GOSHA Oshkosh Bgosh Cla (MM)

OshKosh B'Gosh, Inc. Reports First Quarter 2005 Results ~ Gross Margin Improved 80 Basis Points ~ OSHKOSH, Wis., April 20 /PRNewswire-FirstCall/ -- OshKosh B'Gosh, Inc. (NASDAQ:GOSHA), today reported financial results for its first quarter ended April 2, 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20040614/NYM031LOGO-a ) Net sales increased 6.3% to $84.5 million compared to $79.5 million last year. This increase was driven primarily by a 7.8% comparable store sales increase at the Company's outlet locations. Retail net sales were $51.5 million versus $46.5 million and wholesale net sales were $32.0 million versus $32.1 million last year. During the quarter, the Company closed five outlet stores and ended the quarter with 170 total retail locations. Gross margin increased 80 basis points to 39.5% from 38.7%. The improvement is primarily a result of a lower level of markdowns in Company- operated retail stores and an increasing proportion of retail store sales to total Company net sales. Selling, general and administrative expenses were $37.5 million, or 44.3% of net sales, compared to $36.6 million, or 46.0% of net sales. Net loss was $0.5 million, or $0.04 per diluted share, compared to a net loss of $1.2 million, or $0.10 per diluted share, last year. Results for the first quarter of fiscal 2004 include a $1.1 million pre-tax gain on the sale of a distribution facility. Excluding this one-time gain, last year's after tax net loss totaled $1.9 million, or $0.16 per diluted share. Douglas W. Hyde, Chairman and Chief Executive Officer, said, "The positive trends we experienced at the end of 2004 continued during the first quarter and helped us meet our top line growth target. In our outlet stores, we again improved sell-through and increased our average unit selling price, thereby driving solid comparable store sales. We successfully merchandised our retail locations with more compelling assortments and our customers continue to respond positively to our elevated product offering. Product sell-through with our key wholesale customers also continued its positive trend. In addition, we are very satisfied with the progress of our 'Genuine Kids from OshKosh' sub-brand at Target and look forward to further building this strong partnership throughout 2005." While the momentum generated in last year's fourth quarter has continued, the Company has made a strategic decision to eliminate one of three wholesale deliveries that typically occurs in the second quarter. The Company determined this particular shipment, which falls at a highly promotional time in the retail calendar, was not contributing to growth in long term brand equity. As such, the Company currently anticipates its second quarter diluted earnings per share will be at or slightly below the prior year's result. This operating target assumes a moderate improvement in the outlet business that will be offset by lower wholesale sales resulting from the aforementioned discontinued shipment. "While the decision to eliminate a wholesale delivery in the second quarter will impact our top line somewhat in the short term, we believe it is beneficial to our business and will ultimately help improve our profitability in the long term." Mr. Hyde concluded, "The strategies we have implemented to turn around our core businesses have proven successful and generated positive year-over-year results. Now that our core businesses are stabilized, we must build upon these initiatives to generate sustainable top line growth and drive further success. To accomplish this goal, we will focus on refining our children's lifestyle store concept as well as developing partnerships, such as the one with Target, that will leverage the strength of our brand. To this end, our strong, debt-free balance sheet provides a solid platform from which to grow." 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 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 (Unaudited) Net Sales (Dollars in millions) Domestic Wholesale Retail Other Total Three months ended: April 2, 2005 $32.0 $51.5 $1.0 $84.5 April 3, 2004 32.1 46.5 0.9 79.5 Increase (decrease) $(0.1) $5.0 $0.1 $5.0 Percent increase (decrease) (0.3%) 10.8% 11.1% 6.3% OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands) April 2, 2005 January 1, 2005* (unaudited) ASSETS Current assets Cash and cash equivalents $5,575 $3,608 Investments 25,400 34,070 Accounts receivable, net 15,725 12,428 Inventories 54,086 61,044 Prepaid expenses and other current assets 10,070 10,242 Deferred income taxes 6,950 7,750 Total current assets 117,806 129,142 Property, plant and equipment 82,098 81,880 Less accumulated depreciation and amortization 54,456 52,750 Net property, plant and equipment 27,642 29,130 Non-current deferred income taxes 1,350 950 Other assets 5,161 5,168 Total assets $151,959 $164,390 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $10,922 $18,169 Accrued liabilities 28,875 33,197 Total current liabilities 39,797 51,366 Deferred rent 3,965 4,037 Employee benefit plan liabilities 11,078 11,253 Shareholders' equity Preferred stock -- -- Common stock: Class A 96 95 Class B 22 22 Additional paid-in capital 4,629 3,726 Retained earnings 94,710 96,426 Unearned compensation under restricted stock plan (2,338) (2,535) Total shareholders' equity 97,119 97,734 Total liabilities and shareholders' equity $151,959 $164,390 *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 April 2, 2005 April 3, 2004 Net Sales $84,496 $79,507 Cost of products sold 51,138 48,709 Gross profit 33,358 30,798 Selling, general and administrative expenses 37,460 36,594 Royalty income, net (3,311) (2,863) Gain on sale of assets (3) (1,037) Operating loss (788) (1,896) Other income (expense): Interest expense (47) (49) Interest income 135 67 Miscellaneous (7) 9 Other income (expense) - net 81 27 Loss before income taxes (707) (1,869) Income taxes (benefit) (255) (673) Net loss $(452) $(1,196) Net loss per common share Basic - Class A $(0.04) $(0.10) Basic - Class B $(0.04) $(0.10) Diluted - Class A $(0.04) $(0.10) Diluted - Class B $(0.04) $(0.10) Weighted average common shares outstanding Basic - Class A 11,785 11,693 Basic - Class B 11,785 11,693 Diluted - Class A 11,785 11,693 Diluted - Class B 11,785 11,693 Cash dividends per common share Class A $0.110 $0.110 Class B $0.095 $0.095 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three-Month Period Ended April 2, 2005 April 3, 2004 Cash flows from operating activities Net loss $(452) $(1,196) Depreciation and amortization 1,889 1,620 Deferred income taxes 400 450 Income tax benefit from stock options exercised 137 2 Items in net loss not affecting cash and cash equivalents 19 (1,186) Changes in current assets 3,833 1,180 Changes in current liabilities and deferred rent (11,641) (6,954) Net cash used in operating activities (5,815) (6,084) Cash flows from investing activities Additions to property, plant and equipment (309) (945) Proceeds from disposal of assets 3 1,869 Sale of investments 8,670 7,610 Changes in other assets (85) (120) Net cash provided by investing activities 8,279 8,414 Cash flows from financing activities Dividends paid (1,263) (1,259) Net proceeds from issuance of common shares 766 19 Net cash used in financing activities (497) (1,240) Net increase in cash and cash equivalents 1,967 1,090 Cash and cash equivalents at beginning of period 3,608 3,456 Cash and cash equivalents at end of period $5,575 $4,546 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, or Michael L. Heider, Vice President Finance, Treasurer and Chief Financial Officer, +1-920-232-4418, both of OshKosh B'Gosh, Inc., or Investor Relations, Cara O'Brien/Melissa Myron/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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