GOSHA Oshkosh Bgosh Cla (MM)

OshKosh B'Gosh, Inc. Reports Fourth Quarter 2004 Results ~ Fourth Quarter Sales Increased 10.6% ~ OSHKOSH, Wis., Feb. 2 /PRNewswire-FirstCall/ -- OshKosh B'Gosh, Inc. (NASDAQ:GOSHA), today reported financial results for its fourth quarter and year ended January 1, 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20040614/NYM031LOGO-a ) Fourth Quarter Results For the fourth quarter, net sales increased 10.6% to $120.9 million compared to $109.3 million last year. The Company's retail comparable store sales increased 10.5% primarily due to strong sell-through and improved inventory management. As a result, retail net sales for the fourth quarter were $85.3 million versus $76.3 million last year. Wholesale sales contributed $35.2 million compared to $32.5 million last year. During the quarter, the Company opened six lifestyle stores, ending the quarter with 175 total retail locations. Gross margin increased a significant 940 basis points to 41.5% from 32.1%. The improvement is a result of a considerably lower level of "closeout" promotional sales, more efficient supply chain execution, a continued sales mix shift towards higher margin retail sales, and a comparison to a particularly disappointing gross margin performance in the fourth quarter of 2003. Selling, general and administrative expenses increased to $40.8 million from $37.5 million primarily due to investments in the lifestyle store concept. Net income increased to $8.6 million, or $0.73 per diluted share, compared to net income of $1.0 million, or $0.08 per diluted share, last year. Year End Results For the full year, net sales were $398.7 million compared to $417.3 million last year. Gross margin for the year increased 360 basis points to 39.8% from 36.2% last year. Net income for the full year was $13.8 million, or $1.17 per diluted share, versus net income of $7.2 million, or $0.60 per diluted share, for the full year last year. Douglas W. Hyde, Chairman and Chief Executive Officer, said, "We are very pleased with our financial results for the fourth quarter, a period in which we generated year-over-year improvements in almost every aspect of our business, including our top line, gross margin and net income. Over the course of the year we achieved our objectives to stabilize our core wholesale and outlet store businesses and further revitalize the OshKosh B'Gosh brand. Additionally, our updated product offering was well received by consumers resulting in higher unit average selling prices and improved sell-through, particularly in our outlet stores." Lifestyle Store Strategy After closely reviewing the results of the Company's adult apparel offering as well as conducting numerous market studies, the Company has decided to revise its lifestyle store concept to include only children's apparel and accessories. Previously, the Company positioned its retail concept as a family lifestyle store where consumers could shop for adult and children's apparel and home accessories. By Fall 2005 the Company's 15 existing family lifestyle stores will be converted to offer exclusively children's apparel and accessories. The Company anticipates that any related markdowns and costs will not significantly impact margins due to the limited number of current lifestyle stores. The Company will refine the children's only format in its existing lifestyle stores before entering into new markets. As such, the previously planned Mall of America location will be the only lifestyle store to open in calendar 2005. Mr. Hyde continued, "While we are revising the lifestyle store concept to target only children, our fundamental strategy and plans for long-term future growth of our retail concept are still intact. Over time, we found that our sales and margins have been significantly stronger in our children's department, and we are confident that in shifting our focus exclusively to kids, we will be able to grow the lifestyle store concept successfully. We see the children's lifestyle store as a viable channel for future growth and will ensure its success by leveraging our core values and rich heritage in the children's business." Fiscal 2005 Outlook The momentum gained during the fourth quarter in the outlet division continued into January. Based upon these early results and current visibility into other areas of the business, the Company anticipates that first quarter net sales will increase approximately 3% to 6% over last year. Additionally, the Company expects a modest year-over-year improvement in the bottom line, excluding the impact of the gain on sale of the distribution facility that was sold in the first quarter of 2004. "While our lifestyle store concept will be growing slower than we initially planned, we are encouraged by the significant improvement in our results for the year. We are pleased with our progress in our core business and are excited about the prospects of our children's only lifestyle store concept. Finally, we are optimistic that the ongoing momentum in our business will result in a productive and profitable year in 2005." Mr. Hyde concluded. OshKosh B'Gosh will host a webcast of its fourth quarter and year end 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 2005 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 a number of ports that are experiencing capacity constraints 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 Summary of Net Sales (In millions) Net Sales (in millions) Domestic Wholesale Retail Other Total Three month period ended: January 1, 2005 $35.2 $85.3 $0.4 $120.9 January 3, 2004 32.5 76.3 0.5 109.3 Increase (decrease) $2.7 $9.0 $(0.1) $11.6 Percent increase (decrease) 8.3% 11.8% (20.0%) 10.6% Twelve month period ended: January 1, 2005 $137.8 $258.2 $2.7 $398.7 January 3, 2004 165.7 248.7 2.9 417.3 Increase (decrease) $(27.9) $9.5 $(0.2) $(18.6) Percent increase (decrease) (16.8%) 3.8% (6.9%) (4.5%) OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands) January 1, January 3, 2005 2004 ASSETS Current assets Cash and cash equivalents $37,678 $23,931 Accounts receivable, net 12,428 16,669 Inventories 61,044 61,358 Prepaid expenses and other current assets 10,242 8,316 Deferred income taxes 7,750 10,100 Total current assets 129,142 120,374 Property, plant and equipment, net 25,768 23,696 Deferred income taxes 950 2,000 Other assets 5,168 5,855 Total assets $161,028 $151,925 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $18,169 $16,961 Accrued liabilities 33,197 32,827 Total current liabilities 51,366 49,788 Non-current liabilities 675 725 Employee benefit plan liabilities 11,253 13,647 Shareholders' equity Preferred stock -- -- Common stock: Class A 95 94 Class B 22 22 Additional paid-in capital 3,726 -- Retained earnings 96,426 87,649 Unearned compensation under restricted stock plan (2,535) -- Total shareholders' equity 97,734 87,765 Total liabilities and shareholders' equity $161,028 $151,925 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (Dollars in thousands, except per share amounts) (Unaudited) Three Month Period Ended Twelve Month Period Ended January 1, January 3, January 1, January 3, 2005 2004 2005 2004 Net Sales $120,965 $109,342 $398,740 $417,272 Cost of products sold 70,794 74,249 240,180 266,119 Gross profit 50,171 35,093 158,560 151,153 Selling, general and administrative expenses 40,750 37,506 151,185 151,251 Royalty income, net (3,959) (3,843) (12,972) (11,688) (Gain) loss on sale of assets 21 (182) (1,140) (158) Operating income 13,359 1,612 21,487 11,748 Other income (expense): Interest expense (63) (245) (222) (718) Interest income 171 44 308 200 Miscellaneous 12 (3) 22 4 Other income (expense) -- net 120 (204) 108 (514) Income before income taxes 13,479 1,408 21,595 11,234 Income taxes 4,854 409 7,776 4,045 Net income $8,625 $999 $13,819 $7,189 Net income per common share Basic - Class A $0.75 $0.09 $1.21 $0.62 Basic - Class B $0.65 $0.08 $1.05 $0.54 Diluted - If Converted Method $0.73 $0.08 $1.17 $0.60 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) Twelve Month Period Ended January 1, January 3, 2005 2004 Cash flows from operating activities Net income $13,819 $7,189 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 6,136 6,774 Amortization 531 598 Gain on disposal of assets (1,140) (158) Deferred income taxes 3,400 (200) Compensation earned under restricted stock plan 629 87 Income tax benefit from stock option exercises 50 321 Benefit plan expense, net of contributions (2,394) (446) Changes in operating assets and liabilities: Accounts receivable 4,241 60 Inventories 314 (4,244) Prepaid expenses and other current assets (1,926) (6,631) Accounts payable 1,208 5,054 Accrued liabilities and other non-current liabilities 320 (4,844) Net cash provided by operating activities 25,188 3,560 Cash flows from investing activities Additions to property, plant and equipment (8,641) (3,695) Proceeds from disposal of assets 2,115 510 Changes in other assets (386) (421) Net cash used in investing activities (6,912) (3,606) Cash flows from financing activities Dividends paid (5,042) (4,139) Net proceeds from issuance of common shares 513 868 Repurchase of common shares -- (8,950) Net cash used in financing activities (4,529) (12,221) Net increase (decrease) in cash and cash equivalents 13,747 (12,267) Cash and cash equivalents at beginning of year 23,931 36,198 Cash and cash equivalents at end of year $37,678 $23,931 http://www.newscom.com/cgi-bin/prnh/20040614/NYM031LOGO-aDATASOURCE: OshKosh B'Gosh, Inc. CONTACT: David L. Omachinski, President and Chief Operating Officer, +1-920-232-4140, Michael L. Heider, Vice President Finance, Treasurer and Chief Financial Officer, +1-920-232-4418, both of OshKosh B'Gosh, Inc.; or Investors, Cara O'Brien, Melissa Myron, or Rachel Albert, all of Financial Dynamics, +1-212-850-5600, all for OshKosh B'Gosh, Inc. Web site: http://www.oshkoshbgosh.com/

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