-----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, S22VsZwx5D/dAt0j6M23dSp6eAeV8PtX0hHGgh1dUd08m2twNzdbi6wk0H1nqpcZ gY29GrBN0PVQQ2dGtHUXgA== 0000075042-98-000004.txt : 19980424 0000075042-98-000004.hdr.sgml : 19980424 ACCESSION NUMBER: 0000075042-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980422 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: SEC FILE NUMBER: 000-13365 FILM NUMBER: 98598371 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 April 4, 1998 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) (920) 231-8800 (Registrant's telephone number) Effective January 1, 1998, the Company changed its fiscal year from a calendar year to a 52/53-week year ending on the Saturday closest to December 31 (January 2, 1999 for fiscal 1998). 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 April 4, 1998, there were outstanding 8,705,504 shares of Class A Common Stock and 1,177,357 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-April 4, 1998 and December 31, 1997 3 Unaudited Condensed Consolidated Statements of Income-Three Month Periods ended April 4, 1998 and March 31, 1997 4 Unaudited Condensed Consolidated Statements of Cash Flow-Three Month Periods Ended April 4, 1998 and March 31, 1997 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 11 Signatures 11 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands) April 4, December 31, 1998 1997 * (unaudited) Assets Current assets Cash and cash equivalents $ 15,358 $ 13,779 Short-term investments --- 8,700 Accounts receivable 30,893 23,278 Inventories 64,108 68,226 Prepaid expenses & other current assets 4,772 1,265 Deferred income taxes 15,000 15,800 Total current assets 130,131 131,048 Property, plant & equipment 66,836 62,192 Less accumulated depreciation and amortization 31,137 29,237 Net property, plant & equipment 35,699 32,955 Non-current deferred income taxes 5,300 5,500 Other assets 5,170 5,285 Total assets $ 176,300 $ 174,788 Liabilities and shareholders' equity Current liabilities Accounts payable $ 2,962 $ 10,273 Accrued expenses 41,208 38,013 Total current liabilities 44,170 48,286 Employee benefit plan liabilities 13,638 13,345 Shareholders' equity Preferred stock --- --- Common stock: Class A 87 87 Class B 12 12 Additional paid-in capital 672 --- Retained earnings 117,721 113,058 Total shareholders' equity 118,492 113,157 Total liabilities and shareholders' equity $ 176,300 $ 174,788 *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 Month Period Ended April 4, March 31, 1998 1997 Net sales $ 102,535 $ 97,363 Cost of products sold 65,146 65,069 Gross profit 37,389 32,294 Selling, general and administrative expenses 30,662 27,367 Royalty income, net (2,254) (1,806) Operating income 8,981 6,733 Other income (expense): Interest expense (85) (32) Interest income 238 393 Miscellaneous (51) (128) Other income -- net 102 233 Income before taxes 9,083 6,966 Income taxes 3,742 2,790 Net income $ 5,341 $ 4,176 Net income per common share Basic $ 0.54 $ 0.35 Diluted $ 0.53 $ 0.35 Weighted average common shares outstanding Basic 9,865 11,777 Diluted (Including share equivalents) 9,987 11,780 Cash dividends per common share Class A $ 0.07 $ 0.07 Class B $ 0.06 $ 0.06 See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flow (Dollars in thousands) (Unaudited) Three Month Period Ended April 4, March 31, 1998 1997 Cash flows from operating activities Net income for the period $ 5,341 $ 4,176 Depreciation 2,249 2,113 Provision for deferred income taxes 1,000 3,000 Items in income not affecting cash 542 305 Changes in current assets (7,004) 4,102 Changes in current liabilities (3,845) (7,424) Net cash provided by (used in) operating activities (1,717) 6,272 Cash flows from investing activities Additions to property, plant and equipment (5,135) (1,624) Proceeds from disposal of assets 43 661 Proceeds from sale of short-term investments 8,700 --- Other (34) (389) Net cash provided by (used in) investing activities 3,574 (1,352) Cash flows from financing activities Cash dividends paid (678) (814) Common shares issued, net 400 --- Repurchase of common shares --- (1,691) Net cash used in financing activities (278) (2,505) Net increase in cash and cash equivalents $ 1,579 $ 2,415 See notes to condensed consolidated financial statements. 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 April 4, 1998, the results of operations for the three month periods ended April 4, 1998 and March 31, 1997, and cash flows for the three month periods ended April 4, 1998 and March 31, 1997. 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 1997 Annual Report. Effective January 1, 1998, the Company changed its fiscal year from a calendar year to a 52/53-week year ending on the Saturday closest to December 31 (January 2, 1999 for fiscal 1998). Each quarter will generally consist of a 13-week period ending on a Saturday. Due to the conversion to a 52/53-week year, the first quarter of 1998 consists of 13 weeks and 3 days. Accordingly, the first quarter period ended April 4, 1998 is four days longer than the comparative quarter in fiscal 1997. Note 2. Inventories A summary of inventories follows: April 4, December 31, 1998 1997 (Dollars in thousands) Finished goods $ 46,587 $ 49,400 Work in process 14,967 14,782 Raw materials 2,554 4,044 Total $ 64,108 $ 68,226 The replacement cost of inventory exceeds the above LIFO costs by $14,318 and $14,138 at April 4, 1998 and December 31, 1997, respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected Company income statement data expressed as a percentage of net sales. As a Percentage of Net Sales for the First Quarter Ended April 4, 1998 March 31, 1997 Net sales 100.0% 100.0% Cost of products sold 63.5% 66.8% Gross profit 36.5% 33.2% Selling, general and administrative expenses 29.9% 28.1% Royalty income, net (2.2%) (1.9%) Operating income 8.8% 7.0% Other income, net 0.1% 0.2% Income for income taxes 8.9% 7.2% Income taxes 3.7% 2.9% Net income 5.2% 4.3% Net Sales Consolidated net sales for the three months ended April 4, 1998 were $102.5 million, a $5.1 million increase (5.3%) over 1997 first quarter net sales of $97.4 million. The Company's net sales for the three month periods ended April 4, 1998 and March 31, 1997 are summarized as follows: Net Sales (in millions) Domestic Wholesale Retail International Total Three months ended: April 4, 1998 $ 64.1 $ 36.6 $ 1.8 $102.5 March 31, 1997 62.3 32.8 2.3 97.4 Increase (decrease) 1.8 3.8 (.5) 5.1 Percent increase (decrease) 2.9% 11.6% (21.7%) 5.3% The Company's first quarter 1998 domestic wholesale unit shipments were up 5.9% over 1997. This increase in unit shipments and sales dollars for the first quarter of 1998 resulted primarily from the Company's change in its fiscal year end to a 52/53-week period ending on the Saturday closest to December 31. As a result, the Company's first quarter 1998 ended April 4, which resulted in an additional three days of wholesale shipments as compared to the quarter ended March 31, 1997. The Company's first quarter 1998 retail sales increase resulted from a combination of a 10.6% comparable store sales gain and sales volume from stores opened subsequent to March 31, 1997. First quarter 1998 comparable store sales were favorably impacted by sales of bigger sizes of Genuine Girl and Genuine Blues branded products for the entire quarter. These sizes were introduced during the first quarter of 1997. For the remainder of 1998, the Company currently anticipates comparable store sales gains in the middle single digit range. At April 4, 1998 the Company operated 120 domestic OshKosh retail stores, including 112 outlet stores and 8 showcase stores. During the first quarter of 1998, the Company opened one retail store. At March 31, 1997 the Company operated a total of 113 domestic OshKosh retail stores. Current Company plans for the remainder of 1998 call for the addition of 7 retail stores. Gross Profit The Company's gross profit margin as a percent of sales improved to 36.5% in the first quarter of 1998, compared to 33.2% in the first quarter of 1997. This gross profit margin improvement was due primarily to continued implementation and execution of the Company's sourcing strategy, improved operating efficiencies at the Company's domestic sewing facilities, and the impact of the Company's increased retail sales at higher gross margins as compared to the wholesale business. The Company's current 1998 sourcing plan indicates that approximately 41% of units will be produced at the Company's domestic facilities as compared to approximately 47% in 1997. Selling, General, and Administrative Expenses (S,G&A) S,G&A expenses for the first quarter of 1998 increased $3.3 million over the first quarter of 1997. As a percentage of net sales, S,G&A expenses were 29.9% for the first quarter of 1998 as compared to 28.1% for the first quarter of 1997. The increase in S,G&A expenses relates primarily to a combination of continued expansion of the Company's retail operations and expansion of the Company's brand enhancing activities. Royalty Income The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. The Company's first quarter 1998 net royalty income of $2.3 million increased approximately 24.8% over net royalty income earned in the first quarter of 1997 of approximately $1.8 million, resulting primarily from increased royalty income generated from domestic licensees. Operating Income As a result of the factors described above, the Company's income before income taxes increased to $9.1 million for the first quarter of 1998 as compared to $7.0 million for the first quarter of 1997. Income Taxes The Company's effective tax rate for the first quarter of 1998 was 41.2% as compared to 40.1% for the first quarter of 1997. Net Income Per Common Share The first quarter 1998 computation of net income per common share reflected a lower number of weighted average outstanding shares as compared to the first quarter of 1997 primarily as a result of the Company's Dutch auction tender offer which was completed in August 1997. SEASONALITY OF BUSINESS The Company's business is 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 outlet stores. The Company's second quarter sales and income are the lowest, both because of relatively low domestic wholesale unit shipments and relatively modest retail store sales during this period. The Company anticipates this seasonality trend to continue to impact 1998 quarterly sales and income. First quarter 1998 operating results are not necessarily indicative of anticipated quarterly results throughout the balance of the year. FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY At April 4, 1998 the Company's cash, cash equivalents and short- term investments were $15.4 million, compared to $43.7 million at March 31, 1997 and $22.5 million at December 31, 1997. Net working capital at April 4, 1998 was $86.0 million as compared to $82.8 million at the end of 1997 and $107.1 million at March 31, 1997. The Company's current ratio was 2.9 to 1 at April 4, 1998, compared to 2.7 at the end of 1997 and 3.9 to 1 at March 31, 1997. The reduction in cash, cash equivalents and short-term investments, net working capital, and current ratio at April 4, 1998 compared to March 31, 1997 is attributable primarily to the Company's stock repurchases, offset in part by cash generated from operations. Accounts receivable at April 4, 1998 were $30.9 million compared to $27.4 million at March 31, 1997. This increase in accounts receivable related primarily to increased wholesale sales resulting from the first quarter of 1998 ending on April 4, 1998 due to the change in the Company's fiscal year. Inventories at April 4, 1998 were $64.1 million, compared to $51.1 million at March 31, 1997. Management believes that at April 4, 1998 inventory levels are generally appropriate for anticipated business activities for the remainder of 1998. The Company's first quarter 1998 capital expenditures of $5.1 million compares to $1.6 million for the first quarter of 1997. This increase is primarily due to the Company's upgrade of its distribution systems and White House, Tennessee distribution facilities. Capital expenditures for all of 1998 are currently planned to be approximately $13.0 million, including approximately $8.0 million related to the distribution systems and facilities project. On August 25, 1997, the Company's Board of Directors authorized a 500,000 share repurchase program of the Company's Class A common stock. Through April 4, 1998, the Company repurchased 141,500 shares of its Class A common stock under this program for approximately $4.6 million. At April 4, 1998 and March 31, 1997 the Company had no outstanding long-term debt. The Company believes that its cash and cash equivalents at April 4, 1998, credit facilities, along with cash generated from operations, will be sufficient to finance the Company's seasonal working capital needs and planned capital expenditures for the remainder of 1998. OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE This Form 10-Q contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are based on current assumptions and expectations that involve risks and uncertainties. Actual results may differ materially. The Company's future results of operations and financial position can be influenced by such factors, the level of consumer spending for apparel, particularly in the children's wear segment, overall consumer acceptance of the Company's product styling, the financial strength of the retail industry, including, but not limited to, business conditions and the general economy, competitive factors, risk of non-payment of accounts receivable, failure of Company suppliers to timely deliver needed raw materials, as well as risk associated with foreign operations. In addition, the inability to ship Company products within agreed timeframes due to unanticipated manufacturing delays or the failure of Company contractors to deliver products within scheduled timeframes, are risk factors in ongoing business. As a part of the Company's product sourcing strategy, it routinely contracts for apparel products produced by contractors in Asia. If the current financial and related difficulties were to adversely impact the Company's contractors in the Asian region, it could disrupt the supply of products contracted for by the Company. 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. PART II. OTHER INFORMATION 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: 4/22/98 /S/DOUGLAS W. HYDE Chairman of the Board, President Chief Executive Officer and Director Date: 4/22/98 /S/DAVID L. OMACHINSKI Vice President-Finance, Treasurer Chief Financial Officer and Director EX-27 2
5 3-MOS JAN-02-1999 APR-04-1998 15,358,000 0 36,068,000 5,175,000 64,108,000 130,131,000 66,836,000 31,137,000 176,300,000 44,170,000 0 0 0 99,000 118,393,000 176,300,000 102,535,000 102,535,000 65,146,000 30,662,000 51,000 0 85,000 9,083,000 3,742,000 5,341,000 0 0 0 5,341,000 .54 .53
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