-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rdu5KLdsgvTovQJLt0qxwU/fPTuy/FaQ8xQkxL7Sob8umrBVcofbAoM0IWLzKNoj F7H/g4713SGSmaq/hYurDQ== 0000075042-97-000014.txt : 19970723 0000075042-97-000014.hdr.sgml : 19970723 ACCESSION NUMBER: 0000075042-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970722 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSHKOSH B GOSH INC CENTRAL INDEX KEY: 0000075042 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 390519915 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13365 FILM NUMBER: 97643917 BUSINESS ADDRESS: STREET 1: 112 OTTER AVE STREET 2: P O BOX 300 CITY: OSHKOSH STATE: WI ZIP: 54901 BUSINESS PHONE: 4142318800 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-13365 OshKosh B'Gosh, Inc. (Exact name of registrant as specified in charter) Delaware 39-0519915 (State or other jurisdiction of (IRS Employer Identification No.) Incorporation or organization) 112 Otter Avenue, Oshkosh, Wisconsin 54901 (Address of principal executive offices) (Zip Code) (414) 231-8800 (Registrant's telephone number) 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 As of June 30, 1997, there were outstanding 10,425,571 shares of Class A Common Stock and 1,260,704 shares of Class B Common Stock. FORM 10-Q OSHKOSH B'GOSH, INC. AND SUBSIDIARIES INDEX Page Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - -June 30, 1997 and December 31, 1996 3 Unaudited Condensed Consolidated Statements of Income -- Three Months and Six Months Ended June 30, 1997 and 1996 4 Unaudited Condensed Consolidated Statements of Cash Flow -- Six Months Ended June 30, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7 Part II. Other Information 12 Signatures 13 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands) June 30, December 31, 1997 1996* (Unaudited) Assets Current assets Cash and cash equivalents $ 30,915 $ 31,201 Short-term investments 11,670 10,040 Accounts receivable 20,892 20,504 Inventories 60,849 66,799 Prepaid expenses & other current assets 5,203 1,890 Deferred income taxes 15,300 18,500 Total current assets 144,829 148,934 Property, plant & equipment 65,358 67,747 Less accumulated depreciation and amortization 27,760 25,965 Net property, plant and equipment 37,598 41,782 Non-current deferred income taxes 4,400 3,400 Other assets 3,424 1,917 Total assets $ 190,251 $ 196,033 Liabilities and shareholders' equity Current liabilities Accounts payable $ 3,406 $ 5,408 Accrued expenses 35,166 38,885 Total current liabilities 38,572 44,293 Employee benefit plan liabilities 13,323 13,663 Shareholders' equity Preferred stock -- -- Common stock: Class A 104 105 Class B 13 13 Retained earnings 137,769 137,349 Cumulative foreign currency translation adjustments 470 610 Total shareholders' equity 138,356 138,077 Total liabilities and shareholders' equity $ 190,251 $ 196,033 * Condensed from audited financial statements. See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 Net sales $ 71,144 $ 82,579 $168,507 $203,455 Cost of products sold 47,362 57,057 112,431 141,376 Gross profit 23,782 25,522 56,076 62,079 Selling, general and administrative expenses 26,292 30,211 53,659 62,044 Special charges -- 20,900 -- 20,900 Royalty income, net (1,206) (1,370) (3,012) (2,541) Operating income (loss) (1,304) (24,219) 5,429 (18,324) Other income (expense) Interest expense (97) (261) (129) (526) Interest income 672 247 1,065 580 Other (17) 162 (145) 282 Other income (expense) -- net 558 148 791 336 Income (loss) before taxes (746) (24,071) 6,220 (17,988) Income taxes (benefit) (300) (14,231) 2,490 (11,524) Net income (loss) $ (446) $ (9,840) $ 3,730 $ (6,464) Average number of shares outstanding 11,686 12,456 11,731 12,456 Net income (loss) per common share $ (0.04) $ (0.79) $ 0.32 $ (0.52) Cash dividend per common share Class A $ 0.07 $ 0.07 $ 0.14 $ 0.14 Class B $ 0.06 $ 0.06 $ 0.12 $ 0.12 See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flow (Dollars in thousands) (Unaudited) Six Months Ended June 30, 1997 1996 Cash flows from operating activities Net income (loss) $ 3,730 $ (6,464) Depreciation 4,465 5,350 Special charges --- 20,900 Provision for deferred income taxes 2,200 (11,600) Items in income not affecting cash 173 1,357 Changes in current assets 2,249 (16,010) Changes in current liabilities (5,005) (2,872) Net cash provided by (used in) operating activities 7,812 (9,339) Cash flows from investing activities Additions to property, plant and equipment (2,965) (2,916) Proceeds from disposal of assets 1,765 1,710 Purchase of short-term investments (1,630) --- Other (1,958) (32) Net cash used in investing activities (4,788) (1,238) Cash flows from financing activities Net increase in long-term borrowings --- 11,160 Cash dividends paid (1,619) (1,719) Repurchase of common shares (1,691) --- Net cash provided by (used in) financing activities (3,310) 9,441 Net decrease in cash and cash equivalents $ (286) $ (1,136) OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Basis of Preparation The condensed financial statements included herein have been prepared by the Company without audit. However, the foregoing statements contain all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of Company management, necessary to present fairly the financial position as of June 30, 1997, the results of operations for the three month and six-month periods ended June 30, 1997 and 1996, and cash flows for the six-month periods ended June 30, 1997 and 1996. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 1996 Annual Report. Note 2. Inventories A summary of inventories follows: June 30, December 31, 1997 1996 (Dollars in thousands) Finished goods $ 43,478 $ 51,584 Work in process 14,218 10,698 Raw materials 3,153 4,517 Total $ 60,849 $ 66,799 The replacement cost of inventory exceeds the above LIFO costs by $ 16,120 and $ 15,100 at June 30, 1997 and December 31, 1996, respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Consolidated net sales for the three months ended June 30, 1997 were $71.1 million, a decrease of $11.5 million (13.9 %) over 1996 second quarter sales of $82.6 million. Consolidated net sales for the six months ended June 30, 1996 were $168.5 million, a decrease of $35.0 million (17.2%) from sales of $203.5 million for the first six months of 1996. The Company's net sales for the three month and six month periods ended June 30, 1997 and 1996 are summarized as follows: Net Sales (in millions) Domestic Wholesale Retail International Other Total Three months ended June 30, 1997 $ 34.0 $ 35.7 $ 1.4 $ -- $ 71.1 1996 46.8 32.1 3.0 .7 82.6 Increase (decrease) (12.8) 3.6 (1.6) (.7) (11.5) Percent increase (decrease) (27.4%) 11.2% 53.3% -- (13.9%) Six months ended June 30, 1997 $ 96.3 $ 68.5 $ 3.7 $ -- $ 168.5 1996 127.2 61.2 13.4 1.7 203.5 Increase (decrease) (30.9) 7.3 (9.7) (1.7) (35.0) Percent increase (decrease) (24.3%) 11.9% (72.4%) -- (17.2%) The Company's domestic wholesale unit sales for the three month and six month periods ended June 30, 1997 were down 25.4% and 25.3%, respectively, from the corresponding three month and six month periods of 1996. The decrease in unit shipments for the three month and six month periods ended June 30, 1997 resulted primarily from a combination of the Company's strategic decision to reduce distribution and lower unit bookings, due primarily to relatively weak "sell-thru" results experienced during the first half of 1996. In addition, the Company's 1996 first quarter sales included a substantial amount of wholesale unit shipments of Holiday 1995 close-out merchandise. Shipments of first quality garments during the three month and six month periods ended June 30, 1997 were down approximately 25.1% and 19.1%, respectively, when compared to the same three month and six month periods of 1996. The Company's retail sales for the three month and six month periods ended June 30, 1997 and 1996 are summarized as follows: Retail Net Sales Summary (in millions) OshKosh Stores Genuine Kids Stores Total Stores Three months ended June 30, 1997 $ 35.7 $ -- $ 35.7 1996 24.0 8.1 32.1 Increase (decrease) 11.7 (8.1) 3.6 Percent increase (decrease) 48.8% -- 11.2% Comparable store sales increase 31.6% Six months ended June 30, 1997 $ 68.5 $ -- $ 68.5 1996 45.1 16.1 61.2 Increase (decrease) 23.4 (16.1) 7.3 Percent increase (decrease) 51.9% -- 11.9% Comparable store sales increase 23.1% The Company's increase in retail sales at its OshKosh B'Gosh stores for the three month and six month periods ended June 30, 1997 resulted from both the conversion and combination of a total of 22 Genuine Kids stores in early January, as well as the comparable store sales gains. The three month and six month comparable store sales gains reported in 1997 reflected both an increase in sales of OshKosh B'Gosh branded products, along with the introduction of an expanded retail product line to include bigger sizes under the label Genuine Girls (girls sizes 7-16) and Genuine Blues (boys sizes 8-16). During the second quarter of 1997, the Company also opened one additional retail store. At June 30, 1997, the Company operated 114 domestic OshKosh retail stores, including 108 outlet stores and 6 showcase stores. The Company's gross profit margin as a percent of sales improved to 33.4% in the second quarter of 1997, compared to 30.9% in the second quarter of 1996. For the six months ended June 30, 1997, gross profit margin as a percent of sales was 33.3%, compared to 30.5% for the first six months of 1996. This gross profit margin improvement was due to enhanced gross margins for the Company's domestic wholesale business, along with the impact of the Company's increased retail sales at higher gross margins as compared to the wholesale business. Continued implementation and execution of the Company's sourcing strategy, along with substantial reduction in the sale of close-out merchandise during 1997, also contributed to the gross profit margin improvement. Selling, general, and administrative (S, G, & A) expenses for the three month and six month periods ended June 30, 1997, decreased $3.9 million and $8.4 million over the three and six month periods ended June 30, 1996 (excluding special charges recorded during the second quarter of 1996), respectively. These decreases are directly attributable to the discontinuance of the Company's direct operations in Europe, elimination of the Genuine Kids retail store chain, and decreased volume in the Company's wholesale business. As a percentage of net sales, S, G, & A expenses were 37.0% and 31.8% for the three month and six month periods ended June 30, 1997 as compared to 36.6% and 30.5% in the comparable periods of 1996 (excluding special charges). The primary reason for the increased S, G, & A expenses as a percentage of sales is the decrease in 1997 net sales without a proportionate decrease in the fixed element of the Company's S, G, & A cost structure. During 1996, the Company recorded special charges related to the discontinuance of the Genuine Kids retail store chain and European subsidiaries, and the closing of three domestic sewing facilities. During the first six months of 1997, the Company continued to execute its plan to eliminate underperforming elements of the Company's business and to adjust its domestic manufacturing capacity to improve manufacturing efficiency. The Company has completed substantially all strategic changes related to the special charges, and is not currently anticipating any material changes to the amount of special charges recorded during 1996. The Company's second quarter 1997 net royalty income of $1.2 million was approximately 12% less than net royalty income earned in the second quarter of 1996 of approximately $1.4 million. This decrease was due primarily to a reduction in the Company's domestic royalty income and is consistent with the reduction in the Company's overall wholesale business. Year-to-date royalty income of $3 million is approximately $.5 million (18.5%) over the first six months of 1996, due primarily to the Company's conversion of its European business to a licensee. The Company's interest income net of interest expense was $.6 million and $.9 million for the three month and six month periods ended June 30, 1997 as compared to insignificant net interest income throughout the first half of 1996. These increases resulted from the significantly higher level of cash and shortterm investments throughout the first half of 1997 as compared to 1996. The Company's effective tax rate for the three month and six month periods ended June 30, 1997 was approximately 40.0%. The unusually high income tax credits applied to the Company's net loss for the three month and six month periods ended June 30, 1996 of 59.1% and 64.1%, respectively, were the result of the recognition of previously unrecorded U.S. tax benefits related to the discontinuance of the Company's European subsidiaries. The Company's net loss of $.4 million for the second quarter of 1997 was $9.4 million less than its net loss for the three month period ended June 30, 1996 of $9.8 million. The June 30, 1996 quarter included an after tax charge of approximately $8 million related to special charges. Excluding the special charges, the Company incurred a loss in the second quarter of 1996 of approximately $1.8 million ($.15 per share) as compared to the second quarter of 1997 net loss of approximately $.4 million ($.04 per share). In February 1997, the Financial Accounting Standards Board issued Statement No. 128, entitled "Earnings Per Share," which will be effective for periods ending after December 15, 1997. This statement modifies the computation, presentation and disclosure requirements of earnings per share. This statement will have no material impact on the Company's reported earnings per share. SEASONALITY The Company's business is increasingly seasonal, with highest sales and income in the third quarter which is the Company's peak wholesale shipping period and a major retail selling season at its retail stores. The Company's second quarter sales and income are lowest, both because of relatively low domestic wholesale unit shipments and relatively modest retail outlet store sales during this period. The Company anticipates this seasonal trend to continue to impact 1997 quarterly sales and net income. Second quarter 1997 operating results are not necessarily indicative of anticipated quarterly results through the balance of the year. FINANCIAL CONDITION, CAPITAL RESOURCES, AND LIQUIDITY The Company's financial condition remains strong. At June 30, 1997 the Company's cash, cash equivalents and short-term investments were $42.6 million, compared to $1.3 million at June 30, 1996. In addition, the Company had no direct borrowings outstanding under its line of credit at June 30, 1997 as compared to approximately $11.2 million outstanding under its credit line at June 30, 1996. Net working capital at June 30, 1997 was $106.3 million, as compared to $104.6 million at the end of 1996 and $110 million at June 30, 1996. The Company's current ratio was 3.8 to 1 at June 30, 1997, compared to 3.4 to 1 at the end of 1996 and at June 30, 1996. Accounts receivable at June 30, 1997 were $20.9 million compared to $31.4 million at June 30, 1996. This decrease in accounts receivable relates primarily to decreased wholesale sales for the second quarter of 1997 and the elimination of the Company's European operations. Inventories at June 30, 1997 were $60.8 million, compared to $98.9 million at June 30, 1996. This substantial decrease in inventories is attributable to the elimination of the Company's European and Genuine Kids businesses, sourcing adjustments made by the Company for the reduced volume of anticipated third and fourth quarter 1997 unit shipments, and an overall corporate focus on management of working capital. Management believes that at June 30, 1997 inventory levels are generally appropriate for anticipated business activities for the remainder of 1997. On June 30, 1997, the Company announced that its Board of Directors approved a Dutch auction self-tender offer to repurchase up to two million shares of the Company's Class A common stock and Class B common stock. The Dutch auction tender offer provides an opportunity for shareholders to tender shares within a range of $19 to $22 per share. The SEC has requested that the offer be stated separately for the Class A shares on the one hand and the Class B shares on the other, so the Company has amended the offer so that it is limited to 225,000 Class B shares and 1,775,000 Class A shares. As a result of this modification, the Company has also extended the period of the tender offer and the related proration period and withdrawal rights so that they now end at midnight on August 6, 1997. The Company believes that its cash, cash equivalents and short-term investments at June 30, 1997, available credit facilities, along with cash generated from operations, will be sufficient to finance this tender offer, as well as its seasonal working capital needs and remaining restructuring expenditures for the remainder of 1997. OUTLOOK The information contained in this outlook section is based on current assumptions and expectations. This information is forwardlooking and as such, is subject to certain risks and uncertainties. Actual results may differ materially. The Company's future results of operations can be influenced by such factors as business conditions and the general economy, competitive factors, the level of consumer spending for apparel, particularly in the children's wear segment, as well as overall consumer acceptance of the Company's product styling. Other risks and uncertainties are identified in the Company's 1996 Form 10-K. The forward-looking statements included herein are only made as of the date of this report. The Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. As a result of the Company's 1996 strategic decision to reduce wholesale distribution, the Company anticipates a reduction in its wholesale business during the second half of 1997 of 5% to 10% below the second half of 1996. Current Company plans for the remainder of 1997 call for the opening of seven new OshKosh B'Gosh retail stores and the closing of two stores. Management currently anticipates that its gross profit margins during the remainder of 1997 will continue to compare favorably with gross profit margins reported in the last two quarters of 1996, primarily as a result of the continuing impact of the implementation of the Company's strategic sourcing plan, reduction in the level of close-out merchandise, and anticipated increased retail sales at higher gross margins relative to its domestic wholesale business. The Company currently anticipates that, for all of 1997, its net royalty income from foreign licensees will increase by more than 40%. The Company also currently expects its effective tax rate to be approximately 40% for the remainder of 1997. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The registrant's annual meeting of stockholders was held on May 2, 1997 (the "1997 Annual Meeting"). A majority of the shares of each class of the registrant's Common Stock, represented in person or by proxy, was required to constitute a quorum for action to be taken by such class. A total of 9,666,718 shares of Class A Common Stock and 1,067,901 shares of Class B Common Stock were represented, in person or by proxy, at the 1997 Annual Meeting, constituting a quorum of each class. With respect to the election of Class A Directors, the following votes were cast in favor of and withheld with respect to the following management nominees: Broker Nominee Votes in Favor Votes Withheld Non-Votes Orren J. Bradley 9,572,590 94,128 0 Jerry M. Hiegel 9,572,915 93,803 0 With respect to the election of Class B Directors, the following votes were cast in favor of and withheld with respect to the following management nominees: Nominee Votes in Favor Votes Withheld Broker Non-Votes Douglas W. Hyde 1,065,771 2,130 0 Michael D. Wachtel 1,065,771 2,130 0 David L. Omachinski 1,065,771 2,130 0 Steven R. Duback 1,065,771 2,130 0 Shirley A. Dawe 1,065,771 2,130 0 William F. Wyman 1,065,771 2,130 0 Stig A. Kry 1,065,771 2,130 0 Directors are elected by a plurality of the votes of the shares of the class entitled to elect such directors, present in person or represented by proxy at the meeting. "Plurality" means that the individuals who receive the largest number of votes are elected as directors up to the maximum number of directors to be chosen at the meeting. There were no nominees for director other than management's nominees identified above. Accordingly, each such nominee received a plurality of the votes cast by shares of the class indicated and, therefore, was elected. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OSHKOSH B'GOSH, INC. Date: July 22, 1997 /S/ DOUGLAS W. HYDE Chairman of the Board, President Chief Executive Officer and Director Date: July 22, 1997 /S/ DAVID L. OMACHINSKI Vice President-Finance, Treasurer, Chief Financial Officer and Director EX-27 2
5 1000 6-MOS DEC-31-1997 JUN-30-1997 30915 11670 26234 5342 60849 144829 65358 27760 190251 38572 0 0 0 117 138239 190251 168507 172584 112431 166090 145 0 129 6220 2490 3730 0 0 0 3730 0.32 0.32
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