0000075042-01-500014.txt : 20011029
0000075042-01-500014.hdr.sgml : 20011029
ACCESSION NUMBER: 0000075042-01-500014
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010929
FILED AS OF DATE: 20011024
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: 1230
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-13365
FILM NUMBER: 1764701
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
q103rd01.txt
OSHKOSH B'GOSH, INC. THIRD QUARTER 10Q ENDED 9-29-01
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 29, 2001
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 15, 2001, there were outstanding 9,755,847 shares
of Class A Common Stock and 2,214,548 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 29, 2001 and December 30, 2000 3
Unaudited Condensed Consolidated Statements
of Income-Three Month and Nine Month Periods
Ended September 29, 2001 and September 30, 2000 4
Unaudited Condensed Consolidated Statements
of Cash Flow- Nine Month Periods Ended
September 29, 2001 and September 30, 2000 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 15
Part II. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures
Part I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
September 29, December 30,
2001 2000*
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 22,043 $ 19,839
Investments -- 511
Accounts receivable 33,698 30,166
Inventories 63,663 53,185
Prepaid expenses and
other current assets 1,797 1,882
Deferred income taxes 12,450 13,800
Total current assets 133,651 119,383
Property, plant and equipment 68,896 68,295
Less accumulated depreciation and
amortization 39,129 36,010
Net property, plant and equipment 29,767 32,285
Non-current deferred income taxes 4,800 4,950
Other assets 2,169 1,638
Total assets $ 170,387 $ 158,256
Liabilities and shareholders' equity
Current liabilities
Current portion of long-term debt $ 3,000 $ 10,000
Accounts payable 10,459 14,840
Accrued liabilities 47,696 39,942
Total current liabilities 61,155 64,782
Long-term debt 34,000 34,000
Employee benefit plan liabilities 14,830 15,001
Shareholders' equity
Preferred stock -- --
Common stock:
Class A 97 99
Class B 22 22
Additional paid-in capital -- --
Retained earnings 60,757 45,054
Unearned compensation under
restricted stock plan (474) (702)
Total shareholders' equity 60,402 44,473
Total liabilities and shareholders'
equity $ 170,387 $ 158,256
*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 September September September
29, 2001 30, 2000 29, 2001 30, 2000
Net sales $147,488 $142,339 $337,878 $324,890
Cost of products sold 83,824 81,360 194,983 185,887
Gross profit 63,664 60,979 142,895 139,003
Selling, general and
administrative expenses 38,061 36,461 109,267 104,707
Royalty income, net (2,945) (2,668) (7,128) (6,344)
Operating income 28,548 27,186 40,756 40,640
Other income (expense):
Interest expense (628) (1,697) (2,022) (4,102)
Interest income 176 131 648 554
Miscellaneous 35 1,105 69 1,160
Other income (expense)-net (417) (461) (1,305) (2,388)
Income before income taxes 28,131 26,725 39,451 38,252
Income taxes 10,802 10,423 15,149 14,918
Net income $ 17,329 $ 16,302 $ 24,302 $ 23,334
Net income per common share
Basic $ 1.42 $ 1.34 $ 1.99 $ 1.89
Diluted $ 1.37 $ 1.33 $ 1.93 $ 1.86
Weighted average common
shares outstanding
Basic 12,226 12,169 12,226 12,369
Diluted (including share
equivalents) 12,643 12,304 12,598 12,526
Cash dividends per common
share
Class A $ 0.0600 $ 0.0500 $ 0.1600 $ 0.1500
Class B $ 0.0525 $ 0.0425 $ 0.1375 $ 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 29, September 30,
2001 2000
Cash flows from operating
activities
Net income for the period $ 24,302 $ 23,334
Depreciation and amortization 5,987 5,978
Deferred income taxes 1,500 1,000
Income tax benefit from stock
option exercises 1,023 325
Items in net income not
affecting cash and
cash equivalents 46 (503)
Changes in current assets (13,925) (31,219)
Changes in current liabilities 3,373 6,805
Net cash provided by operating
activities 22,306 5,720
Cash flows from investing
activities
Additions to property, plant
and equipment (3,024) (4,896)
Proceeds from disposal of
assets 84 1,591
Sale of short-term investments,
net 511 --
Changes in other assets (1,049) 428
Net cash used in investing
activities (3,478) (2,877)
Cash flows from financing
activities
Borrowings under revolving
credit agreement -- 125
Payment on long-term debt (7,000) --
Dividends paid (1,907) (1,805)
Net proceeds from issuance of
common shares 2,627 579
Repurchase of common shares (10,344) (9,863)
Net cash used in financing
activities (16,624) (10,964)
Net increase (decrease) in cash
and cash equivalents 2,204 (8,121)
Cash and cash equivalents at
beginning of period 19,839 9,093
Cash and cash equivalents at end
of period $ 22,043 $ 972
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 29, 2001, and the results of operations
and cash flows for the nine-month periods ended September 29,
2001 and September 30, 2000.
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
2000 Annual Report.
Note 2. Inventories
A summary of inventories follows:
September 29, 2001 December 30, 2000
(Dollars in thousands)
Finished goods $ 52,519 $ 37,398
Work in process 10,069 12,595
Raw materials 1,075 3,192
Total $ 63,663 $ 53,185
The replacement cost of inventory exceeds the above LIFO costs by
$11,983 at September 29, 2001 and December 30, 2000,
respectively.
Note 3. 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.
Certain operations are classified as segments as defined by SFAS
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 No. 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 from
procurement to the domestic wholesale and retail business units
at cost. However, procurement receives a markup on product sold
by the Company's wholesale and retail business units. Accounting
policies used for segment reporting are consistent with the
Company's overall accounting policies, except that inventories
are valued on a FIFO basis. In addition, interest income,
interest expense, certain corporate office expenses, and the
effects of the 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:
All
Domestic Other/
Wholesale Retail Procurement Corporate Total
For the three
months ended
September 29,
2001
Net sales $ 69,561 $ 76,623 $ 3 $ 1,301 $147,488
Income before
income taxes 10,909 12,975 2,949 1,298 28,131
Assets 68,950 46,530 21,543 33,364 170,387
Depreciation
expense 407 895 280 217 1,799
For the three
months ended
September 30,
2000
Net sales $ 70,107 $ 71,140 $ -- $ 1,092 $142,339
Income before
income taxes 12,109 11,848 1,120 1,648 26,725
Assets 71,330 40,795 23,068 14,526 149,719
Depreciation
expense 410 888 281 192 1,771
For the nine
months ended
September 29,
2001
Net sales $162,554 $171,528 $ 3 $ 3,793 $337,878
Income before
income taxes 17,186 16,517 3,073 2,675 39,451
Assets 68,950 46,530 21,543 33,364 170,387
Depreciation
expense 1,260 2,721 841 647 5,469
For the nine
months ended
September 30,
2000
Net sales $156,291 $163,215 $ -- $ 5,384 $324,890
Income before
income taxes 18,147 16,215 945 2,945 38,252
Assets 71,330 40,795 23,068 14,526 149,719
Depreciation
expense 1,206 2,369 1,013 664 5,252
For the year
ended December
30, 2000
Net sales $215,982 $230,774 $ -- $ 6,306 $453,062
Income before
income taxes 22,794 25,505 824 3,670 52,793
Assets 62,140 36,216 25,160 34,740 158,256
Depreciation
expense 1,612 3,319 1,357 866 7,154
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 September September September
29, 2001 30, 2000 29, 2001 30, 2000
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products
sold 56.8% 57.2% 57.7% 57.2%
Gross profit 43.2% 42.8% 42.3% 42.8%
Selling, general
and Administrative
expenses 25.8% 25.6% 32.3% 32.2%
Royalty income,
net (2.0%) (1.9%) (2.1%) (1.9%)
Operating income 19.4% 19.1% 12.1% 12.5%
Other income
(expense) - net (.3%) (.3%) (.4%) (.7%)
Income before
income taxes 19.1% 18.8% 11.7% 11.8%
Income taxes 7.3% 7.3% 4.5% 4.6%
Net income 11.8% 11.5% 7.2% 7.2%
Net Sales
Consolidated net sales for the three month period ended September
29, 2001 were $147.5 million, a $5.2 million increase (3.7%) over
2000 third quarter net sales of $142.3 million. Consolidated net
sales for the nine month period ended September 29, 2001 were
$337.9 million, a $13.0 million increase (4.0%) from net sales of
$324.9 million for the first nine months of 2000. The Company's
net sales for the three month and nine month periods ended
September 29, 2001 and September 30, 2000 are summarized as
follows:
Net Sales
(in millions)
Domestic
Wholesale Retail Other Total
Three month period
ended:
September 29, 2001 $ 69.6 $ 76.6 $ 1.3 $ 147.5
September 30, 2000 70.1 71.1 1.1 142.3
Increase (decrease) $ (.5) $ 5.5 $ .2 $ 5.2
Percent increase
(decrease) (.7%) 7.7% 18.2% 3.7%
Nine month period
ended:
September 29, 2001 $ 162.6 $ 171.5 $ 3.8 $ 337.9
September 30, 2000 156.3 163.2 5.4 324.9
Increase (decrease) $ 6.3 $ 8.3 $ (1.6) $ 13.0
Percent increase
(decrease) 4.0% 5.1% (29.6)% 4.0%
The Company's domestic wholesale unit shipments from continuing
businesses (footwear and outerwear were licensed effective May 1,
2001) for the three month period ended September 29, 2001
increased approximately 5.1% as compared to the corresponding
three month period of 2000. Wholesale net sales for the third
quarter of 2001 of $69.6 million were approximately 6.9% over
third quarter 2000 net wholesale sales of $65.1 million (which
excludes approximately $5.0 million of footwear and outerwear net
sales). These increases resulted from a combination of higher
booked orders for the Fall back-to-school season along with more
timely shipment of late Fall orders to the Company's wholesale
customers. For the first nine months of 2001, wholesale unit
shipments from continuing businesses were approximately 9.5%
ahead of the corresponding period in 2000. Net sales for the
first three quarters of 2001 of $162.6 million were approximately
7.5% over 2000 net sales of approximately $151.3 million
exclusive of footwear and outerwear. Year-to-date increases in
unit shipments and net sales dollars are primarily the result of
higher booked orders for the period.
The Company's booked orders for the 2001 Holiday season (shipped
primarily in the fourth quarter) were below orders booked for the
Holiday 2000 season. The Company believes that this reduction is
due primarily to the significant economic slowdown experienced in
the U.S. and the cautious approach to inventory management by
many of the Company's wholesale customers. The Company currently
anticipates that its fourth quarter 2001 wholesale net sales will
be approximately $12 to $14 million below the fourth quarter of
2000. Of this amount, approximately $3 million represents net
sales of footwear and outerwear in the fourth quarter of 2000
which are now licensed products. Included in the Company's
estimate of fourth quarter 2001 wholesale net sales is
approximately $3-$4 million of sales of Spring 2002 product to a
new customer, Kohl's Department Stores.
Beginning with the Spring 2002 season, the Company will be
selling its product offering to Kohl's Department Stores. The
Company currently believes its net sales to Kohl's in 2002 will
approximate $40 to $45 million. The Company currently
anticipates its first quarter 2002 net wholesale sales to be up
approximately 12%-18% over the first quarter of 2001.
The Company's third quarter 2001 retail sales increase resulted
from a comparable store sales increase of 5.0% and from sales
volume from stores opened subsequent to September 30, 2000. (For
the period July 1 through September 10, 2001, the Company
experienced a comparable store sales increase of 6.7%. For the
period September 11 through September 29, 2001, comparable store
sales decreased 1.8%). The third quarter 2001 comparable store
sales increase was favorably impacted by more aggressive
promotional pricing, which had an adverse impact on gross profit
margins. The Company's increase in retail sales for the first
nine months of 2001 resulted from sales volume from newly opened
stores and a comparable store sales increase of 1.0% (as compared
to a .7% increase in 2000). Company management believes that the
year to date comparable store sales were impacted by lower
customer store traffic during the first quarter, due in part to
adverse weather conditions, a generally negative economic
environment and current events in the U.S. creating economic
uncertainty. For the remainder of 2001, the Company currently
anticipates a comparable store sales gain in the low single digit
range.
At September 29, 2001 the Company operated 137 domestic OshKosh
retail stores, including 130 outlet stores, two showcase stores,
and five strip mall stores. During the third quarter of 2001,
the Company opened two new outlet stores. At September 30, 2000
the Company operated a total of 130 domestic OshKosh retail
stores. Current Company plans for the remainder of 2001 call for
the addition of four outlet stores. Preliminary plans for 2002
call for the opening of ten new outlet stores.
Gross Profit
The Company's gross profit margin as a percent of net sales was
43.2% in the third quarter of 2001, compared to 42.8% in the
third quarter of 2000. For the three month period ended
September 29, 2001, the increase in gross margin percentage is
primarily attributable to an increased proportion of sales from
the Company's retail stores. For the nine month period ended
September 29, 2001 gross profit margin as a percent of net sales
was 42.3%, compared to 42.8% for the first nine months of 2000.
The modest decrease in gross margin percentage for the nine month
period was due to increased wholesale customer sales allowances
and a more aggressive promotional pricing strategy at the
Company's retail stores.
The Company currently anticipates a modest increase in its gross
profit margin in the fourth quarter of 2001 as compared to 2000,
which should result from an increased proportion of sales from
the Company's retail stores relative to its wholesale net sales
which are projected to be lower than the fourth quarter of 2000.
Fourth quarter 2001 gross profit margins will be adversely
impacted by a more aggressive pricing strategy at Company retail
stores and increased sales allowances and related support to the
Company's wholesale customers. The Company is currently on
target with its 2001 sourcing plan which calls for approximately
90% of units to be produced in off-shore venues as compared to
approximately 75% in 2000.
Selling, General, and Administrative Expenses (S,G&A)
S,G&A expenses for the three month and nine month periods ended
September 29, 2001 increased $1.6 million and $4.6 million over
the three and nine month periods ended September 30, 2000,
respectively. As a percentage of net sales, S,G&A expenses were
25.8% and 32.3% for the three month and nine month periods ended
September 29, 2001 as compared to 25.6% and 32.2% in the
comparable periods of 2000. The increase in S,G&A expenses in
dollars relates primarily to continued expansion of the Company's
retail operations.
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 29, 2001 was $2.9
million compared to $2.7 million in the third quarter of 2000.
Royalty income for the nine month period ended September 29, 2001
was $7.1 million compared with $6.3 million in the comparable
period of 2000. The increase is primarily attributable to
increased business levels by the Company's Japanese licensees for
the nine month period ending September 29, 2001, and royalty
income from new licenses for outerwear and footwear.
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 29, 2001 amounted to $28.5 million and $40.8 million as
compared to $27.2 million and $40.6 million for the comparable
periods in 2000.
Other Income (Expense) - Net
The Company's third quarter 2001 net other income (expense) was a
$.4 million expense compared to $.5 million in 2000. Interest
expense was lower for the third quarter and nine month period
ending September 29, 2001 compared to 2000 due to lower interest
rates and prepayment of $7 million of the Company's long-term
debt in the first quarter. Net other income (expense) in the
third quarter of 2000 included a $1.1 million gain on sale of a
previously closed manufacturing facility.
Income Taxes
The Company's effective tax rate for the three month and nine
month periods ended September 29, 2001, was approximately 38.4%
compared to 39.0% in 2000. The Company currently anticipates an
effective income tax rate of approximately 38.4% for the
remainder of 2001.
Net Income
Net income for the three months ended September 29, 2001 of $17.3
was a $1.0 million increase (6.1%) compared to net income for the
three months ended September 30, 2000 of $16.3 million. Net
income for the nine months ended September 29, 2001 of $24.3
million was a $1.0 million increase compared with net income for
the nine months ended September 30, 2000 of $23.3 million.
Diluted earnings per share for the quarter ended September 29,
2001 was $1.37, a $.04 (3.0%) increase over the comparable period
in 2000.
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
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 2001 quarterly sales and income. Third
quarter 2001 operating results are not necessarily indicative of
anticipated quarterly results throughout the balance of the year.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
At September 29, 2001, the Company's cash, cash equivalents and
short-term investments were $22.0 million, compared to $20.4
million at the end of 2000 and $1.5 million at September 30,
2000. Net working capital at September 29, 2001 was $72.5 million
compared to $54.6 million at December 30, 2000, and $57.0 million
at September 30, 2000. The increase in cash and working capital
compared to September 30, 2000 is primarily attributable to net
income for the period.
Cash provided by operations amounted to approximately $22.3
million in the first nine months of 2001, compared to $5.7
million in the first nine months of 2000. Accounts receivable at
September 29, 2001 were $33.7 million compared to $30.2 million
at December 30, 2000, and $39.4 million at September 30, 2000.
Inventories at September 29, 2001, were $63.7 million, compared
to $53.2 million at December 30, 2000, and $55.1 million at
September 30, 2000. The increases in inventory levels over 2000
are the result of a management decision to accelerate production
to help ensure the Company's ability to timely deliver customer
orders and maintain fully merchandised Company retail stores.
Management believes that September 29, 2001, inventory levels are
generally appropriate for anticipated ongoing 2001 business
activities.
Investing activities used $3.5 million of cash in the first nine
months of 2001, compared to $2.9 million in 2000. Capital
expenditures were $3.0 million in the first nine months of 2001,
compared with $4.9 million in 2000 and are currently estimated to
be $7.0 million for all of 2001. Capital expenditures in both
years relate primarily to expansions and upgrades of the
Company's retail stores. Depreciation and amortization are
currently budgeted at $8.0 million for 2001.
Cash used in financing activities totaled $16.6 million in the
first nine months of 2001, compared to $11.0 million in the first
nine months of 2000. In 2001, cash generated by the Company was
sufficient to finance all working capital needs and to prepay
$7.0 million of the Company's long-term debt. Financing
activities also included stock repurchase transactions and
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. On December 11, 2000, the Company's Board of
Directors authorized an additional 1.0 million shares to this
repurchase program. During the first nine months of 2001, the
Company repurchased 397,300 shares of its Class A common stock
under this program for approximately $10.3 million. The Company
has repurchased a total of 1,236,400 shares of its Class A common
stock under its current repurchase programs for approximately
$25.3 million.
The Company's unsecured credit agreement, as amended, with a
number of banks provided for $44 million in borrowings for the
repurchase of shares of its common stock, and provides a $75
million revolving credit facility available for general corporate
purposes, including cash borrowings and issuances of letters of
credit. The revolving credit facility expires November 3, 2002.
The Company had $37 million of outstanding long-term debt at
September 29, 2001 and $44 million at December 30, 2000 and
September 30, 2000 under the share repurchase component of the
credit agreement. The term loan is due in annual installments of
$10.0 million and cannot be reborrowed. At September 29, 2001,
the Company had no outstanding borrowings on the revolving credit
facility.
The Company believes that these 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 payments on long-term debt, and business
development needs.
INFLATION
The effects of inflation on the Company's operating results and
financial condition were not significant.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB)
issued Statement No. 141, "Business Combinations" and Statement
No. 142, "Goodwill and Other Intangible Assets" effective for
fiscal years beginning after December 31, 2001. Under these
Statements, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject
to periodic impairment tests and all business combinations
initiated after June 30, 2001 must be accounted for using the
purchase method of accounting. The Company currently believes
that these Statements will not have an impact on the Company's
results of operations or financial position.
In 2001, the Emerging Issues Task Force (EITF) issued EITF No. 00-
14 "Accounting for Certain Sales Incentives" and EITF No. 00-25
"Vendor Income Statement Characterization of Consideration Paid
to a Reseller of the Vendor's Products," which are effective for
the first quarter beginning after December 15, 2001. These
EITF's prescribe guidance regarding the timing of recognition and
income statement classification of costs incurred for certain
sales incentive programs to retailers and end consumers. These
EITF's had no impact on the Company as the Company currently
recognizes these costs and classifies them in accordance with the
prescribed rules.
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, gross
profit expectations, planned store expansions and store closings,
future comparable store net sales, future product sourcing plans,
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 introduction of new products or pricing changes by
the Company's competitors or other competitive factors, the
financial strength of the retail industry, including, but not
limited to, business conditions and the general economy, natural
disasters, risk of non-payment of accounts receivable, the
unanticipated loss of a major customer, failure of Company
suppliers to timely deliver needed raw materials, the Company's
ability to correctly balance the level of its commitments with
actual orders, risks associated with terrorist activities, 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 related 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 or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Interest Rate Risk
The credit agreement entered into by the Company in November,
1999, as amended, provided for $44 million to finance repurchases
of the Company's common stock (of which $37 million is
outstanding) 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 2001.
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
On August 8, 2001, the Company filed an 8-K to disclose
a change in the Company's Certifying Accountant.
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: 10/24/2001 /s/DOUGLAS W. HYDE
Chairman of the Board, President
Chief Executive Officer and Director
Date: 10/24/2001 /s/DAVID L. OMACHINSKI
Vice President-Finance, Treasurer
Chief Financial Officer and Director