Kellwood (NYSE:KWD)
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Kellwood (NYSE: KWD) Reports Third Quarter Results
Regular Quarterly Dividend Declared
ST. LOUIS, Dec. 2 /PRNewswire-FirstCall/ -- Kellwood Company reported
operating results for the third quarter ended October 30, 2004, according to
Hal J. Upbin, chairman and chief executive officer.
Sales for the third quarter increased $73 million, or 11 percent to $717
million, versus $644 million last year due to a combination of organic growth
of $44 million, and the acquisition of Phat Fashions and Phat Farm which
provided $29 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 primarily driven by the new marketing initiatives put in
place during the last nine months of fiscal year 2003 including Calvin
Klein(R), IZOD(R), and XOXO(R) women's sportswear, and Liz Claiborne(R) dresses
and suits, which collectively provided $45 million of growth in the third
quarter. This growth was partially offset by the planned elimination of
certain low margin brands and programs, which reduced sales by $18 million.
Sales growth of the remaining businesses in the third quarter was $17 million,
or 3 percent.
The year-to-year organic sales growth for the quarter came from the Women's
Sportswear segment, up 4 percent, and the Men's Sportswear segment, up 15
percent, and Other Soft Goods up 3 percent.
Net earnings from continuing operations in the third quarter decreased $2.5
million, or 8 percent, to $28.4 million, or $1.01 per diluted share, versus
$30.9 million, or $1.13 per share last year. The drop in earnings was due to a
0.8 percentage point decrease in gross profit as a percent of sales due
principally to higher seasonal markdowns, increased SG&A spending attendant
with the new marketing initiatives and the acquisition of Phat Fashions and
Phat Farm, and higher amortization expense.
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.
Inventory and accounts receivable increased in the third quarter due
principally to the acquisition of Phat Fashions and Phat Farm. We ended the
quarter with 67 days supply of inventory, versus 68 days at the end of the
third quarter last year.
Sales for the first nine months grew by $138 million, or 8 percent to $1.963
billion, versus $1.825 billion last year. The increase came from organic
growth of $83 million, or 5 percent, and $55 from the acquisition of Phat
Fashions and Phat Farm made earlier this year. The increase in organic sales
for the first three quarters came from a 7 percent increase in Women's
Sportswear and a 10 percent increase in Men's Sportswear, partially offset by
an 8 percent drop in sales of Other Soft Goods.
Net earnings from continuing operations for the first nine months increased
$3.8 million, or 6 percent, to $63.6 million, or $2.27 per share on a diluted
basis, versus $59.8 million, or $2.22 per share last year. The strong growth
in net earnings for the first nine months was driven by a 0.9 percentage point
year-to-year improvement in gross profit as a percent of sales partially offset
by higher SG&A spending from launching several new brands and the acquisition
of Phat Fashions and Phat Farm, along with additional amortization expense.
As Kellwood looks forward to the balance of the fiscal year, the Company
expects to be on target with its guidance for sales and earnings provided on
October 21. Sales in the fourth quarter are expected to increase 13-15 percent
and be in the range of $600 million versus $521 million last year.
Approximately 60 percent of the $80 million year-to-year increase in sales will
come from the new marketing initiatives, and approximately 30 percent of the
increase will come from the acquisition of Phat Fashions and Phat Farm with the
balance coming from 1.5 to 2.0 percent growth in Kellwood's base business.
Net earnings from continuing operations in the fourth quarter are forecasted to
increase 7 percent, or $0.9 million, to $13.7 million, or $0.48 per diluted
share versus $12.8 million, or $0.46 per share last year. It is significant to
note that operating earnings (gross profit less SG&A expense) in the fourth
quarter are forecasted to increase $6.5-$7.0 million, or approximately 28
percent versus last year. The strong year-to-year improvement in operating
earnings is expected to be driven by the forecasted growth in sales and an
anticipated improvement in gross profit as a percent of sales. The forecasted
strong year-to-year growth in operating earnings for the fourth quarter will be
partially offset by the one-time gain in other income/expense net reported last
year, higher net interest expense from the issuance of a $200 million 3.5
percent convertible bond earlier in the year, and higher amortization of
intangibles.
For the fiscal year, which ends January 31, 2005, sales are expected to
increase by 9.5 percent to approximately $2.57 billion versus $2.35 billion
last year. Net earnings from continuing operations for the year are forecasted
to be in the range of $77.5 million, or $2.75 per diluted share, versus $72.6
million, or $2.68 per share reported last year from continuing operations.
The Board of Directors declared a regular quarterly dividend of $0.16 per
common share, payable December 24, 2004 to shareholders of record December 13,
2004.
The Company will conduct a conference call on December 3 at 10:00 a.m. EST.
Interested parties who wish to participate, may do so by dialing 617- 614-3528
and entering participant code 66261254. 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 $2.5 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", "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 Nine Months Ended
10/30/2004 11/1/2003 10/30/2004 11/1/2003
Net sales by segment:
Women's Sportswear $413,522 $396,118 $1,171,054 $1,098,104
Men's Sportswear 205,978 153,884 473,748 379,302
Other Soft Goods 97,294 94,129 318,563 347,931
Total net sales 716,794 644,131 1,963,365 1,825,337
Costs and expenses:
Cost of products
sold 567,362 504,752 1,534,974 1,444,288
Selling, general and
administrative
expenses 97,785 84,477 304,019 263,176
Amortization of
intangible assets 3,134 2,433 10,065 7,310
Interest expense, net 6,429 6,451 19,469 18,805
Other (income) and
expense, net (1,039) (88) (1,912) 744
Earnings before
income taxes 43,123 46,106 96,750 91,014
Income taxes 14,770 15,237 33,137 31,172
Net earnings from
continuing operations 28,353 30,869 63,613 59,842
Net loss from discontinued
operations, net of tax - (619) - (2,078)
Net earnings $28,353 $30,250 $63,613 $57,764
Weighted average shares
outstanding:
Basic 27,669 26,632 27,446 26,412
Diluted 28,134 27,321 28,038 26,947
Earnings (loss) per share:
Basic:
Continuing
operations $1.02 $1.16 $2.32 $2.27
Discontinued
operations - (.02) - (.08)
Net earnings $1.02 $1.14 $2.32 $2.19
Diluted:
Continuing
operations $1.01 $1.13 $2.27 $2.22
Discontinued
operations - (.02) - (.08)
Net earnings $1.01 $1.11 $2.27 $2.14
KELLWOOD COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Amounts in thousands)
As of
10/30/2004 11/1/2003
ASSETS
Current assets:
Cash and cash equivalents $208,913 $124,187
Receivables, net 443,790 381,682
Inventories 302,012 266,791
Prepaid taxes and expenses 66,806 63,758
Current assets of discontinued operations - 22,472
Total current assets 1,021,521 858,890
Property, plant and equipment, net 97,548 94,445
Intangible assets, net 195,376 112,379
Goodwill 212,412 163,037
Other assets 34,897 32,197
Long-term assets of discontinued operations - 3,572
Total assets $1,561,754 $1,264,520
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term debt $169 $26,565
Accounts payable 185,368 146,463
Accrued expenses 110,331 103,302
Current liabilities of discontinued operations 1,457 9,096
Total current liabilities 297,325 285,426
Long-term debt 469,658 273,709
Deferred income taxes and other 76,458 69,412
Long-term liabilities of discontinued operations - 2,432
Shareowners' equity 718,313 633,541
Total liabilities & shareowners' equity $1,561,754 $1,264,520
Kellwood Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
Nine Months Ended
10/30/2004 11/1/2003
OPERATING ACTIVITIES
Net earnings $63,613 $57,764
Add/(deduct) items not affecting operating
cash flows:
Depreciation and amortization 30,751 27,186
Deferred income taxes and other 4,407 23,986
Changes in working capital components:
Receivables, net (119,715) (37,285)
Inventories 14,346 96,681
Prepaid taxes and expenses (215) (24,715)
Accounts payable and accrued expenses 4,832 (80,005)
Net cash from operating activities (1,981) 63,612
INVESTING ACTIVITIES
Additions to property, plant and equipment (19,903) (15,048)
Acquisitions, net of cash acquired (144,722) (134,527)
Subordinated note receivable 1,375 1,374
Dispositions of fixed assets 226 2,418
Net cash from investing activities (163,024) (145,783)
FINANCING ACTIVITIES
Borrowings of long-term debt, net of
financing costs 195,131 -
Repayments of long-term debt (4,448) (5,272)
Dividends paid (13,185) (12,692)
Stock transactions under incentive plans 17,265 13,999
Net cash from financing activities 194,763 (3,965)
Net change in cash and cash equivalents 29,758 (86,136)
Cash and cash equivalents, beginning of period 179,155 210,323
Cash and cash equivalents, end of period $208,913 $124,187
Supplemental cash flow Information:
Interest paid $18,285 $20,871
Income taxes paid (refunded), net $9,018 $40,746
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 nine months ended October 30, 2004, there was no
operating activity for the discontinued operations. For the three and
nine months ended November 1, 2003, the operating results for the
discontinued Hosiery and True Beauty businesses are as follows:
Three months ended Nine months ended
November 1, 2003 November 1, 2003
True True
Hosiery Beauty Total Hosiery Beauty Total
Net sales $13,558 $1,627 $15,185 $42,760 $7,229 $49,989
Earnings (loss)
before income
taxes (244) (665) (909) (1,916) (1,248) (3,164)
Income taxes (78) (212) (290) (671) (415) (1,086)
Net earnings
(loss) $(166) $(453) $(619) $(1,245) $(833) $(2,078)
DATASOURCE: Kellwood Company
CONTACT: Financial Contacts, Roger D. Joseph, VP Treasurer & IR,
+1-314-576-3437, Fax +1-314-576-3325, or , or W. Lee
Capps III, Executive VP Finance & CFO, , +1-314-576-3486, Fax +1-314-576-3439,
or ; or Media Contact, Donna Weaver, VP Corp. Comm.,
+1-212-329-8072, Fax 212.329.8073, or ., all of
Kellwood Co.
Web site: http://www.kellwood.com/