-----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, HWGVGcILBZC2uv3FDatkKVdNTLLxr9j9T5yIC5LLAbGUzYQCavije/1h5UTmVQbE 3kehHLaxUt/66lcUg0w3EQ== /in/edgar/work/0000075042-00-000011/0000075042-00-000011.txt : 20001025 0000075042-00-000011.hdr.sgml : 20001025 ACCESSION NUMBER: 0000075042-00-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSHKOSH B GOSH INC CENTRAL INDEX KEY: 0000075042 STANDARD INDUSTRIAL CLASSIFICATION: [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: 744520 BUSINESS ADDRESS: STREET 1: 112 OTTER AVE STREET 2: P O BOX 300 CITY: OSHKOSH STATE: WI ZIP: 54901 BUSINESS PHONE: 9202318800 MAIL ADDRESS: STREET 1: 112 OTTER AVE CITY: OSHKOSH STATE: WI ZIP: 54901 10-Q 1 0001.txt 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 September 30, 2000 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. A Delaware Corporation 39-0519915 (I.R.S. ID) 112 Otter Avenue Oshkosh, Wisconsin 54901 Telephone number: (920) 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 October 16, 2000, there were outstanding 9,937,017 shares of Class A Common Stock and 2,232,177 shares of Class B Common Stock. FORM 10-Q OSHKOSH B'GOSH, INC. AND SUBSIDIARIES INDEX Page Part I. Financial Information 3 Item 1. Financial Statements 3 Condensed Consolidated Balance Sheets- September 30, 2000 and January 1, 2000 3 Unaudited Condensed Consolidated Statements of Income-Three Month and Nine Month Periods Ended September 30, 2000 and October 2, 1999 4 Unaudited Condensed Consolidated Statements of Cash Flow-Nine Month Periods Ended September 30, 2000 and October 2, 1999 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 Part II. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures Part 1. Financial Information Item 1. Financial Statements OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands) September 30, 2000 January 1, 2000* (unaudited) Assets Current assets Cash and cash equivalents $ 972 $ 9,093 Investments 511 511 Accounts receivable 39,407 16,514 Inventories 55,051 48,495 Prepaid expenses & other current assets 2,544 774 Deferred income taxes 12,700 14,200 Total current assets 111,185 89,587 Property, plant & equipment 68,545 67,118 Less accumulated depreciation and amortization 37,820 35,470 Net property, plant & equipment 30,725 31,648 Non-current deferred income taxes 5,900 5,400 Other assets 1,909 3,064 Total assets $ 149,719 $ 129,699 Liabilities and shareholders' Equity Current liabilities Borrowings under revolving credit agreement $ 125 $ -- Current portion of long-term debt -- 15,000 Accounts payable 6,258 10,269 Accrued liabilities 47,792 36,976 Total current liabilities 54,175 62,245 Long-term debt 44,000 29,000 Employee benefit plan liabilities 15,535 15,015 Shareholders' equity Preferred stock -- -- Common stock: Class A 99 104 Class B 22 23 Retained earnings 35,888 23,312 Total shareholders' equity 36,009 23,439 Total liabilities and shareholders' equity $ 149,719 $ 129,699 *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 Nine Month Period Ended September 30, October 2, September 30, October 2, 2000 1999 2000 1999 Net sales $142,339 $140,831 $324,890 $325,280 Cost of products sold 81,360 82,892 185,887 192,823 Gross profit 60,979 57,939 139,003 132,457 Selling, general and administrative expenses 36,461 36,073 104,707 99,047 Royalty income, net (2,668) (2,249) (6,344) (5,911) Operating income 27,186 24,115 40,640 39,321 Other income (expense): Interest expense (1,697) (193) (4,102) (571) Interest income 131 212 554 708 Miscellaneous 1,105 (52) 1,160 (131) Other income (expense) - net (461) (33) (2,388) 6 Income before income taxes 26,725 24,082 38,252 39,327 Income taxes 10,423 9,388 14,918 15,338 Net income $ 16,302 $ 14,694 $ 23,334 $ 23,989 Net income per common share Basic $ 1.34 $ 0.90 $ 1.89 $ 1.43 Diluted $ 1.33 $ 0.89 $ 1.86 $ 1.41 Weighted average common shares outstanding Basic 12,169 16,280 12,369 16,825 Diluted (including share equivalents) 12,304 16,486 12,526 17,056 Cash dividends per common share Class A $ 0.0500 $ 0.0500 $ 0.1500 $ 0.1500 Class B $ 0.0425 $ 0.0425 $ 0.1275 $ 0.1275 See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flow (In thousands) (Unaudited) Nine Month Period Ended September 30, October 2, 2000 1999 Cash flows from operating activities Net income for the period $ 23,334 $ 23,989 Depreciation and amortization 5,978 5,588 Deferred income taxes 1,000 1,500 Income tax benefit from stock option exercises 325 530 Items in net income not affecting cash and cash equivalents (503) 741 Changes in current assets (31,219) 6,021 Changes in current liabilities 6,805 4,596 Net cash provided by operating activities 5,720 42,965 Cash flows from investing activities Additions to property, plant and equipment (4,896) (5,604) Proceeds from disposal of assets 1,591 635 Sale of short-term investments, net -- 2,015 Changes in other assets 428 (616) Net cash used in investing activities (2,877) (3,570) Cash flows from financing activities Borrowings under revolving credit agreement 125 -- Dividends paid (1,805) (2,488) Net proceeds from issuance of common shares 579 635 Repurchase of common shares (9,863) (32,717) Net cash used in financing activities (10,964) (34,570) Net increase (decrease) in cash and cash equivalents $ (8,121) $ 4,825 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 consolidated 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 September 30, 2000, the results of operations for the three-month and nine-month periods ended September 30, 2000 and October 2, 1999, and cash flows for the nine-month periods ended September 30, 2000 and October 2, 1999. 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 consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 1999 Annual Report. Note 2. Inventories A summary of inventories follows: September 30, 2000 January 1, 2000 (Dollars in thousands) Finished goods $ 42,457 $ 37,262 Work in process 11,502 9,352 Raw materials 1,092 1,881 Total $ 55,051 $ 48,495 The replacement cost of inventory exceeds the above LIFO costs by $11,831 and $11,381 at September 30, 2000 and January 1, 2000, respectively. Note 3. Credit Agreements In May 2000, the Company amended its credit agreement with a number of banks. As amended, the unsecured credit agreement provides a $60 million term loan for the repurchase of shares of its common stock and a three year $75 million revolving credit facility available for general corporate purposes, including cash borrowings, commercial paper and issuances of letters of credit. The revolving credit facility expires November 3, 2002. The Company had $44.1 million of outstanding debt at September 30, 2000, including $44 million on the term loan and $.1 million on the revolving credit facility. The revolving credit facility must be reduced to zero for at least thirty consecutive days each year, and the term loan requires an initial payment of $10 million in November 2001. Note 4. Segment Reporting The Company designs, sources, and markets apparel products using primarily the OshKosh B'Gosh brand. The apparel products are primarily marketed in two distinct distribution channels: domestic wholesale and through Company owned retail stores. The Company designs and sources product to meet the needs of these distribution channels through a single procurement business unit. In conjunction with a realignment of the Company's management reporting system at the beginning of 2000, certain operations have been segregated into segments as defined by Statement of Financial Accounting Standards, No. 131, "Disclosures about Segments of an Enterprise and Related Information". The Company manages its business operations by periodic analysis of business unit operating results. For this purpose, domestic wholesale, retail, and procurement are separately identified for management reporting and are considered segments as defined by SFAS #131. Management evaluates the operating performance of each of its business units based on income from operations as well as return on net assets. For this purpose, product is transferred to the domestic wholesale and retail business units at cost. However, procurement receives a markup on product transferred to the Company's marketing business units. Accounting policies used for segment reporting are consistent with the Company's overall accounting policies, except that inventories are valued on a first-in first-out basis. In addition, interest income, interest expense, certain corporate office expenses, and the effects of the last-in, first-out (LIFO) inventory valuation method are not allocated to individual business units, and are included in the All Other/Corporate column below. Segment assets include all assets used in the operation of each business unit, including accounts receivable, inventories, and property, plant and equipment. Certain other corporate assets that cannot be specifically identified with the operation of a business unit are not allocated. Financial information for the Company's reportable segments follows: Domestic All Other/ Wholesale Retail Procurement Corporate Total For the three months ended September 30, 2000 Net sales $ 70,107 $ 71,140 $ -- $ 1,092 $142,339 Segment income before taxes 12,109 11,848 1,120 1,648 26,725 Segment assets 71,330 40,795 23,068 14,526 149,719 Depreciation expense 410 888 281 192 1,771 For the three months ended October 2, 1999 Net sales $ 72,029 $ 66,918 $ -- $ 1,884 $140,831 Segment income before taxes 11,157 8,118 3,783 1,024 24,082 Segment assets 66,098 38,623 19,845 33,135 157,701 Depreciation expense 398 777 284 276 1,735 For the nine months ended September 30, 2000 Net sales $156,291 $163,215 $ -- $ 5,384 $324,890 Segment income before taxes 18,147 16,215 945 2,945 38,252 Segment assets 71,330 40,795 23,068 14,526 149,719 Depreciation expense 1,206 2,369 1,013 664 5,252 For the nine months ended October 2, 1999 Net sales $169,795 $149,177 $ -- $ 6,308 $325,280 Segment income before taxes 16,990 10,362 8,724 3,251 39,327 Segment assets 66,098 38,623 19,845 33,135 157,701 Depreciation expense 1,160 2,154 912 916 5,142 For the twelve months ended January 1, 2000 Net sales $212,371 $210,350 $ -- $ 7,065 $429,786 Segment income before taxes 21,896 18,278 10,556 2,457 53,187 Segment assets 52,580 31,922 19,796 25,401 129,699 Depreciation expense 1,570 3,107 1,222 1,194 7,093 Item 2. 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 Three Month Period Ended Nine Month Period Ended September 30, October 2, September 30, October 2, 2000 1999 2000 1999 Net sales 100.0% 100.0% 100.0% 100.0% Cost of products sold 57.2% 58.9% 57.2% 59.3% Gross profit 42.8% 41.1% 42.8% 40.7% Selling, general and administrative expenses 25.6% 25.6% 32.2% 30.4% Royalty income, net (1.9%) (1.6%) (1.9%) (1.8%) Operating income 19.1% 17.1% 12.5% 12.1% Other income (expense)-net (.3%) -- (.7%) -- Income before income taxes 18.8% 17.1% 11.8% 12.1% Income taxes 7.3% 6.7% 4.6% 4.7% Net income 11.5% 10.4% 7.2% 7.4% Net Sales Consolidated net sales for the three month period ended September 30, 2000 were $142.3 million, a $1.5 million increase (1.1%) over 1999 third quarter net sales of $140.8 million. Consolidated net sales for the nine month period ended September 30, 2000 were $324.9 million, a $.4 million decrease (.1%) from net sales of $325.3 million for the first nine months of 1999. The Company's net sales for the three month and nine month periods ended September 30, 2000 and October 2, 1999 are summarized as follows: Net Sales (in millions) Domestic Wholesale Retail International Total Three month period ended: September 30, 2000 $ 70.1 $ 71.1 $ 1.1 $ 142.3 October 2, 1999 72.0 66.9 1.9 140.8 Increase (decrease) $ (1.9) $ 4.2 $ (.8) $ 1.5 Percent increase (decrease) (2.6%) 6.3% (42.1%) 1.1% Nine month period ended: September 30, 2000 $ 156.3 $163.2 $ 5.4 $ 324.9 October 2, 1999 169.8 149.2 6.3 325.3 Increase (decrease) $ (13.5) $ 14.0 $ (.9) $ (.4) Percent increase (decrease) (8.0%) 9.4% (14.3%) (.1%) The Company's domestic wholesale unit shipments for the three month period ended September 30, 2000 were up approximately 6.5% over the corresponding three month period of 1999. This increase was primarily due to an increase in the number of "close-out" units sold. The 2.6% decrease in net sales dollars was impacted by lower average unit selling prices and higher customer sales allowances. Domestic wholesale unit shipments for the nine month period ending September 30, 2000 decreased 1.5% as compared to 1999. The nine month decrease in unit shipments resulted primarily from slightly lower customer orders. Net sales dollars for the first nine months of 2000 were also impacted by a combination of lower average selling prices and product mix (i.e. a higher mix of lighter weight, lower unit cost garments). As a result of a combination of movement of customer orders to October 2000 (as compared to September in 1999) and higher customer demand, the Company currently anticipates a 10-15% increase in domestic wholesale sales dollars in the fourth quarter of 2000 as compared to 1999's fourth quarter. The Company's third quarter 2000 retail sales increase resulted primarily from sales volume from stores opened subsequent to October 2, 1999. Third quarter 2000 comparable stores sales were down approximately 1.0% as compared to a 6.8% increase in the third quarter of 1999. The Company's increase in retail sales for the first nine months of 2000 resulted from a combination of a .7% comparable store sales gain (as compared to 6.2% for the first nine months of 1999) and sales volume from newly opened stores. For the remainder of 2000, the Company currently anticipates comparable store sales gains in the low single digit range. At September 30, 2000 the Company operated 130 domestic OshKosh retail stores, including 125 outlet stores, three showcase stores and two strip mall stores. During the third quarter of 2000, the Company opened one store and closed two existing stores. At October 2, 1999, the Company operated 128 domestic OshKosh retail stores. Current Company plans for the remainder of 2000 call for the addition of approximately six retail stores including three strip mall stores. Gross Profit The Company's gross profit margin as a percent of net sales improved to 42.8% in the third quarter of 2000, compared to 41.1% in the third quarter of 1999. For the nine month period ended September 30, 2000, gross profit margin as a percent of net sales improved to 42.8%, compared to 40.7% for the first nine months of 1999. This gross profit margin improvement was due primarily to continued implementation and execution of the Company's global sourcing strategy, continuing focus on product design and development activities, and increasing proportion of sales from the Company's retail stores. The Company's current 2000 sourcing plan indicates that approximately 74% of units will be produced at off shore venues as compared to approximately 64% in 1999. Substantially all of the Company's inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) basis. As a result of a substantial reduction of the Company's inventory levels, the fourth quarter 1999 gross profit margin was favorably impacted by an approximate $2.2 million benefit related to the liquidation of certain LIFO layers. The Company does not currently anticipate any significant liquidation of LIFO layers in the fourth quarter of 2000. Accordingly, the Company's fourth quarter gross profit margin as a percent of sales may be significantly less in 2000 as compared to 1999's fourth quarter. Selling, General, and Administrative Expenses (S,G&A) S,G&A expenses for the three month and nine month periods ended September 30, 2000 increased $.4 million and $5.7 million over the three and nine month periods ended October 2, 1999, respectively. As a percentage of net sales, S,G,&A expenses were 25.6% and 32.2% for the three month and nine month periods ended September 30, 2000 as compared to 25.6% and 30.4% in the comparable periods of 1999. The increase in S,G,&A expenses relates primarily to a combination of continued expansion of the Company's retail operations and higher product distribution expenses associated with the Company's transition to an updated distribution system and related processes. Third quarter and year-to-date distribution expenses were $.6 million and $2.0 million higher, respectively, as compared to 1999. Royalty Income The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. Royalty income for the three month period ended September 30, 2000 was $2.7 million compared to $2.2 million in the third quarter of 1999. Royalty income for the nine month period ended September 30, 2000 of $6.3 million was $.4 million greater than royalty income of $5.9 million for the nine month period ending October 2, 1999. Operating Income As a result of the factors described above, the Company's operating income for the three month and nine month periods ended September 30, 2000 amounted to $27.2 million and $40.6 million as compared to $24.1 million and $39.3 million for the comparable periods in 1999. Other Income (Expense) - Net The Company's third quarter 2000 net other income (expense) was a $.5 million expense compared to $33,000 in 1999. Interest expense increased by approximately $1.5 million in the third quarter of 2000 and $3.5 million in the nine months ended September 30, 2000, primarily as a result of borrowings to help finance the Company's Dutch Auction tender offer in November 1999 and subsequent stock repurchase transactions along with higher seasonal borrowings for working capital requirements. The Company also recognized a gain on the sale of a previously closed manufacturing facility in the third quarter of 2000 of approximately $1.1 million. Income Taxes The Company's effective tax rate for the three month and nine month periods ended September 30, 2000, as well as 1999, was approximately 39%. The Company currently anticipates an effective income tax rate of approximately 39% for the remainder of 2000. Net Income Net income for the three months ended September 30, 2000 of $16.3 was a $1.6 million increase compared to net income for the three months ended October 2, 1999 of $14.7 million. Of this increase, $.7 million ($.06 per diluted common share) is attributable to the after tax gain on sale of a manufacturing facility. Net income for the nine months ended September 30, 2000 of $23.3 million was a $.7 million decrease compared to net income for the nine months ended October 2, 1999. The Company's ongoing stock repurchase programs and November 1999 Dutch Auction tender offer resulted in a significant reduction in its weighted-average diluted shares outstanding for the first nine months of 2000 compared to the first nine months of 1999. The increase in net income, combined with the decrease in weighted-average diluted shares outstanding, resulted in a 49.4% increase in diluted earnings per share for the third quarter of 2000 of $1.33 as compared to $.89 in 1999. 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 2000 quarterly sales and income. Third quarter 2000 operating results are not necessarily indicative of anticipated quarterly results throughout the balance of the year. FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY At September 30, 2000, the Company's cash, cash equivalents and short-term investments were $1.5 million, compared to $9.6 million at the end of 1999 and $19.6 at October 2, 1999. This reduction is attributable to the Company's stock repurchases and increased inventory buildup. Net working capital at September 30, 2000 was $57.0 million compared to $27.3 million at January 1,2000, and $67.5 million at October 2, 1999. Accounts receivable at September 30, 2000 were $39.4 million compared to $16.5 million at January 1, 2000 and $39.2 million at October 2, 1999. Cash provided by operations amounted to approximately $5.7 million in the first nine months of 2000, compared to $43.0 million in the first nine months of 1999. The change in cash provided by operating activities in the first nine months of 2000 compared to 1999 is primarily attributable to substantially lower inventory levels at January 1, 2000, as compared to January 2, 1999. Inventories at September 30, 2000 were $55.1 million, compared to $48.5 million at January 1, 2000, $43.2 million at October 2, 1999 and $65.6 million at January 2, 1999. Management believes that September 30, 2000 inventory levels are generally appropriate for anticipated ongoing 2000 business activities. Investing activities used $2.9 million in the first nine months of 2000, compared to $3.6 million in 1999. Capital expenditures were $4.9 million in the first nine months of 2000, compared with $5.6 million in 1999 and are currently budgeted at $7 million for all of 2000. Capital expenditures in both years relate primarily to expansions and upgrades of the Company's retail stores. Depreciation and amortization are currently budgeted at $8 million for 2000. Cash used in financing activities totaled $11.0 million in the first nine months of 2000, compared to a use of $34.6 million in the first nine months of 1999. The Company's primary financing activities consisted of stock repurchase transactions and cash dividends in both periods. On December 6, 1999, the Company's Board of Directors authorized a 1.5 million share repurchase program of the Company's Class A common stock. During the first nine months of 2000, the Company repurchased 565,700 shares of its Class A common stock under this program for approximately $9.9 million. The Company has repurchased a total of 819,600 shares of its Class A common stock under its current repurchase programs for approximately $14.7 million. The Company's credit agreement, as amended, provides a $60 million term loan for the repurchase of shares of its common stock and a three year $75 million revolving credit facility available for general corporate purposes, including cash borrowings, commercial paper and issuances of letters of credit. The revolving credit facility expires November 3, 2002. The term loan requires an initial repayment of $10.0 million in November 2001. The Company had $44.1 million of outstanding debt at September 30, 2000, including $44 million on the term loan and $.1 million on the revolving credit facility compared to $44 million on the term loan at January 1, 2000, and no outstanding debt at October 2, 1999. The Company believes that the new credit facilities, along with cash generated from operations, will be sufficient to finance the Company's seasonal working capital needs as well as its capital expenditures required debt payments and business development needs. INFLATION The effects of inflation on the Company's operating results and financial condition were not significant. FORWARD-LOOKING STATEMENTS This report 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, including statements regarding future sales, planned store expansions and store closings, future comparable store net sales, future inventory levels and valuation implications, future growth in royalty income, future effective income tax rate, planned capital expenditures and depreciation and amortization expenses, and future cash needs. In addition, from time to time, the Company may issue press releases and other written communications, and representatives of the Company may make oral statements which contain forward-looking information. Except for historical information, matters discussed in such oral and written communications, including this report, are forward- looking statements. 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 as 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, natural disasters, competitive factors, risk of non-payment of accounts receivable, the unanticipated loss of a major customer, 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 and/or distribution system 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, Mexico and Central America. If financial, political or other difficulties were to adversely impact the Company's contractors in these regions, 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. Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk The Company's credit agreement, as amended, provides for $60 million to finance repurchases of the Company's common stock and a $75 million revolving credit facility available for general corporate purposes. Borrowings under this agreement bear interest at a variable rate, based on the London Interbank Offered Rates. Accordingly, the Company is affected by interest rate changes on its long-term debt. Management monitors this risk by carefully analyzing the short-term rates on its long-term debt portfolio and comparable long-term interest rates. The Company does not presently hedge its interest rate risk. With respect to this debt, a 1% change in interest rates would not have a material impact on the Company's interest expense for fiscal 2000. Foreign Currency Risk The Company contracts for the manufacture of apparel with contractors in Asia, Central America, and Mexico. While these contracts are stated in terms of U.S. dollars, there can be no assurance that the cost for the production of the Company's products will not be affected by exchange fluctuations between the United States and the local currencies of these contractors. Due to the number of currencies involved, the Company cannot quantify the potential impact of future currency fluctuations on net income in future years. The Company does not hedge its exchange rate risk. Inflation Risk The Company manages its inflation risks by ongoing review of product selling prices and production costs. Management does not believe that inflation risks are material to the Company's business, its consolidated financial position, results of operations, or cash flows. Investment Risk The Company does not believe it has material exposure to market risk with respect to any of its investments as the Company does not utilize market rate sensitive instruments for trading or other purposes. 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: 10/24/2000 /S/DOUGLAS W. HYDE Chairman of the Board, President Chief Executive Officer and Director Date: 10/24/2000 /S/DAVID L. OMACHINSKI Vice President-Finance, Treasurer Chief Financial Officer and Director EX-27 2 0002.txt
5 9-MOS DEC-30-2000 SEP-30-2000 972,000 511,000 48,258,000 8,851,000 55,051,000 111,185,000 68,545,000 37,820,000 149,719,000 54,175,000 0 0 0 121,000 35,888,000 149,719,000 324,890,000 331,234,000 185,887,000 104,707,000 1,160,000 0 4,102,000 38,252,000 14,918,000 23,334,000 0 0 0 23,334,000 1.89 1.86
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