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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 June 30, 2004
( ) 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 August 7, 2004
Class A Common Stock ($.01 par value) 12,041,152
Class B Common Stock ($.01 par value) 8,123,497
Kenneth Cole Productions, Inc.
Index to 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2004
and December 31, 2003.................................................... 3
Condensed Consolidated Statements of Income for the three and six-month
periods ended June 30, 2004 and 2003..................................... 5
Condensed Consolidated Statement of Changes in Shareholders' Equity for
the six-month period ended June 30, 2004................................. 6
Condensed Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 2004 and 2003............................................. 7
Notes to Condensed Consolidated Financial Statements..................... 8
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations...............................................15
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, Use of Proceeds and Issuer Purchase of Equity
Securities..............................................................23
Item 3.Defaults Upon Senior Securities.......................................23
Item 4.Submission of Matters to a Vote of Security Holders...................23
Item 5.Other Information.....................................................24
Item 6.Exhibits and Reports on Form 8-K......................................24
Signatures...................................................................26
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
June 30, December 31,
2004 2003
(Unaudited)
Assets
Current assets:
Cash $116,825,000 $111,102,000
Due from factors 32,271,000 31,487,000
Accounts receivable, net 10,435,000 11,254,000
Inventories 54,850,000 44,851,000
Prepaid expenses and other current assets 3,343,000 1,343,000
Deferred taxes 2,063,000 2,063,000
------------ ------------
Total current assets 219,787,000 202,100,000
Property and equipment - at cost, less
accumulated depreciation 36,899,000 36,755,000
Other assets:
Deposits and deferred taxes 16,671,000 16,603,000
Deferred compensation plan assets 19,855,000 18,383,000
------------ ------------
Total other assets 36,526,000 34,986,000
------------ ------------
Total assets $293,212,000 $273,841,000
============ ============
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
June 30, December 31,
2004 2003
(Unaudited)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 39,221,000 $ 33,847,000
Accrued expenses and other current liabilities 9,256,000 11,153,000
Income taxes payable 0 2,939,000
------------ ------------
Total current liabilities 48,477,000 47,939,000
Deferred compensation 19,855,000 18,383,000
Other 12,352,000 11,185,000
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, and 14,922,616
and 14,534,791 issued in 2004 and 2003 149,000 145,000
Class B Common Stock, par value $.01, per share,
9,000,000 shares authorized, 8,123,497
and 8,168,497 outstanding in 2004 and 2003 81,000 82,000
Additional paid-in capital 77,035,000 69,992,000
Accumulated other comprehensive income 281,000 751,000
Retained earnings 201,203,000 191,585,000
------------ ------------
278,749,000 262,555,000
Class A Common Stock in treasury, at cost,
2,888,400 shares in 2004 and 2003 (66,221,000) (66,221,000)
------------ ------------
Total shareholders' equity 212,528,000 196,334,000
------------ ------------
Total liabilities and shareholders' equity $293,212,000 $273,841,000
============ ============
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Net sales $103,720,000 $ 88,096,000 $217,071,000 $190,213,000
Royalty revenue 9,337,000 8,832,000 18,363,000 16,839,000
------------ ------------ ------------ ------------
Net revenues 113,057,000 96,928,000 235,434,000 207,052,000
Cost of goods sold 61,683,000 52,937,000 131,592,000 115,479,000
------------ ------------ ------------ ------------
Gross profit 51,374,000 43,991,000 103,842,000 91,573,000
Selling, general and
Administrative
expenses 40,382,000 34,622,000 81,174,000 72,353,000
------------ ------------ ------------ ------------
Operating income 10,992,000 9,369,000 22,668,000 19,220,000
Interest and other
income, net 342,000 250,000 591,000 492,000
------------ ------------ ------------ ------------
Income before provision
for income taxes 11,334,000 9,619,000 23,259,000 19,712,000
Provision for
income taxes 4,307,000 3,559,000 8,839,000 7,293,000
------------ ------------ ------------ ------------
Net income $ 7,027,000 $ 6,060,000 $ 14,420,000 $ 12,419,000
============ ============ ============ ============
Earnings per share:
Basic $ .35 $ .31 $ .72 $ .64
Diluted $ .34 $ .30 $ .70 $ .61
Dividends declared
per share $ .12 $ .00 $ .24 $ .00
Shares used to compute
earnings per share:
Basic 20,048,000 19,505,000 19,951,000 19,524,000
Diluted 20,727,000 20,245,000 20,669,000 20,346,000
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, 2004 14,534,791 $ 145,000 8,168,497 $ 82,000
Net income
Translation adjustments
foreign currency, net of
taxes of $7,000
forward contracts, net of
taxes of $(295,000)
Comprehensive income
Exercise of stock options,
and related tax benefit
of $2,674,000 337,938 3,000
Issuance of Class A
Common Stock for ESPP 4,887
Dividends paid on Common
Stock Class A and B
Conversion of Class B
shares to Class A shares
of Common Stock 45,000 1,000 (45,000) (1,000)
-----------------------------------------------
Shareholders' Equity
June 30, 2004 14,922,616 $ 149,000 8,123,497 $ 81,000
===============================================
Accumulated
Additional Other
Paid-in Comprehensive Retained
Capital Income Earnings
Shareholders' equity
January 1, 2004 $ 69,992,000 $ 751,000 $191,585,000
Net income 14,420,000
Translation adjustments
foreign currency, net of
taxes of $7,000 12,000
forward contracts, net of
taxes of $(295,000) (482,000)
Comprehensive income
Exercise of stock options,
and related tax benefit
of $2,674,000 6,929,000
Issuance of Class A
Common Stock for ESPP 114,000
Dividends paid on Common
Stock Class A and B (4,802,000)
Conversion of Class B
shares to Class A shares
of Common Stock
--------------------------------------------
Shareholders' Equity
June 30, 2004 $ 77,035,000 $ 281,000 $201,203,000
============================================
Treasury Stock
Number of
Shares Amount Total
Shareholders' equity
January 1, 2004 (2,888,400) $(66,221,000) $196,334,000
Net income 14,420,000
Translation adjustments
foreign currency, net of
taxes of $7,000 12,000
forward contracts, net of
taxes of $(295,000) (482,000)
------------
Comprehensive income 13,950,000
Exercise of stock options,
and related tax benefit
of $2,674,000 6,932,000
Issuance of Class A
Common Stock for ESPP 114,000
Dividends paid on Common
Stock Class A and B (4,802,000)
Conversion of Class B
shares to Class A shares
of Common Stock
-------------------------------------------
Shareholders' Equity
June 30, 2004 (2,888,400) $(66,221,000) $212,528,000
===========================================
See accompanying notes to condensed consolidated financial statements
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2004 2003
Cash flows from operating activities
Net income $ 14,420,000 $ 12,419,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,810,000 3,798,000
Unrealized loss (gain) on deferred compensation 492,000 (1,913,000)
Realized gain on sale of property and equipment (14,000)
Provision for bad debts 40,000 204,000
Tax benefit from exercise of stock options 2,674,000 701,000
Changes in assets and liabilities:
(Increase) decrease in due from factors (784,000) 4,822,000
Decrease (increase) in accounts receivable 779,000 (2,376,000)
Increase in inventories (10,481,000) (4,338,000)
Increase in prepaid expenses & other
current assets (2,000,000) (21,000)
Increase in other assets (2,032,000) (2,493,000)
Increase in accounts payable 5,374,000 5,524,000
Decrease in income taxes payable (2,939,000) (3,488,000)
Decrease in accrued expenses and other
current liabilities (1,881,000) (892,000)
Increase in other non-current liabilities 2,639,000 5,155,000
------------ ------------
Net cash provided by operating activities 10,097,000 17,102,000
Cash flows from investing activities
Acquisition of property and equipment (4,008,000) (3,103,000)
Proceeds from sale of property and equipment 68,000
------------ ------------
Net cash used in investing activities (3,940,000) (3,103,000)
Cash flows from financing activities
Proceeds from exercise of stock options 4,258,000 1,402,000
Proceeds from issuance of common stock from
Employee Stock Purchase Plan 114,000 101,000
Dividends paid to shareholders (4,802,000)
Purchase of treasury stock (4,526,000)
Principal payments on capital lease obligations (113,000)
------------ ------------
Net cash used in financing activities (430,000) (3,136,000)
Effect of exchange rate changes on cash (4,000) (11,000)
------------ ------------
Net increase in cash 5,723,000 10,852,000
Cash, beginning of period 111,102,000 91,549,000
------------ ------------
Cash, end of period $116,825,000 $102,401,000
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 3,000 $ 23,000
Income taxes $ 11,037,000 $ 8,038,000
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 six months ended June 30, 2004
are not necessarily indicative of the results that may be
expected for the year ended December 31, 2004. 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, 2003.
The consolidated balance sheet at December 31, 2003, as
presented, was derived from the audited financial statements
included in the Company's Annual Report on Form 10-K for the
period ended December 31, 2003.
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 Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Net Income, as reported $ 7,027,000 $ 6,060,000 $14,420,000 $12,419,000
Deduct: Stock-based
Employee compensation
expense determined under
fair value method, net
of related tax effects 672,000 719,000 1,408,000 1,441,000
----------- ----------- ----------- -----------
Pro forma net income $ 6,355,000 $ 5,341,000 $13,012,000 $10,978,000
=========== =========== =========== ===========
Earnings per share:
Basic - as reported $ .35 $ .31 $ .72 $ .64
Basic - pro forma $ .32 $ .27 $ .65 $ .56
Diluted - as reported $ .34 $ .30 $ .70 $ .61
Diluted - pro forma $ .31 $ .26 $ .63 $ .54
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 Six Months Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
Weighted average common
shares outstanding 20,048,000 19,505,000 19,951,000 19,524,000
Effect of dilutive securities:
Stock options 679,000 740,000 718,000 822,000
---------- ---------- ---------- ----------
Weighted average common
shares outstanding and
common share equivalents 20,727,000 20,245,000 20,669,000 20,346,000
========== ========== ========== ==========
Stock options outstanding at June 30, 2004 and 2003,
aggregating 30,000 and 1,307,000, respectively, have not been
included in the diluted per share calculations since their
effect would be antidilutive.
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
$13,950,000 and $11,950,000 for the six-month periods ended
June 30, 2004 and 2003, respectively. Comprehensive income for
the three-month periods ended June 30, 2004 and 2003 amounted
to $7,164,000 and $5,777,000, respectively.
5. Derivative Instruments and Hedging Activities
In the normal course of business, the Company 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 foreign exchange rates 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
$18,000,000 at June 30, 2004 with maturity dates through October
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 six months ended June 30, 2004. At June 30, 2004 the
Company's notional $18,000,000 in forward exchange contracts
resulted in an unrealized gain of approximately $124,000, net of
taxes, which was included as an addition to 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 unrealized gain from other comprehensive
income into earnings within the next four month period due to the
actual executions of foreign exchange contracts to purchase
merchandise and the ultimate sale of that merchandise.
6. Segment Information
The Company has three reportable segments: Wholesale, Consumer
Direct and Licensing. 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 designs, sources, and markets a broad
range of quality footwear and handbags for wholesale distribution.
The Consumer Direct segment markets abroad 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 segment earns royalties
on licensee sales to third parties of the Company's branded
products and royalties 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 channels of distribution the same as,
similar to or otherwise consistent with 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 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
June 30, 2004
Consumer
Wholesale Direct Licensing Totals
Revenues from external 58,920 44,800 9,337 113,057
customers
Intersegment revenues 7,702 7,702
Segment income (1)(2) 4,307 3,471 7,910 15,688
Segment assets 243,299 49,185 3,169 295,653
Three Months Ended
June 30, 2003
Consumer
Wholesale Direct Licensing Totals
Revenues from external 48,609 39,487 8,832 96,928
customers
Intersegment revenues 6,597 6,597
Segment income (1) 5,114 (43) 8,350 13,421
Segment assets 206,185 48,002 3,933 258,120
Six Months Ended
June 30, 2004
Consumer
Wholesale Direct Licensing Totals
Revenues from external 131,257 85,814 18,363 235,434
customers
Intersegment revenues 15,890 15,890
Segment income (1)(2) 12,468 3,820 15,307 31,595
Six Months Ended
June 30, 2003
Consumer
Wholesale Direct Licensing Totals
Revenues from external 118,160 72,053 16,839 207,052
customers
Intersegment revenues 13,842 13,842
Segment income (1) 15,907 (3,159) 14,344 27,092
(1) Before elimination of intersegment profit, unallocated corporate overhead
and income taxes.
(2) Included in the Wholesale segment during the three-months ended June 30,
2004 were $1.1 million in severance and other costs to close the Company's
east coast distribution facility and transfer the operations to a third-party
service provider.
The reconciliation of the Company's reportable segment revenues, profit and
loss, and assets are as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
Revenues
Revenues for external
customers $113,057 $ 96,928 $235,434 $207,052
Intersegment revenues 7,702 6,597 15,890 13,842
Elimination of
intersegment revenues (7,702) (6,597) (15,890) (13,842)
-------- -------- -------- --------
Total consolidated revenues $113,057 $ 96,928 $235,434 $207,052
======== ======== ======== ========
Income
Total profit for
reportable segments $ 15,688 $ 13,421 $ 31,595 $ 27,092
Elimination of intersegment
profit and unallocated
corporate overhead (4,354) (3,802) (8,336) (7,380)
-------- -------- -------- --------
Total income before
income taxes $ 11,334 $ 9,619 $ 23,259 $ 19,712
======== ======== ======== ========
Assets
Total assets for
reportable segments $295,653 $258,120
Elimination of intersegment
inventory profit (2,441) (1,913)
-------- --------
Total consolidated assets $293,212 $256,207
======== ========
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
six months ended June 30, 2004, no shares were repurchased in the
open market leaving the available shares authorized for repurchase at
1,361,000. 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
$238,000 and $566,000 in royalty and advertising expense to Candies
for the three and six months ended June 30, 2004, respectively. The
Company recorded approximately $50,000 in royalty and advertising
expense to Candies for the three months ended June 30, 2003.
9.New York Office Building Purchase
The Company entered into an agreement on April 21, 2004 to
purchase the office building that it is currently leasing for its New
York City worldwide headquarters for approximately $24 million. The
closing date must occur within twenty-three months, the specific
timing to be determined by the parties, based on the ability of the
current landlord to satisfy certain terms and conditions of the
agreement.
10.Severance
In conjunction with the Company's decision to close its east
coast distribution center and transfer the operation to a third-party
service provider, the Company entered into a shutdown agreement
during April 2004, with a local affiliate of the International
Leather Goods, Plastics, Handbags and Novelty Workers Union, Local I
Division of Local 342-50 United Food and Commercial Workers Union,
which provided for, among other things, severance payments for
employees covered by the expiring collective bargaining agreement.
In connection with this transition, the Company incurred
approximately $1.1 million in aggregate costs, including severance
from the aforementioned agreement, the write-off of unamortized
leasehold improvements and moving costs during the three months ended
June 30, 2004. These costs were expensed as incurred in accordance
with SFA's No. 146 "Accounting for Costs Associated with Exit or
Disposal Activity" within the selling, general and administrative
expenses caption on the face of the condensed consolidated statement
of income.
11.Reclassifications
Certain amounts included in the Company's 2003 financial
statements have been reclassified to conform to the June 30, 2004
presentation.
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 such litigation that would have a
material adverse effect on its business operations.
13.Subsequent Event
On July 27, 2004, the Board of Directors of the Company declared
a quarterly cash dividend of $.14 per share payable on September 15,
2004, to shareholders of record at the close of business on August
24, 2004.
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 2004 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 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, 2003.
Overview
Kenneth Cole Productions, Inc., designs, sources and markets a
broad range of fashion footwear and handbags, and, through license
agreements, designs and markets apparel and accessories under its
Kenneth Cole New York, Reaction Kenneth Cole and Unlisted brand
names. During 2003, the Company added the Bongo trademark brand for
footwear through a license agreement. In addition, the Company
designs and sources footwear and handbags for its customers under its
customer's own trademarks. The Company's products are targeted to
appeal to fashion conscious consumers, reflecting a casual urban
perspective and a lifestyle uniquely associated with Kenneth Cole.
The Company markets its products to more than 7,500 department
and specialty store locations, as well as through its Consumer Direct
business, which includes an expanding base of retail and outlet
stores, consumer catalogs and interactive websites, including online
e-commerce.
The popularity of the Kenneth Cole brand names among consumers
has enabled the Company to expand its product offerings and channels
of distribution through licensing agreements and offers through these
agreement a lifestyle collection of men's product categories
including tailored clothing, dress shirts, dress pants, sportswear,
neckwear, briefcases, portfolios, jewelry, fragrance, belts, leather
and fabric outerwear, sunglasses, optical eyewear, watches, luggage,
hosiery and small leather goods. Women's product categories
currently being sold pursuant to license agreements include
sportswear, small leather goods, belts, scarves and wraps, hosiery,
leather and fabric outerwear, sunglasses, optical eyewear, watches,
jewelry, fragrance, swimwear, and luggage. In addition, the Company
licenses children's apparel under the Reaction Kenneth Cole brand.
The Company recorded revenues of $113.1 million for the three
months ended June 30, 2004, a 16.6% increase over the comparable
period in the prior year and earnings per fully diluted share grew
13.3% to $0.34 from $0.30 in the year-ago quarter. The Company also
recorded revenues of $235.4 million for the six months ended June 30,
2004, a 13.7% increase over the comparable period in the prior year
and earnings per share grew 14.3% to $0.70 from $0.61 in the prior
comparable year. The Company's Balance Sheet reflected $116.8
million in cash and no debt as of June 30, 2004. The Company
continues to focus on designing and delivering excellent and timely
products, creating efficient and compelling retail environments, and
continuing close partnerships with its licensees to ensure brand
quality and distribution integrity. Additionally, the Company
continues to concentrate on cost reduction strategies and inventory
control.
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 six months ended June
30, 2004 and June 30, 2003.
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Net sales $103,720 91.7% $ 88,096 90.9% $217,071 92.2% $190,213 91.9%
Royalty revenue 9,337 8.3 8,832 9.1 18,363 7.8 16,839 8.1
-------- ------ -------- ------ -------- ------ -------- ------
Net revenues 113,057 100.0 96,928 100.0 235,434 100.0 207,052 100.0
Gross profit(1) 51,374 45.4 43,991 45.4 103,842 44.1 91,573 44.2
Selling, general
& administrative
expenses 40,382 35.7 34,622 35.7 81,174 34.5 72,353 34.9
-------- ------ -------- ------ -------- ------ -------- ------
Operating income 10,992 9.7 9,369 9.7 22,668 9.6 19,220 9.3
Interest
income, net 342 0.3 250 0.3 591 0.3 492 0.2
-------- ------ -------- ------ -------- ------ -------- ------
Income before
income taxes 11,334 10.0 9,619 10.0 23,259 9.9 19,712 9.5
Income tax expense 4,307 3.8 3,559 3.7 8,839 3.8 7,293 3.5
-------- ------ -------- ------ -------- ------ -------- ------
Net income 7,027 6.2 6,060 6.3 14,420 6.1 12,419 6.0
======== ====== ======== ====== ======== ====== ======== ======
(1) Gross Profit may not be comparable to other entities, since some
entities include the costs related to their distribution network in
cost of goods sold and others entities, similar to the Company,
exclude these costs from gross profit, including them instead in a
line item such as selling, general and administrative expenses.
Three Months Ended June 30, 2004 Compared to Three Months Ended June
30, 2003
REVENUES: Consolidated net revenues increased $16.1 million, or
16.6%, to $113.1 million for the three months ended June 30, 2004
from $96.9 million for the three months ended June 30, 2003. The
increase in revenues spanned all of the Company's segments:
Wholesale, Consumer Direct, and Licensing as further described below
in the sections entitled "Net Sales" and "Licensing Revenue".
NET SALES: Wholesale net sales (excluding sales to the Company's
Consumer Direct business segment) increased $10.3 million, or 21.2%
for the three months ended June 30, 2004 to $58.9 million from $48.6
million for the three months ended June 30, 2003. This increase is
primarily attributable to an increase in sales of the Company's
women's footwear businesses of approximately 35.5% across all brands
and its' handbag businesses. The Company believes the increase is
attributable to strengthening sell-thrus at retail from enhanced
customer acceptance of product design and successful merchandising
initiatives coming to fruition in the handbag business.
Net sales in the Company's Consumer Direct segment increased $5.3
million, or 13.5%, to $44.8 million for the three months ended June
30, 2004 from $39.5 million for the three months ended June 30, 2003.
The increase in net sales is due primarily to an increase in
comparable store sales of 6.4% or $2.4 million, as well as, $2.9
million in sales from new stores opened in 2004 and that portion of
2004 sales for stores not open for all of 2003. The Company believes
this increase is due in part to the economic recovery generally seen
throughout the retail and apparel industry, the Company's increasing
use of "test and react" programs and direct merchandising initiatives
at its outlets.
LICENSING REVENUE: Royalty revenue increased 5.7% to $9.3 million
for the three months ended June 30, 2004 from $8.8 million for the
three months ended June 30, 2003. This growth in licensing revenues
was driven by new licensees such as swimwear, and men's casual pants,
and an increase from women's sportswear. On a comparable basis, the
increase as a percentage of revenue was reduced by a one-time payment
related to the transfer of the Company's fragrance license during the
three-months ended June 30, 2003.
GROSS PROFIT: Consolidated gross profit, as a percentage of net
revenues, remained consistent at 45.4% for the three months ended
June 30, 2004 and 2003, respectively. Margins remained comparable on
a consolidated basis as a result of decreased gross margin in the
Wholesale segment offset by increased margin on Consumer Direct
segment sales. The Company believes the strong gross profit from its
Consumer Direct segment resulted from direct merchandise initiatives
at the outlet stores and continued focus on wear-now products that
limit vulnerability of the mix of products without compromising
fashion and excitement. The decrease in Wholesale margin is a result
of lower initial mark-ups on products sourced in Europe due to the
rise in the Euro against the U.S. dollar and the mix of the segment's
business. Changes in the mix of the Company's revenues from its
Wholesale, Consumer Direct, and Licensing segments also affected
consolidated gross margins. The Wholesale segment, which operates at
a lower gross profit level than the Consumer Direct segment, as a
percentage of net revenue increased to 52.1% for the three-months
ended June 30, 2004 from 50.1% for the three-months ended June 30,
2003, while the Consumer Direct segment as a percentage of net
revenue decreased to 39.6% for the three-months ended June 30, 2004
from 40.7% for the three-months ended June 30, 2003. Furthermore,
Licensing segment revenues, which carry a nominal cost of goods sold,
decreased as a percentage of net revenue to 8.3% for the three-months
ended June 30, 2004 from 9.1% for the three-months ended June 30,
2003.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses, including shipping and warehousing,
increased 16.6% to $40.4 million (or 35.7% of net revenues) for the
three months ended June 30, 2004 from $34.6 million (or 35.7% of net
revenues) for the three months ended June 30, 2003. Expenses, as a
percentage of net revenues, remained comparable as a result of
efficiencies created by revenue growth offset by the one-time costs
associated with closing and transition of the Company's east coast
distribution center to a third-party service provider of
approximately $1.1 million.
INTEREST AND OTHER INCOME: Interest and other income increased to
$342,000 for the three months ended June 30, 2004 from $250,000 for
the three months ended June 30, 2003. The increase is due to higher
average cash balances and an improved rate of return on the Company's
investments.
INCOME TAXES: The Company's effective tax rate has increased to
38.0% for the three months ended June 30, 2004 from 37.0% for the
three-months ended June 30, 2003 as a result of changes in tax laws
from state and local jurisdictions to which the Company's earnings
are subject.
NET INCOME: As a result of the foregoing, net income increased 16.0%
for the three months ended June 30, 2004 to $7.0 million (6.2% of net
revenues) from $6.1 million (6.3% of net revenues) for the three
months ended June 30, 2003.
Six months Ended June 30, 2004 Compared to Six Months Ended June 30,
2003
REVENUES: Consolidated net revenues increased 13.7% to $235.4
million for the six months ended June 30, 2004 from $207.1 million
for the six months ended June 30, 2003. This increase is
attributable primarily to the factors described below in the sections
entitled "Net Sales" and "Licensing Revenue."
NET SALES: Wholesale net sales (excluding sales to the Company's
Consumer Direct business segment) increased $13.1 million or 11.1%
for the six months ended June 30, 2004 to $131.3 million from $118.2
million for the six months ended June 30, 2003. The increase is due
primarily to increased sales from the Company's women's footwear
business of approximately 18.5% and in its handbag businesses. The
Company sells its products under several trademarks at varying price
ranges to multiple demographics through several distribution
channels. The Company believes this mix and the strengthening of sell-
thrus at retail from customer acceptance has improved the Company's
Wholesale net sales.
Net sales in the Company's Consumer Direct segment increased $13.8
million or 19.1% to $85.8 million for the six months ended June 30,
2004 compared to $72.1 million for the six months ended June 30,
2003. The increase in net sales is due to an increase in comparable
store sales of 11.7% or $8.0 million, as well as $5.0 million in
sales from new stores opened in 2004 and that portion of 2004 sales
for stores not open for all of 2003. The remaining sales of $0.8
million were primarily from sales of the Company's Corporate Gift
Program operations. The Company believes the increase in net sales
in the Consumer Direct segment is due in part to the economic
strengthening generally seen throughout the retail and apparel
industry, direct merchandising initiatives at its outlets and the
increasing use of "test and react" programs.
LICENSING REVENUE: Royalty revenue increased 9.1% to $18.4 million
for the six months ended June 30, 2004 from $16.8 million for the six
months ended June 30, 2003. This increase is attributable primarily
to the incremental minimum royalties from the Company's existing
licensees, most significantly women's apparel, as well as new
revenues from the Company's casual pants licensee.
GROSS PROFIT: Consolidated gross profit as a percentage of net
revenues decreased to 44.1% for the six months ended June 30, 2004
from 44.2% for the six months ended June 30, 2003. Higher margins in
the Consumer Direct segment and an increase in the percentage of
revenue contributed by the Consumer Direct segment were offset by
decreased margin within the Wholesale segment. Consumer Direct
segment margins increased from merchandising initiatives at its
outlet stores and new assortments focusing on wear-now products that
limit vulnerability of the mix of products without compromising
fashion and excitement. The Wholesale segment as a percentage of net
revenues decreased to 55.8% for the six months ended June 30, 2004
from 57.1% for the six months ended June 30, 2003, while the Consumer
Direct segment which operates at a higher gross profit percentage
increased as a percentage of net revenues to 36.4% for the six months
ended June 30, 2004 from 34.8% for the six months ended June 30,
2003. In the Wholesale segment the continued weak US dollar compared
to the Euro reduced initial mark-ups, and the sales mix shifted
toward lower margin products. The Company believes it has taken
appropriate measures to address these issues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses, including shipping and warehousing,
increased 12.2% to $81.2 million (or 34.5% of net revenues) for the
six months ended June 30, 2004 from the $72.4 million (or 34.9% of
net revenues) for the six months ended June 30, 2003. The decrease
as a percentage of revenues is attributable to the Company's leverage
on increased sales, particularly in the Consumer Direct segment, and
to cost control strategies in marketing, payroll, and operations.
These improvements were offset by approximately $1.1 million of one-
time costs associated with closing and transition of the Company's
east coast distribution facility to a third-party service provider.
INTEREST AND OTHER INCOME: Interest and other income increased to
$591,000 for the six months ended June 30, 2004 from approximately
$492,000 for the six months ended June 30, 2003. The increase is the
result of higher average cash balances and higher rates of return on
investments.
INCOME TAXES: The Company's effective tax rate increased to 38.0%
for the six-month period ended June 30, 2004 from 37.0% in the six-
month period ended June 30, 2003 as a result of changes in tax laws
from state and local jurisdictions to which the Company's earnings
are subject.
NET INCOME: As a result of the foregoing, net income increased 16.1%
for the six months ended June 30, 2004 to $14.4 million (6.1% of net
revenues) from $12.4 million (6.0% of net revenues) for the six
months ended June 30, 2003.
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 June 30, 2004 and December 31,
2003 working capital was $171.3 million and $154.2 million,
respectively.
Cash provided by operating activities was $10.1 million for the
six months ended June 30, 2004, compared to $17.1 million provided by
operating activities for the six months ended June 30, 2003. The
decrease in cash flow from operations is primarily attributable to an
increase in inventory and the timing of payables and receivables
offset by an increase in net income.
Net cash used in investing activities increased $0.8 million for
the six months ended June 30, 2004 from $3.1 million for the six
months ended June 30, 2003 to $3.9 million for the six months ended
June 30, 2004. Investing activities for the six months ended June
30, 2004 and 2003 were primarily for capital expenditures. Capital
expenditures for new retail store openings and expansions were
approximately $2.2 million and $1.4 million for the six months ended
June 30, 2004 and June 30, 2003, respectively. The remaining
expenditures were used primarily for information technology and
office build-out and renovations.
Net cash used in financing activities was $0.4 million for the
six months ended June 30, 2004 compared to the $3.1 million used in
financing activities for the six months ended June 30, 2003. During
the three-months ended June 30, 2004, the Company declared and paid a
quarterly cash dividend of approximately $4.8 million to common stock
shareholders, which were offset by proceeds from the exercise of
stock options of $4.3 million. During the six-months ended June 30,
2003, the Company used approximately $4.5 million to repurchase
shares of Class A Common Stock under its buy-back program, offset by
$1.4 million in proceeds from the exercise of stock options.
The Company's material obligations under contractual agreements,
including commitments for future payments under operating lease
agreements and contractual agreements as of June 30, 2004 are
summarized as follows:
Payments Due by Period
1 year or 2-3 4-5 After 5
less years years years Total
Operating leases
and other contractual
obligations $25,695,000 $74,921,000 $45,481,000 $92,399,000 $238,496,000
----------- ----------- ----------- ----------- ------------
Total contractual
obligations $25,695,000 $74,921,000 $45,481,000 $92,399,000 $238,496,000
=========== =========== =========== =========== ============
The Company entered into an agreement in April 2004 to purchase
the office building that it currently leases for its New York City
worldwide headquarters for approximately $24 million. The closing
date will occur within twenty-three months based on the ability of
the current landlord to satisfy certain terms and conditions of the
agreement. This amount has been included in the tabular form of
commitments denoted above.
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 $6.5 million in standby letters of
credit and $1.6 million in open letters of credit to $16.9 million at
June 30, 2004.
The Company believes that it will be able to satisfy its cash
requirements for the next year, including requirements for its retail
expansion, office build-out, and renovations and/or office purchase,
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 on future purchases. The Company does not enter into
foreign currency transactions for speculative purposes. At June 30,
2004, the Company had foreign exchange contracts totaling $18.0
million in notional value with an unrealized gain of $124,000, 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 2004 and actual 2003 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
During the Company's most recent fiscal quarter, no changes
occurred in the Company's internal control over financial reporting
that have materially affected, or are reasonably likely to materially
affect, the Company's control over financial reporting.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2.Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4.Submission of Matters to a Vote of Security Holders.
(a) Kenneth Cole Productions, Inc. Annual Meeting of
Shareholders was
held on May 27, 2004.
(b)Election of Directors - All nominees were elected through
proxies solicited pursuant to Regulation 14A under the
Securities and Exchange Act of 1934, as amended. There was
no solicitation in opposition to management's nominees as
listed in the Proxy Statement, and each of the nominees were
elected to hold office until the next Annual Meeting of
Shareholders.
(c) Matters voted on at the Annual Meeting of Shareholders
included, (i) the election of directors, (ii) the r
atification of the selection of the independent public
accountants for the 2004 fiscal year, (iii) the ratification
of the Kenneth Cole Productions, Inc. 2004 Stock Incentive
Plan and (iv) the ratification of the Kenneth Cole
Productions, Inc. 2004 Bonus Plan.
The results of the election of directors were as follows:
FOR AGAINST/ABSTAIN BROKER NON-VOTE
Paul Blum 87,317,876 3,910,901 0
Kenneth D. Cole 87,346,692 3,882,085 0
Robert C. Grayson 9,245,061 528,746 0
Denis F. Kelly 9,255,391 518,416 0
Stanley A. Mayer 87,317,876 3,910,901 0
Philip B. Miller 90,706,045 522,732 0
Holders of 11,789,828 shares of Class A Common Stock, and
8,145,497 shares of Class B Common Stock, constituting
approximately 98.0% of the shares entitled to vote, were present
in person or by proxy at the Annual Meeting of Shareholders.
Each record holder of Class A Common Stock is entitled to one
vote per share, and each record holder of Class B Common Stock
is entitled to 10 votes per share. Holders of Class A Common
Stock voted separately to elect Robert C. Grayson and Denis
Kelly.
With regard to the ratification of the appointment of Ernst & Young
LLP as the Company's independent certified public accountants, the
results were as follows:
FOR AGAINST ABSTAIN BROKER NON-VOTE
91,144,331 69,969 14,477 0
With regard to the ratification of the Kenneth Cole Productions, Inc.
2004 Stock Incentive Plan, the results were as follows:
FOR AGAINST ABSTAIN BROKER NON-VOTE
82,505,486 6,961,041 17,732 1,744,518
With regard to the ratification of the Kenneth Cole Productions, Inc.
2004 Stock Bonus Plan, the results were as follows:
FOR AGAINST ABSTAIN BROKER NON-VOTE
89,076,189 389,534 18,536 1,744,518
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
31.1 Certification pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002-
Chief Executive Officer
31.2 Certification pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002-
Chief Financial Officer
32.1 Certification: Pursuant to 10 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002- Chief Executive Officer
32.2 Certification: Pursuant to 10 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002- Chief Financial Officer
(b) Reports on Form 8-K:
(i) The Company filed a report on For 8-K on April 28,
2004 in conjunction with the announcement of the Company's
results for the quarter ended March 31, 2004.
(ii) The Company filed a report on Form 8-K on June 24,
2004 announcing the Company's planned role change of Stan
Mayer and announcing David Edelman as the Company's new
Chief Financial Officer.
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
August 5, 2004 /s/ DAVID P. EDELMAN
David P. Edelman
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 13a-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 .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
iii. 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: August 5, 2004
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, David P. Edelman, 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 13a-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. 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
iii. 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/ DAVID P. EDELMAN
--------------------------
David P. Edelman
Chief Financial Officer
Date: August 5, 2004
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 ending June 30, 2004
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.
August 5, 2004
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 ending June 30, 2004
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, David P. Edelman, 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/ DAVID P. EDELMAN
- --------------------
David P. Edelman
Chief Financial Officer
Kenneth Cole Productions, Inc.
August 5, 2004