UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-8016
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TULTEX CORPORATION
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(Exact name of registrant as specified in its charter)
Virginia 54-0367896
------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 Commonwealth Boulevard, P. O. Box 5191, Martinsville, Virginia 24115
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 540-632-2961
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(Former name, former address and former fiscal year, if changed since last
report)
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
29,806,793 shares of Common Stock, $1 par value, as of July 25, 1995
---------- -- -------------
PART I. FINANCIAL INFORMATION
Item 1.
Tultex Corporation
Consolidated Statement of Operations (Unaudited - $000's omitted except
in shares and per share data)
July 1, 1995 (and July 2, 1994)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- --------------------------
July 1, 1995 July 2, 1994 July 1, 1995 July 2, 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales and Other Income $ 120,986 $ 101,900 $ 205,124 $ 188,194
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of Products Sold 90,473 77,309 148,833 139,328
Depreciation 5,775 6,256 11,647 12,447
Selling, General and Administrative
(Note 7) 19,410 18,861 47,624 40,998
Interest 5,416 4,366 9,990 8,229
------------ ------------ ------------ ------------
Total Costs and Expenses 121,074 106,792 218,094 201,002
------------ ------------ ------------ ------------
Income (Loss) Before Income Taxes and
Extraordinary Loss on Early
Extinguishment of Debt (88) (4,892) (12,970) (12,808)
Provision for Income Taxes (Note 3) (26) (1,859) (4,921) (4,867)
------------ ------------ ------------ ------------
Income (Loss) Before Extraordinary
Loss on Early Extinguishment of Debt (62) (3,033) (8,049) (7,941)
Extraordinary Loss on Early
Extinguishment of Debt (Net of Income
Taxes of $2,296) (Note 8) - - (3,746) -
------------ ------------ ------------ ------------
Net Income (Loss) (62) (3,033) (11,795) (7,941)
Preferred Dividend Requirement
(Note 4) (284) (284) (567) (567)
------------ ------------ ------------ ------------
Balance Applicable to Common Stock $ (346) $ (3,317) $ (12,362) $ (8,508)
============ ============ ============ ============
Weighted Average Number of Common
Shares Outstanding 29,806,793 29,801,703 29,806,793 29,562,304
============ ============ ============ ============
Net Income (Loss) Per Common Share:
Income (Loss) Before Extraordinary
Loss on Early Extinguishment of Debt
(Notes 4 and 5) $ (.01) $ (.11) $ (.28) $ (.29)
Extraordinary Loss on Early
Extinguishment of Debt (Note 8) - - (.13) -
------------ ------------ ------------ ------------
Net Income (Loss) $ (.01) $ (.11) $ (.41) $ (.29)
============ ============ ============ ============
Dividends Per Common Share (Note 4) $ .00 $ .00 $ .00 $ .05
============ ============ ============ ============
</TABLE>
Tultex Corporation
Consolidated Balance Sheet (Unaudited - $000's omitted)
July 1, 1995 (and December 31, 1994)
Assets July 1, 1995 December 31,1994
------ ------------ ----------------
Current Assets:
Cash $ 2,914 $ 5,776
Accounts Receivable - Net of Allowances
for Doubtful Accounts $2,311 (1995) and
$2,115 (1994) 120,216 139,743
Inventories (Note 2) 204,762 130,183
Prepaid Expenses 8,885 14,205
------------ ----------------
Total Current Assets 336,777 289,907
------------ ----------------
Fixed Assets - Net Book Value 133,112 134,884
Intangible Assets 26,158 26,766
Other Assets 5,746 5,252
------------ ----------------
Total Assets $ 501,793 $ 456,809
============ ================
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Notes Payable to Banks $ 5,500 $ 1,000
Current Maturities of Long-Term Debt
(Note 6) 223 132,353
Accounts Payable 30,217 19,634
Federal and State Income Taxes Payable
(Note 3) (6,458) 2,964
Accrued Expenses 15,310 11,102
------------ ----------------
Total Current Liabilities 44,792 167,053
Long-Term Debt, Less Current Maturities
(Notes 6 and 8) 261,077 83,002
Other Liabilities 20,719 19,653
Stockholders' Equity:
Five Percent Cumulative Preferred Stock
(Note 4) 198 198
Series B, Cumulative Convertible Preferred
Stock (Note 4) 15,000 15,000
Common Stock (Note 4) 29,807 29,807
Capital in Excess of Par Value 5,279 5,279
Retained Earnings 127,034 140,283
------------ ----------------
177,318 190,567
Less Notes Receivable - Stockholders 2,113 3,466
------------ ----------------
Total Stockholders' Equity 175,205 187,101
------------ ----------------
Total Liabilities and Stockholders' Equity $ 501,793 $ 456,809
============ ================
Tultex Corporation
Consolidated Statement of Cash Flows (Unaudited - $000's omitted)
Six Months Ended July 1, 1995 (and July 2, 1994)
Six Months Ended
----------------------------
July 1, 1995 July 2, 1994
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Operations:
Net Income (Loss) (Notes 7 and 8) $ (11,795) $ (7,941)
Items not Requiring (Providing) Cash:
Depreciation 11,647 12,447
Amortization of Intangible Assets 608 608
Deferred Income Taxes - -
Other Deferrals 1,066 (268)
Changes in Assets and Liabilities:
Accounts Receivable 19,527 21,490
Inventories (74,579) (49,187)
Prepaid Expenses (Notes 7 and 8) 5,320 (7,991)
Accounts Payable and Accrued Expenses 14,791 185
Income Taxes Payable (9,422) (6,452)
------------ ------------
Cash Provided (Used) by Operations (42,837) (37,109)
------------ ------------
Investing Activities:
Additions to Property, Plant and Equipment (9,875) (5,425)
Additions to Other Assets (494) 172
------------ ------------
Cash Provided (Used) by Investing Activities (10,369) (5,253)
------------ ------------
Financing Activities:
Issuance of Short-Term Borrowings 4,500 -
Issuance of Long-Term Debt 157,052 47,019
Payments on Long-Term Debt (111,107) (4,462)
Cash Dividends Paid (Note 4) (1,419) (1,774)
Proceeds From Stock Plans 1,318 301
------------ ------------
Cash Provided (Used) by Financing Activities 50,344 41,084
------------ ------------
Net Increase (Decrease) in Cash (2,862) (1,278)
Cash at End of Prior Year 5,776 6,754
------------ ------------
Cash at End of Period $ 2,914 $ 5,476
============ ============
TULTEX CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
July 1, 1995
NOTE 1 - In the opinion of the Company, the accompanying consolidated
financial statements furnished in this quarterly 10-Q Report reflect all
adjustments, consisting only of normal recurring adjustments, which are, in
the opinion of management, necessary for a fair statement of the results of
the interim periods. This balance sheet, statement of income and statement
of cash flows have been prepared from the Company's records and are subject
to audit and year-end adjustments.
NOTE 2 - A summary of inventories by component follows.
(In thousands of dollars) July 1, 1995 December 31, 1994
------------ -----------------
Raw Materials $ 26,283 $ 25,704
Supplies 5,000 3,590
Work-in-process 25,129 13,453
Finished Goods 148,350 87,436
------------ -----------------
Total Inventory $ 204,762 $ 130,183
============ =================
NOTE 3 - Income taxes are provided based upon income reported for financial
statement purposes. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
company's assets and liabilities.
NOTE 4 - Five percent cumulative preferred stock is $100 par value, 22,000
shares authorized, shares issued and outstanding 1,975 shares (1995 and 1994).
The stated quarterly dividend and all cumulative dividends in arrears together
totaling $12,344 were declared on May 2, 1995 and paid on July 3, 1995.
Series B preferred stock is cumulative, convertible preferred stock, $7.50
Series B, $100 stated value, 150,000 shares authorized, issued and outstanding
(1995 and 1994). The stated quarterly dividend and all cumulative dividends
in arrears together totaling $1,406,250 were declared on May 2, 1995 and paid
on July 3, 1995.
Common stock, $1 par value, 60,000,000 shares authorized, shares issued and
outstanding 29,806,793 at July 1, 1995 and December 31, 1994. There were no
dividends declared on the company's common stock for the three month period
ended July 1, 1995. A dividend of $.05 per common share was declared and paid
for the first quarter of 1994.
NOTE 5 - Income (loss) per common share is computed using the weighted average
number of common shares outstanding in the first six months of 1995 and 1994
of 29,806,793 and 29,562,304, respectively.
NOTE 6 - The company's term loan agreement, senior notes and revolving credit
facility contain provisions regarding the company's financial performance and
condition. At July 1, 1995, the company was in compliance with the covenants.
NOTE 7 - On January 1, 1995, the company adopted the provisions of the
Accounting Standards Executive Committee's Statement of Position on Reporting
Advertising Costs ("Statement"). The adoption of the Statement increased
selling, general and administrative expenses for the first six months of 1995
as reported on the Statement of Operations by $4,970,000.
NOTE 8 - In March 1995, the company completed its public offering of $110
million principal amount of 10 5/8% Senior Notes due 2005 and entered into a
senior credit facility with ten banks (the "Refinancing.") In connection with
the Refinancing, the company wrote-off unamortized debt issue costs of
$3,109,000 and incurred a prepayment penalty of $2,933,000. Such amounts, net
of income taxes of $2,296,000, have been reflected in the accompanying
Consolidated Financial Statements as an extraordinary loss on early
extinguishment of debt.
Tultex Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations
July 1, 1995
Results of Operations
---------------------
The following table presents the company's consolidated statement of
operations items as a percentage of net sales.
Three Months Ended Six Months Ended
------------------ ------------------
07/01/95 07/02/94 07/01/95 07/02/94
-------- -------- -------- --------
Net Sales and Other Income 100.0% 100.0% 100.0% 100.0%
Cost of Products Sold 74.8 75.9 72.5 74.0
Depreciation 4.8 6.1 5.7 6.6
Selling, General and Administrative 16.0 18.5 23.2 21.8
Interest 4.4 4.3 4.9 4.4
-------- -------- -------- --------
Total Costs and Expenses 100.0 104.8 106.3 106.8
-------- -------- -------- --------
Income (Loss) Before Income Taxes
and Extraordinary Loss on Early
Extinguishment of Debt (0.0) (4.8) (6.3) (6.8)
Provision for Income Taxes (0.0) (1.8) (2.4) (2.6)
-------- -------- -------- --------
Income (Loss) Before Extraordinary
Loss on Early Extinguishment of Debt (0.0) (3.0) (3.9) (4.2)
Extraordinary Loss on Early
Extinguishment of Debt (Net of Income
Taxes of $2,296) - 0.0 (1.8) -
-------- -------- -------- --------
Net Income (Loss) (0.0)% (3.0)% (5.7)% (4.2)%
======== ======== ======== ========
Note: Certain items have been rounded to cause the columns to add to 100%.
Net sales and other income for the three months ended July 1, 1995, increased
$19 million, or 19% from the second quarter of 1994 due to growth in
activewear sales (up 38%) partially offset by lower licensed apparel sales
(down 11%). Strong customer demand for fleece and T-shirts was primarily
responsible for the activewear increase. The licensed apparel decline was due
to the continuing adverse effects of the Major League Baseball strike and to
the continued overall softening in the licensed apparel marketplace.
The company's strategic emphasis on branded products continued to produce
positive results during the second quarter as evidenced by 104% and 51% sales
growth for the Discus Athletic(Registered Trademark) and Logo Athletic
(Registered Trademark) brands, respectively. The company's consolidated
backlog at July 1, 1995, was $336 million versus $289 million at July 2, 1994.
For the six months to date net sales and other income increased $17 million,
or 9% from the comparable period of 1994 due to a 42% increase in activewear
sales which was primarily due to a 38% increase in volume.
Margins and operating results in 1995 also show improvement over the
comparable second quarter of last year. For the comparative three-month
periods, cost of products sold as a percentage of sales decreased in 1995 to
75% from 76%. This margin improvement resulted primarily from manufacturing
efficiencies realized from increased production schedules and higher average
selling prices. For the comparative six-month periods cost as a percentage
of sales decreased slightly from 74% in 1994 to 73% in 1995. Raw material
costs were higher during the first six months of 1995 as a result of increased
raw cotton and polyester prices. These higher raw material costs will put
pressure on future gross margins as products utilizing such raw materials are
sold. Management believes that the effect will be minimized by price
increases already in place for the second half of 1995 and a shift toward
higher margin products.
Depreciation expense decreased $481,000, or 8% during the second quarter of
1995, and for the six months depreciation decreased $800,000, or 6%. These
decreases were due to relatively low capital expenditures during the preceding
twelve months.
As a percentage of sales, selling, general and administrative expenses
(S, G&A) were 16% for the second quarter of 1995 compared to 19% for the
comparable period of 1994. The decrease was due to higher 1995 sales and
management's continuing emphasis on cost reduction. During the six-month
period ending July 1, 1995, S, G&A expenses as a percentage of sales increased
to 23% of sales from 22% for the comparable period of the prior year. The
primary reason for this increase was the one-time charge associated with
expensing $5 million in deferred advertising costs during the first quarter
of 1995 as required by the Accounting Standards Executive Committee's
Statement on Reporting Advertising Costs. This statement first became
effective for the company at the beginning of the 1995 fiscal year.
Operating income increased sharply during the second quarter to $5 million
compared to an operating loss of $526,000 for the comparable period of the
prior year. This increase was due to the improved performance of the
company's activewear business.
Interest expense increased 24% when compared to the second quarter of 1994,
and 21% for the six months ended July 1, 1995, compared to the first six
months of 1994, due to higher average rates partially offset by lower average
borrowing requirements. The nature of the company's primary businesses
requires extensive seasonal borrowings to support its working capital needs.
For the first six months of 1995 working capital borrowings averaged $113
million at average rates of 7.8% compared to $135 million and 4.5%,
respectively, for the comparable period of the prior year. The average
borrowing reduction was due to the company's continuing emphasis on increasing
inventory turns.
The effective rate for combined federal and state income taxes was 38% for the
first six months of 1995 and 1994.
Management believes the company will continue to benefit from the continuation
of improved activewear demand and should begin to realize improvements in
licensed apparel sales during the remainder of 1995. Despite this optimism,
the company's annual financial performance remains highly dependent on its
seasonally strong second half when historically approximately 65% of its
annual sales occur.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
Net working capital at July 1, 1995, increased $169 million from year-end 1994
due primarily to lower current maturities of long-term debt and higher
inventories.
Net accounts receivable decreased $20 million from December 31, 1994, to July
1, 1995, due to the seasonality of activewear shipments. Receivables
normally peak in September and October and begin to decline in December as
shipment volume decreases and cash is collected.
Inventories traditionally increase during the first half of the year to
support second-half shipments. Compared to the December 31, 1994, inventories
increased approximately $75 million or 57%. The current ratio at July 1,
1995, was 7.5 compared to 1.7 at December 31, 1994. The increase in the
ratio from the beginning of the year was mainly due to lower current
maturities of long term debt and higher inventories.
On March 8, 1995, the company signed a three-year $225 million revolving
credit facility which replaced its existing facility due to expire on October
5, 1995. The credit facility has a three-year term which expires in April
1998. On March 16, 1995, the company sold $110 million of 10 5/8% senior
notes due March 15, 2005. The senior notes require no principal payments for
ten years with interest due semi-annually. These notes, which were priced at
par, were used to repay existing indebtedness of the company. In connection
with these transactions the company recognized a one-time, after tax charge of
$3,746,000 or 13 cents per share, representing unamortized debt issuance costs
and a prepayment premium. While this refinancing has resulted in higher
interest expense, the company believes that the longer maturity and increased
covenant flexibility provided under the terms of these agreements will allow
the company to continue its long-term investment in brand promotion and higher
margin products. Total long-term debt at July 1, 1995, included the senior
notes totaling $110 million and $151 million outstanding under the new
revolver. At the end of the second quarter of 1995, the company was in
compliance with all debt covenants.
Stockholders' equity decreased $12 million during the first six months of 1995
as a result of the net loss for the period of $12 million. Debt as a
percentage of total capitalization was 60% compared to 62% at July 2, 1994.
The company's goal is to reduce debt as a percentage of total capitalization
to 40%.
For the first six months of 1995 net cash used by operations was $43 million
versus $37 million for the same period last year, an increase of $6 million.
The increased need for operating cash was due to higher operating schedules
which resulted in a seasonal inventory increase. Cash used for capital asset
additions increased approximately $4 million in 1995 compared to the first six
months of 1994. Cash provided by financing activities increased $9 million
from the first six months of 1994 primarily as a result of borrowings to
support working capital growth. The company expects that annual cash flows
from income and non-cash items, supplemented by the revolving credit facility,
will be adequate to support requirements for the remainder of 1995.
TULTEX CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
None
Items 1, 2, 3, 4 and 5 are inapplicable and are omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TULTEX CORPORATION
------------------
(Registrant)
Date August 14, 1995 /s/ C. W. Davies, Jr.
--------------- --------------------------------------
C. W. Davies, Jr., President and Chief
Executive Officer
Date August 14, 1995 /s/ O. R. Rollins
--------------- -----------------------------------------
Executive Vice President, General Counsel
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 2,914
<SECURITIES> 0
<RECEIVABLES> 122,527
<ALLOWANCES> 2,311
<INVENTORY> 204,762
<CURRENT-ASSETS> 336,777
<PP&E> 291,671
<DEPRECIATION> 158,559
<TOTAL-ASSETS> 501,793
<CURRENT-LIABILITIES> 44,792
<BONDS> 0
<COMMON> 29,807
0
15,198
<OTHER-SE> 132,313
<TOTAL-LIABILITY-AND-EQUITY> 501,793
<SALES> 120,986
<TOTAL-REVENUES> 120,986
<CGS> 90,473
<TOTAL-COSTS> 96,251
<OTHER-EXPENSES> 18,480
<LOSS-PROVISION> 930
<INTEREST-EXPENSE> 5,416
<INCOME-PRETAX> (88)
<INCOME-TAX> (26)
<INCOME-CONTINUING> (62)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (62)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
