KWD Kellwood

Kellwood (NYSE: KWD) Reports First Quarter Results Sales Up 2 Percent - Net Earnings Up 19 Percent ST. LOUIS, MO., June 3 /PRNewswire-FirstCall/ -- Kellwood Company reported operating results for the first quarter ended May 1, 2004, according to Hal J. Upbin, chairman and chief executive officer. (Logo: http://www.newscom.com/cgi-bin/prnh/20011220/CGTH038LOGO ) Sales for the first quarter increased $14 million to $686 million, versus $672 million last year due to a combination of organic growth of $5 million, or approximately 1 percent, and the acquisition of Phat Fashions which provided $9 million of revenue. Phat Fashions was acquired on February 3, 2004, and is being reported within the Men's Sportswear segment. The organic growth was driven by the new marketing initiatives put in place during the last nine months of fiscal year 2003 which includes Calvin Klein(R), IZOD(R), XOXO(R), and Lucy Pereda(TM) women's sportswear, Liz Claiborne(R) dresses and suits, and Def Jam University(TM) urban sportswear. Nearly two-thirds of this growth was offset by the planned elimination of certain low margin business. All of the organic growth for the quarter came from the Women's Sportswear segment, up 6 percent, and the Men's Sportswear segment, up 1 percent. Sales of Other Soft Goods were down 16 percent from last year due principally to sourcing and logistical challenges in Intimate Apparel. These issues are being addressed and should be resolved during the second half. Net earnings from continuing operations for the quarter were strong, increasing $3.9 million, or 19 percent to $25.0 million, or $0.90 per diluted share, versus $21.1 million, or $0.80 per share last year. The increase in earnings was driven by a 2.2 percentage point increase in gross profit as a percent of sales, which was partially offset by an increase in SG&A spending attendant with the new marketing initiatives. The improvement in gross profit as a percent of sales came from the acquisition of Phat Fashions, a mix of higher margin branded business, improved sourcing, less markdown pressure, and lower surplus and obsolete inventory. This is the eighth consecutive quarter in which Kellwood has reported a significant year-to-year improvement in gross profit as a percent of sales reflecting the continued underlying strengthening of operations, quality of inventory, and improving mix of business. Kellwood ended the quarter with an exceptionally strong balance sheet. Total debt continues to drop and represented 30 percent of total capital at the end of the first quarter, versus 34 percent at the same time last year. Total inventory was $27 million below last year and represented 56 days supply, versus 68 days at the end of the first quarter last year. As Kellwood looks ahead to the second quarter and total year, the Company is encouraged by the improving economy and improving same store sales being reported by the retailers. In spite of these favorable and encouraging trends, the retailers are continuing to place orders closer to the selling season and are not stepping up with big increases in open-to-buy. Cautious optimism continues to be the mindset at retail which is good for the entire supply chain - retail and wholesale. More emphasis is being placed on gross margin, inventory turnover and return on investment which benefits everyone. As a result, the Company expects sales in the second quarter to increase 10 to 12 percent and to be in the range of $560 to $570 million, versus $509 million reported last year. Net earnings from continuing operations are forecasted to increase by approximately 20 percent and to be in the range of $9-$10 million, or $0.32-$0.35 per diluted share, versus $7.9 million, or $0.29 per share last year. The Company expects to be on target with its financial plan through the first six months. At this time, Kellwood remains comfortable in staying with its original financial plan and guidance for the year which calls for sales to increase by 11 percent to approximately $2.6 billion, versus $2.35 billion last year. Net earnings from continuing operations for the year are planned to increase by $15-$17 million, or approximately 23 percent to $88-$90 million, or $3.15-$3.25 per diluted share, versus $72.6 million, or $2.68 per share reported last year. The Company held its forty-second Annual Shareowners' meeting today at its headquarters in St. Louis. Approximately 90 percent of the outstanding shares were represented either in person or by proxy. Robert C. Skinner, Jr., Kellwood president and chief operating officer, was elected a new Board member. Other Directors standing for election this year were Martin Bloom, Martin J. Granoff and Hal J. Upbin. All were elected. The Board of Directors declared a regular quarterly dividend of $0.16 per common share, payable June 25, 2004 to shareholders of record June 14, 2004. The Company will conduct a conference call on June 4 at 10:00 a.m. EDT. Interested parties who wish to participate, may do so by dialing 646-862-1100. An updated version of Kellwood's analyst presentation is accessible on its website at http://www.kellwood.com/ . Kellwood (NYSE:KWD), a $2.35 billion marketer of apparel and consumer soft goods. Kellwood specializes in branded as well as private label products, and markets to all channels of distribution with product specific to a particular channel. Kellwood brands include Phat Farm(R), Baby Phat(R), Sag Harbor(R), Koret(R), Jax(R), David Dart(R), Democracy(R), David Meister(TM), Dorby(TM), My Michelle(R), Briggs New York(R), Northern Isles(R), David Brooks(R), Kelty(R), and Sierra Designs(R). Calvin Klein(R), XOXO(R), Liz Claiborne(R) Dresses and Suits, IZOD(R), Dockers(R), Gerber(R), Slates(R) and Bill Burns(R) are produced under licensing agreements. For more information, visit http://www.kellwood.com/ . SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe", "expect", "will", "estimate", "project", "forecast", "should", "anticipate" and similar expressions may identify forward-looking statements. These forward-looking statements represent the Company's expectations concerning future events, are based on various assumptions and are subject to a number of risks and uncertainties. These risks include, without limitation: changes in the retail environment; an economic downturn in the retail market, including deflationary pressures; economic uncertainty due to the elimination of quotas on Chinese imports; a decline in the demand for the Company's products; the lack of customer acceptance of the Company's new designs and/or product lines; the increasingly competitive and consolidating retail environment; financial or operational difficulties of customers or suppliers; disruptions to transportation systems used by the Company or its suppliers; continued satisfactory relationships with licensees and licensors of trademarks and brands; ability to generate sufficient sales and profitability related to licenses containing minimum royalty payments; the economic impact of uncontrollable factors, such as terrorism and war; the effect of economic conditions and trade, legal social and economic risks (such as import, licensing and trade restrictions); stable governments and business conditions in the countries where the Company's products are manufactured; the impact of acquisition activity and the ability to effectively integrate acquired operations; and changes in the Company's strategies and expectations. These risks are more fully described in the Company's periodic filings with the SEC. Actual results could differ materially from those expressed or implied in forward-looking statements. The Company disclaims any obligation to publicly update or revise any of its forward-looking statements. KELLWOOD COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) (Amounts in thousands, except per share data) Three Months Ended 5/1/2004 5/3/2003 Net sales by segment: Women's Sportswear $437,977 $411,926 Men's Sportswear 128,157 117,214 Other Soft Goods 119,969 143,206 Total net sales 686,103 672,346 Costs and expenses: Cost of products sold 531,538 536,043 Selling, general and administrative expenses 106,908 94,078 Amortization of intangible assets 3,466 2,818 Interest expense, net 6,288 6,443 Other (income) and expense, net (180) 178 Earnings before income taxes 38,083 32,786 Income taxes 13,044 11,663 Net earnings from continuing operations 25,039 21,123 Net earnings (loss) from discontinued operations - (295) Net earnings $25,039 $20,828 Weighted average shares outstanding: Basic 27,090 26,174 Diluted 27,832 26,554 Earnings (loss) per share: Basic: Continuing operations $.92 $.81 Discontinued operations - (.01) Net earnings $.92 $.80 Diluted: Continuing operations $.90 $.80 Discontinued operations - (.02) Net earnings $.90 $.78 KELLWOOD COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (Amounts in thousands) As of 5/1/2004 5/3/2003 ASSETS Current assets: Cash and cash equivalents $72,672 $94,419 Receivables, net 388,317 380,251 Inventories 247,384 274,129 Prepaid taxes and expenses 70,506 41,759 Current assets of discontinued operations - 24,144 Total current assets 778,879 814,702 Property, plant and equipment, net 97,388 97,824 Intangible assets, net 227,298 129,847 Goodwill 186,597 150,196 Other assets 28,568 37,673 Long-term assets of discontinued operations - 8,206 Total assets $1,318,730 $1,238,448 LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $18,153 $28,629 Accounts payable 152,353 155,357 Accrued expenses 116,797 106,627 Current liabilities of discontinued operations 2,120 14,840 Total current liabilities 289,423 305,453 Long-term debt 271,875 278,022 Deferred income taxes and other 73,435 59,444 Long-term liabilities of discontinued operations - 2,500 Shareowners' equity 683,997 593,029 Total liabilities & shareowners' equity $1,318,730 $1,238,448 KELLWOOD COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Amounts in thousands) Three Months Ended 5/1/2004 5/3/2003 OPERATING ACTIVITIES Net earnings $25,039 $20,828 Add/(deduct) items not affecting operating cash flows: Depreciation and amortization 10,247 9,451 Deferred income taxes and other 2,674 4,280 Changes in working capital components: Receivables, net (65,665) (40,614) Inventories 68,697 86,954 Prepaid taxes and expenses (3,934) (615) Accounts payable and accrued expenses (20,864) (59,492) Net cash from operating activities 16,194 20,792 INVESTING ACTIVITIES Additions to property, plant and equipment (4,442) (4,705) Acquisitions, net of cash acquired (143,473) (132,517) Dispositions of fixed assets 692 1,629 Net cash from investing activities (147,223) (135,593) FINANCING ACTIVITIES Proceeds from notes payable and short-term borrowings, net 15,657 1,408 Reduction of long-term debt - (303) Stock transactions under incentive plans 13,230 1,989 Dividends paid (4,341) (4,197) Net cash from financing activities 24,546 (1,103) Net increase (decrease) in cash and cash equivalents (106,483) (115,904) Cash and cash equivalents, beginning of period 179,155 210,323 Cash and cash equivalents, end of period $72,672 $94,419 Significant non-cash investing and financing activities: Issuance of stock for acquisitions $- $11,891 Supplemental cash flow Information: Interest paid $6,197 $7,593 Income taxes paid (refunded), net $(2,552) $10,925 Note Regarding Discontinued Operations (Amounts in thousands, except per share data) On October 30, 2003, the Company finalized an agreement to sell its domestic and European hosiery (Hosiery) operations for $7,500 plus reimbursement of $2,800 for costs incurred by the Company in connection with the closure of certain facilities. In addition, during the fourth quarter of 2003, the Company decided to discontinue its True Beauty by Emme(R) (True Beauty) operations. This included the termination of the related license agreement before its expiration. The operations of True Beauty ceased in the fourth quarter of 2003. Accordingly, both the Hosiery and True Beauty businesses have been accounted for as discontinued operations. As such, their operating results and assets and liabilities are segregated in the accompanying condensed consolidated statement of earnings and condensed consolidated balance sheet. Prior to being classified as discontinued, the Hosiery operations were included in the Men's Sportswear segment, and True Beauty was included in the Women's Sportswear segment. For the three months ended May 1, 2004, there was no operating activity for the discontinued operations. For the three months ended May 3, 2003, the operating results for the discontinued Hosiery and True Beauty businesses are as follows: Three-months ended May 3, 2003 Hosiery True Beauty Total Net sales $12,979 $3,898 $16,877 Earnings (loss) before income taxes (920) 462 (458) Income taxes (327) 164 (163) Net earnings (loss) $(593) $298 $(295) http://www.newscom.com/cgi-bin/prnh/20011220/CGTH038LOGO http://photoarchive.ap.org/ DATASOURCE: Kellwood Company CONTACT: Financial, Roger D. Joseph, VP Treasurer & IR, +1-314-576-3437, or fax, +1-314-576-3325, , or W. Lee Capps III, Executive VP Finance & CFO, +1-314-576-3486, or fax, +1-314-576-3439, ; Media, Donna Weaver, VP Corp. Comm., +1-314-576-3391, or fax, +1-314-576-3434, , all of Kellwood Co. Web site: http://www.kellwood.com/

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