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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13082
KENNETH COLE PRODUCTIONS, INC.
(Exact name of registrant as specified in its charter)
New York 13-3131650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
603 West 50th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 265-1500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes (X) No ( )
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class November 6, 2003
Class A Common Stock ($.01 par value) 11,596,016
Class B Common Stock ($.01 par value) 8,201,497
Kenneth Cole Productions, Inc.
Index to 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30,2003 and
December 31, 2002..................................................... 3
Condensed Consolidated Statements of Income for the three and nine-month
periods ended September 30, 2003 and 2002............................. 5
Condensed Consolidated Statement of Changes in Shareholders' Equity for
the nine-month period ended September 30, 2003........................ 6
Condensed Consolidated Statements of Cash Flows for the nine-month
periods ended September 30, 2003 and 2002............................. 7
Notes to Condensed Consolidated Financial Statements.................... 8
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk...... 22
Item 4. Controls and Procedures......................................... 22
Part II.OTHER INFORMATION
Item 1.Legal Proceedings................................................ 23
Item 2.Changes in Securities and Use of Proceeds........................ 23
Item 3.Defaults Upon Senior Securities.................................. 23
Item 4.Submission of Matters to a Vote of Security Holders.............. 23
Item 5.Other Information................................................ 23
Item 6.Exhibits and Reports on Form 8-K................................. 23
Signatures.............................................................. 24
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
September December
30, 31,
2003 2002
(Unaudited)
Assets
Current assets:
Cash $ 78,102,000 $ 91,549,000
Due from factor 46,544,000 30,886,000
Accounts receivable, net 13,003,000 7,884,000
Inventories 54,647,000 43,724,000
Prepaid expenses and other current assets 1,787,000 1,074,000
Deferred taxes 2,900,000 2,900,000
------------ ------------
Total current assets 196,983,000 178,017,000
Property and equipment - at cost, less
accumulated depreciation 36,900,000 36,002,000
Other assets:
Deposits and deferred taxes 14,394,000 14,243,000
Deferred compensation plan assets 17,308,000 12,055,000
------------ ------------
Total other assets 31,702,000 26,298,000
------------ ------------
Total assets $265,585,000 $240,317,000
============ ============
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
September December
30, 31,
2003 2002
(Unaudited)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 39,718,000 $ 33,634,000
Accrued expenses and other current liabilities 10,063,000 14,040,000
Income taxes payable 2,512,000 6,240,000
------------ ------------
Total current liabilities 52,293,000 53,914,000
Deferred compensation 17,308,000 12,055,000
Accrued rent and other long term liabilities 10,671,000 9,446,000
Commitments and contingencies
Shareholders' equity:
Series A Convertible Preferred Stock par value
$1.00, per share, 1,000,000 shares authorized,
none outstanding
Class A Common Stock, par value $.01, per share,
20,000,000 shares authorized, 14,367,885 and
13,921,817 issued in 2003 and 2002 144,000 139,000
Class B Common Stock, par value $.01, per share,
9,000,000 shares authorized, 8,201,497 and
8,360,497 outstanding in 2003 and 2002 82,000 84,000
Additional paid-in capital 67,531,000 63,476,000
Accumulated other comprehensive income 556,000 654,000
Retained earnings 183,221,000 162,244,000
------------ ------------
251,534,000 226,597,000
Class A Common Stock in treasury, at cost,
2,888,400 and 2,688,400 shares in 2003 and 2002 (66,221,000) (61,695,000)
------------ ------------
Total shareholders' equity 185,313,000 164,902,000
------------ ------------
Total liabilities and shareholders' equity $265,585,000 $240,317,000
============ ============
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Net sales $121,179,000 $115,325,000 $311,392,000 $295,860,000
Royalty revenue 10,887,000 8,195,000 27,726,000 19,821,000
------------ ------------ ------------ ------------
Net revenues 132,066,000 123,520,000 339,118,000 315,681,000
Cost of goods sold 74,442,000 69,299,000 189,921,000 171,603,000
------------ ------------ ------------ ------------
Gross profit 57,624,000 54,221,000 149,197,000 144,078,000
Selling, general and
administrative expenses 41,855,000 39,266,000 114,208,000 112,356,000
Asset impairment 4,446,000 4,446,000
------------ ------------ ------------ ------------
Operating income 15,769,000 10,509,000 34,989,000 27,276,000
Interest and other
income, net 158,000 266,000 650,000 863,000
------------ ------------ ------------ ------------
Income before provision
for income taxes 15,927,000 10,775,000 35,639,000 28,139,000
Provision for
income taxes 5,893,000 3,987,000 13,186,000 10,412,000
------------ ------------ ------------ ------------
Net income $ 10,034,000 $ 6,788,000 $ 22,453,000 $ 17,727,000
============ ============ ============ ============
Earnings per share:
Basic $ .51 $ .34 $ 1.15 $ .90
Diluted $ .49 $ .33 $ 1.10 $ .86
Shares used to compute
earnings per share:
Basic 19,627,000 19,690,000 19,558,000 19,667,000
Diluted 20,475,000 20,665,000 20,389,000 20,636,000
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
Class A Class B
Common Stock Common Stock
Number Number
of shares Amount of shares Amount
Shareholders' equity
January 1, 2003 13,921,817 $ 139,000 8,360,497 $ 84,000
Net income
Translation adjustments
foreign currency
forward contracts,
net of taxes
Comprehensive income
Exercise of stock options,
and related tax benefits
of $1,567,000 278,168 3,000
Issuance of Class A Common
Stock for ESPP 8,900
Dividends paid to shareholders
Purchase of Class A
Common Stock
Conversion of Class B shares
to Class A shares 159,000 2,000 (159,000) (2,000)
---------------------------------------------
Shareholders' equity
September 30, 2003 14,367,885 $ 144,000 8,201,497 $ 82,000
=============================================
Accumulated
Additional Other
Paid-in Comprehensive Retained
Capital Income Earnings
Shareholders' equity
January 1, 2003 $ 63,476,000 $ 654,000 $162,244,000
Net income 22,453,000
Translation adjustments
foreign currency (99,000)
forward contracts,
net of taxes 1,000
Comprehensive income
Exercise of stock options,
and related tax benefits
of $1,567,000 3,904,000
Issuance of Class A Common
Stock for ESPP 151,000
Dividends paid to shareholders (1,476,000)
Purchase of Class A
Common Stock
Conversion of Class B shares
to Class A shares
---------------------------------------------
Shareholders' equity
September 30, 2003 $ 67,531,000 $ 556,000 $183,221,000
=============================================
Treasury Stock
Number of
Shares Amount Total
Shareholders' equity
January 1, 2003 (2,688,400) $(61,695,000) $164,902,000
Net income 22,453,000
Translation adjustments
foreign currency (99,000)
forward contracts,
net of taxes 1,000
-----------
Comprehensive income 22,355,000
Exercise of stock options,
and related tax benefits
of $1,567,000 3,907,000
Issuance of Class A Common
Stock for ESPP 151,000
Dividends paid to shareholders (1,476,000)
Purchase of Class A
Common Stock (200,000) (4,526,000) (4,526,000)
Conversion of Class B shares
to Class A shares
-------------------------------------------
Shareholders' equity
September 30, 2003 (2,888,400) $(66,221,000) $185,313,000
===========================================
See accompanying notes to condensed consolidated financial statements
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2003 2002
Cash flows from operating activities
Net income $ 22,453,000 $ 17,727,000
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 5,795,000 5,528,000
Asset impairment 4,446,000
Unrealized (gain) loss on deferred compensation (2,115,000) 1,465,000
Provision for bad debts 214,000 134,000
Tax benefit from exercise of stock options 1,567,000 594,000
Changes in assets and liabilities:
Increase in due from factor (15,658,000) (19,274,000)
Increase in accounts receivable (5,333,000) (3,181,000)
Increase in inventories (10,922,000) (23,523,000)
Increase in prepaid expenses & other current assets (713,000) (188,000)
(Increase) decrease in other assets (3,289,000) 67,000
Increase in accounts payable 6,084,000 13,095,000
Decrease in income taxes payable (3,728,000) (435,000)
(Decrease) increase in accrued expenses and
other current liabilities (3,893,000) 1,761,000
Increase in other non-current liabilities 6,478,000 644,000
------------ ------------
Net cash used in operating activities (3,060,000) (1,140,000)
Cash flows from investing activities
Acquisition of property and equipment, net (6,693,000) (6,169,000)
------------ ------------
Net cash used in investing activities (6,693,000) (6,169,000)
Cash flows from financing activities
Proceeds from exercise of stock options 2,340,000 715,000
Proceeds from issuance of common stock 151,000 161,000
Dividends paid to shareholders (1,476,000)
Purchase of treasury stock (4,526,000) (4,562,000)
Principal payments on capital lease obligations (171,000) (158,000)
------------ ------------
Net cash used in financing activities (3,682,000) (3,844,000)
Effect of exchange rate changes on cash (12,000) (6,000)
------------ ------------
Net decrease in cash (13,447,000) (11,159,000)
Cash, beginning of period 91,549,000 68,966,000
------------ ------------
Cash, end of period $ 78,102,000 $ 57,807,000
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 31,000 $ 28,000
Income taxes $ 14,989,000 $ 11,579,000
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared by Kenneth Cole
Productions, Inc. (the "Company") in accordance with accounting
principles generally accepted in the United States for interim
financial information. Accordingly, they do not include all of
the information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. Certain items contained in these financial
statements are based on estimates. In the opinion of the
Company's management, the accompanying unaudited condensed
consolidated financial statements reflect all significant
adjustments, consisting of only normal and recurring
adjustments, necessary for a fair presentation of the financial
position and results of operations and cash flows for the
periods presented. All significant intercompany transactions
have been eliminated.
Operating results for the nine months ended September 30,
2003 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003. These unaudited
condensed consolidated financial statements should be read in
conjunction with the financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
The consolidated balance sheet at December 31, 2002, as
presented, was derived from the audited financial statements as
of December 31, 2002 included in the Company's Annual Report on
Form 10-K.
2. Stock-Based Compensation
The Company measures compensation expense for its
stock-based compensation plans using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") and
related Interpretations. The Company has adopted disclosure
only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123").
Pro forma disclosures, as required by Statement of
Financial Accounting Standard No. 148, "Accounting for Stock-
Based Compensation - Transition and Disclosure", are computed
as if the Company recorded compensation expense based on the
fair value for stock-based awards or grants. The following pro
forma information includes the effects of the options discussed
above.
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Net Income, as reported $ 10,034,000 $ 6,788,000 $ 22,453,000 $ 17,727,000
Deduct: Stock-based
employee compensation
expense determined
under fair value
method, net of related
tax effects 678,000 727,000 2,119,000 2,147,000
----------- ----------- ------------ ------------
Pro forma net income $ 9,356,000 $ 6,061,000 $ 20,334,000 $ 15,580,000
Earnings per share:
Basic - as reported $ .51 $ .34 $ 1.15 $ .90
Basic - pro forma $ .48 $ .31 $ 1.04 $ .79
Diluted - as reported $ .49 $ .33 $ 1.10 $ .86
Diluted - pro forma $ .46 $ .29 $ 1.00 $ .76
3.Earnings Per Share
The following is an analysis of the differences between
basic and diluted earnings per common share in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share".
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
Weighted average common
shares outstanding 19,627,000 19,690,000 19,558,000 19,667,000
Effect of dilutive
securities:
Stock options 848,000 975,000 831,000 969,000
---------- ---------- ---------- ----------
Weighted average common
shares outstanding and
common share equivalents 20,475,000 20,665,000 20,389,000 20,636,000
========== ========== ========== ==========
4. Comprehensive Income
Comprehensive income is comprised of net income, the effect
of foreign currency translation and changes in unrealized gains
and losses on forward exchange contracts used to hedge
merchandise commitments. Comprehensive income amounted to
$22,355,000 and $17,667,000 for the nine-month periods ended
September 30, 2003 and 2002, respectively. Comprehensive
income for the three-month periods ended September 30, 2003 and
2002 amounted to $10,405,000 and $6,738,000, respectively.
5. Derivative Instruments and Hedging Activities
The Company, in the normal course of business, routinely
enters into forward exchange contracts in anticipation of future
purchases of inventory denominated in Euros. These forward
exchange contracts are used to hedge against the Company's
exposure to changes in the Euro to protect the purchase price of
merchandise under such commitments and are not held for the
purpose of trading or speculation; therefore, the Company has
classified these contracts as cash flow hedges. The Company had
outstanding forward exchange contracts of $10,500,000 at
September 30, 2003 with maturity dates through January 2004.
5. Derivative Instruments and Hedging Activities (continued)
All terms and conditions of the Company's foreign exchange
contracts are included in the measurement of the related hedge
effectiveness. The critical terms of the foreign exchange
contracts are the same as the underlying forecasted transactions;
therefore, changes in the fair value of the contracts should be
highly effective in offsetting changes in the expected cash flows
from the forecasted transactions. No gains or losses related to
ineffectiveness of cash flow hedges were recognized in earnings
during the nine months ended September 30, 2003. At September
30, 2003 the Company's notional $10,500,000 in forward exchange
contracts resulted in an unrealized gain of approximately
$392,000, net of taxes, which was included as an addition to
accumulated other comprehensive income in the Company's Condensed
Consolidated Statement of Changes in Shareholders' Equity and an
increase to inventory, the underlying exposure on the balance
sheet. The Company expects to reclassify all of the ultimate
unrealized gain/(loss) from accumulated other comprehensive
income into earnings within the next four month period due to the
actual executions of foreign exchange contracts to purchase
merchandise.
6. Segment Information
The Company has three reportable segments: Wholesale, Consumer
Direct and Licensing/International. The Company's reportable
segments are business units that offer different products and
services or similar products through different channels of
distribution. The Wholesale segment is comprised of designing,
sourcing and marketing a broad range of quality footwear and
handbags for wholesale distribution. The Consumer Direct segment
markets the broad selection of the Company's branded products,
including licensee products, for sale directly to the consumer
through its own channels of distribution, which include full
price retail stores, outlet stores, catalogs and e-commerce (at
website addresses www.kennethcole.com and
www.reactiononline.com). The Licensing/International segment
primarily consists of earning royalties on licensee sales to
third parties of the Company's branded products and royalties
earned on the purchase and sale to foreign retailers or to
consumers in foreign countries. The Company maintains control
over quality and image and allows licensees to sell primarily to
the same channels of distribution as those of the Company's
Wholesale segment. The Company evaluates performance and
allocates resources based on profit or loss from each segment.
The Wholesale segment is evaluated on income from operations
before income taxes. The Consumer Direct segment is evaluated on
profit or loss from operations before unallocated corporate
overhead and income taxes. The Licensing/International segment
is evaluated on royalties earned and pretax segment profit.
Intersegment sales between the Wholesale and Consumer Direct
segment include a markup, which is eliminated in consolidation.
Revenues from international customers represent less than two
percent of the Company's consolidated revenues.
6. Segment Information (continued)
Financial information of the Company's reportable segments is
as follows (in thousands):
Three Months Ended
September 30, 2003
Consumer Licensing/
Wholesale Direct International Totals
Revenues from external
customers $ 78,697 $ 42,124 $ 11,245 $132,066
Intersegment revenues (9,028) (9,028)
Segment income (1) 10,707 1,509 8,040 20,256
Segment assets 211,997 52,025 3,702 267,724
Three Months Ended
September 30, 2002
Consumer Licensing/
Wholesale Direct International Totals
Revenues from external
customers $ 75,820 $ 39,340 $ 8,360 $123,520
Intersegment revenues (7,628) (7,628)
Segment income (1)(2) 11,467 (3,486) 7,141 15,122
Segment assets 176,109 55,205 2,408 233,722
Nine Months Ended
September 30, 2003
Consumer Licensing/
Wholesale Direct International Totals
Revenues from external
customers $196,666 $114,177 $ 28,275 $339,118
Intersegment revenues (22,870) (22,870)
Segment income (1) 26,673 (1,650) 22,325 47,348
Nine Months Ended
September 30, 2002
Consumer Licensing/
Wholesale Direct International Totals
Revenues from external
customers $182,955 $112,425 $ 20,301 $315,681
Intersegment revenues (24,197) (24,197)
Segment income (1)(2) 26,064 (713) 14,702 40,053
(1) Before elimination of intersegment profit, unallocated corporate overhead
and income taxes.
(2) Segment income for the Consumer Direct segment includes an asset
impairment charge of $4.4 million and a gain of $860,000 recorded during the
three months ended September 30, 2002.
6. Segment Information (continued)
The reconciliation of the Company's reportable segment revenues, profit and
loss, and assets are as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Revenues
Revenues for external customers $132,066 $123,520 $339,118 $315,681
Intersegment revenues 9,028 7,628 22,870 24,197
Elimination of
intersegment revenues (9,028) (7,628) (22,870) (24,197)
-------- -------- -------- --------
Total consolidated revenues $132,066 $123,520 $339,118 $315,681
======== ======== ======== ========
Income
Total profit for
reportable segments $ 20,256 $ 15,122 $ 47,348 $ 40,053
Elimination of intersegment
profit and unallocated
corporate overhead (4,329) (4,347) (11,709) (11,914)
-------- -------- -------- --------
Total income before income taxes $ 15,927 $ 10,775 $ 35,639 $ 28,139
======== ======== ======== ========
Assets
Total assets for
reportable segments $267,724 $233,722
Elimination of intersegment
inventory profit (2,139) (2,351)
-------- --------
Total consolidated assets $265,585 $231,371
======== ========
7. Common Stock Repurchase
The Board of Directors of the Company has authorized
management to repurchase, from time to time, up to an aggregate
4,250,000 shares of the Company's Class A Common Stock. During the
nine months ended September 30, 2003, 200,000 shares were repurchased
in the open market at an average price per share of $22.63 reducing
the available shares authorized for repurchase to 1,361,600. The
repurchased shares have been recorded as Treasury Stock.
8. Licensing Agreement
On May 1, 2003, the Company entered into an exclusive license
agreement with Candies, Inc. and its trademark holding company, IP
Holdings, LLC, ("Candies") to use the Bongo trademark in connection
with worldwide manufacture, sale and distribution of women's, men's
and children's footwear. The Chief Executive Officer and Chairman of
Candies is the brother of the Company's Chief Executive Officer and
Chairman. The initial term of the agreement is through December 31,
2007, with options to renew through December 31, 2016 based upon the
Company reaching certain sales thresholds. During these periods, the
Company is obligated to pay Candies a percentage of net sales based
upon the terms of the agreement. The Company recorded approximately
$386,000 and $436,000 in royalty and advertising expense to Candies
for the three and nine months ended September 30, 2003, respectively.
9. Asset Impairment Charge and Gain
On September 30, 2002, the Company determined that based upon
the performance and anticipated future outlook of its Rockefeller
Center flagship store, located in New York City and in accordance
with SFAS 144, certain fixed assets were impaired. As a result, a
pre-tax charge of $4.4 million was recorded during the three months
ended September 30, 2002. In addition, the Company recognized a gain
as part of cost of goods sold on the income statement in the amount
of $860,000 relating to price adjustments from sales to Kenneth Cole
retail stores from the audit results of its licensees.
10. Reclassifications
Certain amounts included in the Company's 2002 financial
statements have been reclassified to conform to the September 30,
2003 presentation.
11. Dividend
On July 29, 2003, the Board of Directors of the Company declared a
quarterly cash dividend of $.075 per share payable September 18, 2003
to shareholders of record at the close of business on Kenneth Cole
August 28, 2003. Aggregate dividends in the amount of $1,476,000
were paid out, approximately $861,000 and $615,000 to Class A and
Class B shareholders, respectively.
12. Other
The Company, from time to time, is a party to litigation that
arises in the normal course of its business operations. The Company
presently is not a party to any litigation that it believes would
have a material adverse effect on its business operations.
13. Subsequent Events
On October 28, 2003, the Board of Directors declared a quarterly
cash dividend of $0.09 per share payable on December 17, 2003 to
shareholders of record at the close of business on November 25, 2003.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements Disclosure
The statements contained in this report which are not historical
facts including, without limitation, statements that relate to future
performance and/or statements regarding the Company's anticipated
results or level of business for 2003 or any other future period, may
be deemed to constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are based on current beliefs and expectations only,
and actual future results might differ materially from those
projected in such statements due to a number of risks and
uncertainties, including, but not limited to, demand and competition
for the Company's products, the ability to enter into new licensee
agreements, to maintain and renew existing licensing agreements and
to open new stores, dependence on certain large customers and changes
in the Company's relationships with vendors and other resources. The
forward-looking statements contained herein are also subject to other
risks and uncertainties that are described in the Company's reports
and registration statements filed with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly update
or revise any forward-looking statement, whether as a result of new
information, future results or otherwise.
Update on Critical Accounting Policies
The Company's consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the
United States, which require the Company to make estimates in the
application of its accounting policies based on the best assumptions,
judgments, and opinions of management. For a description of a
summary of the Company's significant accounting policies, see Note A
to the Company's consolidated financial statements included in the
Company's annual report on Form 10-K for the year ended December 31,
2002.
Results of Operations
The following table sets forth the Company's condensed
consolidated statements of income in thousands of dollars and as a
percentage of net revenues for the three and nine months ended
September 30, 2003 and September 30, 2002.
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Net sales $121,179 91.8% $115,325 93.4% $311,392 91.8% $295,860 93.7%
Royalty revenue 10,887 8.2 8,195 6.6 27,726 8.2 19,821 6.3
Net revenues 132,066 100.0 123,520 100.0 339,118 100.0 315,681 100.0
Gross profit 57,624 43.6 54,221 43.9 149,197 44.0 144,078 45.6
Selling, general
& administrative
expenses 41,855 31.7 39,266 31.8 114,208 33.7 112,356 35.6
Asset impairment 4,446 3.6 4,446 1.4
Operating income 15,769 11.9 10,509 8.5 34,989 10.3 27,276 8.6
Interest income,net 158 0.2 266 0.2 650 0.2 863 0.3
Income before
income taxes 15,927 12.1 10,775 8.7 35,639 10.5 28,139 8.9
Income tax expense 5,893 4.5 3,987 3.2 13,186 3.9 10,412 3.3
Net income 10,034 7.6 6,788 5.5 22,453 6.6 17,727 5.6
Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002
REVENUES: Consolidated net revenues increased $8.5 million, or 6.9%,
to $132.1 million for the three months ended September 30, 2003 from
$123.5 million for the three months ended September 30, 2002. This
increase is attributable primarily to the factors described below in
the sections entitled "Net Sales" and "Licensing/International
Revenue".
NET SALES: Wholesale net sales (excluding sales to the Company's
Consumer Direct business segment) increased $2.9 million, or 3.8% for
the three months ended September 30, 2003 to $78.7 million from $75.8
million for the three months ended September 30, 2002. This increase
is primarily due to increased shipments of women's footwear,
including the addition of Bongo licensed footwear, offset by declines
in the handbag business. Net sales in the Company's Consumer Direct
segment increased $2.8 million, or 7.1%, to $42.1 million for the
three months ended September 30, 2003 from $39.3 million for the
three months ended September 30, 2002. This increase is due
primarily to an increase in comparable store sales of 2.2%,
additional sales from new stores opened in 2003 and that portion of
2003 sales for stores not open for all of 2002. The Company believes
the increase in comparable store sales is a result of its efforts to
adapt its product offerings to better reflect current consumer
demands. The Catalog/Internet operations accounted for the remaining
increase in sales of the Company's Consumer Direct segment.
LICENSING/INTERNATIONAL REVENUE: Royalty revenue increased 32.8% to
$10.9 million for the three months ended September 30, 2003 from $8.2
million for the three months ended September 30, 2002. This growth
in licensing revenues is driven primarily by increases in the
Company's women's categories, including sportswear, watches, eyewear
and jewelry. Other strong categories were luggage, mens dress
shirts, ties, watches and fragrance. The increase also reflected a
one-time payment related to the transfer of the Company's sunglass
license.
GROSS PROFIT: Consolidated gross profit as a percentage of net
revenues decreased to 43.6% for the three months ended September 30,
2003 from 43.9% for the three months ended September 30, 2002. This
decrease is primarily due to the change in mix of the Company's
revenues from its Wholesale, Consumer Direct, and
Licensing/International segments, which operate at very different
gross margin levels. The Wholesale segment, which operates at a
lower gross profit level than the Consumer Direct segment, as a
percentage of net revenues decreased to 59.6% for the three months
ended September 30, 2003 from 61.4% for the three months ended
September 30, 2002, while the Consumer Direct segment as a percentage
of net revenues increased to 31.9% for the three months ended
September 30, 2003 from 31.8% for the three months ended September
30, 2002. The decrease in gross profit as a percentage of net
revenues was partially offset by the gross profit generated from the
Licensing/International segment which carries nominal associated cost
of goods sold. Licensing/International revenue increased as a
percentage of net revenues to 8.5% for the three months ended
September 30, 2003 from 6.8% for the three months ended September 30,
2002. The decrease in Wholesale gross margin percentage stemmed in
part from a weakened dollar against the Euro. The increase in
Consumer Direct gross profit is attributable to improvement in
product assortments resulting in better sell-thrus.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses, including shipping and warehousing,
increased 6.6% to $41.9 million (or 31.7% of net revenues) for the
three months ended September 30, 2003 from $39.3 million (or 31.8% of
net revenues) for the three months ended September 30, 2002. The
improvement was the result of continued cost control strategies,
partially offset by heavier than normal expenditures related to the
Company's 20th anniversary marketing campaign.
ASSET IMPAIRMENT: The Company recorded a charge of $4.4 million
during the three months ended September 30, 2002 due to a write-down
of the leasehold improvement associated with the Company's flagship
retail store located at Rockefeller Center in New York City. This
charge, which represented 3.6% of net revenues for the three months
ended September 30, 2002, is included within operating income.
INTEREST AND OTHER INCOME: Interest and other income decreased to
$158,000 for the three months ended September 30, 2003 from $266,000
for the three months ended September 30, 2002. The decrease is due
to lower short-term interest rates on cash investments.
INCOME TAXES: The Company's effective tax rate has remained at 37.0%
for the three months ended September 30, 2003 and 2002.
NET INCOME: As a result of the foregoing, net income increased $3.2
million or 47.8% for the three months ended September 30, 2003 to
$10.0 million (7.6 % of net revenues) from $6.8 million (5.5% of net
revenues), including an asset impairment charge of $4.4 million and a
gain included in gross profit of $860,000 for the three months ended
September 30, 2002.
Nine months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002
REVENUES: Consolidated net revenues increased 7.4% to $339.1 million
for the nine months ended September 30, 2003 from $315.7 million for
the nine months ended September 30, 2002. This increase is
attributable primarily to the factors described below in the sections
entitled "Net Sales" and "Licensing/International Revenue".
NET SALES: Wholesale net sales (excluding sales to the Company's
Consumer Direct business segment) increased $13.7 million or 7.5% for
the nine months ended September 30, 2003 to $196.7 million from
$183.0 million for the nine months ended September 30, 2002. The
increase is due primarily to increased shipments from men's and
women's footwear, including the addition of the Bongo licensed
footwear, offset by a decline in the handbag business. The Company
believes improved sell-thrus increased its footwear businesses, but
were partially offset by the tightening of inventory levels by
certain major Company customers, while the handbag business has
undergone distribution and merchandising initiatives creating the
current short term sales reduction. Net sales in the Company's
Consumer Direct segment increased $1.8 million or 1.6% to $114.2
million for the nine months ended September 30, 2003 compared to
$112.4 million for the nine months ended September 30, 2002. The
increase in net sales is due to $4.7 million in sales from new
stores opened in 2003 and that portion of 2003 sales for stores not
open for all of 2002, partially offset a decrease in comparable store
sales of 2.9% or $3.1 million.
LICENSING/INTERNATIONAL REVENUE: Royalty revenue increased 39.9% to
$27.7 million for the nine months ended September 30, 2003 from $19.8
million for the nine months ended September 30, 2002. This increase
is attributable primarily to the incremental minimum royalties from
the Company's existing licensees, most significantly from men's and
women's apparel, new revenues from the Company's fragrance and
women's jewelry licensees and payments related to the transfer of the
Company's fragrance and sunglass licenses.
GROSS PROFIT: Consolidated gross profit as a percentage of net
revenues decreased to 44.0% for the nine months ended September 30,
2003 from 45.6% for the nine months ended September 30, 2002. The
decrease is primarily due to lower margins in the Company's Wholesale
and Consumer Direct segments offset by a greater portion of gross
profit, as a percentage of net revenues, by the Licensing/
International segment, which carries nominal associated cost of goods
sold. The Wholesale segment as a percentage of net revenues
remained at 58.0% for the nine months ended September 30, 2003 and
2002, while the Consumer Direct segment which operates at a higher
gross profit percentage decreased as a percentage of net revenues to
33.7%, for the nine months ended September 30, 2003 from 35.6% for
the nine months ended September 302002. The wholesale gross margin
percentage eroded somewhat as a result of the weakened US dollar
compared to the Euro. The Company believes the decrease in Consumer
Direct gross profit percentage was attributable to a highly
competitive, promotionally driven retail environment. Licensing/
International revenue increased as a percentage of net revenues to
8.3% for the nine months ended September 30, 2003 from 6.4% for the
nine months ended September 30, 2002.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses, including shipping and warehousing,
increased 1.6% to $114.2 million (or 33.7% of net revenues) for the
nine months ended September 30, 2003 from the $112.4 million (or
35.6% of net revenues) for the nine months ended September 30, 2002.
The decrease as a percentage of revenues is attributable to the
Company's ongoing cost control strategies, partially offset by a one
time accrual for severance.
ASSET IMPAIRMENT: The Company recorded a charge of $4.4 million
(1.4% of net revenue) for the nine months ended September 30, 2002
for a write-down of the lease hold improvements associated with the
Company's flagship store located at Rockefeller Center in New York
City. The charge is included within operating income.
INTEREST AND OTHER INCOME: Interest and other income decreased to
$650,000 for the nine months ended September 30, 2003 from
approximately $863,000 for the nine months ended September 30, 2002.
The decrease is the result of declining short-term interest rate
returns on cash investments.
INCOME TAXES: The Company's effective tax rate remained at 37.0% for
the nine-month period ended September 30, 2003 and 2002.
NET INCOME: As a result of the foregoing, net income increased 26.7%
for the nine months ended September 30, 2003 to $22.5 million (6.6%
of net revenues) from $17.7 million (5.6% of net revenues), including
an asset impairment charge of $4.4 million and a gain of $860,000
included in gross profit for the nine months ended September 30,
2002.
Liquidity and Capital Resources
The Company uses cash from operations as the primary source of
financing for its expansion and seasonal requirements. Cash
requirements vary from time to time as a result of the timing of the
receipt of merchandise from suppliers, the delivery by the Company of
merchandise to its customers, and the level of accounts receivable
and due from factors balances. At September 30, 2003 and December
31, 2002 working capital was $144.7 million and $124.1 million,
respectively.
Cash used in operating activities was $3.1 million for the nine
months ended September 30, 2003, compared to $1.1 million for the
nine months ended September 30, 2002. The decrease in cash flow from
operations is primarily attributable to the timing of receivables and
payables offset by a reduction of inventory and additional net income
of $4.7 million.
Net cash used in investing activities increased $524,000 for the
nine months ended September 30, 2003 from $6.2 million for the nine
months ended September 30, 2002 to $6.7 million for the nine months
ended September 30, 2003. Investing activities for the nine months
ended September 30, 2003 and 2002 were for capital expenditures.
Capital expenditures for new retail store openings and expansions
were approximately $2.5 million and $3.1 million for the nine months
ended September 30, 2003 and September 30, 2002, respectively. The
remaining expenditures were used primarily for information technology
and corporate headquarter renovations. The Company expects to incur
approximately $4.3 million in expenditures within the next two years
for the remaining build out of its corporate headquarters.
Net cash used in financing activities was $3.7 million for the
nine months ended September 30, 2003 compared to the $3.8 million
used in financing activities for the nine months ended September 30,
2002. This is primarily attributable to the Company's repurchase of
200,000 shares of Class A Common Stock under its buyback program for
an aggregate purchase price of $4.5 million during the first quarter
2003 and a quarterly dividend of approximately $1.5 million during
the three months ended September 30, 2003, partially offset by
proceeds from the exercise of employee stock options. This compared
to the Company's repurchas of 200,000 shares of Class A Common Stock
during the nine months ending September 30, 2002, at an aggregate
purchase price of approximately $4.6 million The dividend was
declared and paid during the three months ended September 30, 2003 at
a rate of $.075 per share to Class A and B shareholders, 11,473,417
and 8,201,497 shares, respectively.
The Company's material obligations under contractual agreements,
including commitments for future payments under operating lease
agreements and contractual agreements as of September 30, 2003 are
summarized as follows:
Payments Due by Period
1 year or 2-3 4-5 After 5
less years years years Total
Leases and other
contractual
obligations $23,626,000 $45,660,000 $40,593,000 $88,932,000 $198,811,000
----------- ----------- ----------- ----------- ------------
Total contractual
obligations $23,626,000 $45,660,000 $40,593,000 $88,932,000 $198,811,000
=========== =========== =========== =========== ============
The Company currently has a line of credit, which allows for
borrowings and letters of credit up to a maximum of $25.0 million to
finance working capital requirements. The Company has no outstanding
advances under this line of credit; however, amounts available under
the line of credit were reduced by $2.8 million in standby letters of
credit and $1.6 million in open letters of credit to $20.6 million at
September 30, 2003.
The Company believes that it will be able to satisfy its cash
requirements for the next year, including requirements for its retail
expansion, new corporate office build-out, dividend payments and
enhancements to its information systems, primarily with cash flow
from operations and current cash levels.
The foregoing commentary should be considered to fall
within the coverage of the "Safe Harbor Statement" under the Private
Securities Litigation reform Act of 1995 included in this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company does not believe it has a material exposure to
market risk. The Company is primarily exposed to currency exchange-
rate risks with respect to its inventory transactions denominated in
Euros. Business activities in various currencies expose the Company
to the risk that the eventual net dollar cash flows from transactions
with foreign suppliers denominated in foreign currencies may be
adversely affected by changes in currency rates. The Company manages
these risks by utilizing foreign exchange forward contracts to hedge
its cost in future purchases. The Company does not enter into
foreign currency transactions for speculative purposes. At
September 30, 2003, the Company had foreign exchange contracts
totaling $10.5 million in notional value with an unrealized gain of
$392,000, net of taxes. The Company's earnings may also be affected
by changes in short-term interest rates as a result of borrowings
under its line of credit facility. At the Company's borrowing
levels; a two percent increase in interest rates affecting the
Company's credit facility would not have a material effect on the
Company's year-to-date and projected 2003 and actual 2002 net income.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
The Company's chief executive officer and chief financial
officer, after evaluating the effectiveness of the Company's
"disclosure controls and procedures" (as defined in Rules 13a-15(e)
or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as
of the end of the period covered by this quarterly report, have
concluded that the Company's disclosure controls and procedures were
effective and designed to ensure that material information relating
to the Company and the Company's consolidated subsidiaries would be
made known to them by others within those entities to allow timely
decisions regarding required disclosures.
Changes in internal controls
There were no significant changes in the Company's internal
controls or in other factors that could significantly affect those
controls subsequent to the most recent evaluation of the Company's
disclosure controls and procedures.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities and Use of Proceeds. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
31.1 Certification of Kenneth D. Cole, Chief Executive
Officer of Kenneth Cole Productions, Inc., pursuant to Rule
13(a)-14(a) or Rule 15(d)-14(a) of the Securities Exchange
Act of 1934, as amended.
31.2 Certification of Stanely A Mayer, Chief Financial
Officer of Kenneth Cole Productions, Inc., pursuant to Rule
13(a)-14(a) or Rule 15(d)-14(a) of the Securities Exchange
Act of 1934, as amended.
32.1 Certification of Kenneth D. Cole, Chief Executive
Officer of Kenneth Cole Productions, Inc., pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Stanely A. Mayer, Chief Financial
Officer of Kenneth Cole Productions, Inc., pursuant to
18 U.S.C. section 1350, as adopted pursuant to section
906 of the Sarbanes-Oxley Act of 2002.
(b) Current Reports on Form 8-K: The Company filed a report on
Form 8-K on July 30, 2003 in conjunction with the announcement of
the Company's results for the three and six month periods ended June
30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Kenneth Cole Productions, Inc.
Registrant
November 10, 2003 /s/ Stanley A. Mayer
Stanley A. Mayer
Executive Vice President and
Chief Financial Officer
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Kenneth D. Cole, certify that:
1. I have reviewed this quarterly report on Form 10-Q being filed by
Kenneth Cole Productions, Inc.;
2. Based on my knowledge, the report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by the report;
3. Based on my knowledge, the financial statements, and other
financial information included in the report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
the report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 15(f) and 15d-15(f)) for the registrant and have:
i. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
ii. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principals;
iii. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
iv. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
i. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
ii. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
By: /s/Kenneth D. Cole
--------------------------
Kenneth D. Cole
Chief Executive Officer
Date: November 10, 2003
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Stanley A. Mayer, certify that:
1. I have reviewed this quarterly report on Form 10-Q being filed by
Kenneth Cole Productions, Inc.;
2. Based on my knowledge, the report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by the report;
3. Based on my knowledge, the financial statements, and other
financial information included in the report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
the report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 15(f) and 15d-15(f)) for the registrant and have:
i. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
ii. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principals;
iii. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
iv. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
i. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
ii. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
By: /s/Stanley A. Mayer
--------------------------
Stanley A. Mayer
Chief Financial Officer
Date: November 10, 2003
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Kenneth Cole Productions,
Inc. (the "Company") on Form 10-Q for the period ended September 30,
2003 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Kenneth D. Cole, Chairman and Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C.
1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Kenneth D. Cole
Kenneth D. Cole
Chairman and Chief Executive Officer
Kenneth Cole Productions, Inc.
November 10, 2003
A signed original of this written statement required by Section 906,
or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the
electronic version of this written statement required by Section 906,
has been provided to Kenneth Cole Productions, Inc. and will be
retained by Kenneth Cole Productions, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Kenneth Cole Productions,
Inc. (the "Company") on Form 10-Q for the period ended September 30,
2003 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Stanley A. Mayer, Executive Vice President
and Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Stanley A. Mayer
Stanley A. Mayer
Executive Vice President and
Chief Financial Officer
Kenneth Cole Productions, Inc.
November 10, 2003
A signed original of this written statement required by Section 906,
or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the
electronic version of this written statement required by Section 906,
has been provided to Kenneth Cole Productions, Inc. and will be
retained by Kenneth Cole Productions, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.