UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________________ to _________________
Commission file number 1-8016
TULTEX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0367896
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(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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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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Common Stock, $1 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant:
$133,583,091 at March 15, 1996.
- ------------------------------
(APPLICABLE TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
29,824,371 shares of Common Stock, $1 par value, as of March 15, 1996
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DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K into which the document is incorporated:
1. Those portions of the Annual Report to Stockholders for the fiscal
year ended December 30, 1995 ("1995 Annual Report to Stockholders")
incorporated herein by reference in Part II, Items 5, 6, 7 and 8;
and Part IV, Item 14.
1. Those portions of the Proxy Statement for the company's 1996 Annual
Meeting of Stockholders ("1996 Proxy Statement") incorporated
herein by reference in Part III, Items 10, 11, 12 and 13.
<PAGE>
PART I
Item 1. Business
General
Tultex Corporation is one of the world's largest marketers and manufacturers
of activewear and licensed sports apparel for consumers and sports enthusiasts.
The company's diverse product line includes fleeced sweats, jersey products
(outerwear T-shirts), and decorated jackets and caps. These products are sold
under the company's own brands led by the Discus Athletic and Logo Athletic
premium labels and under private labels, including Nike, Levi Strauss, Reebok
and Pro Spirit. In addition, the company has numerous professional and college
sports licenses to manufacture and market embroidered and screen-printed
products with team logos and designs under its Logo Athletic and Logo 7 brands.
The company is a licensee of professional sports apparel, holding licenses from
the National Football League ("NFL"), Major League Baseball ("MLB"), the
National Basketball Association ("NBA") and the National Hockey League ("NHL")
to manufacture a full range of sports apparel for adults and children.
Historically, Tultex has been a producer of quality fleece products for sale
to distributors and resale to consumers under private labels. However, in the
1980s, the activewear industry began to change. Increasing consumer demand
reflecting more active and casual lifestyles and the industry's historically
good long-term growth prospects and low fashion risk as compared to other
apparel products, attracted large, well-financed companies which acquired
competitors of the company. Simultaneously, larger mass merchandise retailers
began to exert pressure on margins for lower-priced fleece products.
In recent years, Tultex has initiated a strategy to enhance its competitiveness
and to capitalize on growth opportunities by becoming a consumer-oriented
apparel maker able to compete in a changing industry. This strategy includes
the following elements:
Increasing Emphasis on Higher-Margin Products. The company is strengthening
its competitiveness in the activewear business through the development of
branded and private label, higher-quality and higher-margin products to
supplement its traditionally strong position in the lower-priced segment of
the business. The company is developing its own brands, promoting Discus
Athletic for its premium products and using the Tultex label for the
value-oriented segment of the market. Discus Athletic's highly visible
advertising during televised broadcasts of college football and basketball on
the ESPN and ABC television networks and of Atlantic Coast Conference
basketball has contributed to significant annual increases in sales of this
brand since 1992. In addition, Tultex has partnering arrangements to supply
higher-quality, private label products to companies such as Reebok, Levi
Strauss and Nike, none of which accounted for more than 10% of the company's
consolidated sales during 1995. To complement its development of higher-margin
products, the company began manufacturing jersey products in 1991.
Expanding into Licensed Apparel Business to Complement Activewear Business.
Tultex's 1992 acquisitions of Logo 7, a marketer of licensed sports apparel,
and Universal, a marketer of sports licensed headwear, enabled the company to
achieve the fourth largest market share (12.0%) in the higher-margin licensed
apparel business in 1994, and have created opportunities for significant
manufacturing and distribution synergies with the company's activewear
business. The promotion of the Logo Athletic brand of licensed apparel
through television and print advertising, as well as promotional
arrangements featuring Superbowl quarter back Troy Aikman of the Dallas
<PAGE>
Cowboys', San Francisco 49ers' quarterback Steve Young, Miami Dolphins'
quarterback Dan Marino, Denver Broncos' quarterback John Elway and the
Green Bay Packers' Reggie White, among others, has helped to increase the
visibility and sales of Logo Athletic products.
Increasing Distribution Channels and Strengthening Customer Relationships.
Tultex actively pursues strong relationships with department, sporting goods
and other specialty stores, such as Sears, JC Penney, Modell's, Dillard's,
Foot Locker, Champs and Sports Authority, to distribute its higher margin
branded and private label products. In addition, the company continues to
strengthen its relationships with high volume retailers such as Wal-Mart and
Target by supplying private label and Tultex products. Tultex provides
customers with exceptional service and support; as an example, its
distribution capabilities are highly responsive to customers' changing
delivery and inventory management requirements.
Investing in Modern Distribution and Production Facilities. During fiscal
1988 through fiscal 1995, Tultex invested approximately $208 million in
capital expenditures, primarily in the construction of its customer service
center and in high-efficiency spinning, knitting, dyeing, cutting and
embroidering machinery. In 1991, Tultex began operating the customer service
center, which the company believes is the most highly automated in the
industry. Having made significant investments in its distribution and
production facilities, the company's 1996 capital budget is set at $16 million.
The company's strategy has improved its sales mix. While net sales increased
3.5% in fiscal 1995 over 1994, net sales of Discus Athletic activewear
increased 29.9% to $75.8 million and net sales of Logo Athletic licensed
apparel increased 42.8% to $92.0 million. Sales of jersey products were $93.1
million for the fiscal year ended December 30, 1995, representing 24.0% of the
company's activewear sales during such period compared to 16.5% for fiscal
1994. Reduced consumer demand for licensed apparel due to the MLB strike and
NHL lockout, a slowdown at retail for activewear products in the fourth quarter
and higher raw material costs adversely affected Tultex's results of operations
during 1995.
The company's activewear business is vertically integrated, spinning
approximately 80% of the yarn it requires in three yarn plants located in
North Carolina (the balance is purchased under yarn supply contracts) and
knitting, dyeing and cutting fabric and sewing finished goods in 7 plants in
Virginia and North Carolina and one plant in Jamaica. The company's licensed
sports apparel operations are conducted from one plant in Indiana and one
plant in Massachusetts.
Industry
The Company produces activewear and licensed sports apparel and headwear for
sale at a broad range of price points through all major distribution channels.
Activewear
The company's activewear business consists of its fleecewear and jersey
products. All activewear industry and market share data included herein has
been estimated by the company based on data provided by Market Research
Corporation of America, a leading provider of market information on the
textile industry.
<PAGE>
Fleecewear. The fleecewear industry, with retail sales of approximately $7.8
billion in 1995, has grown 1.7% in unit sales from 1990 to 1995. The
predominant fleecewear products are sweatshirts, pants and shorts.
Jersey (Outerwear T-shirts). Unit retail sales of jersey products have grown
7.5% from 1990 to 1995 and in 1995 totaled $7.0 billion, or 73 million dozens.
Like fleecewear, the industry characteristics of jersey apparel include low
fashion risk and long-term growth. Imports are a greater threat as the
weight/labor ratio and the freight costs involved are lower for jersey products
than for fleecewear; however, the ability to produce large volumes with short
delivery times gives domestic manufacturers an advantage over import
competition in both fleecewear and jersey apparel.
Licensed Apparel and Headwear
Estimated wholesale sales of professional sports licensed apparel (including
headwear) for 1994 were approximately $1.8 billion, according to Sports Style
Magazine, an industry publication. In general, the company believes that the
prospects for its continued growth in this market are good, although growth is
expected to be less rapid than in recent years due to increased competition.
The continually changing fortunes of existing teams, together with the
introduction of new franchises, has made the market extremely dynamic, as
interest in each team fluctuates with its performance. Manufacturers, such as
the company, with the capacity to respond quickly to these changes with new
products and designs, enjoy a competitive advantage over smaller competitors.
Company Products
Activewear
The principal activewear products of the company are fleeced knitwear items
such as sweatshirts, jogging suits, hooded jackets, headwear and jersey
apparel for work and casual wear. The company manufactures apparel products
principally under the Discus Athletic and Tultex brands. Products carrying the
Discus Athletic name are marketed for sale to chains such as Foot Locker,
department stores such as Sears and sporting goods stores, while Tultex
products are marketed for sale to mass merchandisers such as Wal-Mart and
wholesale clubs such as Sam's. The company is licensed to manufacture and
market adult fleecewear under the Britannia trademark owned by Levi Strauss &
Co. The company also manufactures private-label products for sale under many
labels, including Nike, Levi Strauss, Reebok and Pro Spirit.
Licensed Apparel and Headwear
The company's licensed apparel products include jackets, sweats, T-shirts,
baseball-style caps and other headwear, embroidered or imprinted with
professional and college sports and entertainment-related licensed designs and
logos. These products are marketed under the Logo Athletic and Logo 7 brands.
Under the Logo Athletic name, the company offers premium-quality jackets, caps
and other activewear, including NFL "Pro-Line" authentic sideline gear and NBA
"Authentics" apparel. Tultex, through Logo 7, acquired Pro-Line status from
the NFL in 1993, a flagship program entitling the company to sell products
identical to those worn on the sidelines by NFL players and coaches. Under the
terms of the non-exclusive four-year Pro-Line contract, the company markets
Pro-Line products at retail for all 30 NFL teams. Under the terms of the
non-exclusive three-year NBA Authentics contract, the company markets products
that are identical to those worn by NBA players, coaches and managers during
competition. The company's NFL Pro-Line and NBA Authentics products
<PAGE>
prominently feature the Logo Athletic name and trademark, which the company
believes are key elements in developing the Logo Athletic brand. Under the
Logo 7 brand, the company offers moderately-priced outerwear, fleecewear,
T-shirts and caps with licensed designs and logos. The company also sells
popularly-priced licensed fleecewear, jersey apparel and headwear.
Customers; Marketing and Sales
Customers
The company offers a diverse product line for sale at a full range of price
points through all major distribution channels. The company has no customer
that constituted 10% of net sales in 1995. The company's top four customers
together accounted for approximately 27% of sales.
Marketing and Sales
The company has shifted its marketing strategy in recent years to focus on the
development of its own brands and sales through distribution channels that
support higher margins. In particular, the company has devoted significant
resources to the promotion of its Discus Athletic and Logo Athletic brands.
In 1993, the company began conducting advertising campaigns to promote its
Discus Athletic and Logo Athletic brands. The Discus Athletic advertising
campaign emphasizes quality and the usefulness of the product for many sports.
The company believes that this positioning effectively differentiates the
Discus Athletic line from competing specialized lines with powerful brand
associations. The Logo Athletic campaign focuses on establishing the
"authenticity" of Logo Athletic products. The company believes that licensed
apparel sales benefit substantially from the perception that products are the
same as those worn by professional sports stars.
Advertising expenditures were $17.1 million and $17.7 million in 1994 and 1995,
respectively, of which $14.7 million and $22.7 million, respectively, were
expensed in those years. In fiscal 1995, the company adopted the provisions of
the Accounting Standards Executive Committee's Statement of Position on
Reporting Advertising Costs ("Statement"). The Statement required that
certain advertising costs which were previously deferred and amortized over
an anticipated benefit period be recognized currently in the statement of
income. Advertising expenses reported as part of selling, general and
administrative expenses on the statement of income increased by approximately
$5.0 million in 1995 as a result of adopting this change in accounting method.
New product introductions are important to the company's licensed apparel
business and are undertaken to generate consumer excitement and demand.
Logo 7's creative design team, in cooperation with key customers and licensors,
continually develops and introduces new products and styles. The company is
able to react quickly to changing team fortunes, designing new products to
capitalize on shifts in popularity and delivering those products to the market
<PAGE>
rapidly, sometimes in a matter of hours. During major professional and
collegiate sporting events, such as the Super Bowl, the company produces
on-site decorated products with championship logos of the winning teams for
immediate distribution and sale at the event.
The company's marketing methods for other products are typical of producers of
basic clothing products. Its merchandising department keeps abreast of current
fashionable styles and colors. After internal reviews by manufacturing
departments, selected customers preview and comment upon prototype garments
before the merchandising department determines those to be presented in sales
catalogs. Production is planned on orders received and anticipated customer
orders for these garments.
As of December 30, 1995, Tultex operated a sales office in each of New York,
Boston, Chicago and Atlanta and a Discus Athletic showroom in New York City.
These offices are the primary points of contact for customers and coordinate
sales, distribution of sales information, certain advertising, point-of-sale
displays and customer service. The company also employs eight independent
sales representatives to market its Discus Athletic line in the fragmented
sporting goods market. Logo 7's products are marketed through a sales force
of 50, including Logo 7 employees and independent sales representatives. In
1992, the company entered into an agreement with Nissan Trading Co., Ltd.,
a subsidiary of Nissan Motor Co., to market and sell the company's Discus
Athletic products in Japan. International sales in 1994 and 1995 were less
than 10%.
In November 1995, the company and four other investors completed the formation
of Wide Open Performance Wear, Inc. The company has minority ownership in
this joint venture which markets garments screenprinted with NASCAR graphics.
At December 30, 1995, Dominion Stores, Inc., a wholly-owned subsidiary,
operated 13 outlet stores in North Carolina, Virginia and West Virginia, which
sell surplus company apparel and apparel items of other manufacturers, and
operated 29 The Sweatshirt Company retail stores in 18 states, which primarily
sell first-quality company-made products and accessories. Dominion Stores'
total sales in fiscal 1995 were $16.0 million.
Licenses
Most of the company's licensed products are sold through Logo 7. The company
is a licensee of professional sports apparel, maintaining a full complement of
licenses with all of the major North American professional sports leagues
- -- the NFL, MLB, the NBA and the NHL -- and the Collegiate Licensing Company.
The company also holds licenses for the 1996 Summer Olympics in Atlanta and
NASCAR. These licenses require the payment of royalties generally ranging
from 9% to 16% of sales with guaranteed royalties of approximately $6 million
in fiscal 1996. The company's major licenses with the NFL, NBA and NHL expire
in 1997 and the MLB license expires in 1996. The company is licensed to
manufacture and market adult fleecewear under the Britannia(registered
trademark) trademark owned by Levi Strauss & Co.
The company's ability to compete is dependent on its ability to obtain and
renew licenses, particularly those from the major professional sports leagues.
The company enjoys long-standing relationships with its major league licensees,
having been awarded its first licenses with the NFL in 1971, with the NBA in
1977, with MLB in 1980 and with the NHL in 1988. The company has no reason to
believe that it will not be able to successfully renew these licenses. While
the company has enjoyed long, successful and uninterrupted licensing
<PAGE>
relationships with its professional and collegiate athletic licensors, if a
significant license or licenses were not renewed or replaced, the company's
sales would likely be materially and adversely affected. In addition, the
company's material licenses are non-exclusive and new or existing competitors
may obtain similar licenses.
Manufacturing
The company's manufacturing process consists of yarn production; fabric
construction including knitting, dyeing and finishing operations; apparel
manufacturing including cutting and sewing operations; and, for garments with
logos, screenprint and embroidery operations. As a result of its modernization
efforts, the company believes that its manufacturing facilities are outfitted
with some of the most efficient and technologically-advanced equipment in the
industry.
During fiscal 1988 through fiscal 1995, the company invested approximately
$208 million to open new facilities, including sewing facilities in Roanoke,
Virginia and Montego Bay, Jamaica (a leased facility), and the highly
automated customer service center in Martinsville, Virginia, and to modernize
other facilities. Open-end spinning frames were acquired to increase yarn
production and reduce costs, higher color quality and lower dyeing costs were
achieved from the installation of new jet dyeing equipment, new dryers were
added in the fabric finishing process, automated cutting machines were
introduced, and new information systems were implemented.
Tultex's highly-automated customer service center, opened in 1991, has greatly
expanded the company's distribution capabilities. The customer service center
allows the company to package and ship its products according to the more
detailed color, size and quantity specifications typically required by
high-margin retailers and department stores and has permitted consolidation of
the company's warehouses.
In spring 1992, Logo 7 moved its operations to a newly-constructed, leased
facility built to Logo 7's specifications. This 650,000 square foot building
allowed Logo 7 to centralize operations, increase inventory control, improve
material flow and will allow for future expansion.
Tultex manufactures yarn at three facilities located in North Carolina, which
have a combined production capacity of 1.3 million pounds per week, utilizing
modern, open-end spinning frames. For its knitting operations, Tultex operates
approximately 500 modern high-speed, latch-needle circular knitting machines,
which produce various types of fabrics. The company believes its dyeing
operations are among the most modern and technologically efficient in the
industry; dyeing operations are computer-controlled, allowing precise
duplication of dyeing procedures to ensure "shade repeatability" and
color-fast properties. The finishing operations employ mechanical squeezing
and steaming equipment.
The Martinsville cutting facility uses advanced Bierrebi automatic continuous
cutting machines with computer-controlled hydraulic die-cutting heads and
"lay-up" machines and high-speed reciprocating knives. Sewing production at
the company's eight sewing facilities is organized on an assembly-line basis.
<PAGE>
The company decorates its unfinished licensed apparel products using
screenprinting or embroidery at Logo 7's facilities in Indianapolis and
Universal's facilities in Massachusetts. Automatic silk-screen machines and
dryers are used for longer runs, and hand-operated presses are used for
shorter or more complicated runs. Embroidery is applied using high-speed,
computerized stitching equipment.
In September 1995, the company entered into a five-year production agreement
with Overseas Manufacturing Systems of America, Inc. ("OMSA"), a Mexican joint
venture, to produce jersey products. The company provided three spinning
machines to OMSA for use in its yarn making operations and OMSA agreed to
manufacture up to 24,000 dozens of jersey product per year for delivery to the
company or its U.S. based customers.
The company's order backlog at December 31, 1994 was approximately $143
million and at December 30, 1995 was approximately $184 million. Backlogs are
computed from orders on hand at the last day of each fiscal period. The
company believes that due to the seasonality of the company's business and the
just-in-time nature of much of the company's sales, order backlogs are not a
reliable indicator of future sales volume.
Raw Materials
The company's principal raw materials for the production of activewear are
cotton and polyester. Cotton content in fleecewear typically is 50% and in
jersey apparel typically is 100%. The company is producing increasing amounts
of fleecewear containing 90-100% cotton. Fleecewear and jersey manufacturers
are extremely sensitive to fluctuations in cotton and polyester prices as
these materials represent approximately 30% of the manufacturing cost of the
product. In addition, the company is indirectly impacted by increasing costs
of raw materials in its licensed apparel business because the company
purchases finished goods containing cotton and polyester and these higher raw
materials costs often are effectively passed on to the company. Cotton prices
increased significantly in 1995 over 1994 levels. In 1995, the company's
average price per pound of cotton was $0.85, compared with $0.72 in 1994,
while the average price per pound of polyester was $0.80 in 1995, compared
with $0.64 in 1994. The company expects the average price paid for fiber in
1996 to be relatively unchanged from the average price for the prior year
As of March 12, 1996, the company has fixed the price on approximately 50% of
its planned cotton purchases for fiscal 1996. To the extent cotton prices
increase before the company fixes the price for the remainder of its raw cotton
needs, the company's results of operations could be adversely affected.
Trademarks
The company increasingly promotes and relies upon its trademarks, including
Discus Athletic, Logo Athletic, Tultex, and Logo 7, which are registered in
the United States and many foreign countries.
Seasonality
The company's business is seasonal. The majority of fleecewear sales and
related net income occur in the third and fourth quarters, coinciding with
cooler weather and the playing seasons of popular professional and college
sports. Jersey sales peak in the second and third quarters of the year,
somewhat offsetting the seasonality of fleecewear sales.
<PAGE>
Environmental Matters
The company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage,
handling and disposal of a variety of substances and wastes used in or
resulting from its operations, including, but not limited to, the Water
Pollution Control Act, as amended; the Clean Air Act, as amended; the Resource
Conservation and Recovery Act, as amended; the Toxic Substances Control Act,
as amended; and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
The company returns dyeing wastes for treatment to the City of Martinsville,
Virginia's municipal wastewater treatment systems operated pursuant to a
permit issued by the state. The city has filed a timely application to renew
its permit. In 1989, the city adopted a plan for removing the coloration,
caused by the dye wastes, from the water by using polymer chemicals to combine
with the extremely small particles of the dye to create a sludge-like
substance that can be retrieved from the water at the city's wastewater
treatment plant and disposed of as a non-hazardous waste in the city's
landfill. To cover the cost to the city, the company pays 50 to 80 cents per
thousand gallons of water above regular water costs. The expenditures required
do not have a material effect on the company's earnings or competitive
position.
The company's operations also are governed by laws and regulations relating to
employee safety and health, principally the Occupational Safety and Health Act
and regulations thereunder, which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical and ergonomic hazards in the workplace.
The company believes that it is in material compliance with the aforementioned
laws and regulations and does not expect that future compliance and actions
responding to routine inspections will have a material adverse effect on its
capital expenditures, earnings or competitive position in the foreseeable
future. However, there can be no assurances that environmental and other legal
requirements will not become more stringent in the future or that the company
will not incur significant costs in the future to comply with such requirements.
Employees
The company had approximately 6,835 employees at December 30, 1995, of which
5,990 or 88% were paid hourly.
In August 1994, hourly employees at the company's Martinsville, Virginia
facilities voted for representation by the Amalgamated Clothing and Textile
Workers Union (now known as the Union of Needletrades, Industrial and Textile
Employees or UNITE). The company accepted a three-year labor contract with the
union which covers all hourly employees at the Martinsville facilities. It was
ratified by an employee vote in March 1995. The contract covers approximately
2,100 hourly employees in the Martinsville area. In May 1995, hourly
employees at the company's South Boston, Virginia sewing facility voted for
representation by UNITE. A three-year contract was ratified by an employee
vote in August 1995. The contract covers approximately 550 employees in the
South Boston area. Employees represented by UNITE accounted for approximately
39% of the company's total employees and approximately 44% of the company's
hourly employees. None of the company's other employees are represented by a
union.
<PAGE>
Item 2. Properties
Most of the company's principal physical facilities (other than those of Logo
7 and Universal) are located in Virginia and North Carolina, within a
150 - mile radius of the City of Martinsville. All facilities are of masonry
construction except the buildings at Vinton, Virginia, Mattapoisett,
Massachusetts and the Customer Service Center in Martinsville, Virginia, which
are steel-framed metal-walled buildings constructed on a concrete slab. All
buildings are well-maintained. The location, approximate size and use of the
company's principal owned properties are summarized in the following table:
Square
Location Footage Use
- ---------------- ------- ----------------------------------------
Martinsville, VA 45,200 Administrative offices
Martinsville, VA 1,100,000 Administrative offices, manufacturing
and distribution (apparel)
Koehler, VA 60,000 Warehousing
Martinsville, VA 70,000 Warehousing
South Boston, VA 130,000 Sewing (apparel)
Bastian, VA 53,500 Sewing (apparel)
Longhurst, NC 287,000 Manufacturing (yarn)
Roxboro, NC 110,000 Manufacturing (yarn)
Dobson, NC 38,000 Sewing (apparel)
Mayodan, NC 612,000 Manufacturing, warehousing
and shipping (yarn and apparel)
Vinton, VA 50,000 Sewing (apparel)
Martinsville, VA 502,200 Warehousing and shipping (apparel)
Mattapoisett, MA 116,250 Distribution (headwear)
The following table presents certain information relating to the company's
principal leased facilities:
Lease
Expira- Current
Square tion Annual
Location Footage Date Rental Use
- --------------- ------- -------- ---------- ---------------------
Chilhowie, VA 40,015 08/31/97 $ 46,200 Sewing (apparel)
Montego Bay, 66,510 12/31/96 266,040 Sewing (apparel)
Jamaica
Martinsville, VA 17,600 01/15/02 60,095 Warehousing (apparel)
Martinsville, VA 30,000 Monthly 43,200 Warehousing (apparel)
<PAGE>
Lease
Expira- Current
Square tion Annual
Location Footage Date Rental Use
- --------------- ------- -------- ---------- ---------------------
Martinsville, VA 300,000 06/01/98 684,000 Warehousing (apparel)
Martinsville, VA 300,000 06/01/98 978,000 Warehousing (apparel)
Indianapolis, IN 650,000 04/30/07 1,404,000 Manufacturing (apparel)
Manufacturing equipment, substantially all of which is owned by the company,
includes carding, spinning and knitting machines, jet-dye machinery, dryers,
cloth finishing machines, cutting and sewing equipment and automated
storage/retrieval equipment. This machinery is modern and kept in good repair.
The company leases a fleet of trucks and tractor-trailers which are used for
transportation of raw materials and for interplant transportation of
semi-finished and finished products.
The company's facilities and its manufacturing equipment are considered
adequate for its needs.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
As of February 29, 1996 there were 2,897 record holders of the Company's
common stock. Other information required by Item 5 of Form 10-K appears under
the heading "Common Stock Prices and Dividend Information" on page 24 and in
"Note 6" of "Notes to Financial Statements" on page 15 of the company's 1995
Annual Report to Stockholders.
Item 6. Selected Financial Data.
The information required by Item 7 of Form 10-K appears on pages 34 and 35 of
company's 1995 Annual Report to Stockholders and is incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by Item 7 of Form 10-K appears on pages 29 through 33
of the company's 1995 Annual Report to Stockholders and is incorporated herein
by reference.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements, together with the report thereon of
Price Waterhouse LLP, dated February 6, 1996, appearing on pages 7 through 28
of the company's 1995 Annual Report to Stockholders are incorporated by
reference in this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
With respect to the directors of the company, the information required by
Item 10 of Form 10-K appears on pages 3 through 5 of the company's 1996 Proxy
Statement and is incorporated herein by reference.
Pursuant to General Instruction G to Form 10-K, the following information is
furnished concerning the executive officers of the company.
Executive Officers of the Company
Name Office Age
- ---------------------- -------------------------------------------- ---
John M. Franck Chairman of the Board 43
Charles W. Davies, Jr. President and Chief Executive Officer 47
O. Randolph Rollins Executive Vice President and General Counsel 53
Walter J. Caruba Vice President - Sales and Marketing 48
W. Jack Gardner, Jr. Vice President - Operations 52
B. Alvin Ratliff Vice President - Sourcing, Contracting and
Strategic Planning 50
Don P. Shook Vice President - Administration 58
John J. Smith Vice President - Customer Services 53
Suzanne H. Wood Vice President and Chief Financial Officer 36
Kevin W. Walsh Treasurer 41
Kathy H. Rogers Secretary 37
<PAGE>
John M. Franck, Chairman of the Board of Directors, was Chairman of the Board
of Directors and Chief Executive Officer from January 1991 to January 1995,
and served as President and Chief Operating Officer from November 1988 to
January 1991. Mr. Franck is a director of Piedmont Trust Bank, Martinsville,
Virginia.
Charles W. Davies, Jr., Chief Executive Officer of the Company since January
1995, was President and Chief Operating Officer from January 1991 to January
1995, and Executive Vice President from December 1989 to January 1991. From
February 1988 through November 1989, he was President and Chief Executive
Officer of Signal Apparel Company in Chattanooga, Tennessee. From March 1986
to February 1988, Mr. Davies was President of Little Cotton Manufacturing
Company in Wadesboro, North Carolina, and from December 1984 through February
1986 was Senior Vice President of Fieldcrest-Cannon in Kannapolis, North
Carolina.
O. Randolph Rollins became Executive Vice President and General Counsel in
October 1994. Prior thereto, Mr. Rollins was a partner with the law firm of
McGuire, Woods, Battle & Boothe, Richmond, Virginia, from 1973 to 1990 and
from January 1994 to October 1994. From 1990 to January 1994, Mr. Rollins
served in the Cabinet of Virginia's Governor L. Douglas Wilder, first as
Deputy Secretary of Public Safety and from 1992 through January 14, 1994 as
Secretary of Public Safety of the Commonwealth of Virginia. Mr. Rollins is
the brother-in-law of John M. Franck.
Walter J. Caruba became Vice President - Sales and Marketing in September 1992.
He served as Vice President - Distribution between October 1990 and September
1992. He served as General Manager - Planning from November 1989 to October
1990 and was Director - Production Control from December 1985 to November 1989.
W. Jack Gardner, Jr. became Vice President - Operations in September 1994 and
served as General Manager - Fabric Manufacturing from January 1988 until that
time.
B. Alvin Ratliff became Vice President - Sourcing, Contracting and Strategic
Planning in March 1995. He previously served as Vice President and
Service/Quality Coordinator from February 1994 until March 1995 after serving
as Vice President - Operations from December 1984 until that time.
Don P. Shook became Vice President - Administration in January 1995 after
serving as Vice President - Human and Financial Resources since January 1994.
He previously served as Vice President - Finance and Administration from
December 1988 until January 1994. Prior thereto, he served as Vice President
- - Finance from January 1987 to November 1988 and was Controller from December
1985 and January 1987.
John J. Smith became Vice President - Customer Services in September 1992.
Prior thereto, he served as Vice President - Sales and Marketing since December
1987 after serving as Director - Corporate Planning since May 1987. He was
Manager - Information Systems & Services between December 1985 and May 1987.
Suzanne H. Wood became Vice President and Chief Financial Officer in February
1996. She previously served as Controller of the company from October 1993
after joining the Company in June 1993. Prior to joining the company, she
was employed by Price Waterhouse LLP, most recently as Audit Senior Manager.
<PAGE>
Kevin W. Walsh was appointed Treasurer in December 1994. In the six years
prior to joining the company, he was a vice president and senior loan officer
of Signet Bank.
Kathy H. Rogers became Secretary in January 1996. She also continues as
Director - Corporate Communications, a position she has held since September
1992. She was Manager - Employee Communications between May 1989 and
September 1992.
All terms of office will expire concurrently with the meeting of directors
following the next annual meeting of stockholders at which the directors are
elected.
Item 11. Executive Compensation.
The information required by Item 11 of Form 10-K appears on pages 6
(beginning with "Executive Compensation") through 9 of the company's 1996
Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 12 of Form 10-K appears on page 1 and 2 of
the company's 1996 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 of Form 10-K appears on page 11 of the
company's 1996 Proxy Statement and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) Financial Statements: Page in Annual Report
Report of Independent Accountants 28
Balance Sheet at December 30, 1995 and
December 31, 1994 7
Statement of Income for each of the three
years in the peroid ended Decembe 30, 1995 8
Statement of Changes in Stockholders' Equity
for each of the three years in the period
ended December 30, 1995 9
Statement of Cash Flows for each of the
three years in the period ended
December 30, 1995 10
Notes to Financial Statements 11 - 27
<PAGE>
(2) Financial Statement Schedule: Page in Form 10-K
Report of Independent Accountants on
Financial Statement Schedule: F-1
Consolidated Financial Statement Schedule
for each of the three years in the period
ended December 30, 1995:
II-Valuation and Qualifying Accounts and
Reserves F-2
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) Exhibits
3.1 Restated Articles of Incorporation (filed as Exhibit 3.1 to
the company's Form 10-K for the year ended December 29, 1990
and incorporated herein by reference)
3.2 Articles of Amendment to the Restated Articles of
Incorporation (filed as Exhibit 3 to the company's 8-K dated
January 31, 1992 and incorporated herein by reference)
3.3 By-laws of Tultex Corporation (filed as Exhibit 3.3 to the
company's Amendment No. 1 to Form S-1 dated March 17, 1995
and incorporated herein by reference)
3.4 Articles of Incorporation of AKOM Ltd. (filed as Exhibit 3.4
to the company's Amendment No. 1 to Form S-1 dated March 17,
1995 and incorporated herein by reference)
3.5 By-laws of AKOM, Ltd. (filed as Exhibit 3.5 to the company's
Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
3.6 Articles of Incorporation of Dominion Stores, Inc. (filed as
Exhibit 3.6 to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.7 By-laws of Dominion Stores, Inc. (filed as Exhibit 3.7 to the
company's Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
3.8 Articles of Incorporation of Tultex International, Inc. (filed
as Exhibit 3.8 to the company's Amendment No. 1 to Form S-1
dated March 17, 1995 and incorporated herein by reference)
3.9 By-laws of Tultex International, Inc. (filed as Exhibit 3.9 to
the company's Amendment No. 1 to Form S-1 dated March 17, 1995
and incorporated herein by reference)
3.10 Articles of Incorporation of Logo 7, Inc. (filed as Exhibit
3.10 to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
<PAGE>
3.11 By-laws of Logo 7, Inc. (filed as Exhibit 3.11 to the company's
Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
3.12 Articles of Incorporation of Universal Industries, Inc. (filed
as Exhibit 3.12 to the company's Amendment No. 1 to Form S-1
dated March 17, 1995 and incorporated herein by reference)
3.13 By-laws of Universal Industries, Inc. (filed as Exhibit 3.13 to
the company's Amendment No. 1 to Form S-1 dated March 17, 1995
and incorporated herein by reference)
3.14 Articles of Incorporation of Tultex Canada, Inc. (filed as
Exhibit 3.14 to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.15 By-laws of Tultex Canada, Inc. (filed as Exhibit 3.15 to the
company's Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
3.16 Articles of Incorporation of SweatJet, Inc. (filed as Exhibit
3.16 to the company's Amendment No. 1 to Form S-1 dated
March 17, 1995 and incorporated herein by reference)
3.17 By-laws of SweatJet, Inc. (filed as Exhibit 3.17 to the
company's Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
4.1 Indenture among Tultex Corporation, the Guarantors and First
Union National Bank of Virginia, as Trustee, relating to the
Senior Notes dated March 23, 1995 (filed as Exhibit 4.1 to the
company's Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
4.2 Senior Note (included in Exhibit 4.1 as filed with the company's
Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
4.3 Subsidiary Guarantee (included in Exhibit 4.1 as filed with the
company's Amendment No. 1 to Form S-1 dated March 17, 1995 and
incorporated herein by reference)
10.1 Tultex Corporation 1987 Stock Option Plan (filed as Exhibit B to
the company's Definitive Proxy Statement dated and mailed
January 15, 1988 and incorporated herein by reference)
10.2 Tultex Corporation 1990 Stock Option Plan (filed as Exhibit A
to the company's Definitive Proxy Statement dated and mailed
February 14, 1991 and incorporated herein by reference)
10.3 Supplemental Retirement Plan (filed as an exhibit to the
company's Form 10-K for the fiscal year ended December 30, 1990
and incorporated herein by reference)
10.4 Tultex Corporation Salaried Employees' Common Stock Purchase
Plan, dated February 11, 1994 (filed as Exhibit 4.5 to the
company's Registration Statement Form S-8 dated February 11,
1994 and incorporated herein by reference)
<PAGE>
10.5 Form of Employment Continuity Agreement (filed as exhibits to
the company's Form 10-Q for the quarter ended April 1, 1989 and
the company's Form 10-Q for the quarter ended March 31, 1990 and
incorporated herein by reference)
10.6 Standstill Agreement, dated as of January 31, 1992, among Tultex
Corporation, Logo 7, Inc. (Ind.), Melvin Simon and Herbert
Simon (filed as Exhibit 10(b) to the company's Form 8-K dated
January 31, 1992 and incorporated herein by reference)
10.7 Credit Agreement for $225 million credit facility, dated
March 23, 1995 (filed as Exhibit 10.7 to the company's Form
10-K for the year ended December 30, 1995 and incorporated
herein by reference)
11 The computation of earnings per share can be clearly determined
from the financial statements of the Company contained in the
Annual Report to Stockholders
13 Annual Report to Stockholders
21 Subsidiaries of the company (filed herewith)
23 Consent of Price Waterhouse LLP (filed herewith)
(b) Reports of Form 8-K
No reports on Form 8-K were filed for the quarter ended
December 30, 1995.
<PAGE>
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)
/s/ Charles W. Davies, Jr.
----------------------------------------------
By: Charles W. Davies, Jr., President and CEO
Date: March 29, 1996
--------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
March 29, 1996 /s/ Charles W. Davies, Jr.
----------------------------------------
Charles W. Davies, Jr., President, CEO &
Director (Principal Executive Officer)
March 29, 1996 /s/ Suzanne H. Wood
-----------------------------------------
Suzanne H. Wood, Vice President and Chief
Financial Officer (Principal Financial
Officer)
March 29, 1996 /s/ John M. Franck
-----------------------------------
John M. Franck, Director (Chairman)
March 29, 1996 /s/ Irving M. Groves, Jr.
------------------------------
Irving M. Groves, Jr. Director
March 29, 1996 /s/ Lathan M. Ewers, Jr.
------------------------------
Lathan M. Ewers, Jr., Director
March 29, 1996 /s/ H. Richard Hunnicutt, Jr.
-----------------------------------
H. Richard Hunnicutt, Jr., Director
March 29, 1996 /s/ F. Kenneth Iverson
----------------------------
F. Kenneth Iverson, Director
March 29, 1996 /s/ Bruce M. Jacobson
---------------------------
Bruce M. Jacobson, Director
March 29, 1996 /s/ Richard M. Simmons, Jr.
---------------------------------
Richard M. Simmons, Jr., Director
<PAGE>
EXHIBITS
ANNUAL REPORT ON FORM 10-K
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
TULTEX CORPORATION
COMMISSION FILE NUMBER 1-8016
<PAGE>
Exhibit Index
13 Annual Report to Stockholders
21 Subsidiaries of the Company
23 Consent of Price Waterhouse
27 Financial Data Schedule
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Tultex Corporation
Our audits of the consolidated financial statements referred to in our
report dated February 6, 1996 appearing on page 20 of the 1995 Annual
Report to Stockholders of Tultex Corporation, (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K), also included an audit of the Financial Statement Schedule listed
in the accompanying index of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
February 6, 1996
<PAGE>
TULTEX CORPORATION SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS CONSOLIDATED
(In thousands of dollars)
Balance at Additions Balance
Reserve for doubtful beginning charged to at end
accounts of period operations Reductions of period
- ----------------------- ---------- ---------- ---------- ---------
For the fifty-two weeks
ended January 1, 1994 $ 2,360 $ 3,241 $ (3,227) (1) $ 2,374
========== ========== ========== =========
For the fifty-two weeks
ended December 31, 1994 $ 2,374 $ 3,935 $ (4,194) (1) $ 2,115
========== ========== ========== =========
For the fifty-two weeks
ended December 30, 1995 $ 2,115 $ 7,061 $ (4,949) (1) $ 4,227
========== ========== ========== =========
(1) Amounts represent write-off of uncollectible receivable balances.
F-2
<PAGE>
<PAGE>
TULTEX
(Photo of material with the words DISCUS stitched on it)
(Photo of Logo Athletic clothing label)
(Photo of sweatshirts)
(Photo of a jacket with the DISCUS logo stitched on it)
1995 ANNUAL REPORT
<PAGE>
CONTENTS
1 Financial Highlights
3 To Our Stockholders
7 Balance Sheet
8 Statement of Income
9 Statement of Changes in Stockholders' Equity
10 Statement of Cash Flows
11 Notes to Financial Statements
28 Report of Independent Accountants
29 Management's Discussion and Analysis
34 Selected Financial Data
36 Common Stock Prices and Dividend Information
Inside Back Cover: General Information, Officers and Directors
ABOUT OUR COMPANY
Established in 1937, Tultex Corporation is a consumer-oriented marketer and
manufacturer of activewear and licensed sports apparel. The company offers
a wide range of products under various names. Its premium brands are Discus
Athletic(R) and Logo Athletic(R), and can be found in department stores,
sporting goods stores and specialty chains. The company is a private label
supplier of premium products to several major customers. In addition, the
company sells high-value products to mass merchandisers, wholesale clubs
and discount retailers under the Tultex(R), Logo 7(R) and Brittania(R) name.
Tultex remains committed to increasing shareholder value by focusing on
several strategies for growth, including:
(Bullet) Increasing sales of the company's premium and private label brands.
(Bullet) Capitalizing on partnerships with key customers and vendors.
(Bullet) Strengthening our balance sheet by reducing our debt to 40%
of capitalization.
(Bullet) Making the most of our human resources through team technology and
synergies existing between our divisions.
<PAGE>
Tultex is headquartered in Martinsville, Virginia and operates facilities
throughout Virginia and North Carolina, as well as in Indianapolis,
Indiana; Mattapoisett, Massachusetts; and Montego Bay, Jamaica. The company
also has contract sewing operations in Mexico. Tultex employs approximately
6,900 people.
(Photo of sweatshirt in background)
(Photo of 49ers logo stitched on material)
(Photo of jacket with NFL label inside)
(Photo of jacket with Olympic Games label inside)
(Photo of Hornets cap)
FINANCIAL HIGHLIGHTS Tultex Corporation
<TABLE>
<CAPTION>
Fiscal years ended: DEC. 30, 1995 Dec. 31, 1994 %Increase
(In thousands of dollars except per share data) (52 WEEKS) (52 weeks) (Decrease)
<S> <C> <C> <C>
Operating Results:
Net sales and other income $585,289 $565,433 3.5%
Income before income taxes and extraordinary
loss on early extinguishment of debt $ 8,948 $ 14,435 (38.0)%
Net income before extraordinary loss on early
extinguishment of debt $ 5,548 $ 8,950 (38.0)%
Net income $ 1,802 $ 8,950 (79.9)%
Return on average common stockholders' equity (1) 1.0% 5.3% -
Per Share of Common Stock:
Net income before extraordinary loss on early
extinguishment of debt (2)(3) $ .15 $ .26 (42.3)%
Net income (2)(3) $ .02 $ .26 (92.3)%
Cash dividends (Note 6) $ .00 $ .05 (100.0)%
Book value (3) $ 5.83 $ 5.74 1.6%
Year-End Status:
Working capital $274,844 $122,854 123.7%
Property, plant and equipment-net $129,002 $134,884 (4.4)%
Total assets $475,799 $456,809 4.2%
Long-term debt $227,540 $ 83,002 174.1%
Common stockholders' equity $173,859 $171,903 1.1%
Shares of common stock outstanding 29,824,371 29,806,793 0.1%
Number of stockholders 2,932 3,423 (14.3)%
Number of employees 6,835 6,933 (1.4)%
Other:
Depreciation $ 23,163 $ 23,973 (3.4)%
Capital expenditures $ 17,337 $ 8,624 101.0%
Interest expense $ 21,952 $ 18,151 20.9%
Cash dividends - common and preferred $ 1,986 $ 1,774 12.0%
</TABLE>
1
<PAGE>
(1) After extraordinary loss on early extinguishment of debt of $3,746,000
during the first quarter of 1995.
(2) Based on weighted average number of shares outstanding.
(3) After considering preferred dividends in arrears at December 31, 1994. No
dividends were in arrears at December 30, 1995.
See Notes to Financial Statements.
2
<PAGE>
TO OUR STOCKHOLDERS
Net income for the year ended December 30, 1995, was $8.6 million before
a $6.8 million after-tax charge related to the company's debt
refinancing and a required change in the method of accounting for
advertising costs. Results for fiscal 1994 were $6.2 million before a
one-time, after-tax gain on the sale of a facility. As reported, net
income was $1.8 million compared with $8.9 million for the year ended
December 31, 1994. Sales for the year just ended were $585.3 million
compared with $565.4 million for the year ended December 31, 1994.
Our overall operating performance during 1995 compares favorably with
the prior year in spite of the challenges faced by the apparel industry.
Historically high raw material costs, labor problems in professional
sports and weak consumer spending on apparel in the fall affected the
entire apparel chain from manufacturer to retailer.
Our company showed significant improvement in operating performance as
illustrated in the table below. Activewear's operating margin
improvements more than offset the decrease in our licensed business so
that overall EBIT increased 38%. The information presented below
reflects EBIT (earnings before interest, taxes and extraordinary item)
and operating margin as though advertising was expensed in 1993 and 1994
using the accounting method adopted in first quarter 1995.
OPERATING MARGIN BY BUSINESS SEGMENT (In millions of dollars)
Tultex Licensed Products 1993 1994 1995
Sales $214 $221 $197
EBIT 16 10 8
Operating margin% 7.5% 4.5% 4.1%
Tultex Activewear
Sales 320 344 388
EBIT 8 16 28
Operating margin% 2.5% 4.7% 7.2%
Total Tultex
Sales 534 565 585
EBIT 24 26 36
Operating margin% 4.5% 4.6% 6.2%
Caption appears in upper left margin and reads as follows:
LED BY DISCUS ATHLETIC, AS WELL AS INCREASES IN
OUR PRIVATE LABEL AND WHOLESALE BUSINESS,
ACTIVEWEAR SALES GREW 13% LAST YEAR, AND
OPERATING PROFITS INCREASED BY 75%.
3
<PAGE>
We believe that the fundamentals of our business are good as we look to
the future. Demand for our product is increasing and raw material
prices, which have been at historical highs, are beginning to decline.
We continue to be successful in moving our business toward higher-margin
branded and private label sales. This is evident in our strong gains
with the company's Discus AthleticRegistration Mark and Logo
AthleticRegistration Mark brands. Our commitment to these brands
resulted in a 37% increase in branded sales for the year and helped us
move our margins up. Spring training is underway after an exciting
Playoff and World Series in baseball. Magic and Michael are back in the
NBA. Our spokesman Troy Aikman was the winning Super Bowl quarterback.
And, 1996 is an Olympic year.
ACTIVEWEAR
Led by Discus Athletic, as well as increases in our private label and
wholesale business, activewear sales grew 13% last year, and operating
profits for this business segment increased by 75%. In 1995, 44% of our
activewear dozens were sewn outside the United States, helping us to
lower cos ts while still providing good service to our customers. In
1996, we expect approximately 55% of our dozens to be sewn outside the
U.S. Some of our competitors are reducing capacity, particularly in
fleece, and we are continuing to take market share. As we began 1996,
our backlog was up 29% over the previous year.
Our customer relationships are excellent with the right customers. We're
partnered with the best in the business. In November, Tultex received
the Sears Platinum Circle Award, given to an elite set of partners with
whom Sears plans to grow its business. For the third consecutive year,
Tultex was the recipient of the Vendor of Excellence Award from the
Women's Department of Target stores. The Target Men's Department also
awarded Tultex the Vendor of Excellence Award for 1995. This is our
first year in supplying this program and the first award given by that
department in the last three years. We believe Sears and Target, among
others of our customers, have success formulas which will generate
continued growth for them, and for us.
Caption appears in lower right margin and reads as follows:
OUR CUSTOMER RELATIONSHIPS ARE EXCELLENT WITH
THE RIGHT CUSTOMERS. WE'RE PARTNERED WITH THE
BEST IN THE BUSINESS.
4
<PAGE>
LICENSED PRODUCTS
Our licensed business, continuing to feel the effects from 1994's
professional player strikes and lockouts, struggled for three quarters
of 1995. But a strong year-end finish and higher order backlogs
indicate that licensed products is experiencing a strong recovery. The
Logo Athletic brand has gained in popularity and has taken market share.
Super Bowl Quarterback Troy Aikman continues as our primary spokesman
for the Logo Athletic brand and his association with the brand has been
instrumental in increasing its revenues from $0 in 1992 to $92 million
in 1995. We expect Logo Athletic sales to continue to grow in 1996. With
the success of our Logo Athletic brand and the prospect of full seasons
in all major sports and the Olympics, 1996 looks like a promising year
in licensed products-the best in several years. The Operating Margin
table shows the historic dynamics of our two businesses, Activewear and
Licensed Products. You can see what the positive impact of a turnaround
in licensed products would be.
As we discussed in the 1994 annual report, we completed a refinancing of
our company's debt in March 1995. We believe the longer maturities and
increased covenant flexibility provided by this refinancing give us the
stable financial platform needed to continue investing in our brands
and to take advantage of new business opportunities as they arise.
Shareholders of record as of March 8, 1996 will be voting on a new
Consolidated Incentive Compensation Plan, which replaces all other
salaried incentive plans. It is designed so that no incentive
compensation is earned by any member of management unless there is an
improvement in our company's return on assets. Our Board strongly
believes this plan is designed such that it enhances share value.
Caption appears in upper left margin and reads as follows:
SUPER BOWL QUARTERBACK TROY AIKMAN
CONTINUES AS OUR PRIMARY SPOKESMAN FOR THE
LOGO ATHLETIC BRAND AND HIS ASSOCIATION WITH
LOGO ATHLETIC HAS BEEN INSTRUMENTAL IN
INCREASING ITS REVENUES FROM $0 IN 1992 TO
$92 MILLION IN 1995.
5
<PAGE>
In 1995, we improved our business in a difficult industry and rugged
retail environment. In 1996, we expect to improve much more. Most of our
own personal net worth is invested in Tultex stock. We continue to be
buyers of the stock. Our money is where your money is, and we continue
to put more of it there, because we believe strongly in the company's
long-term future and the prospects for a good year in 1996.
Sincerely,
(Signature of John M. Franck appears here)
John M. Franck
Chairman of the Board
(Signature of Charles W. Davies, Jr. appears here)
Charles W. Davies, Jr.
President and Chief Executive Officer
March 22, 1996
Caption appears in upper right margin and reads as follows:
WE BELIEVE STRONGLY IN THE COMPANY'S
LONG-TERM FUTURE AND THE PROSPECTS FOR A
GOOD YEAR IN 1996.
6
<PAGE>
BALANCE SHEET (In thousands of dollars Tultex Corporation
except share data)
<TABLE>
<CAPTION>
ASSETS DEC. 30, 1995 Dec. 31, 1994
<S> <C> <C>
Current assets:
Cash and equivalents $ 1,981 $ 5,776
Accounts receivable, less allowance for doubtful accounts
of $4,227 (1995) and $2,115 (1994) 142,732 139,743
Inventories (Note 2) 157,946 130,183
Prepaid expenses 12,498 14,205
Total current assets 315,157 289,907
Property, plant and equipment, net of depreciation (Note 3) 129,002 134,884
Intangible assets 25,550 26,766
Other assets 6,090 5,252
TOTAL ASSETS $ 475,799 $ 456,809
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 4) $ - $ 1,000
Current maturities of long-term debt (Notes 5 and 19) 145 132,353
Accounts payable - trade 27,017 19,634
Accrued liabilities - other 11,868 11,102
Dividends payable (Note 6) 2 -
Income taxes payable 1,281 2,964
Total current liabilities 40,313 167,053
Long-term debt, less current maturities (Notes 5 and 19) 227,540 83,002
Deferrals:
Deferred income taxes (Note 8) 12,603 14,893
Other 6,286 4,760
Total deferrals 18,889 19,653
Stockholders' equity (Notes 5, 6, 7, 14 and 15):
5% cumulative preferred stock, $100 par value; authorized
- 22,000 shares, issued and outstanding - 1,975 shares
(1995 and 1994) 198 198
Series B, $7.50 cumulative convertible preferred stock;
authorized, issued and outstanding - 150,000 shares
(1995 and 1994) 15,000 15,000
Common stock, $1 par value; authorized - 60,000,000
shares, issued and outstanding - 29,824,371 shares
(1995) and 29,806,793 shares (1994) 29,824 29,807
Capital in excess of par value 5,347 5,279
Retained earnings 140,099 140,283
190,468 190,567
Less notes receivable from stockholders 1,411 3,466
Total stockholders' equity 189,057 187,101
Commitments and contingencies (Notes 11, 12 and 13)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 475,799 $ 456,809
</TABLE>
The accompanying Notes to Financial Statements are an integral part of
this statement.
7
<PAGE>
STATEMENT OF INCOME Tultex Corporation
<TABLE>
<CAPTION>
Fiscal years ended: DEC. 30, 1995 Dec. 31, 1994 Jan. 1, 1994
(52 WEEKS) (52 weeks) (52 weeks)
<S> <C> <C> <C>
(In thousands of dollars except per share data)
Net sales and other income $ 585,289 $ 565,433 $ 533,611
Costs and expenses:
Cost of products sold 432,062 419,769 395,727
Depreciation 23,163 23,973 23,364
Selling, general and administrative (Note 16) 99,164 93,510 88,433
Gain on sale of facilities - (4,405) -
Interest 21,952 18,151 16,996
Total costs and expenses 576,341 550,998 524,520
Income (loss) before income taxes and extraordinary loss
on early extinguishment of debt 8,948 14,435 9,091
Provision for income taxes (Note 8) 3,400 5,485 3,188
Net income (loss) before extraordinary loss on early
extinguishment of debt 5,548 8,950 5,903
Extraordinary loss on early extinguishment of debt
(Net of income taxes of $2,296) (Note 5) (3,746) - -
NET INCOME (LOSS) $ 1,802 $ 8,950 $ 5,903
INCOME (LOSS) PER COMMON SHARE:
Net income (loss) before extraordinary loss on
early extinguishment of debt $ .15 $ .26 $ .16
Extraordinary loss on early extinguishment of debt (.13) - -
NET INCOME (LOSS) $ .02 $ .26 $ .16
DIVIDENDS PER COMMON SHARE (Note 6) $ .00 $ .05 $ .20
</TABLE>
The accompanying Notes to Financial Statements are an integral part of
this statement.
8
<PAGE>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Tultex Corporation
<TABLE>
<CAPTION>
CAPITAL NOTES
5% SERIES B IN EXCESS RECEIVABLE- TOTAL
PREFERRED PREFERRED COMMON OF PAR RETAINED STOCK- STOCKHOLDERS'
STOCK STOCK STOCK VALUE EARNINGS HOLDERS EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands of dollars except share data)
BALANCE AS OF JAN. 2, 1993,
AS PREVIOUSLY REPORTED $198 $15,000 $28,878 $ 681 $132,378 $ (100) $177,035
Adjustment for cumulative effect on prior
years of applying retroactively the new
method of valuing inventories (Note 2) 1,758 1,758
BALANCE AS OF JAN. 2, 1993, AS ADJUSTED 198 15,000 28,878 681 134,136 (100) 178,793
Net income for the 52 weeks ended
Jan. 1, 1994 5,903 5,903
Employee stock purchases 175 1,208 (11) 1,372
Collections - stockholders' notes
receivable 61 61
Cash dividends on common stock
($.20 per share) (Note 6) (5,797) (5,797)
Cash dividends on preferred stock (Note 6) (1,135) (1,135)
BALANCE AS OF JAN. 1, 1994 198 15,000 29,053 1,889 133,107 (50) 179,197
Net income for the 52 weeks ended
Dec. 31, 1994 8,950 8,950
Employee stock purchases 754 3,390 (4,144) -
Collections - stockholders' notes
receivable 728 728
Cash dividends on common stock
($.05 per share) (Note 6) (1,490) (1,490)
Cash dividends on preferred stock (Note 6) (284) (284)
BALANCE AS OF DEC. 31, 1994 198 15,000 29,807 5,279 140,283 (3,466) 187,101
Net income for the 52 weeks ended
Dec. 30, 1995 1,802 1,802
Shares issued as payment of agency
commissions 17 68 85
Collections - stockholders' notes
receivable 2,055 2,055
Cash dividends on preferred stock (Note 6) (1,986) (1,986)
BALANCE AS OF DEC. 30, 1995 $198 $15,000 $29,824 $5,347 $140,099 $ (1,411) $189,057
</TABLE>
The accompanying Notes to Financial Statements are an integral part of
this statement.
9
<PAGE>
STATEMENT OF CASH FLOWS Tultex Corporation
<TABLE>
<CAPTION>
Fiscal years ended: DEC. 30, 1995 Dec. 31, 1994 Jan. 1, 1994
(In thousands of dollars) (52 WEEKS) (52 weeks) (52 weeks)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 1,802 $ 8,950 $ 5,903
Items not requiring (providing) cash:
Depreciation 23,163 23,973 23,364
Gain on sale of facilities - (4,405) -
Deferred income taxes (2,290) 879 1,880
Amortization of intangible assets 1,216 1,217 1,217
Unamortized deferred debt issuance costs 3,109 - -
Other deferrals 1,526 (942) 1,859
Changes in assets and liabilities:
Accounts receivable (2,989) (23,360) (6,503)
Inventories (27,763) 27,095 (27,112)
Prepaid expenses 2,636 (5,929) (2,598)
Accounts payable and accrued expenses 8,151 (3,093) (790)
Income taxes payable (1,683) 179 (3,113)
Cash provided (used) by operating activites (Notes 2, 5
and 8) 6,878 24,564 (5,893)
INVESTING ACTIVITIES:
Additions to property, plant and equipment (17,337) (8,624) (22,250)
Change in other assets (838) 1,264 (2,413)
Sales and retirements of property and equipment 56 5,947 299
Cash used by investing activities (18,119) (1,413) (24,364)
FINANCING ACTIVITIES:
Issuance (payment) of short-term borrowings (1,000) 1,000 (79,825)
Issuance (payment) of revolving credit facility borrowings 13,500 (17,000) 121,000
Issuance of long-term debt 110,052 2,054 -
Payments of long-term debt (111,222) (9,137) (2,268)
Cost of debt issuance (4,038) - -
Cash dividends (Note 6) (1,986) (1,774) (6,932)
Net proceeds from issuance of common stock 85 - -
Proceeds from stock plans 2,055 728 1,433
Cash provided (used) by financing activities 7,446 (24,129) 33,408
Net increase (decrease) in cash and equivalents (3,795) (978) 3,151
Cash and equivalents at beginning of year 5,776 6,754 3,603
Cash and equivalents at end of year $ 1,981 $ 5,776 $ 6,754
</TABLE>
The accompanying Notes to Financial Statements are an integral part of
this statement.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS Tultex Corporation
Fiscal years ended December 30, 1995, December 31, 1994 and
January 1, 1994.
NOTE 1-ACCOUNTING POLICIES
Tultex Corporation is a marketer and vertically integrated manufacturer
of activewear and licensed sports apparel which is considered a single
business segment.The company's product line includes fleeced
sweats, jersey products and decorated jackets and caps.The significant
accounting policies followed by Tultex Corporation and its subsidiaries in
preparing the accompanying consolidated financial statements are as follows:
Basis of Consolidation: The consolidated financial statements include
the accounts of the company and its subsidiaries. All significant intercompany
balances and transactions are eliminated in consolidation.
Cash and Equivalents:The company considers cash on hand, deposits
in banks, certificates of deposit and short-term marketable securities as
cash and equivalents for the purposes of the statement of cash flows.
Such cash equivalents have maturities of less than 90 days.
Inventories: Inventories are recorded at the lower of cost or market,
with cost determined on the first-in, first-out (FIFO) method. See Note 2
for information concerning the change in the method of valuing
inventories from the last-in, first-out (LIFO) method to the FIFO method
during 1993.
Property, Plant and Equipment: Land, buildings and equipment are
carried at cost. Major renewals and betterments are charged to the
property accounts while replacements, maintenance and repairs which
do not improve or extend the lives of the respective assets are
expensed currently. Interest is capitalized on major capital expenditures
during the period of construction.There was no interest capitalized in
the three years ended December 30, 1995. Depreciation is provided on
the straight-line method for all depreciable assets over their estimated
useful lives as follows:
Classification Estimated Useful Lives
Land improvements 20 years
Buildings and improvements 12-50 years
Machinery and equipment 3-20 years
11
<PAGE>
Intangible Assets: Goodwill and licenses are being amortized on a
straight-line basis over 25 years.The company continually evaluates
the existence of goodwill impairment on the basis of whether the
goodwill is fully recoverable from projected, undiscounted net cash
flows of the related asset.The gross amount of goodwill was $3,909,000 at
December 30, 1995 and December 31, 1994. Accumulated amortization of goodwill
was $625,000 and $469,000 at December 30, 1995 and December 31, 1994,
respectively.The gross amount of licenses was $26,507,000 at December 30, 1995
and December 31, 1994. Accumulated amortization of licenses was $4,241,000 and
$3,181,000 at December 30, 1995 and December 31, 1994, respectively.
Pensions: Pension expense includes charges for amounts not less than the
actuarially determined current service costs plus amortization of prior service
costs over 30 years.The company funds amounts accrued for pension expense not
in excess of the amount deductible for federal income tax purposes.
Revenue Recognition:The company recognizes the sale when the
goods are shipped or ownership is assumed by the customer.
Income Taxes: Income taxes are provided based upon income reported
for financial statement purposes. Deferred income taxes reflect the tax
effect of temporary differences between financial and taxable income.
Net Income per Common Share: Net income per common share is
computed using the weighted average number of common shares
outstanding during the period after giving retroactive effect to stock
splits and stock dividends and after deducting the preferred dividend
requirements which accrued during the period.The weighted average
number of common shares outstanding were 29,810,000, 29,685,000
and 28,961,000 for fiscal 1995, 1994 and 1993, respectively. Fully
diluted net income per common share is not materially different from
primary net income per common share for fiscal 1995, 1994 and 1993.
Fiscal Year:The company's fiscal year ends on the Saturday nearest to
December 31, which periodically results in a fiscal year of 53 weeks.
Other Postretirement Benefits: As further described in Note 9, the
company changed its method of accounting for the costs of certain life
insurance and medical benefits for eligible retirees and dependents in
1993.
Fair Value of Financial Instruments: Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instru-
ments," requires disclosure about the fair value of certain instruments.
Cash, accounts receivable, accounts payable, accrued liabilities and
variable rate debt are reflected in the financial instruments at fair value
because of the short-term maturity of these instruments.The estimated
fair value of the company's fixed rate debt is disclosed in Note 5.
Use of Estimates in Preparation of Financial Statements:The prepara-
tion of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
12
<PAGE>
Tultex Corporation
New Accounting Standard: In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which
established a fair value-based method of accounting and requires certain
disclosures related to stock-based compensation plans. SFAS 123, which is
effective in fiscal 1996, will require the company to determine whether it
will adopt the fair value-based method of accounting or provide certain
required pro forma disclosures in the notes to financial statements. Management
does not expect the adoption of the standard to have a material effect on the
company's financial position or results of operations.
NOTE 2-INVENTORIES
The components of inventories are as follows:
(In thousands DEC. 30, Dec. 31, Jan. 1,
of dollars) 1995 1994 1994
Raw materials $ 20,803 $ 25,704 $ 29,291
Goods in process 17,645 13,453 11,956
Finished goods 113,290 87,436 112,296
Supplies 6,208 3,590 3,735
Total inventories $157,946 $130,183 $157,278
During the fourth quarter of 1993, the company changed its method of
determining the cost of inventories from the LIFO method to the FIFO
method. Under the current economic environment of low inflation, the
company believes that the FIFO method will result in a better measure-
ment of operating results.This change has been applied by retroac-
tively restating the accompanying consolidated financial statements.
This change in method did not materially impact net income for 1993.
The balance of retained earnings for the year ended January 2, 1993
has been adjusted for the effect (net of income taxes) of applying
retroactively the new method of valuing inventories.
NOTE 3-PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following:
DEC. 30, Dec. 31,
(In thousands of dollars) 1995 1994
Land and improvements $ 3,779 $ 3,760
Buildings and improvements 68,757 68,262
Machinery and equipment 219,352 207,518
Construction in progress 6,494 2,444
298,382 281,984
Less accumulated depreciation 169,380 147,100
Net property, plant and equipment $ 129,002 $ 134,884
13
<PAGE>
In 1994, the company sold one of its yarn manufacturing facilities.The
net proceeds and gain from the sale amounted to $5,500,000 and
$4,405,000, respectively.
NOTE 4-SHORT TERM AGREEMENTS
The company currently has short-term lines of credit with two lending
banks totaling $8,000,000.There were no borrowings outstanding
under these lines at December 30, 1995. Borrowings outstanding at
December 31, 1994 were $1,000,000 with interest at 6.1%.
The company utilizes letters of credit for foreign sourcing of inventory.
Trade letters of credit outstanding were $3,648,000, $2,026,000 and
$9,715,000 at December 30, 1995, December 31, 1994 and January 1,
1994, respectively.
NOTE 5-LONG TERM DEBT
DEC. 30, Dec. 31,
(In thousands of dollars) 1995 1994
Amount due under revolving
credit agreements $117,500 $104,000
10 5/8% senior notes due
March 15, 2005 110,000 -
8 7/8% senior notes due
June 1, 1999 - 95,000
Term loan due July 31, 1996 - 15,997
Other indebtedness 185 358
227,685 215,355
Less current maturities 145 132,353
Total long-term debt $227,540 $ 83,002
In March 1995, the company sold $110 million of 10 5/8% senior notes
due March 15, 2005. Net proceeds from the sale, together with
borrowings under the revolving credit facility, were used to pay
principal, accrued interest and prepayment expenses related to the
$95,000,000 aggregate principal amount of 8 7/8% senior notes due
June 1, 1999 and the $15,997,000 aggregate principal amount term
loan due July 31, 1996. In connection with the repayment of the 8 7/8%
senior notes and the term loan, the company was required to write off
unamortized debt issuance costs and incurred a prepayment penalty.
The resultant one-time, after-tax charge amounted to $3,746,000 or 13
cents per share.
Concurrent with the sale of the 10 5/8% senior notes, the company
entered into a three-year $225,000,000 revolving credit facility which
replaced its existing two-year facility due to expire on October 5, 1995.
The terms of the new agreement are substantially equivalent to those in
the former facility and provide for borrowings at or below prime.
14
<PAGE>
Tultex Corporation
NOTE 5 (Continued)
All subsidiaries of the company full and unconditionally guarantee the
company's obligations under the 10 5/8% senior notes on a joint and
several basis.
The senior notes and revolving credit facility contain provisions regarding
maintenance of net worth, indebtedness levels and restrictions on the payment
of cash dividends. At December 30, 1995, the company was in compliance with all
debt covenants. Consolidated retained earnings, which were free of dividend
restrictions, amounted to $5,080,000 at December 30, 1995.
Interest paid by the company in 1995, 1994 and 1993 was $22,412,000,
$18,598,000 and $16,830,000, respectively.The weighted average interest rates
on borrowings under the revolving credit facility at December 30, 1995 and
December 31, 1994 were 7.6% and 5.2%, respectively.
The aggregate maturities of long-term debt for each of the next five
fiscal years are as follows:
(In thousands of dollars) Total
1996 $ 145
1997 24
1998 117,509*
1999 7
2000 -
*Includes maturity of $117,500,000 outstanding under revolving credit
facility.
At December 30, 1995 the fair value of the 10 5/8% Senior notes
exceeded the carrying amount by approximately $2,100,000. Such fair
value was determined using valuation techniques that considered cash
flows discounted at current market rates in effect at the end of the year.
NOTE 6-DIVIDENDS
At December 30, 1995, dividends payable represented amounts paid on the
company's 5% cumulative preferred stock on January 2, 1996. All stated
dividends on the Series B cumulative preferred stock had been declared and
paid prior to December 30, 1995.
During the second quarter of 1994, the company suspended the
payment of dividends on its common stock. As of December 30, 1995,
common stock dividends had not been reinstated.
NOTE 7-STOCK OPTIONS
In 1988, the company's stockholders ratified the 1987 Stock Option Plan
under which 700,000 shares of common stock were reserved for stock
option grants to certain officers and employees.The plan provided that
options may be granted at prices not less than the fair market value on
the date the option is granted, which means the closing price of a share
15
<PAGE>
of common stock as reported on the New York Stock Exchange
composite tape on such day. Some options remain unexercised from the
1987 Stock Option Plan, which expired November 19, 1992.
On March 21, 1991, the company's stockholders ratified the 1990 Stock
Option Plan under which 700,000 shares of common stock were
reserved for stock option grants to certain officers and employees.
Options granted under the 1990 Plan may be incentive stock options
("ISOs") or nonqualified stoc k options.The option price will be fixed by
the Executive Compensation Committee of the Board at the time the
option is granted, but in the case of an ISO, the price cannot be less
than the share's fair market value on the date of grant. Grants must be
made before October 18, 2000 and generally expire within 10 years of
the date of grant. In exercising options, an employee may receive a loan
from the company for up to 90% of the exercise price. Outstanding loans
are shown as a reduction of stockholders' equity on the balance sheet.
On May 19, 1994, the stockholders approved an increase of 500,000
shares in the maximum number of shares to be issued pursuant to the
exercise of options granted under the Plan, extended the date that
grants could be made to October 27, 2003, and provided that no
participant may be granted options in any calendar year for more than
50,000 shares of common stock.
A summary of the changes in the number of common shares under
option for each of the three previous years follows:
Year Ended Number Per Share
December 30, 1995 of Shares Option Price
Outstanding at beginning of year 1,225,400 $ 5.13-$9.75
Granted 181,000 $ 5.00-$5.50
Exercised - -
Expired 82,300 $ 7.50-$7.63
Cancelled 25,700 $ 5.00-$9.75
Outstanding at end of year 1,298,400 $ 5.00-$9.75
Exercisable at end of year 1,098,400 $ 5.00-$9.75
Shares reserved for future grant:
Beginning of year 190,000
End of year 23,000
16
<PAGE>
Tultex Corporation
Year Ended Number Per Share
December 31, 1994 of Shares Option Price
Outstanding at beginning of year 928,233 $ 6.88-$9.75
Granted 397,500 $ 5.13-$6.00
Exercised - -
Expired 20,000 $ 9.13
Cancelled 80,333 $ 6.00-$9.75
Outstanding at end of year 1,225,400 $ 5.13-$9.75
Exercisable at end of year 1,025,400 $ 5.13-$9.75
Shares reserved for future grant:
Beginning of year 39,900
End of year 190,000
Year Ended Number Per Share
January 1, 1994 of Shares Option Price
Outstanding at beginning of year 1,015,833 $ 7.50-$9.63
Granted 280,000 $ 6.88-$9.75
Exercised 175,600 $ 7.63-$9.63
Expired 165,000 $ 7.88
Cancelled 27,000 $ 7.63-$9.63
Outstanding at end of year 928,233 $ 6.88-$9.75
Exercisable at end of year 748,233 $ 6.88-$9.75
Shares reserved for future grant:
Beginning of year 307,400
End of year 39,900
NOTE 8-PROVISION FOR INCOME TAXES
The components of the provision for federal and state income taxes are
summarized as follows:
(In thousands DEC. 30, Dec. 31, Jan. 1,
of dollars) 1995 1994 1994
Currently payable:
Federal $ 4,965 $4,072 $ 1,192
State 725 534 116
5,690 4,606 1,308
Deferred:
Federal (1,778) 590 1,723
State (512) 289 157
(2,290) 879 1,880
Total provision $ 3,400 $5,485 $ 3,188
17
<PAGE>
Tultex Corporation
Deferred income taxes resulted from the following temporary differences:
(In thousands DEC. 30, Dec. 31, Jan. 1,
of dollars) 1995 1994 1994
Depreciation $ 63 $ 579 $ 2,095
Inventory (1,593) 1,388 (24)
Pension (395) 31 (486)
Abandonment loss - - 187
Intangible assets 608 299 283
Postretirement benefits (156) (58) (172)
AMT credit carryforward 1,255 (1,617) -
Bad debt and other
allowances (1,133) 99 (2)
Accrued liabilities (512) - -
Other (427) 158 (1)
Total $ (2,290) $ 879 $ 1,880
NOTE 8 (CONTINUED)
Significant components of the deferred tax liabilities and assets are as
follows:
DEC. 30, Dec. 31,
(In thousands of dollars) 1995 1994
Deferred tax liabilities:
Tax over book depreciation $ 16,632 $ 16,569
Spare parts inventory 776
Intangible assets 1,332 724
Inventory - 177
Other - 303
Gross deferred tax liabilities 17,964 18,549
Deferred tax assets:
Bad debt and other allowances 1,599 466
Inventory reserves 640 -
Postretirement benefits 390 234
Pension obligations 1,326 931
Worker's compensation 227 225
AMT credit carryforward 362 1,617
Accrued liabilities 512 -
Other 305 183
Gross deferred tax assets 5,361 3,656
Net deferred tax liabilities $ 12,603 $ 14,893
18
<PAGE>
Tultex Corporation
A reconciliation of the statutory federal income tax rates with the company's
effective income tax rates for 1995, 1994 and 1993 was as follows:
DEC. 30, Dec. 31 Jan. 1,
1995 1994 1994
Statutory federal rate ..................... 35% 35% 34
State rate, net ............................ 3 3 2
Other ...................................... -- -- (1)
Effective income tax rate .................... 38% 38% 35
Income tax payments were $4,895,000, $4,659,000 and $4,512,000 for fiscal 1995,
1994 and 1993, respectively.
The company recently underwent an examination by the Internal Revenue Service
for the years ended 1991, 1992 and 1993. The outcome of this examination did
not materially impact the company's financial position or results of operations.
NOTE 9-EMPLOYEE BENEFITS
All qualified employees of the parent company and its Universal subsidiary are
covered by a noncontributory, defined benefit plan. The benefits are based on
years of service and the employee's highest five consecutive calendar years of
compensation paid during the 10 most recent years before retirement. Prior
service costs are amortized over 30 years.The status of the defined benefit
plan as of December 30, 1995 and December 31, 1994 was as follows:
(In thousands of dollars) 1995 1994
Fair value of plan assets, primarily
listed stocks and corporate and
government debt $ 35,631 $ 34,594
Accumulated benefit obligation,
including vested benefits of $33,735
and $26,733, respectively 34,320 27,393
Additional benefits based on
estimated future salary levels 4,512 6,002
Projected benefit obligation 38,832 33,395
Plan assets in excess of projected
benefit obligation (3,201) 1,199
Unrecognized net (gain) loss 2,025 (1,273)
Unrecognized net transitional assets (1,369) (1,838)
Unrecognized prior service cost 502 145
Accrued pension liability $ (2,043) $ (1,767)
The following rate assumptions were made for the plan:
1995 1994
Discount rate of return on
projected benefit obligation 7.75% 8.5%
Rate of return on plan assets 10.0% 10.0%
19
<PAGE>
Tultex Corporation
The long-term rate of salary progression for 1995 reflected an increase of 3.5%
for the first two years, followed by 4% for six years with an ultimate rate of
increase of 5% thereafter.The long-term rate for 1994 reflected no anticipated
rate increase for the first year, followed by 3.5% for two years, 4% for six
years and 5% thereafter.
Pension expense in 1995, 1994 and 1993 included the following components:
(In thousands of dollars) 1995 1994 1993
Service cost-benefits earned
during the period $ 1,285 $ 1,707 $ 1,861
Interest on projected benefit
obligation 2,814 2,808 2,893
Actual (gain) loss on plan assets (4,542) 4,587 (2,362)
Net deferral 719 (9,000) (1,919)
Net periodic pension cost $ 276 $ 102 $ 473
The company's policy has been to fund the minimum required contribution after
the end of the fiscal year plus interest on the contribution from the end of
the plan year until paid.The company's Universal Industries subsidiary
historically funded the maximum required contribution during the year.
The company has a nonqualified, unfunded supplementary retirement
plan for which it has purchased cost recovery life insurance on the lives
of the participants.The company is the sole owner and beneficiary of
such policies.The amount of coverage is designed to provide sufficient
revenues to recover all costs of the plan if assumptions made as to
mortality experience, policy earnings and other factors are realized.
Expenses related to the plan were $577,000 in 1995, $536,000 in 1994
and $547,000 in 1993.The actuarially determined liability which has
been included in other deferrals was $3,434,000 at December 30, 1995,
$3,506,000 at December 31, 1994 and $3,190,000 at January 1, 1994.
20
<PAGE>
Tultex Corporation
The following table sets forth the plan's status and amounts recognized
in the company's financial statements at December 30, 1995 and
December 31, 1994:
(In thousands of dollars) 1995 1994
Fair value of plan assets $ - $ -
Accumulated benefit obligation,
including vested benefits of
$3,288 and $3,406, respectively 3,434 3,506
Additional benefits based on
estimated future salary levels 402 433
Projected benefit obligation 3,836 3,939
Projected benefit obligation in excess
of plan assets (3,836) (3,939)
Unrecognized net loss 1,229 1,271
Unrecognized prior service cost 260 280
Unrecognized transitional obligation 892 992
Adjustment required to recognize
minimum liability (1,979) (2,110)
Unfunded accrued
supplementary cost $ (3,434) $ (3,506)
Net supplementary pension cost for the three years included the
following components:
(In thousands of dollars) 1995 1994 1993
Service cost-benefits earned
during the period $ 85 $139 $110
Interest on projected benefit
obligation 309 255 276
Net amortization 183 142 161
Net periodic supplementary
pension cost $577 $536 $547
Substantially all employees meeting certain service requirements are
eligible to participate in the company's employee savings (401-k) plan.
Employee contributions are limited to a percentage of their compensa-
tion, as defined in the plan.The plan does not provide for any company
contributions.
Substantially all employees are eligible to receive bonuses or profit-
sharing distributions, the amounts of which are determined by the labor
contract for employees covered by the collective bargaining agreement
and on a discretionary basis for all other employees. Such expenses
amounted to $2,044,000 in 1995, $1,791,000 in 1994 and $2,329,000 in 1993.
The company also provides certain postretirement medical and life
insurance benefits to substantially all employees who retire with a
21
<PAGE>
Tultex Corporation
NOTE 9 (Continued)
minimum of 20 years of service for the period of time until the employee and
any dependents reach age 65.The medical plan requires monthly contributions by
retired participants which are dependent on the participant's length of service,
age at the date of retirement and Medicare eligibility.The life insurance plan
is noncontributory. Prior to 1993, the company expensed the costs relating to
these unfunded plans as incurred.
In 1993, the company adopted Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions.
The standard required companies to recognize the estimated costs of providing
postretirement benefits on an accrual basis.The company elected the delayed
recognition method of adoption which allows amortization of the initial transi-
tional obligation over a 20-year period. At January 2, 1993, the actuarially
determined accumulated postretirement benefit obligation was $5,101,000.
The amounts recognized in the company's balance sheet at December 30, 1995
and December 31, 1994 were as follows:
(In thousands of dollars) 1995 1994
Accumulated postretirement benefit obligation $ (6,973) $ (7,066)
Unrecognized transitional obligation 4,334 4,590
Unrecognized loss 1,770 1,847
Accrued liability $ (869) $ (629)
Net periodic postretirement benefit cost for 1995, 1994 and 1993
included the following components:
(In thousands of dollars) 1995 1994 1993
Service cost-benefits earned
during the period $ 207 $ 198 $ 171
Interest on accumulated
postretirement benefit obligation 564 398 402
Amortization of accumulated
postretirement benefit obligation 256 256 256
Amortization of loss 63 - -
Total periodic postretirement
benefit cost $ 1,090 $ 852 $ 829
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.75% for 1995, 8.5% for 1994 and 8% for 1993.The assumed
medical cost trend rate was 11% in 1994, declining by 1% per year until an
ultimate rate of 5.5% is achieved. For 1995, the rate used was 10%, still
declining by 1% per year until reaching an ultimate goal of 5.5%.The effect of a
1% increase in the assumed health care cost trend rates for each future year
would have increased the aggregate of 1995 service cost and interest cost by
$69,000, and would have increased the December 30, 1995 accumulated
postretirement benefit obligation by $456,000.
The adoption of SFAS No. 112, "Employers' Accounting for Postemployment
Benefits" in 1994 had no material impact on the company's results of operations
or financial position, as the company does not have significant post-employ-
ment benefits.
22
<PAGE>
Tultex Corporation
NOTE 10-QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information
for the years ended December 30, 1995 and December 31, 1994.
(In thousands of dollars
except per share data) 1995 1994
Net Sales and Other Income
1st quarter $ 84,138 $ 86,294
2nd quarter 120,986 101,900
3rd quarter 207,911 208,931
4th quarter 172,254 168,308
Total $585,289 $ 565,433
Gross Profit
1st quarter $ 20,445 $ 18,511
2nd quarter 25,275 18,757
3rd quarter 46,303 44,136
4th quarter 39,833 42,049
Total $131,856 $ 123,453
Income Before Income Taxes and Extraordinary Loss on Early
Extinguishment of Debt
1st quarter $(12,882) $ (7,916)
2nd quarter (88) (4,892)
3rd quarter 14,889 11,924
4th quarter 7,029 15,319
Total $ 8,948 $ 14,435
Income Before Extraordinary Loss on Early Extinguishment of Debt
1st quarter $ (7,987) $ (4,908)
2nd quarter (62) (3,033)
3rd quarter 9,239 7,393
4th quarter 4,358 9,498
Total $ 5,548 $ 8,950
Net Income
1st quarter $(11,733) $ (4,908)
2nd quarter (62) (3,033)
3rd quarter 9,239 7,393
4th quarter 4,358 9,498
Total $ 1,802 $ 8,950
Net Income per Common Share Before Extraordinary Loss on Early
Extinguishment of Debt
1st quarter $ (.27) $ (.18)
2nd quarter (.01) (.11)
3rd quarter .30 .24
4th quarter .13 .31
Total $ .15 $ .26
23
<PAGE>
Tultex Corporation
(In thousands of dollars
except per share data) 1995 1994
Net Income per Common Share
1st quarter $ (.40) $ (.18)
2nd quarter (.01) (.11)
3rd quarter .30 .24
4th quarter .13 .31
Total $ .02 $ .26
NOTE 11-COMMITMENTS
At December 30, 1995, the company was obligated under a number of
noncancellable, renewable operating leases as follows:
Data Manufacturing
(In thousands Processing Facilities and
of dollars) Equipment Other Total
1996 $ 2,755 $ 6,275 $ 9,030
1997 2,706 4,846 7,552
1998 1,588 3,867 5,455
1999 1,051 2,608 3,659
2000 - 2,203 2,203
2001 and after - 13,831 13,831
$ 8,100 $33,630 $41,730
Rental expense charged to income was $13,128,000 in 1995,
$13,358,000 in 1994 and $15,092,000 in 1993.
The company has entered into various licensing agreements which permit it to
market apparel with copyrighted logos and characters from the sports and
entertainment industries. Under the terms of these agreements, the company is
required to pay minimum guaranteed fees to certain licensors.The remaining
minimum obligations under these agreements at December 30, 1995 were
approximately $5,800,000 in fiscal 1996 and $8,000,000 in fiscal 1997.
NOTE 12-EMPLOYMENT AGREEMENTS
The company has entered into employment continuity agreements with
certain of its executives which provide for the payments to these execu-
tives of amounts up to three times their annual compensation plus
continuation of certain benefits if there is a change in control in the
company (as defined) and a termination of their employment.The
maximum contingent liability at December 30, 1995 under these agree-
ments was approximately $4,496,000. Under predefined events of
termination the company could incur a maximum liability of $1,123,000.
NOTE 13-CONCENTRATION OF CREDIT RISK
The company's concentration of credit risk is limited due to the large
number of primarily domestic customers who are geographically
dispersed.The company has no customer that constituted 10% of net
sales in 1995.There was one customer that constituted 10.4% of net
sales in 1994 and no such customer in 1993. As disclosed on the
balance sheet, the company maintains an allowance for doubtful
accounts to cover estimated credit losses.
24
<PAGE>
Tultex Corporation
NOTE 14- SHAREHOLDER RIGHTS PLAN
In March 1990, the Board of Directors of the company adopted a
Shareholder Rights Plan and declared a dividend of one right for each
outstanding share of common stock to shareholders of record on April
2, 1990. Each right entitles the registered holder to purchase from the
company, until the earlier of March 22, 2000 or the redemption of the
rights, one one-thousandth of a share of newly authorized Junior
Participating Cumulative Preferred Stock, Series A, without par value, at
an exercise price of $40.The rights are not exercisable or transferable
apart from the common stock until the earlier of (i) 10 days following the
public announcement that a person or a group of affiliated persons has
acquired or obtained the right to acquire beneficial ownership of 10% or
more of the company's outstanding common stock or (ii) 10 business
days following the commencement of a tender offer or exchange offer
that would result in a person or group owning 10% or more of the
company's outstanding common stock.The company may redeem the
rights at a price of $.01 per right at any time prior to the acquisition of
10% or more of the company's outstanding common stock or certain
other triggering events.
NOTE 15-STOCK PURCHASE PLAN
In February 1994, the company initiated the Salaried Employees' Stock
Purchase Plan. Under the plan, employees could elect to purchase
shares of the company's common stock in amounts ranging from 20-
30% of their annual salary. Employees will pay for the stock through
payroll deductions over a 60-month period. Interest at 6% per annum
will be charged until the stock is fully paid and the shares will be held by
the company until that time. Under the plan, 753,667 shares were
issued at a price of $5.50. Of the $4,144,000 loans recorded for the
shares, $2,777,000 has been collected, leaving an outstanding balance
at December 30, 1995 of $1,367,000. Interest income realized in 1995
and 1994 on the loans was $138,000 and $188,000, respectively. In
January 1995, the directors of the company approved an amendment to
the plan that allows an employee options for early payment of the loan.
NOTE 16-ADVERTISING COSTS
In fiscal 1995, the company adopted the provisions of the Accounting
Standards Executive Committee's Statement of Position on Reporting
Advertising Costs ("Statement"). The Statement required that certain
advertising costs which were previously deferred and amortized over an
anticipated benefit period be recognized currently in the statement of
income. Advertising expense charged to income was $22,706,000 in
1995, $14,669,000 in 1994 and $9,934,000 in 1993. Selling, general
and administrative expenses reported on the statement of income
increased by approximately $5,000,000 in 1995 as a result of adopting
this change in accounting method.
25
<PAGE>
Tultex Corporation
NOTE 17-UNIONIZATION OF FACILITIES
In August 1994, hourly employees at the company's Martinsville,
Virginia facilities voted for representation by the Amalgamated Clothing
and Textile Workers Union (now known as the Union of Needletrades,
Industrial and Textile Employees or UNITE).Tultex accepted a three-
year contract with UNITE, which was ratified by an employee vote in
March 1995.The contract covers approximately 2,100 employees in the
Martinsville area. In May 1995, hourly employees at the company's
South Boston, Virginia sewing facility voted for representation by
UNITE. A three-year contract was ratified by an employee vote in
August 1995.The contract covers approximately 550 employ
South Boston area.
NOTE 18-INVESTMENT IN JOINT VENTURE
In November 1995, the company and four other investors completed
the formation of Wide Open Performance Wear, Inc.Through its
investment of $750,000 in cash, the company acquired a minority
ownership in this newly-formed sportswear company which markets
garments screenprinted with NASCAR graphics.
NOTE 19-CONDENSED CONSOLIDATING FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Wholly-owned Majority-owned
(In thousands of dollars) Parent Subsidiaries Subsidiary Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
As of and for the year ended
December 30, 1995
Current assets $267,300 $ 206,137 $ 3,559 $ (161,839) $ 315,157
Noncurrent assets 182,927 38,089 - (60,374) 160,642
Total assets $450,227 $ 244,226 $ 3,559 $ (222,213) $ 475,799
Current liabilities $ 25,222 $ 173,849 $ 2,956 $ (161,714) $ 40,313
Noncurrent liabilities 246,463 (22) (51) 39 246,429
Total liabilities $271,685 $ 173,827 $ 2,905 $ (161,675) $ 286,742
Net sales $386,300 $ 214,230 $ 8,681 $ (23,922) $ 585,289
Costs and expenses 373,466 219,240 8,073 (24,438) 576,341
Pretax net income (loss) $ 12,834 $ (5,010) $ 608 $ 516 $ 8,948
</TABLE>
26
<PAGE>
Tultex Corporation
<TABLE>
<CAPTION>
Wholly-owned Majority-owned
(In thousands of dollars) Parent Subsidiaries Subsidiary Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
As of and for the year ended
December 31, 1994
Current assets $242,754 $110,927 $ 1,938 $ (65,712) $ 289,907
Noncurrent assets 185,383 41,894 - (60,375) 166,902
Total assets $428,137 $158,821 $ 1,938 $ (126,087) $ 456,809
Current liabilities $153,163 $ 76,728 $ 1,698 $ (64,536) $ 167,053
Noncurrent liabilities 101,098 1,611 (56) 2 102,655
Total liabilities $254,261 $ 78,339 $ 1,642 $ (64,534) $ 269,708
Net sales $341,420 $240,239 $ 3,644 $ (19,870) $ 565,433
Costs and expenses 327,931 239,748 3,931 (20,612) 550,998
Pretax net income (loss) $ 13,489 $ 491 $ (287) $ 742 $ 14,435
</TABLE>
<TABLE>
Wholly-owned Majority-owned
(In thousands of dollars) Parent Subsidiaries Subsidiary Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
As of and for the year ended
January 1, 1994
Current assets $237,088 $ 111,401 $ 2,906 $ (62,704) $ 288,691
Noncurrent assets 203,828 44,578 - (62,132) 186,274
Total assets $440,916 $ 155,979 $ 2,906 $ (124,836) $ 474,965
Current liabilities $ 15,597 $ 80,895 $ 2,442 $ (53,796) $ 45,138
Noncurrent liabilities 257,459 486 (51) (7,264) 250,630
Total liabilities $273,056 $ 81,381 $ 2,391 $ (61,060) $ 295,768
Net sales $323,785 $ 234,278 $ 6,489 $ (30,941) $ 533,611
Costs and expenses 320,689 227,673 6,632 (30,474) 524,520
Pretax net income (loss) $ 3,096 $ 6,605 $ (143) $ (467) $ 9,091
</TABLE>
27
<PAGE>
Tultex Corporation
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Tultex Corporation
In our opinion, the accompanying consolidated balance sheet and related
consolidated statements of income, of cash flows and of changes in stockholders'
equity present fairly, in all material respects, the financial position of
Tultex Corporation and its subsidiaries (the company) at December 30, 1995 and
December 31, 1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 30, 1995, in conformity
with generally accepted accounting principles.These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audits.We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reason-
able assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and significant estimates made by management, and evaluating the
overall financial statement presentation.We believe that our audits provide a
reasonable basis for the opinion expressed above.
In 1993, the company changed its method of valuing inventory and accounting
for postretirement medical and life insurance benefits, as discussed in Notes 2
and 9 of Notes to Financial Statements, respectively. In addition, in 1995, the
company changed its method of recording advertising costs, as discussed in Note
16 of Notes to Financial Statements.
(Signature of Price Waterhouse LLP)
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
February 6, 1996
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Tultex Corporation
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The company changed its method of determining cost of inventories
from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO)
method during the fourth quarter of fiscal 1993.This change has been
applied retroactively by restating all prior periods.
RESULTS OF OPERATIONS
The following table presents the company's consolidated statement of
operations items as a percentage of net sales:
DEC. 30, 1995 Dec. 31, 1994 Jan. 1, 1994
(52 WEEKS) (52 weeks) (52 weeks)
Net sales and
other income 100.0% 100.0% 100.0%
Cost of products sold 73.8 74.2 74.1
Depreciation 4.0 4.2 4.4
Selling, general and
administrative 16.9 16.5 16.6
Gain on sale of facilities (0.7) - -
Interest 3.8 3.2 3.2
Total costs and expenses 98.5 97.4 98.3
Income (loss) before
income taxes and extra-
ordinary loss on early
extinguishment of debt 1.5 2.6 1.7
Provision for income taxes .6 1.0 0.6
Income (loss) before extra-
ordinary loss on early
extinguishment of debt .9 1.6 1.1
Extraordinary loss on early
extinguishment of debt
(net of income taxes of
$2,296) (.6) - -
Net income (loss) .3% 1.6% 1.1%
Note: Certain items have been rounded to cause the columns to add to 100%.
29
<PAGE>
Tultex Corporation
Fiscal Year 1995 Compared to Fiscal Year 1994
Net Sales and Other Income for the year ended December 30, 1995
increased $19.9 million, or 3.5%, over the prior year level of $565.4
million.The increase was attributable primarily to increased sales
volume in the activewear line.This increase was partially offset by
decreases in licensed apparel and licensed headwear sales due to the
National Hockey League lockout, Major League Baseball strike and
retailer reluctance to buy National Basketball Association apparel until a
labor agreement was reached in September. Activewear sales in fiscal
1995 increased $43.4 million or 12.6% over fiscal 1994 from $344.4
million to $387.8 million. Licensed apparel sales decreased $17.2
million or 11.3% to $135.4 million as compared to fiscal 1994, while
licensed headwear sales decreased $6.4 million or 9.4% to $62.0
million. Sales of Discus Athletic(R) activewear increased 29.9% to $75.8
million, and sales of Logo Athletic(R) licensed apparel increased 42.8% to
$92.0 million. Sales of jersey products were $93.1 million for the fiscal
year ended December 30, 1995, representing 24.0% of the company's
activewear sales during such period compared to 16.5% for fiscal 1994.
Cost of Products Sold as a percentage of sales improved in fiscal 1995,
decreasing from 74.2% in fiscal 1994 to 73.8%.This reduction resulted
primarily from manufacturing efficiencies realized from increased
production schedules and higher average selling prices. Costs were
reduced in spite of growth in jersey volume, which typically produces
lower margins, and increased raw material costs. Raw material costs
were higher in 1995 than in 1994 as a result of the increased price of
both raw cotton and polyester fiber. Cotton prices fluctuate based on the
relationship between supply and demand, with prices increasing as
demand increases and/or supply decreases.The company expects its
cotton prices for 1996 to be relatively unchanged from 1995. As of March
12, 1996, the company has fixed the price on approximately 50% of its
planned cotton purchases for fiscal 1996.
Depreciation expense as a percentage of sales was 4.0% for fiscal 1995
and 4.2% for fiscal 1994. Depreciation expense in 1995 was $23.2
million, which was $0.8 million or 3.4% lower than fiscal 1994 levels due
to relatively low capital expenditures.
Selling, General and Administrative ("S,G&A") e xpenses increased $5.7
million in 1995. As a percentage of net sales, S,G&A expenses were
16.9% in 1995 and 16.5% in 1994. Higher S,G&A expenses in 1995
resulted from higher advertising expenses and increases in the
company's provision for bad debts. Included in the company's 1995
advertising expenses were $5.0 million in deferred advertising costs
which were charged off as required by the Accounting Standards
Executive Committee's Statement of Position on Reporting Advertising
Costs.This statement first became effective for the company at the
beginning of fiscal 1995.The decision to increase the bad debt provision
was made in response to difficulties currently facing customers in the
retail and wholesale business sectors.
Operating income (income before interest, income taxes and gain on
sale of facility) increased 9.6% during the 1995 fiscal year to $30.9
million compared to $28.2 million for fiscal 1994.This increase was due
to the improved performance of the company's activewear business.
30
<PAGE>
Tultex Corporation
Interest expense as a percentage of sales increased from 3.2% of sales
in fiscal 1994 to 3.8% of sales in fiscal 1995. Interest expense increased
$3.8 million or 20.9% in 1995 over 1994, from $18.2 million to $22.0
million primarily as a result of higher average rates partially offset by
lower average borrowing requirements.The nature of the company's
business requires extensive seasonal borrowings to support its working
capital needs. During fiscal 1994, revolving credit facility borrowings
averaged $155.3 million at an average rate of 5.2%. During fiscal 1995,
average borrowings under the revolving credit facility were $136.4 at an
average rate of 7.6%.The reduction in average borrowings was due to
the company's continuing emphasis on increasing cash management.
Provision for Income Taxes is a function of pretax earnings and the
combined effective rate of federal and state income taxes.The effective
rate for combined federal and state income taxes was 38% in 1995 and
1994.The provision for income taxes decreased $2.1 million in 1995 as
a result of lower pretax earnings. As a percentage of net sales, it
decreased to 0.6% in fiscal 1995 from 1.0% in fiscal 1994.
Fiscal Year 1994 Compared to Fiscal Year 1993
Net Sales and Other Income for fiscal 1994 increased $31.8 million or
6.0% over 1993 from $533.6 million to $565.4 million.The 1994 sales
growth was due to increased sales volume in the activewear and
licensed headwear lines partially offset by a decrease in other licensed
apparel sales. Unit sales volume of activewear apparel increased 12%
from the prior year's level, while the average selling price of activewear
decreased approximately 3% from 1993.The 1994 average selling
price decline of activewear products was primarily due to proportion-
ately higher shipping volume of jersey products, which sell at lower
prices than fleece garments.
Cost of Products Sold as a percentage of sales in fiscal 1994 remained
relatively unchanged from 1993, increasing from 74.1% to 74.2%.
Continuing efficiency improvements and overhead reductions during
1994 helped contain total costs. Costs were contained notwithstanding
growth of jersey volume, which typically produces lower margins,
increased raw material costs and product improvements. Utilization of
the company's manufacturing and distribution facilities improved in the
second half of 1994 as a result of the increased demand for activewear.
Raw material costs were higher in 1994 than in 1993 as a result of the
increased price of raw cotton.
Depreciation expense as a percentage of sales decreased to 4.2% of
sales for 1994 from 4.4% for 1993. Depreciation expense increased by
$0.6 million or 2.6% over 1993 from $23.4 million to $24.0 million, due
to fixed asset additions.
Selling, General and Administrative expenses decreased as a percent-
age of sales to 16.5% in 1994 from 16.6% in 1993. S,G&A expenses
increased $5.1 million in 1994.This increase was primarily attributable
to higher advertising costs and sales commissions in activewear lines,
especially relating to the company's Discus Athletic brand, and higher
royalties in the licensed apparel lines.
31
<PAGE>
Tultex Corporation
Interest expense was 3.2% of sales for both 1994 and 1993. Interest
expense increased $1.2 million or 7.1% in 1994 over 1993, from $17.0
million to $18.2 million, primarily as a result of higher average borrow-
ings to finance working capital requirements.
Provision for Income Taxes reflects an effective tax rate for combined
federal and state income taxes of 38% in 1994 and 35% in 1993.The
increase in provision for income taxes was due to higher pretax
earnings and higher effective federal and state income tax rates.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net working capital at December 30, 1995 increased $152.0 million or
123.7% to $274.8 million from $122.8 million at December 31, 1994.
This increase resulted primarily from the completion of the refinancing
which is described later and which caused the reclassification of $104.0
million of borrowings from current maturities at year-end 1994 to long-
term debt at year-end 1995. Net accounts receivable increased $3.0
million from December 31, 1994 to December 30, 1995.
Inventories traditionally increase during the first half of the year to
support second-half shipments. In 1995, inventories peaked on July 1
1995. As of December 30, 1995, inventories had increased approxi-
mately $27.8 million or 21.3% from December 31, 1994, while sales
had increased 3.5% in fiscal 1995 versus fiscal 1994.The increase in
inventory, particularly fleece product, was due to lower than anticipated
consumer spending at retail during the latter part of fourth quarter.
Additionally, the company increased its jersey inventory supply in order
to meet anticipated first quarter 1996 sales demand.The current ratio
(ratio of current assets to current liabilities) at December 30, 1995 was
7.8 compared to 1.7 at December 31, 1994.The increase in the current
ratio was due mainly to higher current maturities of debt at year-end
1994.
In first quarter 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 but which allows for two one-year extensions. In
first quarter 1995, the company also sold $110 million of 10 5/8% senior
notes due March 15, 2005.The senior notes require no principal
payments until 2005 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 indebtedness at December 30, 1995
consisted primarily of the senior notes totaling $110.0 million and
$117.5 million outstanding under the revolving credit facility.The
company's average credit facility borrowings during fiscal 1995 were
$136.4 million and its peak borrowing was $182.6 million at September
5, 1995. As of December 30, 1995, the company was in compliance
with all debt covenants.
32
<PAGE>
Tultex Corporation
In fiscal 1995, net cash provided by operations was $6.9 million
compared to $24.6 million in fiscal 1994. Cash used for capital
expenditures increased $8.7 million in fiscal 1995 from $8.6 million to
$17.3 million.The company has budgeted approximately $16 million for
capital expenditures in fiscal 1996. Cash provided by financing activities
was $7.4 million for fiscal 1995 compared to cash used by financing
activities of $24.1 million as a result of increased borrowing require-
ments.The company expects that its short-term borrowing needs will be
met through cash generated from operations and borrowings under the
revolving credit facility. In addition, the notes will require no scheduled
repayments until their maturity in 2005. Debt as a percentage of
capitalization was 54.6% at December 30, 1995 compared to 53.6% at
December 31, 1994.The company's long-term goal is to reduce debt as
a percentage of total capitalization to 40%.
Stockholder's equity increased $2.0 million during fiscal 1995 primarily
due to net income of $1.8 million and net proceeds from the employee
stock purchase plan of $2.1 million.This increase was partially offset by
cash dividends on the company's preferred stock of $1.9 million.
Substantially contemporaneously with the consummation of the senior
note offering, the company paid the current dividend and existing
dividend arrearage on its preferred stock totaling $1.4 million and has
continued paying quarterly dividends thereon.
33
<PAGE>
SELECTED FINANCIAL DATA Tultex Corporation
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
(In thousands of dollars except per share data) (52 WEEKS) (52 weeks) (52 weeks) (53 weeks) (52 weeks)
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Net sales and other income $ 585,289 $ 565,433 $ 533,611 $ 503,946 $ 349,910
Costs and operating expenses 554,389 532,847 507,524 470,155 330,079
Operating income 30,900 32,586 26,087 33,791 19,831
Interest expense 21,952 18,151 16,996 13,540 9,064
Income before income taxes, cumulative effect of a
change in accounting principle and extraordinary
loss on early extinguishment of debt 8,948 14,435 9,091 20,251 10,767
Provision for income taxes 3,400 5,485 3,188 7,060 3,443
Income before cumulative effect of a change in
accounting principle and extraordinary loss on early
extinguishment of debt 5,548 8,950 5,903 13,191 7,324
Cumulative effect of a change in accounting principle - - - - 2,848
Extraordinary loss on early extinguishment of debt (3,746) - - - -
Net Income 1,802 8,950 5,903 13,191 10,172
Less preferred dividend requirement 1,135 1,135 1,135 1,041 10
Balance to common stock $ 667 $ 7,815 $ 4,768 $ 12,150 $ 10,162
Weighted average number of common shares
outstanding* 29,810 29,685 28,961 28,872 28,862
Shares outstanding at year end* 29,824 29,807 29,053 28,878 28,862
</TABLE>
34
<PAGE>
Tultex Corporation
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
(In thousands of dollars except per share data) (52 WEEKS) (52 weeks) (52 weeks) (53 weeks) (52 weeks)
<S> <C> <C> <C> <C> <C>
Income before cumulative effect of a change in
accounting principle and extraordinary loss on early
extinguishment
of debt $ .15 $ .26 $ .16 $ .42 $ .25
Net income $ .02 $ .26 $ .16 $ .42 $ .35
Dividends declared (Note 6) $ .00 $ .05 $ .20 $ .20 $ .32
Book value $ 5.83 $ 5.74 $ 5.64 $ 5.67 $ 5.44
Year-End Data:
Current assets $ 315,157 $ 289,907 $ 288,691 $ 249,327 $171,692
Current liabilities 40,313 167,053 45,138 122,610 86,681
Working capital $ 274,844 $ 122,854 $ 243,553 $ 126,717 $ 85,011
Inventories $ 157,946 $ 130,183 $ 157,278 $ 130,166 $ 89,368
Property, plant and equipment (net) 129,002 134,884 151,775 153,188 140,426
Total assets 475,799 456,809 474,965 435,818 314,957
Bank notes payable - 1,000 - 79,825 55,762
Current portion of long-term debt 145 132,353 8,524 2,268 2,443
Capital Invested:
Long-term debt $227,540 $ 83,002 $230,914 $118,438 $ 56,827
Stockholders' equity 189,057 187,101 179,197 178,793 157,091
Total capital in vested $ 416,597 $270,103 $ 410,111 $297,231 $213,918
Return on average total capital invested 0.5% 2.6% 1.7% 5.2% 4.6%
Long-term debt as a percentage of total capital 54.6% 30.7% 56.3% 39.8% 26.6%
</TABLE>
Years prior to 1993 have been restated to reflect the acquisition of
Universal Industries, Inc. treated as a pooling of interests, and to reflect a
change in accounting method from LIFO to FIFO.
*As adjusted for stock splits, stock dividends and shares issued in
pooling-of-interests acquisition of Universal Industries, Inc. in 1992.
35
<PAGE>
COMMON STOCK PRICES AND
DIVIDEND INFORMATION Tultex Corporation
The company's common stock is listed on the New York Stock Exchange under
the symbol TTX.The following table shows the daily high, low and closing
quotations and dividends per share paid by quarters:
<TABLE>
<CAPTION>
52 Weeks ended December 30, 1995 52 Weeks ended December 31, 1994
Range of Quotations Range of Quotations
Dividends Dividends
Quarter Ended Low High Close per Share Low High Close per Share
<S> <C> <C> <C> <C> <C> <C> <C> <C>
April 1 $4 1/8 $5 1/8 $4 5/8 $ - $5 1/8 $7 7/8 $6 7/8 $ .05
July 1 4 5/8 5 7/8 5 5/8 - 4 1/8 7 1/8 4 3/4 -
September 30 5 1/4 6 1/2 5 3/8 - 4 1/2 5 3/8 4 3/4 -
December 30 4 5 3/8 4 1/8 - 4 1/4 6 4 7/8 -
</TABLE>
See Note 5 to Consolidated Financial Statements for restrictions of
consolidated retained earnings. At December 30, 1995, $5,080,000 of consolidated
retained earnings were free of dividend restrictions.
SHARES OF STOCK
The average number of shares of common stock for the year was
29,810,415 shares.The common shares outstanding at year-end
amounted to 29,824,371.
STOCK DIVIDENDS AND STOCK SPLITS
Stock dividends and stock splits in the last 10 years include a
three-for-two split on July 31, 1987, and a two-for-one stock split on
July 31, 1986.
36
<PAGE>
GENERAL INFORMATION
Stock Listing
Traded on the New York Stock Exchange under the symbol -- TTX
Form 10-K Request
Copies of the company's report to the Securities and Exchange Commission on Form
10-K may be obtained without charge by writing to:
Kathy Rogers
Corporate Secretary
Tultex Corporation
P.O. Box 5191
Martinsville, VA 24115
or by calling 540-632-2961, extension 3830
Shareholder Relations
If you have questions regarding your stock, you may contact:
Regina Haynes
Supervisor-Shareholder Relations
Tultex Corporation
P.O. Box 5191
Martinsville, VA 24115
540-632-2961, extension 3831
Corporate Office
Tultex Corporation
P.O. Box 5191
Martinsville, VA 24115
540-632-2961
FAX: 540-632-8000
General Counsel
Hunton & Williams
P.O. Box 1535
Richmond, VA 23212
804-788-8200
Independent Accountants
Price Waterhouse LLP
1800 One Triad Park
Winston-Salem, NC 27101
910-725-0691
Transfer Agent
First Union National Bank of NC
Shareholder Services Group
230 South Tryon Street
Charlotte, NC 28288-1153
800-829-8432
<PAGE>
Corporate Officers
J. M. Franck
Chairman of the Board
C. W. Davies, Jr.
President and Chief Executive Officer
O. R. Rollins
Executive Vice President and General Counsel
J. J. Smith
Vice President-Customer Services
W. J. Gardner, Jr.
Vice President-Operations
B. A. Ratliff
Vice President-Sourcing, Contracting and Strategic Planning
D. P. Shook
Vice President-Administration
W. J. Caruba
Vice President-Sales and Marketing
S. H. Wood
Vice President and Chief Financial Officer
K. W. Walsh
Treasurer
K. H. Rogers
Corporate Secretary
R. C. Haynes
Assistant Secretary
W. T. Moore
Assistant Treasurer
Board of Directors
J. M. Franck
C. W. Davies, Jr.
L. M. Ewers, Jr.
Partner
Hunton & Williams, Attorneys at Law
I. M. Groves, Jr.
Retired Chairman and Chief Executive Officer
Mainstreet BankGroup, Incorporated
(formerly Piedmont BankGroup, Incorporated)
H. R. Hunnicutt, Jr.
Retired Chairman and Chief Executive Officer of the Company
<PAGE>
F. K. Iverson
Chairman
Nucor Corporation
B. M. Jacobson
Partner
Katz, Sapper & Miller
Certified Public Accountants
R. M. Simmons Jr.
Retired Chairman of the Board
Virginia Carolina Freight Lines, Inc.
Committees of the Board
Audit Committee
I. M. Graves, Jr.
B. M. Jacobson
Executive Compensation Committee
L. M. Ewers, Jr.
R. M. Simmons, Jr.
Nominating Committee
J. M. Franck
H. R. Hunnicutt, Jr.
F. K. Iverson
We would like to take this opportunity to express our sadness upon the death of
J. Burness Frith, who retired from our board in May 1995. He had been a director
of the company since 1978. He will be missed by all of us at Tultex, as well as
the Martinsville and Henry County community.
<PAGE>
TULTEX
Tultex Corporation
PO Box 5191
Martinsville VA 24115
Exhibit 21
Subsidiaries of the Registrant
During fiscal 1995, the company had the following subsidiaries, all of which
are included in the consolidated financial statements incorporated in this
report:
AKOM, Ltd., a Cayman Islands, B.W.I. corporation (100% owned)
Dominion Stores, Inc., a Virginia corporation (100% owned)
Tultex International, Inc., a Virginia corporation (100% owned)
Logo 7, Inc., a Virginia corporation (100% owned) Virginia
Universal Industries, Inc., a Massachusetts corporation (100% owned)
Tultex Canada, Inc., a Canadian corporation (100% owned)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-12394, 33-20194, 33-43596 and 33-52247)
of Tultex Corporation of our report dated February 6, 1996 appearing on
page 20 of the Annual Report to Stockholders which is incorporated by
reference in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedules,
which appears on page F-1 of this Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
March 27, 1996
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