2007'12.04.Tue
Kellwood to Sell Smart Shirts to Youngor Group Co., Ltd.
November 06, 2007
Company Sells Related Real Estate Assets in Hong Kong
Proceeds Expected to Be Used to Repurchase Shares and
Reduce Debt
Reaffirms 2007 Guidance, As Adjusted For the Sale of Smart
Shirts
Company to Hold Conference Call Today at 10:00 AM ET
ST. LOUIS, Nov. 6 /Xinhua-PRNewswire / -- Kellwood
Company (NYSE: KWD) announced today that its Board of
Directors has unanimously approved the sale of its Smart
Shirts manufacturing operations as well as related real
estate assets in two separate transactions that will bring
Kellwood gross proceeds of approximately $161 million in
cash in the aggregate. The Company expects to utilize the
proceeds from the transactions to repurchase shares and
reduce debt.
The Company announced that Youngor Group Co., Ltd.
(Youngor Group) has agreed to acquire Kellwood's Smart
Shirts business for approximately $120 million in cash.
The transaction, which is subject to certain customary
closing conditions including regulatory approvals, is
expected to close by the end of fiscal year 2007.
Separately, the Company has sold its Smart Shirts real
estate assets in Hong Kong to Bright Treasure Development
Ltd. for approximately $41 million in cash.
"As part of our strategy to increase shareholder
value, we continually assess our portfolio of businesses to
ensure that we are focused on our strongest opportunities
for sales and earnings growth," stated Robert C.
Skinner, Jr., chairman, president and chief executive
officer of Kellwood Company. "Following a careful
review of the Company's strategy and operations, the Board
and management have concluded that Smart Shirts is not
consistent with our long-term strategic plan, which
includes developing better and above price point brands and
reinvigorating our legacy businesses. Eliminating
capital-intensive manufacturing from our operations and
enhancing the Company's focus on the development of our
lifestyle brands will enable us to elevate Kellwood's
position in the apparel industry. Consistent with our
strategy to transform Kellwood into a brand-focused
marketing enterprise, this move allows us to significantly
reduce our concentration in private brand sales from 28% to
12% today."
Use of Proceeds
Kellwood expects to use proceeds from the transactions
to repurchase shares and reduce debt. The repurchase of
shares would be in addition to the previously approved $50
million stock repurchase program announced in September
2007.
Kellwood expects to report a pre-tax gain on the sale
of the Smart Shirts business and Hong Kong building of
approximately $10 million.
Guidance
Given today's announced sale of the Smart Shirts
business, Kellwood has updated its previously issued net
sales and earnings guidance to exclude Smart Shirts from
ongoing operations. Other than these adjustments, guidance
for the third quarter and total year from ongoing operations
remains the same as previously provided on September 6,
2007. The Smart Shirts business will be included in
discontinued operations for historical and future periods.
In addition, the gain on the sale of the Smart Shirts
business and Hong Kong building, as well as costs
associated with these transactions, will be included in
discontinued operations.
Third Quarter 2007
For the third quarter of fiscal 2007, the Company
expects net sales from ongoing operations as adjusted for
the newly discontinued Smart Shirts business to be
approximately $400.0 million to $415.0 million. This
compares to its previous expectation, which includes Smart
Shirts, for net sales from ongoing operations of $520.0
million to $535.0 million, and versus actual net sales from
ongoing operations, excluding Smart Shirts, of $397.0
million in the third quarter of last year. Operating
earnings (gross profit less selling, general &
administrative expense before stock option expense,
amortization and impairment, restructuring and other
non-recurring charges) from ongoing operations are
currently expected to range from $16.5 million to $18.5
million, as compared to the Company's previous expectation,
which includes Smart Shirts, for operating earnings from
ongoing operations of approximately $24.0 million to $26.0
million, versus $22.4 million last year, excluding Smart
Shirts.
Net earnings from ongoing operations are currently
estimated to be approximately $2.4 million to $3.9 million,
or $0.10 to $0.15 per diluted share. This compares to the
Company's previous guidance, which includes Smart Shirts,
for net earnings from ongoing operations of $7.5 million to
$9.0 million, or $0.30 to $0.35 per diluted share, and
versus net earnings from ongoing operations, excluding
Smart Shirts, of $10.6 million, or $0.41 per share, in the
third quarter of 2006.
Fiscal 2007
For fiscal 2007, the Company expects net sales from
ongoing operations as adjusted for the newly discontinued
Smart Shirts business to range from $1.500 billion to
$1.550 billion. This compares to its previous expectation,
which includes Smart Shirts, for net sales from ongoing
operations of approximately $1.950 billion to $2.0 billion
and versus actual net sales from ongoing operations,
excluding Smart Shirts, of $1.514 billion in fiscal 2006.
The Company is forecasting that operating earnings (gross
profit less selling, general & administrative expense
before stock option expense, amortization and impairment,
restructuring and other non-recurring charges) from ongoing
operations will approximate $68.0 million to $73.0 million.
This compares to the Company's previous expectation, which
includes Smart Shirts, for operating earnings from ongoing
operations of approximately $87.5 million to $92.5 million,
and versus actual operating earnings from ongoing
operations, excluding Smart Shirts, of $64.4 million last
year.
On an ongoing basis, net earnings for fiscal 2007 are
currently estimated to range from $17.0 million to $20.0
million, as compared to the Company's previous expectation,
which includes Smart Shirts, for net earnings from ongoing
operations of approximately $33.5 million to $36.5 million
and with fiscal 2006 net earnings from ongoing operations,
excluding Smart Shirts, of $23.2 million. Also, on an
ongoing basis, fiscal 2007 diluted earnings per share are
currently estimated in the range of approximately $0.66 to
$0.76, as compared to the Company's previous expectation,
which includes Smart Shirts, for diluted earnings per share
of approximately $1.30 to $1.40. This compares to actual
earnings per diluted share, excluding Smart Shirts, of
$0.90 in fiscal 2006.
Adjusted Historical Financial Information
The Company will post schedules on its website under
Investor Relations / Presentations that reflect the results
of ongoing operations excluding the Smart Shirts business
for each quarter in fiscal 2005 and 2006 and for the first
two quarters of 2007. These schedules set forth the
various components of the statement of operations for
ongoing operations, impairment, restructuring and
non-recurring charges, discontinued operations and the
repatriation tax benefit included in overall operating
results.
The Phat Fashions business will now be included in the
women's sportswear segment as a result of transforming Phat
Farm men's business to solely a licensing model. This
change has also been reflected in the schedules posted on
the Company's website for each quarter in fiscal 2005 and
2006 and for the first two quarters of 2007.
As a result of the sale of the Smart Shirts business
and inclusion of the Phat Fashions business in the women's
sportswear segment, the Company will no longer report a
men's sportswear segment.
Conference Call Information
The Company will host a conference call with management
to discuss today's announcements at 10:00 a.m. ET today. If
you wish to participate, you may do so by dialing
888-694-4728 or 973-582-2745 (toll / international). This
call will be webcast to the general public and can be
accessed via Kellwood's website at
http://www.kellwood.com.
About Smart Shirts
Smart Shirts is a leading manufacturer, marketer,
seller and distributor of woven and knit garments --
principally men's shirts -- around the world. While
primarily a manufacturer for private brands, this business
also designs, makes, and sells licensed brands of men's
shirts including Nautica, Claiborne, Axcess A Claiborne
Company, Concepts by Claiborne, O Oscar, an Oscar de la
Renta Company, and Perry Ellis. Smart Shirts has 14
manufacturing facilities located in the People's Republic
of China, Hong Kong, Sri Lanka and the Philippines.
About Kellwood
Kellwood (NYSE: KWD) is a $1.6 billion leading marketer
of apparel and consumer soft goods. The Company's brands are
designed to meet and exceed its consumers' needs and
expectations. Specializing in branded products, the
Company markets to all channels of distribution with
products and brands tailored to each specific channel. For
more information, visit http://www.kellwood.com .
About Youngor Group Co., Ltd.
Youngor Group Co., Ltd.'s (SHG:600177) principal
activities are designing, manufacturing, selling and
trading clothing products and accessories. It carries the
"Youngor" brand for men's clothing, which
includes shirts, pants, suits, ties, T-shirts and pajamas,
among others. In addition, the Company is one of China's
largest manufacturers of high grade yarn dyed woven
fabrics. Other activities include developing, leasing and
selling condominium and residential buildings and operating
hotels. It also provides transportation and warehouses,
technical consultation, management and investment services
and distribution and selling of electrical and thermal
power. Headquartered in Ningbo, China, operations are
carried out in the People's Republic of China and other
countries.
Statements in this press release that are not strictly
historical are "forward-looking" statements
within the meaning of the safe harbor provisions of the
federal securities laws. Actual results may differ
materially due to risks and uncertainties that are
described in the Company's Form 10-K and other filings with
the SEC.
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", "planned",
"should", "anticipate" and similar
expressions may identify forward-looking statements.
Although we believe that our expectations reflected in the
forward-looking statements are reasonable, we cannot and do
not give any assurance that such expectations will prove to
be correct. These forward-looking statements, which
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: intense competition in the apparel
industry on many fronts, including from our retail
customers' private label or exclusive brand programs;
failing to continually anticipate fashion trends and
consumer tastes; uncertainties regarding consumer
confidence and spending patterns; concentration of our
customers; consolidation and change in the retail industry;
performance of our retail customers in selling our goods;
execution of the long-term corporate strategy; loss of key
personnel; continued value of owned and licensed brands;
ability to generate sufficient sales to offset the minimum
royalty payments we must pay with respect to licensed
brands; inability to protect our intellectual property
rights; reliance on independent manufacturers; the
continued movement in the global location of lowest cost
manufacturing sources; fluctuations in the price,
availability and quality of raw materials; availability of
suitable acquisition candidates; integration of completed
acquisitions into our existing business and the
availability of reasonably priced debt. These factors
should be read in conjunction with the risk factors
included in our Annual Report to Stockholders on Form 10-K
for 2006 (the fiscal year ended February 3, 2007) and
subsequent periodic filings. 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.
Use of Non-GAAP Financial Measures
The Company has provided non-GAAP adjusted earnings and
earnings per share information for its third quarter and
full year 2007 guidance and third quarter and full year
2006 results in this release, in addition to providing
financial results in accordance with GAAP. This non-GAAP
financial information is provided to enhance the user's
overall understanding of the Company's current financial
performance. Specifically, the Company believes the
non-GAAP adjusted results provide useful information to
both management and investors by excluding items that the
Company believes are not indicative of the Company's core
operating results. The non-GAAP financial information
should be considered in addition to, not as a substitute
for or as being superior to, operating income, cash flows
or other measures of financial performance prepared in
accordance with GAAP.
The following tables summarize net sales, operating
earnings, net earnings and diluted earnings per share from
Kellwood's ongoing operations, the impairment,
restructuring and non-recurring charges, amortization of
intangible assets and stock option expense included in
continuing operations. See the last page of the release
for footnotes (1), (2) and (3) to the tables. (Amounts in
thousands, except per share data.)
Third Quarter:
Adjusted Guidance for FY 2007 at the Mid-Point of the
Range
Impairment,
Restructuring
Adjusted Stock Amortization
and Non Adjusted
Continuing Option of Intangible
Recurring Ongoing
Operations Expense(2) Assets(2)
Charges Operations
Net sales $407,500 $- $-
$- $407,500
Operating
earnings
(loss)(1) $(4,100) $300 $3,800
$17,500 $17,500
Net
earnings
(loss) from
continuing
operations $(7,450) $- $-
$10,600 $3,150
Diluted
earnings
(loss) per
share from
continuing
operations $(0.29) $- $-
$0.41 $0.12
Previous Guidance for FY 2007 at the Mid-Point of the
Range
Impairment,
Restructuring
Previous Stock Amortization and
Non Previous
Continuing Option of Intangible
Recurring Ongoing
Operations Expense(2) Assets(2)
Charges Operations
Net sales $527,500 $- $-
$- $527,500
Operating
earnings(1) $3,400 $300 $3,800
$17,500 $25,000
Net earnings
(loss) from
continuing
operations $(2,350) $- $-
$10,600 $8,250
Diluted
earnings
(loss) per
share from
continuing
operations $(0.09) $- $-
$0.41 $0.32
Guidance Adjustments for FY 2007 at the Mid-Point of
the Range
Previous Adjusted
Ongoing Smart Ongoing
Operations Shirts(3) Operations
Net sales $527,500 $(120,000) $407,500
Operating
earnings(1) $25,000 $(7,500) $17,500
Net earnings
from
continuing
operations $8,250 $(5,100) $3,150
Diluted
earnings
per share
from
continuing
operations $0.32 $(0.20) $0.12
Third Quarter:
Adjusted Results for FY 2006
Impairment,
Restructuring
Adjusted Stock Amortization
and Non Adjusted
Continuing Option of Intangible
Recurring Ongoing
Operations Expense(2) Assets(2)
Charges Operations
Net sales $397,007 $- $-
$- $397,007
Operating
earnings(1) $277 $468 $2,628
$19,041 $22,414
Net earnings
(loss) from
continuing
operations $(1,483) $- $-
$12,092 $10,609
Diluted
earnings
(loss) per
share from
continuing
operations $(0.06) $- $-
$0.47 $0.41
As Reported Results for FY 2006
Impairment,
Restructuring As
As Reported Stock Amortization
and Non Reported
Continuing Option of Intangible
Recurring Ongoing
Operations Expense(2) Assets(2)
Charges Operations
Net sales $516,397 $- $-
$- $516,397
Operating
earnings(1) $9,412 $468 $2,628
$19,041 $31,549
Net earnings
from
continuing
operations $5,521 $- $-
$12,092 $17,613
Diluted
earnings
per share
from
continuing
operations $0.21 $- $-
$0.47 $0.68
Results Adjustments for FY 2006
As Reported Adjusted
Ongoing Smart Ongoing
Operations Shirts(3) Operations
Net sales $516,397 $(119,390) $397,007
Operating
earnings(1) $31,549 $(9,135) $22,414
Net earnings
from
continuing
operations $17,613 $(7,004) $10,609
Diluted
earnings
per share
from
continuing
operations $0.68 $(0.27) $0.41
Fiscal Year:
Adjusted Guidance for FY 2007 at the Mid-Point of the
Range
Impairment,
Restructuring
Adjusted Stock Amortization
and Non Adjusted
Continuing Option of Intangible
Recurring Ongoing
Operations Expense(2) Assets(2)
Charges Operations
Net sales $1,525,000 $- $-
$- $1,525,000
Operating
earnings
(loss)(1) $(84,600) $1,400 $14,500
$139,200 $70,500
Net earnings
(loss) from
continuing
operations $(73,000) $- $-
$91,500 $18,500
Diluted
earnings
(loss) per
share from
continuing
operations $(2.81) $- $-
$3.52 $0.71
Previous Guidance for FY 2007 at the Mid-Point of the
Range
Impairment,
Restructuring
Previous Stock Amortization
and Non Previous
Continuing Option of Intangible
Recurring Ongoing
Operations Expense(2) Assets(2)
Charges Operations
Net sales $1,975,000 $- $-
$- $1,975,000
Operating
earnings
(loss)(1) $(65,100) $1,400 $14,500
$139,200 $90,000
Net earnings
(loss) from
continuing
operations $(56,500) $- $-
$91,500 $35,000
Diluted
earnings
(loss)
per share
from
continuing
operations $(2.17) $- $-
$3.52 $1.35
Guidance Adjustments for FY 2007 at the Mid-Point of
the Range
Previous Adjusted
Ongoing Smart Ongoing
Operations Shirts(3) Operations
Net sales $1,975,000 $(450,000) $1,525,000
Operating
earnings(1) $90,000 $(19,500) $70,500
Net
earnings
from
continuing
operations $35,000 $(16,500) $18,500
Diluted
earnings
per share
from
continuing
operations $1.35 $(0.63) $0.71
Fiscal Year:
Adjusted Results for FY 2006
Impairment,
Restructuring
Adjusted Stock Amortization and
Non Adjusted
Continuing Option of Intangible
Recurring Ongoing
Operations Expense(2) Assets(2)
Charges Operations
Net sales $1,514,287 $- $-
$- $1,514,287
Operating
earnings(1) $15,467 $4,345 $10,935
$33,632 $64,379
Net earnings
from
continuing
operations $1,728 $- $-
$21,423 $23,151
Diluted
earnings
per share
from
continuing
operations $0.07 $- $-
$0.83 $0.90
As Reported Results for FY 2006
Impairment,
Restructuring As
As Reported Stock Amortization
and Non Reported
Continuing Option of Intangible
Recurring Ongoing
Operations Expense(2) Assets(2)
Charges Operations
Net sales $1,961,750 $- $-
$- $1,961,750
Operating
earnings(1) $43,010 $4,345 $10,935
$33,632 $91,922
Net
earnings
from
continuing
operations $21,083 $- $-
$21,423 $42,506
Diluted
earnings
per share
from
continuing
operations $0.82 $- $-
$0.83 $1.64
Results Adjustments for FY 2006
As Reported Adjusted
Ongoing Smart Ongoing
Operations Shirts(3) Operations
Net sales $1,961,750 $(447,463) $1,514,287
Operating
earnings(1) $91,922 $(27,543) $64,379
Net
earnings
from
continuing
operations $42,506 $(19,355) $23,151
Diluted
earnings
per share
from
continuing
operations $1.64 $(0.75) $0.90
(1) Operating earnings for ongoing operations is a
non-GAAP measure that
differs from GAAP operating earnings in that it
excludes impairment,
restructuring and non-recurring charges, stock
option expense and
amortization of intangible assets. Operating
earnings for the
ongoing operations should not be considered as an
alternative to GAAP
operating earnings. Operating earnings before
impairment,
restructuring and non-recurring charges, stock
option expense and
amortization of intangible assets is the primary
measure used by
management to evaluate the Company's performance,
as well as the
performance of the Company's divisions and
segments. Management
believes the comparison of operating earnings
before impairment,
restructuring and non-recurring charges, stock
option expense and
amortization of intangibles assets between periods
is useful in
showing the interaction of changes in sales, gross
profit and
selling, general and administrative expenses.
Operating earnings
before impairment, restructuring and non-recurring
charges, stock
option expense and amortization of intangible
assets may not be
comparable to any similarly titled measure used by
another company.
(2) Stock option expense and amortization of intangible
assets is not
included in operating earnings for the ongoing
operations; however,
it is included in net earnings. See footnote (1)
for further
discussions of the presentation of operating
earnings for the ongoing
operations.
(3) Smart Shirts represents the newly discontinued
operations.
For more information, please contact:
Media:
Donna B. Weaver
VP Corporate Communications
Kellwood Company
Tel: +1-212-329-8072
Email: donna.weaver@kellwood.com
Financial:
Samuel W. Duggan II
VP Investor Relations and Treasurer
Kellwood Company
Tel: +1-314-576-8580
Email: sam.duggan@kellwood.com
Joele Frank or Eric Brielmann or Jennifer Schaefer
Wilkinson Brimmer Katcher
Tel: +1-212-355-4449
Allison Malkin
Integrated Corporate Relations
Tel: +1-203-682-8225
PR
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