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 April 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
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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 703-632-2961
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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
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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 May 5, 1995
- ---------- -- -----------
PART I. FINANCIAL INFORMATION
Item 1.
Tultex Corporation
Consolidated Statement of Operations (Unaudited - $000's omitted except in
shares and per share data)
April 1, 1995 (and April 2, 1994)
Three Months Ended
-----------------------------
April 1, 1995 April 2, 1994
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Net Sales and Other Income $ 84,138 $ 86,294
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Costs and Expenses:
Cost of Products Sold 58,360 62,019
Depreciation 5,872 6,191
Selling, General and Administrative (Note 7) 28,214 22,137
Interest 4,574 3,863
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Total Costs and Expenses 97,020 94,210
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Income (Loss) Before Income Taxes and
Extraordinary Loss on Early Extinguishment of
Debt (12,882) (7,916)
Provision for Income Taxes (Note 3) (4,895) (3,008)
------------- -------------
Income (Loss) Before Extraordinary Loss on
Early Extinguishment of Debt (7,987) (4,908)
Extraordinary Loss on Early Extinguishment of
Debt (Net of Income Taxes of $2,296) (Note 8) (3,746) -
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Net Income (Loss) (11,733) (4,908)
Preferred Dividend Requirement (Note 4) (284) (284)
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Balance Applicable to Common Stock $ (12,017) $ (5,192)
============= =============
Weighted Average Number of
Common Shares Outstanding 29,806,793 29,322,906
============= =============
Net Income (Loss) Per Common Share:
Income (Loss) Before Extraordinary Loss on
Early Extinguishment of Debt (Notes 4 and 5) $ (.27) $ (.18)
Extraordinary Loss on Early Extinguishment of
Debt (Note 8) (.13) -
------------- -------------
Net Income (Loss) $ (.40) $ (.18)
============= =============
Dividends Per Common Share (Note 4) $ .00 $ .05
============= =============
Tultex Corporation
Consolidated Balance Sheet (Unaudited - $000's omitted)
April 1, 1995 (and December 31, 1994)
Assets April 1, 1995 December 31,1994
- ------ ------------- ----------------
Current Assets:
Cash $ 2,458 $ 5,776
Accounts Receivable - Net of Allowances for
Doubtful Accounts $1,427 (1995) and
$2,115 (1994) 85,883 139,743
Inventories (Note 2) 174,037 130,183
Prepaid Expenses 8,607 14,205
------------- ----------------
Total Current Assets 270,985 289,907
Fixed Assets - Net Book Value 136,095 134,884
Intangible Assets 26,463 26,766
Other Assets 5,853 5,252
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Total Assets $ 439,396 $ 456,809
============= ================
Liabilities and Stockholders' Equity
Current Liabilities:
Notes Payable to Banks $ 1,300 $ 1,000
Current Maturities of Long-Term Debt
(Note 6) 231 132,353
Accounts Payable 25,877 19,634
Federal and State Income Taxes Payable
(Note 3) (6,428) 2,964
Accrued Expenses 12,299 11,102
------------- ----------------
Total Current Liabilities 33,279 167,053
Long-Term Debt, Less Current Maturities
(Notes 6 and 8) 210,126 83,002
Other Liabilities 20,483 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 128,516 140,283
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178,800 190,567
Less Notes Receivable - Stockholders 3,292 3,466
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Total Stockholders' Equity 175,508 187,101
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Total Liabilities and Stockholders' Equity $ 439,396 $ 456,809
============= ================
Tultex Corporation
Consolidated Statement of Cash Flows (Unaudited - $000's omitted)
Three Months Ended April 1, 1995 (and April 2, 1994)
Three Months Ended
-----------------------------
April 1, 1995 April 2, 1994
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Operations:
Net Income (Loss) (Notes 7 and 8) $ (11,733) $ (4,908)
Items not Requiring (Providing) Cash:
Depreciation 5,872 6,191
Amortization of Intangible Assets 303 304
Deferred Income Taxes - -
Other Deferrals 830 (380)
Changes in Assets and Liabilities:
Accounts Receivable 53,860 30,033
Inventories (43,854) (24,778)
Prepaid Expenses (Notes 7 and 8) 5,598 (3,500)
Accounts Payable and Accrued Expenses 7,440 1,721
Income Taxes Payable (9,392) (4,490)
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Cash Provided (Used) by Operations 8,924 193
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Investing Activities:
Additions to Property, Plant and Equipment (7,083) (3,954)
Additions to Other Assets (601) 215
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Cash Provided (Used) by Investing Activities (7,684) (3,739)
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Financing Activities
Issuance of Short-Term Borrowings 300 2,000
Issuance of Long-Term Debt 110,051 4,019
Payments on Long-Term Debt (115,049) (2,129)
Cash Dividends Paid (Note 4) - (1,774)
Proceeds From Stock Plans 140 79
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Cash Provided (Used) by Financing Activities (4,558) 2,195
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Net Increase (Decrease) in Cash (3,318) (1,351)
Cash at End of Prior Year 5,776 6,754
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Cash at End of Period $ 2,458 $ 5,403
============= =============
TULTEX CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
April 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) April 1, 1995 December 31, 1994
------------- -----------------
Raw Materials $ 25,392 $ 25,704
Supplies 4,102 3,590
Work-in-process 21,917 13,453
Finished Goods 122,626 87,436
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Total Inventory $ 174,037 $ 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). There were no
dividends declared on the company's five percent cumulative
preferred stock for the three month period ended April 1, 1995.
Prior to second quarter 1994 all regular dividends on the five
percent cumulative preferred stock had been declared and paid.
The cumulative dividends that had not been paid as of April 1,
1995 amounting to $9,875 were declared on May 2, 1995 and are
payable 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).
There were no dividends declared on the company's Series B
preferred stock for the three month period ended April 1, 1995.
Prior to second quarter 1994 all regular dividends on the Series
B cumulative preferred stock had been declared and paid. The
cumulative dividends that had not been declared or paid as of
April 1, 1995 amounting to $1,125,000 were declared on May 2,
1995 and are payable July 3, 1995.
Common stock, $1 par value, 60,000,000 shares
authorized, shares issued and outstanding 29,806,793 at April 1,
1995 and December 31, 1994. There were no dividends declared on
the company's common stock for the three month period ended
April 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 three months of 1995 and 1994 of 29,806,793 and
29,322,906, respectively. Although the cumulative preferred
dividends of $1,134,875 were not declared for the last four
quarters, they have been reflected in the calculation of income
(loss) per common share.
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 April 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 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 a number of 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
April 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
-------------------
04/01/95 04/02/94
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Net Sales and Other Income 100.0% 100.0%
Cost of Products Sold 69.4 71.9
Depreciation 7.0 7.2
Selling, General and Administrative 33.5 25.7
Interest 5.4 4.4
-------- --------
Total Costs and Expenses 115.3 109.2
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Income (Loss) Before Income Taxes and
Extraordinary Loss on Early Extinguishment
of Debt (15.3) (9.2)
Provision for Income Taxes (5.8) (3.5)
-------- --------
Income (Loss) Before Extraordinary Loss on
Early Extinguishment of Debt (9.5) (5.7)
Extraordinary Loss on Early Extinguishment
of Debt (Net of Income Taxes of $2,296) (4.4) 0.0
-------- --------
Net Income (Loss) (13.9)% (5.7)%
======== ========
Note: Certain items have been rounded to cause the
columns to add to 100%.
Net sales and other income for the three months ended April 1, 1995
decreased $2 million, or 2% from the first quarter of 1994 due to
lower licensed sports apparel sales (down 43%) and lower headwear
revenues (down 26%) partially offset by sales growth in
non-decorated activewear sales (up 50%). The licensed sports
apparel and headwear declines were due to the continuing adverse
effects of the Major League Baseball strike and the National
Hockey League lockout and to some overall softening in the
licensed sports apparel marketplace. The resumption of the
hockey season in January and the baseball season in April
should begin to lessen this unfavorable trend in the second
half of 1995.
Sales of the company's jersey products were
particularly strong during the first quarter of 1995 with
revenues increasing 129% compared to the first quarter of 1994.
The company's strategic emphasis on branded products has enabled
the Discus Athleticr brand to gain recognition in the
marketplace as evidenced by 66% sales growth over the comparable
period of the prior year. The company's licensed activewear
backlog at April 1, 1995 was $332 million versus $143 million at
April 2, 1994. Decorated apparel backlogs were $23 million and
$27 million at April 1, 1995 and April 2, 1994, respectively.
Margins and operating results in 1995 also show
improvement over the comparable first quarter of last year. For
the comparative three-month periods, cost of products sold as a
percentage of sales decreased in 1995 to 69% from 72%. This
margin improvement resulted primarily from manufacturing
efficiencies realized from increased production schedules and
higher average selling prices. The company is currently
operating its non-decorated activewear plants at or near
capacity. Raw material costs were higher in the first quarter
of 1995 as a result of increased raw cotton and polyester
prices. The company has contracted to purchase substantially
all of its raw cotton needs for 1995 and has fixed the price on
approximately 67% of these needs. Depreciation expense for the
first quarter decreased $319 thousand compared to the first
quarter of 1994 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 34% for the first three
months of 1995 compared to 26% for the comparable period of
1994. The increase was primarily due to expensing $5 million
in deferred advertising costs 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. Excluding
this one-time charge, S, G&A expenses as a percentage of sales
were 28%. This increase compared to the first quarter of 1994
was mainly due to increased advertising of the company's premium
Discus Athleticr and Logo Athleticr brands.
Interest expense increased 18% when compared to the
first quarter 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
three months of 1995 working capital borrowings averaged $98
million at average rates of 8.1% compared to $129 million and
4.1%, 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 and reducing
average accounts receivable days outstanding.
The effective rate for combined federal and state
income taxes was 38% for the first quarter of 1995 and 1994.
Management believes the company is well positioned to
benefit directly from the continuation of strong sales and
improved margins in non-decorated activewear and to begin to
realize improvements in decorated apparel and headwear. The
company's continuing efforts to reduce seasonality benefited
from the dramatic sales growth of its jersey products. Despite
this improvement, the company's annual financial performance is
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 April 1, 1995 increased $115
million from year-end 1994 due to lower current maturities of
long-term debt.
Net accounts receivable decreased $54 million from
December 31, 1994 to April 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 $44
million or 33%. The current ratio at April 1, 1995 was 8.1
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 described below.
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. On March
16, 1995, the company sold $110 million of 10 5/8% senior notes
due March 15, 2005. The senior 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 will result 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 April 1, 1995 included the senior notes
totaling $110 million and $100 million outstanding under the new
revolver. At the end of the first quarter of 1995 the company
was in compliance with all debt covenants.
Stockholders' equity decreased $12 million during the
first three months of 1995 as a result of the net loss for the
period of $12 million. On April 21, 1994, the Board of
Directors voted to suspend further dividend payments until such
time as cash flow and profitability are sufficient to support
them. On May 2, 1995 the Board of Directors declared dividends
for the five percent cumulative preferred stock and the Series
B, cumulative convertible preferred stock for the dividend
arrearage of $1,135,000 payable on July 3, 1995.
For the first three months of 1995 net cash provided
by operations was $9 million versus $193,000 for the same period
last year, an increase of $9 million. The lower need for
operating cash was due to significant collections of accounts
receivable and lower prepaid expenses partially offset by the
company's seasonal inventory increases. Cash used for capital
asset additions increased approximately $3 million in 1995
compared to the first three months of 1994. Cash used by
financing activities increased $7 million from the first three
months of 1994 primarily as a result of debt repayment. The
senior notes require no principal payments for ten years with
interest due semi-annually. The $225 million revolver has a
three-year term which expires in April 1998. 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 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
On May 2, 1995 at the company's Annual Meeting of
Stockholders held in Martinsville, VA there were two matters
submitted to a vote of security holders.
1. A Board of Directors, consisting of eight
persons, was elected for the ensuing year.
2. The Board of Directors appointment of Price
Waterhouse LLP, independent accountants, as auditors for
fiscal 1995 was ratified.
The actual vote count for these matters is summarized
below.
Board of Directors:
Authority Broker
Director For Withheld Abstain Non-Votes
------------------------- ---------- --------- ------- ---------
Charles W. Davies, Jr. 26,910,650 221,655 301,811 0
Lathan M. Ewers, Jr. 27,016,151 116,154 301,811 0
John M. Franck 26,908,065 224,240 301,811 0
Irving M. Groves, Jr. 26,916,683 215,622 301,811 0
H. Richard Hunnicutt, Jr. 26,691,466 440,839 301,811 0
F. Kenneth Iverson 27,015,646 116,659 301,811 0
Bruce M. Jacobson 27,018,962 113,343 301,811 0
Richard M. Simmons, Jr. 26,872,683 259,622 301,811 0
Auditors: Authority Broker
Independent Accountant For Withheld Abstain Non-Votes
---------------------- ---------- --------- ------- ---------
Price Waterhouse LLP 27,155,907 212,233 65,976 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
None
Items 1, 2, 3 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 May 12, 1995 /s/ C. W. Davies, Jr.
--------------------------------------
C. W. Davies, Jr., President and Chief
Executive Officer
Date May 12, 1995 /s/ O. R. Rollins
-----------------------------------
Executive Vice President, General
Counsel and Chief Financial Officer
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<COMMON> 29,807
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