 Total
liabilities & shareowners' equity $1,563,004 $1,264,004
Kellwood Company and Subsidiaries CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS (UNAUDITED) (Amounts in thousands) Six Months Ended
7/31/2004 8/2/2003 OPERATING ACTIVITIES Net earnings $35,260
$27,514 Add/(deduct) items not affecting operating cash flows:
Depreciation and amortization 20,528 18,086 Deferred income taxes
and other 5,324 17,381 Changes in working capital components:
Receivables, net (18,439) 38,343 Inventories (30,104) 18,521
Prepaid taxes and expenses (3,389) (24,104) Accounts payable and
accrued expenses 29,797 (49,963) Net cash from operating activities
38,977 45,778 INVESTING ACTIVITIES Additions to property, plant and
equipment (12,952) (10,093) Acquisitions, net of cash acquired
(143,337) (134,150) Subordinated note receivable 1,375 688
Dispositions of fixed assets 202 1,923 Net cash from investing
activities (154,712) (141,632) FINANCING ACTIVITIES Borrowings of
long-term debt, net of financing costs 195,390 - Repayments of
long-term debt (4,448) (2,948) Dividends paid (8,758) (8,428) Stock
transactions under incentive plans 16,904 8,108 Net cash from
financing activities 199,088 (3,268) Net change in cash and cash
equivalents 83,353 (99,122) Cash and cash equivalents, beginning of
period 179,155 210,323 Cash and cash equivalents, end of period
$262,508 $111,201 Supplemental cash flow Information: Interest paid
$12,403 $14,596 Income taxes paid (refunded), net $7,927 $32,364
Significant non-cash investing and financing activities: Issuance
of stock for acquisitions $- $11,891 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 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 and six months ended July 31, 2004, there was no
operating activity for the discontinued operations. For the three
and six months ended August 2, 2003, the operating results for the
discontinued Hosiery and True Beauty businesses are as follows:
Three months ended Six months ended August 2, 2003 August 2, 2003
Hosiery True Beauty Total Hosiery True Beauty Total Net sales
$16,224 $1,704 $17,928 $29,203 $5,602 $34,805 Earnings (loss)
before income taxes (753) (1,045) (1,798) (1,672) (583) (2,255)
Income taxes (266) (368) (634) (592) (204) (796) Net earnings
(loss) $(487) $(677) $(1,164) $(1,080) $(379) $(1,459)
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., +1-212-329-8072, or fax,
+1-212-329-8073, , all of Kellwood Co. Web site:
http://www.kellwood.com/
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