GOSHA Oshkosh Bgosh Cla (MM)

Oshkosh B'Gosh, Inc. Reports Second Quarter 2004 Results - Company Reaffirms Fiscal 2004 Outlook - OSHKOSH, Wis., July 21 /PRNewswire-FirstCall/ -- Oshkosh B'Gosh, Inc. (NASDAQ:GOSHA), today reported financial results for its second quarter ended July 3, 2004. (Photo: http://www.newscom.com/cgi-bin/prnh/20040614/NYM031LOGO-a) For the second quarter, net sales were $83.1 million compared to $84.5 million last year. A 1.6% comparable store sales increase combined with ten additional stores, resulted in retail net sales gaining 4.5% to $53.5 million during the second quarter. The wholesale business contributed $29.0 million compared to $32.7 million last year. Unit shipments in the wholesale business declined due to the previously announced Kids 'R' Us store closings and lower Summer 2004 bookings. During the quarter, the Company opened five Family Lifestyle stores, part of the initial rollout of this new retail concept, and added one outlet store. The quarter ended with 168 total retail locations, including eight Family Lifestyle stores. Gross margin increased 190 basis points to 38.2% from 36.3%. Selling, general and administrative expenses increased to $37.0 million compared to $35.5 million primarily due to the Company's investments in launching its Family Lifestyle Concept, which were partially offset by cost containment efforts in various corporate support functions. Net loss was $1.6 million, or $0.14 per diluted share, compared to a net loss of $1.9 million, or $0.16 per diluted share, last year. For the first six months, net sales were $162.6 million compared to $183.8 million last year. Reflecting a first quarter characterized by promotional support to wholesale customers combined with aggressive in-store promotional initiatives, net loss totaled $2.8 million, or $0.24 per diluted share. Excluding the gain on the sale of the vacant OshKosh, Wisconsin distribution facility that was sold in the first quarter, net loss was $3.5 million, or $0.30 per diluted share, versus a net loss of $0.6 million, or $0.05 per diluted share, in the prior six-month period. Douglas W. Hyde, Chairman and Chief Executive Officer, said, "While challenges remain, we are encouraged by the results of our second quarter. Our core business remained stable and we began to see a gradual improvement in key metrics such as gross margin and comparable store sales. Additionally, our efforts to improve the design of our product are paying dividends. Our merchandise offering more accurately communicates our vision for the brand and has received a warm response from our customers." Mr. Hyde concluded, "Given these positive indicators, we believe we are on the right track to further strengthen our brand and drive additional sales of OshKosh B'Gosh products to our wholesale accounts and in our retail stores going forward. As we said at the beginning of the year, we are managing through a year of transition. However, we are seeing encouraging signs that the initiatives we have been discussing for some time are beginning to gain momentum that will carry into the second half of the year. As such, we are comfortable reiterating the outlook we first gave earlier this year for net sales in the range of $390 million to $410 million, with retail sales accounting for approximately 65% of the total, and earnings per diluted share between $0.75 and $0.95." OshKosh B'Gosh will host a webcast of its first quarter results conference call today at 10:00 a.m., Eastern Time. Investors and the media are invited to listen to the call at the Company's web site, http://www.oshkoshbgosh.com/. An archive of the webcast will be available on the same site. OshKosh B'Gosh, Inc. is best known as a premier marketer of quality children's apparel and accessories, available in over 50 countries around the world. The Company is headquartered in Oshkosh, Wisconsin. Statements contained herein that relate to the Company's future performance including, without limitation, statements with respect to the Company's anticipated financial position, results of operations or level of businesses for 2004 or any other future period, are "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements, which are generally indicated by words or phrases such as "plan," "estimate," "guidance," "project," "anticipate," "reaffirm," "outlook," "the Company believes," "management expects," "currently anticipates," and similar phrases are based on current expectations only and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, projected, or estimated. Among the factors that could cause actual results to materially differ include the level of consumer spending for apparel, particularly in the children's wear segment; risks associated with competition in the market place, including the financial condition of and consolidations, restructurings and other ownership changes in, the apparel and related products industry and the retail industry, the introduction of new products or pricing changes by the Company's competitors, price deflation in the apparel industry, and the Company's ability to remain competitive with respect to product, service and value; risks associated with the Company's dependence on sales to a limited number of large department and specialty store customers, including risks related to customer requirements for vendor margin support, as well as risks related to extending credit to large customers; risks associated with possible deterioration in the strength of the retail industry, including, but not limited to, business conditions and the economy, natural disasters, and the unanticipated loss of a major customer; risks related to the failure of Company suppliers to timely deliver needed raw materials, risks associated with importing its products into the United States under current and future customs and quota rules and regulations which are becoming more stressed, risks associated with importing its products using a global transportation matrix including independent truckers and the Company's ability to correctly balance the level of its commitments with actual orders; risks associated with terrorist activities as well as risks associated with foreign operations including global disease management; risks related to the Company's ability to defend and protect its trademarks and other proprietary rights and other risks related to managing intellectual property issues. In addition, the inability to ship Company products within agreed time frames due to unanticipated manufacturing, distribution system or freight carrier delays or the failure of Company contractors to deliver products within scheduled time frames 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, Africa, 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 product contracted for by the Company. The forward-looking statements included herein are only made as of the date of this press release. 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. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands) July 3, 2004 January 3, 2004* (unaudited) ASSETS Current assets Cash and cash equivalents $6,490 $23,931 Accounts receivable, net 14,048 16,669 Inventories 74,515 1,358 Prepaid expenses and other current assets 10,505 8,316 Deferred income taxes 8,300 10,100 Total current assets 113,858 120,374 Property, plant and equipment 74,402 72,416 Less accumulated depreciation and amortization 51,129 48,720 Net property, plant and equipment 23,273 23,696 Non-current deferred income taxes 2,250 2,000 Other assets 5,280 5,855 Total assets $144,661 $151,925 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $19,259 $16,961 Accrued liabilities 29,322 33,552 Total current liabilities 48,581 50,513 Employee benefit plan liabilities 13,127 13,647 Shareholders' equity Preferred stock -- -- Common stock: Class A 96 94 Class B 22 22 Additional paid-in capital 3,321 -- Retained earnings 82,321 87,649 Unearned compensation under restricted stock plan (2,807) -- Total shareholders' equity 82,953 87,765 Total liabilities and shareholders' equity $144,661 $151,925 *Condensed from audited financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three-Month Period Ended Six-Month Period Ended July 3, 2004 July 5, 2003 July 3, 2004 July 5, 2003 Net Sales $83,081 $84,546 $162,588 $183,833 Cost of products sold 51,309 53,846 100,018 112,429 Gross profit 31,772 30,700 62,570 71,404 Selling, general and administrative expenses 36,966 35,527 73,560 76,345 Royalty income, net (2,594) (1,953) (5,457) (4,166) (Gain) loss on sale of assets (64) (28) (1,101) 10 Operating loss (2,536) (2,846) (4,432) (785) Other income (expense): Interest expense (51) (183) (100) (257) Interest income 46 54 113 96 Miscellaneous -- -- 9 5 Other income (expense) - net (5) (129) 22 (156) Loss before income taxes (2,541) (2,975) (4,410) (941) Income tax benefit (928) (1,101) (1,601) (348) Net loss $(1,613) $(1,874) $(2,809) $(593) Net loss per common share Diluted $ (0.14) $(0.16) $(0.24) $(0.05) Weighted average common shares outstanding Diluted 11,751 11,869 11,722 11,893 Cash dividends per common share Class A $ 0.110 $ 0.070 $ 0.220 $ 0.140 Class B $ 0.095 $ 0.060 $ 0.190 $ 0.120 See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six-Month Period Ended July 3, 2004 July 5, 2003 Cash flows from operating activities Net loss $(2,809) $(593) Depreciation and amortization 3,143 3,431 Deferred income taxes 1,550 3,250 Income tax benefit from stock options exercised 16 254 Items in net loss not affecting cash and cash equivalents (1,262) 149 Changes in current assets (12,725) (20,804) Changes in current liabilities (1,932) (8,216) Net cash used in operating activities (14,019) (22,529) Cash flows from investing activities Additions to property, plant and equipment (2,903) (1,391) Proceeds from disposal of assets 2,068 126 Changes in other assets (210) (375) Net cash used in investing activities (1,045) (1,640) Cash flows from financing activities Short-term borrowings -- 3,900 Dividends paid (2,519) (1,622) Net proceeds from issuance of common shares 142 358 Repurchase of common shares -- (2,801) Net cash used in financing activities (2,377) (165) Net decrease in cash and cash equivalents (17,441) (24,334) Cash and cash equivalents at beginning of period 23,931 36,198 Cash and cash equivalents at end of period $6,490 $11,864 See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Summary of Net Sales (In millions) Net Sales (in millions) Domestic Wholesale Retail Other Total Three months ended: July 3, 2004 $29.0 $53.5 $0.6 $83.1 July 5, 2003 32.7 51.2 0.6 84.5 Increase (decrease) $(3.7) $2.3 $-- $(1.4) Percent increase (decrease) (11.3%) 4.5% -- (1.7%) Six months ended: July 3, 2004 $61.1 $100.0 $1.5 $162.6 July 5, 2003 83.2 99.1 1.5 183.8 Increase (decrease) $(22.1) $0.9 $ -- $(21.2) Percent increase (decrease) (26.6%) 0.9% -- (11.5%) http://www.newscom.com/cgi-bin/prnh/20040614/NYM031LOGO-aDATASOURCE: Oshkosh B'Gosh, Inc. CONTACT: David L. Omachinski, President and Chief Operating Officer, Inc., +1-920-232-4140, or Michael L. Heider, Vice President Finance, Treasurer and Chief Financial Officer, +1-920-232-4418, both of OshKosh B'Gosh; or Investor Relations, Cara O'Brien, or Melissa Myron, both of Financial Dynamics, +1-212-850-5600 for OshKosh B'Gosh Web site: http://www.oshkoshbgosh.com/

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