Kellwood Company net sales for the fourth quarter totaled $473.4 million, as compared to $495.5 million last year. Net earnings for the fourth quarter were $12.5 million, or 49 cents per diluted share, versus $7.1 million, or 25 cents per diluted share, last year. Included in net earnings for the current quarter were the net reversals of previously accrued restructuring and related non-recurring costs of $6.6 million, or $0.26 per share associated with the Company's earlier announced strategic initiatives that focus on increasing its penetration of consumer lifestyle brands while reducing exposure to smaller volume brands and certain private label businesses.
For the fourth quarter, on an ongoing basis (continuing operations excluding the restructuring and related non-recurring charges/credits), net sales were $473.4 as compared to $495.5 million last year. Net earnings were $7.4 million, or $0.29 per diluted share, compared to $3.9 million, or $0.14 per share last year, exceeding previous guidance of $5.9 million, or $0.23 per share.
Mr. Skinner stated, “Our fourth quarter results were ahead of our expectations and demonstrate meaningful progress toward meeting our restructuring, brand refocusing and balance sheet initiatives. During the quarter, we substantially completed our restructuring program. The total cost of the program will be below budget by approximately $70 million before tax, and $45 million after tax. We also continued to execute our turnaround strategies that focus on improving the performance of our lifestyle brands by upgrading our talent base and enhancing our business processes. Additionally, we redeployed infrastructure savings toward more effective marketing efforts to heighten awareness of our brands, reduce time to market, and intensify consumer research to help insure that our product offerings are consistent with the desires of our core consumers.”
By segment, on a continuing and ongoing basis for the fourth quarter, sales were down 6 percent in women's sportswear to $277.2 million versus $296.4 million last year, and down 6 percent in men's sportswear sales to $118.4 million versus $125.3 million last year. These decreases were partially offset by a 5 percent increase in other soft goods sales to $77.8 million versus $73.8 million last year.
Sales for fiscal 2005 declined 6 percent to $2.062 billion as compared to $2.200 in fiscal 2004. The net loss for the year was $(38.4) million, or $(1.42) per diluted share, compared to net earnings of $66.3 million, or $2.37 per diluted share in fiscal 2004. Included in the net loss for fiscal 2005 were restructuring and impairment charges of $(86.0) million, or $(3.17) per share. Partially offsetting these charges was a one-time tax benefit for the repatriation of foreign earnings of $13.0 million, or $0.48 per share.
For fiscal 2005, on an ongoing basis (continuing operations excluding the impairment, restructuring and related non-recurring charges and the repatriation tax benefit), net sales were $2.065 billion compared to $2.200 billion last year. Net earnings were $45.6 million, or $1.68 per diluted share, as compared to $64.4 million, or $2.30 per diluted share in fiscal 2004.
By segment, on a continuing and ongoing basis for the year sales were down 10 percent in women's sportswear to $1.24 billion versus $1.39 billion last year, and down 1 percent in men's sportswear to $498.1 million versus $505.3 million last year. These decreases were partially offset by a 5 percent increase in other soft goods sales to $319.4 million versus $305.2 million last year.
“Several of our operating divisions performed very well this year, including American Recreation Products, Gerber Childrenswear, Briggs women's sportswear, Smart Shirts, New Campaign small leather goods, and Kellwood Western Region which manages Kellwood's junior sportswear brands, and designs and sources private label women's sportswear,” Mr. Skinner continued. “While recognizing that we are in the early stages of our turnaround, we remain confident that as we move through fiscal 2006, our current strategies, under new brand leadership with enhanced business processes will produce improved results for Kellwood in the second half of the year.”
Kellwood ended the quarter with considerable liquidity and a strong financial position. At January 28, 2006, cash and cash equivalents increased by $172 million to $433 million. Inventory totaled $206 million, or 50 days supply, a reduction of $64 million from $270 million, or 54 days supply at fiscal year end 2004. Total debt increased $38 million to $508 million versus $470 million last year due to borrowings by our Asian operations.
During fiscal 2005, the Company repurchased 2.2 million shares under its stock repurchase program at an average price of $24.99 per share completing approximately 80 percent of the Board approved program. There remains the lessor of $19.5 million, or 565,000 shares, available for repurchase under the original $75 million stock repurchase authorization.
For the fiscal 2006 year, the Company continues to expect sales to be in the range of $2.0 billion. This compares to actual sales from ongoing operations of $2.065 billion in fiscal 2005.
On an ongoing basis, net earnings for fiscal 2006 year continue to be estimated to be in the range of $44 million to $45 million, essentially flat with fiscal 2005 net earnings from ongoing operations. Also on an ongoing basis, fiscal 2006 diluted earnings per share continue to be estimated at approximately $1.70 per diluted share, which compares to actual diluted earnings per share from ongoing operations of $1.68 in fiscal 2005. The Company's fiscal 2006 forecast includes $4.3 million before tax, $2.8 million after tax, or $0.11 per diluted share of stock options expense related to the adoption of FAS 123R “Share-Based Payment,” a new accounting pronouncement requiring the expensing of stock-based compensation.
For the first quarter of fiscal 2006, the Company continues to estimate net sales of $480 million, as compared to actual sales from ongoing operations of $554 million in the first quarter last year. Net earnings from ongoing operations in the first quarter of fiscal 2006 continue to be estimated at approximately $4.0 million, or $0.15 per diluted share, inclusive of $1.8 million before tax, $1.2 million after tax, or $0.05 per diluted share of stock option expense. This compares to net earnings from ongoing operations of $15.1 million, or $0.54 per share, in the first quarter of fiscal 2005.
Restructuring and other related non-recurring charges are currently projected to be $10.0 million, or $0.38 per diluted share, for the full year 2006 and $5.0 million, or $0.19 per diluted share, for the first quarter.
Fourth Quarter
Summary of Results for FY2005 Actual
FY2005 Actual
Ongoing Discontinued
Operations Repatriation Restructuring Operations Total
Net Sales $473,440 $- $- $- $473,440
Net Earnings
(Loss) from
Continuing
Operations $7,393 $- $(2,146) $- $5,247
Net Earnings
(Loss) from
Discontinued
Operations - - 8,725 (1,459) 7,266
Net Earnings
(Loss) $7,393 $- $6,579 $(1,459) $12,513
Diluted EPS:
Continuing
Operations $0.29 $- $(0.08) $- $0.20
Discontinued
Operations - - 0.34 (0.06) 0.29
Net Earnings
(Loss) $0.29 $- $0.26 $(0.06) $0.49
Fiscal Year 2005
Summary of Results for FY2005 Actual
FY2005 Actual
Ongoing Discontinued
Operations Repatriation Restructuring Operations Total
Net
Sales $2,064,594 $- $(2,450) $- $2,062,144
Net
Earnings
(Loss) from
Continuing
Operations $45,611 $13,000 $(35,508) $- $23,103
Net Earnings
(Loss) from
Discontinued
Operations - - (50,508) (11,008) (61,516)
Net Earnings
(Loss) $45,611 $13,000 $(86,016) $(11,008) $(38,413)
Diluted EPS:
Continuing
Operations $1.68 $0.48 $(1.31) $- $0.85
Discontinued
Operations - - (1.86) (0.41) (2.27)
Net Earnings
(Loss) $1.68 $0.48 $(3.17) $(0.41) $(1.42)
First Quarter
Current Guidance for FY2006
Current Guidance
Ongoing Continuing
Operations Restructuring Operations
Net Sales $480,000 $- $480,000
Net Earnings $4,000 $(5,000) $(1,000)
Diluted EPS $0.15 $(0.19) $(0.04)
Fiscal Year 2006
Current Guidance for FY2006
Current Guidance
Ongoing Continuing
Operations Restructuring Operations
Net Sales $2,000,000 $- $2,000,000
Net Earnings $44,000 $(10,000) $34,000
Diluted EPS $1.70 $(0.38) $1.32
