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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 28, 1996
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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
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TULTEX CORPORATION
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(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:
$234,134,786 at March 7, 1997.
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(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.
29,464,071 shares of Common Stock, $1 par value, as of March 7, 1997
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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 28, 1996 ("1996 Annual Report to Stockholders")
incorporated herein by reference in Part II, Items 5, 6, 7 and 8; and
Part IV, Item 14.
2. Those portions of the Proxy Statement for the company's 1997 Annual
Meeting of Stockholders ("1997 Proxy Statement") incorporated herein
by reference in Part III, Items 10, 11, 12 and 13.
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ITEM 1. Business
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GENERAL
The Company 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), decorated jackets and caps. These products are sold un-
der the Company's own brands led by the Discus Athletic and LogoAthletic pre-
mium labels and under private labels, including Nike, Reebok and Pro Spirit.
In addition, the Company has numerous professional and college sports licenses
to market and manufacture embroidered and screen-printed products with team
logos and designs under its Discus Athletic, LogoAthletic, Logo 7 and
TrackGear brands. The Company is a licensee of professional sports apparel,
holding licenses from the National Football League ("NFL"), Major League Base-
ball ("MLB"), the National Basketball Association ("NBA"), the National Hockey
League ("NHL") and the National Association for Stock Car Auto Racing
("NASCAR") to manufacture a full range of 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 re-
flecting more active and casual lifestyles and the industry's historically
good long-term growth prospects and low fashion risk as compared to other ap-
parel products, attracted large, well-financed companies which acquired com-
petitors of the Company. Simultaneously, larger mass merchandise retailers be-
gan to exert pressure on margins for lower-priced fleece products.
In recent years, Tultex has successfully pursued a strategy to enhance its
competitiveness and to capitalize on growth opportunities by becoming a con-
sumer-oriented apparel maker able to compete in a changing industry. This
strategy includes the following elements:
. PROMOTING HIGHER-MARGIN PRODUCTS. The Company continues to strengthen its
competitiveness through (i) 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 and (ii) since
1991, the manufacture of jersey products. The Company has developed its own
brands, promoting Discus Athletic and LogoAthletic for its premium products
and using the Tultex and Logo 7 labels for the value-oriented and wholesale
segments 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 sports marketing sponsorships, such as ProBeach
Women's Volleyball, have contributed to significant annual increases in
sales of this brand since 1992. In addition, Tultex has partnering arrange-
ments to supply higher-quality, private label products to companies such as
Reebok and Nike, none of which accounted for more than 10% of the Company's
consolidated sales during 1996. Sales of the higher-margin branded and pre-
mium private label products have grown from 13.8% of consolidated sales in
1993 to 37.6% in 1996.
. EXPANDING INTO LICENSED APPAREL BUSINESS TO COMPLEMENT ACTIVEWEAR
BUSINESS. Tultex's 1992 acquisitions of LogoAthletic, a marketer of li-
censed sports apparel, and LogoAthletic/Headwear, a marketer of sports li-
censed headwear, contributed to the Company's achieving the third largest
market share (11.8%) in the higher-margin licensed apparel business in
1995, and created opportunities for significant manufacturing and distribu-
tion synergies with the Company's activewear business. The promotion of the
LogoAthletic brand of licensed apparel through television and print adver-
tising, as well as promotional arrangements featuring Dallas Cowboys' Troy
Aikman, Miami Dolphins' Dan Marino, Denver Broncos' John Elway, Kansas City
Chiefs' Marcus Allen and the Buffalo Bills' Bruce Smith, among others, has
helped to increase the visibility and sales of LogoAthletic products.
. STRENGTHENING CUSTOMER RELATIONSHIPS. Tultex actively pursues strong rela-
tionships 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 prod-
ucts. In addition, the Company continues to strengthen its relationships
with high volume retailers such as Wal-Mart, Kmart and Target by supplying
private label, Tultex and Logo 7 products. Tultex provides customers with
exceptional service and support; as an example, its distribution capabili-
ties are highly responsive to customers' changing delivery and inventory
management requirements.
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. INCREASING EMPHASIS ON WHOLESALE DISTRIBUTION. In recent years, Tultex has
placed increased emphasis on distribution channels, entering into a strate-
gic relationship with T-Shirt City, Cincinnati, Ohio, a major distributor of
fleecewear and jerseywear in the midwest, and agreeing to acquire California
Shirt, a major jerseywear distributor in 11 western states and Hawaii. See "
-Recent Development". The California Shirt transaction is expected to be
completed in April, 1997.
. VERTICALLY INTEGRATING. The Company's activewear business is vertically in-
tegrated, spinning approximately 80-85% 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 fin-
ished goods in eight plants in Virginia and North Carolina and one plant in
Jamaica. The Company's licensed apparel operations are conducted from one
plant in Indiana, one plant in Massachusetts, and one plant in North Caroli-
na.
The Company's strategy has improved its sales mix. While net sales increased
8.7% in fiscal 1996 over 1995, net sales of Discus Athletic activewear,
LogoAthletic licensed apparel and premium private label products increased
23.7% to $239.3 million. Sales of jersey products were $112.4 million for the
fiscal year ended December 28, 1996, representing 27.5% of the Company's
activewear sales during such period compared to 24.0% for fiscal 1995.
RECENT DEVELOPMENT
On March 11, 1997, the Company agreed to acquire substantially all of the as-
sets and assume the operating liabilities of California Shirt, a major
jerseywear distributor headquartered in California with distribution operations
in 11 western states and Hawaii. Prior to the transaction, California Shirt had
been the Company's major distributor for sales to small retail outlets and
screenprinters in California Shirt's distribution territory. In addition to
distributing Tultex jerseywear, California Shirt distributes products manufac-
tured by others under nationally recognized name brands. The acquisition is not
expected to affect the availability of product from these manufacturers. This
acquisition furthers the Company's strategy to become more vertically inte-
grated from the manufacture of fleece and jerseywear to distributing consumer
products to wholesale and screenprint customers. The acquisition will not re-
quire a significant financial commitment and will be funded by internally gen-
erated funds.
INDUSTRY
The Company produces activewear and licensed 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 prod-
ucts. 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.
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 predomi-
nant fleecewear products are sweatshirts and bottoms.
The basic fleecewear industry is characterized by:
. LOW FASHION RISK-although fashion detailing changes often, basic garment
styles are not driven by trends or fads;
. OVERALL STABILITY-despite cyclical fluctuations, industry sales volume is
estimated to have remained relatively stable, growing from 680.0 million
units in 1990 to 691.6 million units in 1995;
. ENTRY BY WELL-FINANCED ACQUIRORS-new entrants have been attracted by the
industry's long-term growth and have been able to make the large initial
capital investments for manufacturing;
. BARRIERS TO ENTRY-barriers include large required capital investments, and
growing importance of brand-name recognition and established customer rela-
tionships; and
. LOW THREAT OF IMPORTS-the low labor portion of the cost of manufacturing
fleecewear and the short delivery times required for inventory control by
retail customers reduce the threat of competition from imports.
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Sales of fleeced apparel experienced significant growth during the late 1970s
and 1980s due to the increased pursuit of physical fitness and active life-
styles and the related rise in popularity and acceptance of sweatshirts, jer-
sey apparel and other types of athletic clothing as "streetwear." Moreover,
fleecewear products have registered significant improvements in fabric
weights, blends, quality of construction, size, style, and color availability
over the past few years, which has contributed to this growth in demand. In
particular, garments are sized larger and typically use heavier, more shrink-
resistant fabrics. In addition, acrylic-dominant blends have been supplanted
by polyester-dominant and cotton-dominant blends. Despite these upgrades in
product specifications, retail prices have remained relatively flat in real
terms due to improvements in manufacturing technology and competitive pres-
sures.
Fleecewear exhibits a marked seasonality. For example, over the past three
fiscal years, an average of 72.9% of the Company's fleecewear unit sales have
occurred in the third and fourth quarters.
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 871.9 million
units. 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 prod-
ucts 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.
Industry Makeup and Retail Channels. In 1995, the five largest fleece manufac-
turers together accounted for an estimated 29.9% of the branded market in the
fleecewear industry, with Hanes Corporation, Russell Corporation, Fruit-of-
the-Loom, Inc., Tultex and VF Corporation accounting for approximately 10.9%,
6.7%, 4.3%, 4.2% and 3.8% of wholesale industry sales, respectively. The re-
tail jersey industry also is fragmented. In 1995, the 5 largest jersey manu-
facturers together accounted for an estimated 18.1% of the branded market in
the jersey industry, with Sara Lee Corporation, Fruit-of-the-Loom, Russell
Corporation, VF Corporation and Tultex accounting for approximately 6.5%,
5.8%, 2.7%, 2.1% and 1.0% of wholesale industry sales, respectively. The
activewear industry has been characterized since the 1980s by the acquisition
of existing competitors by larger companies with substantial financial re-
sources and manufacturing and distribution capabilities. These factors and the
resulting price reductions and inventory build-ups have adversely affected
participants in the activewear industry, including Tultex, particularly with
respect to the fleecewear industry.
While fleeced apparel pricing has improved and inventory levels have recovered
to more typical levels in the second half of 1996, there can be no assurance
that these market conditions will continue. Fleecewear is distributed through
department stores, chain stores and sporting goods stores, although mass mer-
chandisers, wholesale clubs, and other discount retailers represent a dominant
and growing percentage of the total fleecewear market.
Competitive Factors. The Company believes that price and quality are the pri-
mary factors in consumer purchasing decisions. Brand name is often a proxy for
quality; as a result, those companies with brand name recognition enjoy in-
creased sales from this competitive advantage, as mass merchandisers, depart-
ment store chains, and wholesale clubs are requiring more branded than private
label activewear. Management believes that the market share of foreign compet-
itors in the fleecewear and jersey industries is immaterial.
Licensed Apparel
Estimated wholesale sales of professional sports licensed apparel (including
headwear) for 1995 were approximately $2.2 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 Company also believes that the industry has recovered from the effect of
labor disputes in basketball and continues to recover from the effect of the
labor disputes in baseball and hockey. 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 perfor-
mance. 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.
Industry Makeup and Retail Channels. The industry has expanded rapidly over
the past five years, with the professional sports leagues granting large num-
bers of licenses. With this proliferation of licenses, individual competitor's
sales growth slowed, though the top companies continued to gain market share.
After giving
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effect to industry consolidation, management estimates that at the end of
1995, the top four companies would have accounted for approximately 51.5% of
the market, with Starter Corporation, VF Corporation, Tultex and Fruit-of-the-
Loom accounting for approximately 17.3%, 13.1%, 11.8% and 9.3% of wholesale
industry sales in 1995, respectively, according to Sports Style Magazine. Im-
ports of finished goods purchased by retailers directly or through import com-
panies do not represent a significant factor in the industry as a whole, since
there are no foreign licensees. However, all of the larger domestic companies
competing in the market do use significant off-shore sourcing of finished out-
erwear goods. Licensed apparel products are generally sold through the same
retail channels as activewear.
Competitive Factors. There are significant barriers to entering the licensed
sports apparel industry and expanding such a business to significant size. Af-
ter expanding the number of licensees rapidly in recent years, the licensing
associations have begun to consolidate their relationships with existing manu-
facturers and appear less likely to enter into licensing agreements with new
entrants. New entrants would be required to devote considerable resources to
developing their product mix and sales and distribution capabilities to com-
pete effectively.
COMPANY PRODUCTS
Activewear ($408.2 million or 64.2% of 1996 consolidated sales)
The principal activewear products of the Company are fleeced knitwear items
such as sweatshirts, jogging suits, hooded jackets, headwear and jersey ap-
parel 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, de-
partment 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 also manufactures private-label products for
sale under many labels, including Nike, Reebok and Pro Spirit.
Licensed Apparel and Headwear ($228.1 million or 35.8% of 1996 consolidated
sales)
The Company's licensed products include jackets, sweats, T-shirts, baseball-
style caps and other headwear, embroidered or imprinted with professional and
college sports logos. These products are marketed under the LogoAthletic, Logo
7 and TrackGear brands. Under the LogoAthletic name, the Company offers premi-
um-quality jackets, caps and other activewear, including NFL "Pro-Line" au-
thentic sideline gear and NBA "Authentics" apparel. Tultex, through
LogoAthletic, acquired Pro-Line status from the NFL in 1993, a flagship pro-
gram entitling the Company to sell products identical to those worn on the
sidelines by NFL players and coaches. Under the terms of the nonexclusive Pro-
Line contract, the Company markets Pro-Line products at retail for all 30 NFL
teams. The Company's NFL Pro-Line and NBA Authentics products prominently fea-
ture the LogoAthletic name and trademark, which the Company believes are key
elements in developing the LogoAthletic brand. See "-Licenses." 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. Under the TrackGear
brand, the Company offers items such as t-shirts, sweatshirts, windbreakers
and hats featuring designs involving NASCAR drivers and cars.
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. Customers include chain
stores, department stores, sporting goods specialty stores, and mass merchan-
disers. The Company's higher-quality fleecewear and jersey products, such as
the Discus Athletic and LogoAthletic brands, are sold primarily through de-
partment and specialty stores and mail-order distribution channels rather than
through mass merchandisers and wholesale clubs, thereby enabling Tultex to en-
hance the image of these branded and private label products and achieve higher
margins. The Tultex and Logo 7 brands are marketed through mass merchandisers
and wholesale clubs that compete more on price than brand. The following chart
details the distribution channels for the Company's branded products.
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<TABLE>
<CAPTION>
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BRANDS PRODUCTS DISTRIBUTION CHANNELS
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<S> <C> <C>
Discus Athletic Fleece and jersey activewear Sporting goods specialty stores
and chain stores (Sports
Authority, Modell's), department
store (Belk's) retail chains
(Sears), international
distributors and sales agencies
(Nissan Trading)
Tultex Fleece and jersey activewear Mass merchants (Kmart, Wal-
Mart), retail chains (Montgomery
Ward), regional discounters
(Shopko), distributors and mass
merchant screenprinters
(California Shirt Sales, T-Shirt
City, Brazos Sportswear, Jerry
Leigh, Giant Merchandise,
Wintergreen), wholesale clubs
(Sam's)
LogoAthletic Licensed activewear, Retail chains (JC Penney,
outerwear and headwear Sears), sporting goods specialty
stores (Champs, Foot Locker),
department stores (Dillard's,
Mercantile)
Logo 7 Licensed activewear, Mass merchants (Kmart),
outerwear and headwear distributors (West Coast
Novelties)
TrackGear Licensed activewear, Retail chains, corporate
outerwear and headwear accounts, and stockcar
racetracks
</TABLE>
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 sup-
port higher margins. In particular, the Company has devoted significant re-
sources to the promotion of its Discus Athletic and LogoAthletic brands.
In 1993, the Company began conducting advertising campaigns to promote its Dis-
cus Athletic and LogoAthletic brands. The Discus Athletic advertising campaign
emphasizes quality and the usefulness of the product for many sports. The Com-
pany believes that this positioning effectively differentiates the Discus Ath-
letic line from competing specialized lines with powerful brand associations.
To reinforce the association of the brand with competitive athletics, Discus
Athletic advertises on ESPN's college football and basketball programs, ABC's
college basketball program and televised Atlantic Coast Conference and Big 10
basketball games. The Company believes these placements are particularly effec-
tive in reaching college sports enthusiasts, an important part of the Company's
target market.
The LogoAthletic campaign focuses on establishing the "authenticity" of
LogoAthletic 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. LogoAthletic acquired NFL Pro-Line status in 1993.
To provide visibility and reinforce this authenticity, the Company provided
sideline garments and caps prominently featuring the LogoAthletic trademark for
eight NFL teams in 1996, the Green Bay Packers, Indianapolis Colts, St. Louis
Rams, Phoenix Cardinals, Tampa Bay Buccaneers, Buffalo Bills, Kansas City
Chiefs and Houston Oilers, as well as for several NFL All-Pro players, such as
the Dallas Cowboys' Troy Aikman, Denver Broncos' John Elway, Miami Dolphins'
Dan Marino, Kansas City Chiefs' Marcus Allen and Buffalo Bills' Bruce Smith.
The Company participates in the NBA Authentics program and provides ball-boy
garments featuring the LogoAthletic trademark to the Boston Celtics, Denver
Nuggets, Indiana Pacers, Orlando Magic and Toronto Raptors for use during
games. The Company also has become recognized as a prominent designer and sup-
plier of distinctive "locker room" caps bearing championship team logos and
carrying the highly visible LogoAthletic trademark.
The Company paid $21.6 million and $17.7 million for advertising services in
1996 and 1995, respectively, and recognized $21.6 million and $22.7 million,
respectively, in expense in those years. The advertising expense budget for
1997 is $28.7 million.
New product introductions are important to the Company's licensed apparel busi-
ness and are undertaken to generate consumer excitement and demand.
LogoAthletic's creative design team, in cooperation with key customers and li-
censors, continually develops and introduces new products and styles. For exam-
ple, the "shark's tooth" design featured on certain LogoAthletic caps and jack-
ets has been extremely successful and
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is in high demand. The Company is able to react quickly to changing team for-
tunes, designing new products to capitalize on shifts in popularity and deliv-
ering those products to the market 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 depart-
ments, selected customers preview and comment upon prototype garments before
the merchandising department determines those to be presented in sales cata-
logs. Production is planned on orders received and anticipated customer orders
for these garments.
As of December 28, 1996, Tultex operated a sales office in each of New York,
Boston and Chicago and a Discus Athletic showroom in New York City. These of-
fices 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 seven independent sales repre-
sentatives to market its Discus Athletic line in the fragmented sporting goods
market. LogoAthletic's products are marketed through a sales force of approxi-
mately 50 people, including employees and independent sales representatives.
In 1996, the Company renewed its agreement with Nissan Trading Co., Ltd., a
subsidiary of Nissan Motor Co., to market and sell the Company's products in
Japan. This agreement has been extended through 1999. International sales in
1995 and 1996 were insignificant.
At December 28, 1996, Dominion Stores, Inc., a wholly-owned subsidiary, oper-
ated 13 outlet stores in North Carolina, Virginia and West Virginia, which
sell surplus Company apparel and apparel items of other manufacturers, 21 The
Sweatshirt Company retail stores in 14 states, which primarily sell first-
quality Company-made products and accessories and two LogoAthletic stores in
Indiana which primarily sell surplus licensed apparel. Dominion Stores' total
sales in fiscal 1996 were $16.4 million.
LICENSES
Most of the Company's licensed products are sold through LogoAthletic. The
Company is a licensee of professional sports apparel, maintaining a full com-
plement of licenses with all of the major North American professional sports
leagues-the NFL, MLB, the NBA and the NHL-and the Collegiate Licensing Compa-
ny. The Company also holds licenses for NASCAR. These licenses require the
payment of royalties ranging from 8% to 15% of sales with guaranteed royalties
of approximately $2.8 million in fiscal 1997. The Company's major licenses
with the NBA, NHL and MLB expire in 1997 and in 1999 for the NFL. The Company
anticipates that the licenses with the NBA, NHL and MLB expiring this year
will be renewed on terms similar to those currently in effect.
The Company's ability to compete is dependent on its ability to obtain and re-
new 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 li-
censes. While the Company has enjoyed long, successful and uninterrupted li-
censing 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 addi-
tion, the Company's material licenses are non-exclusive and new or existing
competitors may obtain similar licenses.
MANUFACTURING AND DISTRIBUTION
Because consumer value is a key competitive factor in the activewear industry,
Tultex has focused on being a low-cost producer of quality goods. The Company
pursues this goal through cost reduction measures, plant modernization and im-
provement of garment characteristics, such as increasing the range of garment
sizes, cloth weight, durability, style and comfort to meet consumer demands.
Implementation of modern information systems and inventory cost control mea-
sures have allowed the closing or sale of several costlier, less efficient
plants, including the Company's December 1994 sale of its yarn pro-
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duction plant in Rockingham, North Carolina. Savings are achieved through
lower average production costs in the more modern facilities and higher capac-
ity utilization in the remaining plants.
The Company's manufacturing process consists of: yarn production; fabric con-
struction including knitting, dyeing and finishing operations; apparel manu-
facturing including cutting and sewing operations; and, for garments with log-
os, 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 1989 through fiscal 1996, the Company invested approximately
$203 million to open new facilities, including sewing facilities in Roanoke,
Virginia and Montego Bay, Jamaica (a leased facility), a dyeing facility in
Asheville, North Carolina, 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 proc-
ess, 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 de-
tailed color, size and quantity specifications typically required by high-mar-
gin retailers and department stores and has permitted consolidation of the
Company's warehouses. The Company has improved its utilization of the customer
service center and believes that its strategy of increasing sales of higher-
margin retail products, which require more sophisticated packaging, will con-
tinue to improve utilization of the customer service center. Additionally,
management's continued focus on cost reduction, streamlining of operations and
increased throughput has reduced activewear distribution costs as a percentage
of sales from 13.3% in 1993 to 7.5% in 1996.
In spring 1992, LogoAthletic moved its operations to a newly-constructed,
leased facility built to its specifications. This 650,000 square foot building
allowed LogoAthletic to centralize operations, increase inventory control, im-
prove 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 1.5 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 opera-
tions 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.
The Company has incorporated sophisticated systems into several key areas of
the manufacturing process. The Company relies on a knitting ticket system to
track and report the manufacturing process from yarn inventory through the
knitting of individual rolls of fabric into greige cloth storage. From this
point, the shop floor control module of the Cullinet manufacturing system mon-
itors and reports the movement of each production lot through the operations
of dyeing, finishing, cutting and sewing. Each sewing plant then electroni-
cally transmits an advance shipping notice to the automated customer service
center so the distribution planning module at the center can plan the arrival
and storage/packing of the sewn garments. Frontier knitting monitor systems,
cutting production systems, and sewing production systems use computer-based
data collection on each knitting, cutting, and sewing machine to monitor ma-
chine and operator efficiency, data that is useful for quality control, incen-
tive-based payroll data, and production management information.
The Company decorates its unfinished licensed apparel products using
screenprinting or embroidery at facilities in Indiana, Massachusetts and North
Carolina. Automatic silkscreen machines and dryers are used for longer runs,
and hand-operated presses are used for shorter or more complicated runs. Em-
broidery is applied using high-speed, computerized stitching equipment.
7
<PAGE>
The Company's order backlog at December 28, 1996 was approximately $113.7 mil-
lion and at December 30, 1995 was approximately $184.0 million. Backlogs are
computed from orders on hand at the last day of each fiscal period. The com-
pany 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 pur-
chases finished goods containing cotton and polyester and these higher raw ma-
terials costs often are effectively passed on to the Company. In 1996, the
Company's average price per pound of fiber (cotton and polyester) purchased
was $0.75, compared with $0.83 in 1995. In 1997, Tultex expects to use approx-
imately 50 million pounds of raw cotton and 25 million pounds of polyester
staple in its manufacture of yarn for fleecewear and jersey apparel. Tultex
makes advance purchases of raw cotton based on projected demand. The Company
has contracted to purchase substantially all of its raw cotton needs for 1997
and has fixed the price on approximately 60% of its raw cotton needs. To the
extent cotton prices increase before the Company fixes the price for the re-
mainder of its raw cotton needs, the Company's results of operations could be
adversely affected. Also in 1997, the Company expects to use an additional 25
million pounds of yarn which will be purchased.
TRADEMARKS
The Company promotes and relies upon its trademarks, including Discus Athlet-
ic, LogoAthletic, Tultex, TrackGear and Logo 7, many of which are registered
in the United States and foreign countries.
SEASONALITY
The Company's business is seasonal. The majority of fleecewear sales 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.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, han-
dling and disposal of a variety of substances and wastes used in or resulting
from its operations, including, but not limited to, the Water Pollution Con-
trol 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 per-
mit issued by the state. In 1989, the city adopted a plan for removing the
coloration, caused by the dye wastes, from the water by using polymer chemi-
cals 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 expendi-
tures required do not have a material effect on the Company's earnings or com-
petitive 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 lim-
itations for cotton dust, formaldehyde, asbestos and noise, and regulate chem-
ical 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 will have a
material adverse effect on its capital expenditures,
8
<PAGE>
earnings or competitive position in the foreseeable future. However, there can
be no assurances that environmental and other legal requirements will not be-
come more stringent in the future or that the Company will not incur signifi-
cant costs in the future to comply with such requirements.
LITIGATION
The Company is not currently a party to any legal proceedings the result of
which it believes could have a material adverse impact on its business or fi-
nancial condition.
EMPLOYEES
The Company had approximately 6,600 employees at December 28, 1996, of which
approximately 87% were paid hourly.
Hourly employees at the Company's Martinsville and South Boston, Virginia fa-
cilities are represented by the Union of Needletrades, Industrial and Textile
Employees (UNITE). The Company's labor contracts with the union, covering all
hourly employees at the Martinsville and South Boston facilities, expire in
1998. As of December 28, 1996, the Company's hourly employees represented by
the Union accounted for approximately 40.0% of the Company's total employees
and approximately 45.9% of the Company's hourly employees. None of the
Company's other employees are represented by a union. The following table sum-
marizes the approximate number of employees in the Company's principal divi-
sions at December 28, 1996.
<TABLE>
<CAPTION>
-------------------
DECEMBER 28, 1996
-------------------
DIVISION SALARY HOURLY TOTAL
--------------- ------ ------ -----
<S> <C> <C> <C>
Activewear 715 5,041 5,756
Licensed Apparel 99 627 726
Licensed Headwear 30 106 136
--- ----- -----
Total 844 5,77 6,618
=== ===== =====
</TABLE>
ITEM 2. Properties
Almost all of the Company's principal physical facilities (other than those of
LogoAthletic) are located in Virginia and North Carolina, within a 150-mile
radius of the City of Martinsville. All buildings are well-maintained. The
Company and its subsidiaries also lease sales offices and retail outlets in
major cities from coast to coast. The location, approximate size and use of
the Company's principal owned properties are summarized in the following ta-
ble:
<TABLE>
<CAPTION>
------------------------------------------------------------
SQUARE
LOCATION FOOTAGE USE
- -------------- --------- --------------------------------------------------
<S> <C> <C>
Martinsville, VA 1,100,000 Manufacturing (apparel) and administrative offices
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)
Asheville, NC 106,650 Manufacturing (apparel)
</TABLE>
9
<PAGE>
The following table presents certain information relating to the Company's
principal leased facilities:
<TABLE>
<CAPTION>
------------------------------------------------------------
LEASE CURRENT
SQUARE EXPIRATION ANNUAL
LOCATION FOOTAGE DATE RENTAL USE
- ---------------- ------- ---------- ---------- ------------------------------
<S> <C> <C> <C> <C>
Chilhowie, VA 40,015 8/31/97 $ 46,200 Sewing (apparel)
Montego Bay, Ja-
maica 28,422 Monthly 113,688 Sewing (apparel)
Montego Bay, Ja-
maica 38,088 12/31/98 152,352 Sewing (apparel)
Martinsville, VA 300,000 6/1/98 684,000 Warehousing (apparel)
Martinsville, VA 300,000 6/1/98 594,000 Warehousing (apparel)
Indianapolis, IN 650,000 5/31/07 1,408,000 Distribution (licensed apparel)
Charlotte, NC 26,500 10/30/99 94,104 Distribution (licensed apparel)
</TABLE>
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-fin-
ished and finished products.
The Company's facilities and its manufacturing equipment are considered ade-
quate for its immediate needs.
10
<PAGE>
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 28, 1997 there were 2,566 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 23 and in "Note
6" of "Notes to Financial Statements" on page 11 of the company's 1996 Annual
Report to Stockholders and is incorporated herein by reference.
Item 6. Selected Financial Data.
- ------- ------------------------
The information required by Item 6 of Form 10-K appears on page 22 of the
company's 1996 Annual Report to Stockholders and is incorporated herein 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 20 and 21 of
the company's 1996 Annual Report to Stockholders and is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data.
- ------- --------------------------------------------
The consolidated financial statements, together with the report thereon of Price
Waterhouse LLP, dated February 4, 1997, appearing on pages 6 through 19 of the
company's 1996 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 1997 Proxy
Statement and is incorporated herein by reference.
11
<PAGE>
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
<TABLE>
<CAPTION>
Name Office Age
- --------------------------------------------------------------------------------
<S> <C> <C>
John M. Franck Chairman of the Board of Directors 44
Charles W. Davies, Jr. President and Chief Executive Officer 48
O. Randolph Rollins Executive Vice President and General Counsel 54
Walter J. Caruba Vice President - Marketing and Sales 49
Anthony J. Pichirallo Vice President - Wholesale Marketing 38
W. Jack Gardner, Jr. Vice President - Domestic Operations 53
B. Alvin Ratliff Vice President - Resources 51
John J. Smith Vice President - Distribution/Logistics and 54
Systems
Suzanne H. Wood Vice President and Chief Financial Officer 37
Jeffrey F. Kies Corporate Controller 40
Kathy H. Rogers Secretary 38
</TABLE>
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., President and 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. From 1995 to 1996 he was Chief Financial Officer. Prior thereto,
Mr. Rollins was a partner with the law firm of
12
<PAGE>
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 - Marketing and Sales 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.
Anthony J. Pichirallo became Vice President - Wholesale Marketing in February
1997. He served as General Manager - Wholesale from July 1991 until that time.
W. Jack Gardner, Jr. became Vice President - Domestic Operations in September
1994 and served as General Manager - Fabric Manufacturing from January 1988
until that time.
B. Alvin Ratliff became Vice President - Resources 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
since December 1984.
John J. Smith became Vice President - Distribution/Logistics and Systems 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. Prior to that appointment, Ms. Wood was Corporate Controller. In the 10
years prior to joining the company, in 1993, she was employed by Price
Waterhouse LLP, most recently as Audit Senior Manager.
Jeffrey F. Kies became Corporate Controller in August 1996. Prior to joining the
company, he was employed by R. J. Reynolds Tobacco Co. as Senior Financial
Manager.
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 through 7
and pages 9 through 11 of the company's 1997 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 1997 Proxy
13
<PAGE>
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 5 of the
company's 1997 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:
<TABLE>
<CAPTION>
(1) Financial Statements: Page in Annual Report*
--------------------- ---------------------
<S> <C>
Report of Independent Accountants 19
Balance Sheet at December 28, 1996 and
December 30, 1995 6
Statement of Income for each of the three years in the
period ended December 28, 1996 7
Statement of Changes in Stockholders' Equity for each of
the three years in the period ended December 28, 1996 8
Statement of Cash Flows for each of the three years in the
period ended December 28, 1996 9
Notes to Financial Statements 10 - 18
<CAPTION>
(2) Financial Statement Schedule: Page in Form 10-K
----------------------------- -----------------
<S> <C>
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 28, 1996:
II-Valuation and Qualifying Accounts and Reserves F-2
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
*Incorporated by reference from the indicated pages of the 1996 Annual Report to
Stockholders.
(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.
14
<PAGE>
<TABLE>
<S> <C>
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)
3.11 By-laws of Logo 7, Inc. (filed as Exhibit 3.11 to the company's Amendment
No. 1 to Form
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)
3.18 Articles of Incorporation of TrackGear, Inc. (filed herewith)
3.19 By-laws of TrackGear, Inc. (filed herewith)
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)
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
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)
10.5 Form of Employment Continuity Agreement (filed as exhibits to the
company's Form 10-Q for the quarter ended April 1, 1989 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 The company's 1996 Annual Report to Stockholders (filed herewith)
21 Subsidiaries of the company (filed herewith)
23 Consent of Price Waterhouse LLP (filed herewith)
99 The company's 1997 Proxy Statement dated March 21, 1997
(b) Reports of Form 8-K
-------------------
</TABLE>
No reports on Form 8-K were filed for the quarter ended December 28 1996.
16
<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 26, 1997
---------------------
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.
<TABLE>
<S> <C>
March 26, 1997 /s/ Charles W. Davies, Jr.
- -------------- -------------------------------
Charles W. Davies, Jr., President, CEO &
Director (Principal Executive Officer)
March 26, 1997 /s/ Suzanne H. Wood
- -------------- -------------------
Suzanne H. Wood,Vice President and Chief
Financial Officer (Principal Financial Officer)
March 26, 1997 /s/ Jeffrey F. Kies
- -------------- -------------------
Jeffrey F. Kies, Corporate Controller (Principal
Accounting Officer)
March 26, 1997 /s/ John M. Franck
- -------------- ------------------
John M. Franck, Director (Chairman)
March 26, 1997 /s/ Seth P. Bernstein
- -------------- ---------------------
Seth P. Bernstein, Director
March 26, 1997 /s/ Irving M. Groves, Jr.
- -------------- -------------------------
Irving M. Groves, Jr., Director
March 26, 1997 /s/ Lathan M. Ewers
- -------------- -------------------
Lathan M. Ewers, Director
March 26, 1997 /s/ H. Richard Hunnicutt, Jr.
- -------------- ------------------------------
Harold R. Hunnicutt, Jr., Director
March 26, 1997 /s/ F. Kenneth Iverson
- -------------- ----------------------
F. Kenneth Iverson, Director
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
March 26, 1997 /s/ Bruce M. Jacobson
- -------------- ---------------------
Bruce M. Jacobson, Director
March 26, 1997 /s/ Richard M. Simmons
- -------------- ----------------------
Richard M. Simmons, Director
</TABLE>
18
<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 4, 1997 appearing on page 19 of the 1996 Annual Report to
Stockholders of Tultex Corporation, (which report and consolidated financial
statements are incorporated by reference in the 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 4, 1997
F-1
<PAGE>
TULTEX CORPORATION SCHEDULE II
- ------------------ ------------
VALUATION AND QUALIFYING ACCOUNTS CONSOLIDATED
- --------------------------------- ------------
AND RESERVES
- ------------
(In thousands of dollars)
<TABLE>
<CAPTION>
Balance at Additions Balance
beginning charged to at end
Reserve for doubtful accounts of period operations Reductions(1) of period
- ----------------------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
For the fifty-two weeks
ended December 31, 1994
$ 2,374 $ 3,935 $ (4,194) $ 2,115
=========== ========== ========== ==========
For the fifty-two weeks
ended December 30, 1995
$ 2,115 $ 7,061 $ (4,949) $ 4,227
=========== ========== ========== ==========
For the fifty-two weeks
ended December 28, 1996
$ 4,227 $ 3,707 $ (4,172) $ 3,762
=========== ========== ========== ==========
</TABLE>
(1) Amounts represent write-off of uncollectible receivable balances.
F-2
<PAGE>
Exhibit Index
-------------
3.18 Articles of Incorporation of TrackGear, Inc.
3.19 By-laws of TrackGear, Inc.
13 The company's 1996 Annual Report to Stockholders
21 Subsidiaries of the Company
23 Consent of Price Waterhouse LLP
99 The company's 1997 Proxy Statement
<PAGE>
Exhibit 3.18
WIDE OPEN PERFORMANCE WEAR, INC.
ARTICLES OF INCORPORATION
ARTICLE I
NAME
The name of the Corporation is Wide Open Performance Wear, Inc.
ARTICLE II
PURPOSE
The Corporation is organized to engage in any lawful business not required
by the Virginia Stock Corporation Act to be stated in the Articles of
Incorporation.
ARTICLE III
AUTHORIZED SHARES
A. Number and Designation. The number and designation of shares that the
----------------------
Corporation shall have authority to issue and the par value per share are as
follows:
<TABLE>
<CAPTION>
Class Number of Shares Par Value
----- ---------------- ---------
<S> <C> <C>
Common 5,000 $1.00
</TABLE>
3.2 Preemptive Rights. No holder of outstanding shares shall have any
-----------------
preemptive right with respect to (i) any shares of any class of the Corporation,
whether now or hereafter authorized, (ii) any warrants, rights or options to
purchase any such shares, or (iii) any obligations convertible into any such
shares or into warrants, rights or options to purchase any such shares.
3.3 Voting; Distributions. The holders of the Common Shares shall have
---------------------
unlimited voting rights and are entitled to receive the net assets of the
Corporation upon the liquidation, dissolution or winding up of the affairs of
the Corporation.
3.4 Vacancies on Board of Directors. Any vacancy which occurs on the
-------------------------------
Board of Directors, including a vacancy resulting from an increase in the number
of directors, shall be filled only by the shareholders.
1
<PAGE>
3.5 Bylaw Amendments. The Bylaws of the Corporation shall not be amended
----------------
except by the affirmative vote of the holders of more than two-thirds of all the
outstanding Common Shares of the Corporation.
ARTICLE IV
REGISTERED OFFICE AND REGISTERED AGENT
The address of the initial registered office of the Corporation, which is
located in the City of Richmond, Virginia, is c/o McGuire, Woods, Battle &
Boothe, L.L.P., One James Center, 901 E. Cary Street, Richmond, VA 23219. The
initial registered agent of the Corporation is Larry M. Goodall, Esq., whose
business office is identical with the registered office and who is a resident of
Virginia and a member of the Virginia State Bar.
ARTICLE V
LIMIT ON LIABILITY AND INDEMNIFICATION
5.1 Limit on Liability. In every instance in which the Virginia Stock
------------------
Corporation Act, as it exists on the date hereof or may hereafter be amended,
permits the limitation or elimination of liability of directors or officers of a
corporation to the corporation or its shareholders, the directors and officers
of the Corporation shall not be liable to the Corporation or its shareholders.
2
<PAGE>
5.2 Mandatory Indemnification. The Corporation (the term "Corporation" as
-------------------------
used in this Section 5.2 shall mean this Corporation only and no predecessor
entity or other legal entity) shall indemnify any individual who is, was or is
threatened to be made a party to a civil, criminal, administrative,
investigative or other proceeding (including a proceeding by or in the right of
the Corporation or by or on behalf of its shareholders) because such individual
is or was a director or officer of the Corporation or of any legal entity
controlled by the Corporation, or is a fiduciary of any employee benefit plan
established at the direction of the Corporation, against all liabilities and
reasonable expenses incurred by him or her on account of the proceeding, except
such liabilities and expenses as are incurred because of his or her willful
misconduct or knowing violation of the criminal law. Before any indemnification
is paid a determination shall be made that indemnification is permissible in the
circumstances because the person seeking indemnification has met the standard of
conduct set forth above. Such determination shall be made in the manner
provided by Virginia law for determining that indemnification of a director is
permissible, provided, however, that if a majority of the directors of the
Corporation has changed after the date of the alleged conduct giving rise to a
claim for indemnification, the determination that indemnification is permissible
shall, at the option of the person claiming indemnification, be made by special
legal counsel agreed upon by the Board of Directors and such person. Unless a
determination has been made that indemnification is not permissible, the
Corporation shall make advances and reimbursement for expenses incurred by any
of the persons named above upon receipt of an undertaking from him or her to
repay the same if it is ultimately determined that such individual is not
entitled to indemnification. The Corporation is authorized to contract in
advance to indemnify any of the persons named above to the extent it is required
to indemnify them pursuant to the provisions of this Section 5.2.
5.3 Miscellaneous. The rights of each person entitled to indemnification
-------------
under this Article shall inure to the benefit of such person's heirs, executors
and administrators. Indemnification pursuant to this Article shall not be
exclusive of any other right of indemnification to which any person may be
entitled, including indemnification pursuant to a valid contract,
indemnification by legal entities other than the Corporation and indemnification
under policies of insurance purchased and maintained by the Corporation or
others. However, no person shall be
3
<PAGE>
entitled to indemnification by the Corporation to the extent such person is
indemnified by another, including an insurer.
Dated: October 5, 1995
By: /s/ Larry M. Goodall
--------------------
Larry M. Goodall, Incorporator
4
<PAGE>
Exhibit 3.19
WIDE OPEN PERFORMANCE WEAR, INC.
BYLAWS
ARTICLE I
MEETINGS OF SHAREHOLDERS
1.1 Place and Time of Meetings. Meetings of shareholders shall be held at
such place, either within or without the Commonwealth of Virginia, and at such
time as may be provided in the notice of the meeting and approved by the Board
of Directors.
1.2 Annual Meeting. The annual meeting of shareholders shall be held on
the second Tuesday in October of each year or on such date as may be designated
by resolution of the Board of Directors from time to time for the purpose of
electing directors and conducting such other business as may properly come
before the meeting.
1.3 Special Meetings. Special meetings of the shareholders may be called
by the Board of Directors or by any two directors, and shall be called by the
Secretary upon demand of shareholders as required by law. Only business within
the purpose or purposes described in the notice for a special meeting of
shareholders may be conducted at the meeting.
1.4 Record Dates. The record date for determining shareholders entitled
to demand a special meeting is the date the first shareholder signs the demand
that the meeting be held.
Except as is provided in the preceding paragraph the Board of Directors may
fix, in advance, a record date to make a determination of shareholders for any
purpose, such date to be not more than 70 days before the meeting or action
requiring a determination of shareholders. If no such record date is set, then
the record date shall be the close of business on the day before the date on
which the first notice is given.
When a determination of shareholders entitled to notice of or to vote at
any meeting of shareholders has been made, such determination shall be effective
for any adjournment of the meeting unless the Board of Directors fixes a new
record date, which it shall do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
1
<PAGE>
1.5 Notice of Meetings. Written notice stating the place, day and hour of
each meeting of shareholders and, in case of a special meeting, the purpose or
purposes for which the meeting is called shall be given not less than 10 nor
more than 60 days before the date of the meeting (except when a different time
is required in these Bylaws or by law) either personally or by mail, telephone,
telegraph, teletype, telecopy or other form of wire or wireless communication,
or by private courier, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be effective when deposited
in first class United States mail with postage thereon prepaid and addressed to
the shareholder at his address as it appears on the share transfer books of the
Corporation. If given in any other manner, such notice shall be deemed to be
effective (i) when given personally or by telephone, (ii) when sent by
telegraph, teletype, telecopy or other form of wire or wireless communication or
(iii) when given to a private courier to be delivered.
If a meeting is adjourned to a different date, time or place, notice need
not be given if the new date, time or place is announced at the meeting before
adjournment. However, if a new record date for an adjourned meeting is fixed,
notice of the adjourned meeting shall be given to shareholders as of the new
record date unless a court provides otherwise.
1.6 Waiver of Notice; Attendance at Meeting. A shareholder may waive any
notice required by law, the Articles of Incorporation or these Bylaws before or
after the date and time of the meeting that is the subject of such notice. The
waiver shall be in writing, be signed by the shareholder entitled to the notice
and be delivered to the Secretary for inclusion in the minutes or filing with
the corporate records.
A shareholder's attendance at a meeting (i) waives objection to lack of
notice or defective notice of the meeting unless the shareholder, at the
beginning of the meeting, objects to holding the meeting or transacting business
at the meeting and (ii) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice unless the shareholder objects to considering the matter when it
is presented.
1.7 Quorum and Voting Requirements. Unless otherwise required by law, a
majority of the votes entitled to be cast on a matter constitutes a quorum for
action on that matter. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any
2
<PAGE>
adjournment of that meeting unless a new record date is or shall be set for that
adjourned meeting. If a quorum exists, action on a matter, other than the
election of directors, is approved if the votes cast favoring the action exceed
the votes cast opposing the action unless a greater number of affirmative votes
is required by law or by the Articles of Incorporation. Directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present. Less than a quorum may
adjourn a meeting.
1.8 Action Without Meeting. Action required or permitted to be taken at a
meeting of the shareholders may be taken without a meeting and without action by
the Board of Directors if the action is taken by all the shareholders entitled
to vote on the action. The action shall be evidenced by one or more written
consents describing the action taken, signed by all the shareholders entitled to
vote on the action and delivered to the Secretary for inclusion in the minutes
or filing with the corporate records. Action taken by unanimous consent shall
be effective according to its terms when all consents are in the possession of
the Corporation unless the consent specifies a different effective date, in
which event the action taken shall be effective as of the date specified therein
provided that the consent states the date of execution by each shareholder. A
shareholder may withdraw a consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents are in the
possession of the Corporation.
If not otherwise fixed pursuant to the provisions of Section 1.4, the
record date for determining shareholders entitled to take action without a
meeting is the date the first shareholder signs the consent described in the
preceding paragraph.
ARTICLE II
DIRECTORS
2.1 General Powers. The Corporation shall have a Board of Directors. All
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation managed under the direction of, its
Board of Directors, subject to any limitation set forth in the Articles of
Incorporation.
2.2 Number, Term and Election. The number of directors of the Corporation
shall be six. This number may be changed only by the shareholders pursuant to
Section 5.3 of these Bylaws. A decrease in number shall not
3
<PAGE>
shorten the term of any incumbent director. Each director shall hold office
until his death, resignation, retirement or removal or until his successor is
elected.
Except as provided in Section 2.3 of this Article, the directors (other
than initial directors) shall be elected by the holders of the Common Shares at
the annual meeting of shareholders and those persons who receive the greatest
number of votes shall be deemed elected even though they do not receive a
majority of the votes cast. No individual shall be named or elected as a
director without his prior consent.
2.3 Removal; Vacancies. The shareholders may remove one or more
directors, with or without cause, if the number of votes cast for such removal
constitutes a majority of the votes entitled to be cast at an election of
directors. A director may be removed by the shareholders only at a meeting
called for the purpose of removing him and the meeting notice must state that
the purpose, or one of the purposes of the meeting, is removal of the director.
Pursuant to Section 3.4 of the Articles of Incorporation, a vacancy on the
Board of Directors, including a vacancy resulting from the removal of a director
or an increase in the number of directors, may be filled only by the
shareholders and may, in the case of a resignation that will become effective at
a specified later date, be filled before the vacancy occurs, but the new
director may not take office until the vacancy occurs.
2.4 Annual and Regular Meetings. An annual meeting of the Board of
Directors, which shall be considered a regular meeting, shall be held
immediately following each annual meeting of shareholders for the purpose of
electing officers and carrying on such other business as may properly come
before the meeting. The Board of Directors may also adopt a schedule of
additional meetings which shall be considered regular meetings. Regular
meetings shall be held at such times and at such places, within or without the
Commonwealth of Virginia, as the Chairman, the President or the Board of
Directors shall designate from time to time. If no place is designated, regular
meetings shall be held at the principal office of the Corporation.
2.5 Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman, the President or a majority of the directors of the
Corporation and shall be held at such times and at such places, within or
without the Commonwealth of Virginia, as the person or persons calling the
meetings shall designate. If no such place is designated in the notice of a
meeting, it shall be held at the principal office of the Corporation.
4
<PAGE>
2.6 Notice of Meetings. No notice need be given of regular meetings of
the Board of Directors.
Notices of special meetings of the Board of Directors shall be given to
each director in person or delivered to his residence or business address (or
such other place as he may have directed in writing) not less than twenty-four
(24) hours before the meeting by mail, messenger, telecopy, telegraph, or other
means of written communication or by telephoning such notice to him. Any such
notice shall set forth the time and place of the meeting and state the purpose
for which it is called.
2.7 Waiver of Notice; Attendance at Meeting. A director may waive any
notice required by law, the Articles of Incorporation or these Bylaws before or
after the date and time stated in the notice and such waiver shall be equivalent
to the giving of such notice. Except as provided in the next paragraph of this
section, the waiver shall be in writing, signed by the director entitled to the
notice and filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director, at the beginning of
the meeting or promptly upon his arrival, objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
2.8 Quorum; Voting. Five directors shall constitute a quorum for the
transaction of business at a meeting of the Board of Directors. If a quorum is
present when a vote is taken, the affirmative vote of at least five of the
directors present is the act of the Board of Directors. A director who is
present at a meeting of the Board of Directors or a committee of the Board of
Directors when corporate action is taken is deemed to have assented to the
action taken unless (i) he objects, at the beginning of the meeting or promptly
upon his arrival, to holding it or transacting specified business at the meeting
or (ii) he votes against or abstains from the action taken.
2.9 Telephonic Meetings. The Board of Directors may permit any or all
directors to participate in a regular or special meeting by or conduct the
meeting through the use of any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
2.10 Action Without Meeting. Action required or permitted to be taken at
a meeting of the Board of Directors may be taken without a meeting if the action
is taken by all members of the Board. The action shall be evidenced by one or
more written consents stating the action taken, signed by each director either
before or after the
5
<PAGE>
action is taken and included in the minutes or filed with the corporate records.
Action taken under this section shall be effective when the last director signs
the consent unless the consent specifies a different effective date, in which
event the action taken is effective as of the date specified therein, provided
the consent states the date of execution by each director.
2.11 Compensation. The Board of Directors may fix the compensation of
directors and may provide for the payment of all expenses incurred by them in
attending meetings of the Board of Directors.
ARTICLE III
OFFICERS
3.1 Officers. The officers of the Corporation shall be a Chairman of the
Board of Directors, a President, a Secretary/ Treasurer, and, in the discretion
of the Board of Directors, one or more Vice-Presidents and such other officers
as may be deemed necessary or advisable to carry on the business of the
Corporation. Any two or more offices may be held by the same person.
3.2 Election; Term. Officers shall be elected at the annual meeting of
the Board of Directors and may be elected at such other time or times as the
Board of Directors shall determine. They shall hold office, unless removed,
until the next annual meeting of the Board of Directors or until their
successors are elected. Any officer may resign at any time upon written notice
to the Board of Directors and such resignation shall be effective when notice is
delivered unless the notice specifies a later effective date.
3.3 Removal of Officers. The Board of Directors may remove any officer at
any time, with or without cause.
3.4 Duties of Officers. The President shall be the Chief Executive
Officer of the Corporation. He and the other officers shall have such powers
and duties as generally pertain to their respective offices as well as such
powers and duties as may be delegated to them from time to time by the Board of
Directors. The Chairman of the Board, if he is present, shall be chairman of
all meetings of the shareholders, the Board of Directors and any committee of
which he is a member.
6
<PAGE>
ARTICLE IV
SHARE CERTIFICATES
4.1 Form. Shares of the Corporation shall, when fully paid, be evidenced
by certificates containing such information as is required by law and approved
by the Board of Directors. Certificates shall be signed by the President and
the Secretary and may (but need not) be sealed with the seal of the Corporation.
The seal of the Corporation and any or all signatures on a share certificate may
be facsimile. If any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued it may be issued by the Corporation with the same effect
as if he were such officer on the date of issue. 4.2 Transfer. Subject to
any shareholder agreement to which the corporation is a party, the Board of
Directors may make rules and regulations concerning the issue, registration and
transfer of certificates representing the shares of the Corporation. Transfers
of shares and of the certificates representing such shares shall be made upon
the books of the Corporation by surrender of the certificates representing such
shares accompanied by written assignments given by the owners or their
attorneys-in-fact.
4.3 Restrictions on Transfer. A lawful restriction on the transfer or
registration of transfer of shares is valid and enforceable against the holder
or a transferee of the holder if the restriction complies with the requirements
of law and its existence is noted conspicuously on the front or back of the
certificate representing the shares. Unless so noted, a restriction is not
enforceable against a person without knowledge of the restriction.
4.4 Lost or Destroyed Share Certificates. The Corporation may issue a new
share certificate in the place of any certificate theretofore issued which is
alleged to have been lost or destroyed and may require the owner of such
certificate, or his legal representative, to give the Corporation a bond, with
or without surety, or such other agreement, undertaking or security as the Board
of Directors shall determine is appropriate, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss or
destruction or the issuance of any such new certificate.
7
<PAGE>
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Corporate Seal. The corporate seal of the Corporation shall be
circular and shall have inscribed thereon, within and around the circumference
"WIDE OPEN PERFORMANCE WEAR, INC." In the center shall be the word "SEAL".
5.2 Fiscal Year. The fiscal year of the Corporation shall be determined
in the discretion of the Board of Directors, but in the absence of any such
determination it shall be the Saturday, whether before or after December 31,
which is closest to December 31st of each year.
5.3 Amendments. Pursuant to Section 3.5 of the Articles of Incorporation,
these Bylaws may be amended or repealed, and new Bylaws may be made, only by the
affirmative vote of the holders of more than two-thirds of all the outstanding
Common Shares of the Corporation.
5.4 Shareholder Agreement Controlling. In the event of any inconsistency
between any provision of these Bylaws and any provision of the Shareholder
Agreement dated November 14, 1995, as the same may be amended from time to time,
among the Corporation and its shareholders (the "Shareholder Agreement"), the
provision of the Shareholder Agreement shall control.
8
<PAGE>
Exhibit 13
TULTEX 1996 ANNUAL REPORT
(Action photo of volleyball player with DISCUS logo clothing)
<PAGE>
CONTENTS
1 Financial Highlights
2 To Our Stockholders
6 Balance Sheet
7 Statement of Income
8 Statement of Changes in Stockholders' Equity
9 Statement of Cash Flows
10 Notes to Financial Statements
19 Report of Independent Accountants
20 Management's Discussion and Analysis
22 Selected Financial Data
23 Common Stock Prices and Dividend Information
24 General Information, Officers and Directors
Inside Back Cover: Plant Locations,
Subsidiaries, Company-Owned Stores
ABOUT OUR COMPANY
Tultex Corporation is one of the world's largest manufacturers and
marketers of casual apparel, including activewear, licensed apparel
and caps. The vertically integrated company has broad distribution
for its products in the retail and wholesale channels. Products are
sold under such brand names as Discus Athletic R, LogoAthletic R,
Logo 7 R, Tultex R and TrackGear TM. Licenses include the NFL,
NBA, MLB, NHL, NASCAR and college.
The company operates yarn, fabric, sewing and distribution
facilities in Virginia, North Carolina, Indiana, Massachusetts and
Jamaica. In addition, Tultex has contractors in Mexico, Central
America, Canada and the Caribbean. Licensed apparel is sourced
from China, Korea, and Taiwan.
Through its strategies, Tultex continues its transformation into a
customer-driven, higher-margin apparel company. These
strategies are:
1. Growing emphasis on higher-margin branded products;
2. Increasing higher-margin distribution channels for activewear;
3. Developing strategic partnerships with major customers;
4. Further reducing operation costs;
5. Creating a stable financial platform.
(On the cover: Katy Eldridge, outside hitter for Team Discus, which
finished third in the 1996 Bud Light Pro Beach Volleyball Series)
<PAGE>
FINANCIAL HIGHLIGHTS Tultex Corporation
<TABLE>
<CAPTION>
Fiscal years ended: Dec. 28, 1996 Dec. 30,31, 1995 %Increase
(52 Weeks) (52 weeks) (Decrease)
(In thousands of dollars except per share data)
<S> <C> <C> <C>
Operating Results:
Net sales and other income $636,341 $585,289 8.7%
Income before income taxes and extraordinary
loss on early extinguishment of debt $ 26,933 $ 8,948 201.0%
Net income before extraordinary loss on early
extinguishment of debt $ 16,699 $ 5,548 201.0%
Net income $ 16,699 $ 1,802 826.7%
Return on average common stockholders' equity (1) 9.2% 1.0% -
Per Share of Common Stock:
Net income before extraordinary loss on early
extinguishment of debt (2) $ .53 $ .15 253.3%
Net income (2) $ .53 $ .02 2,550.0%
Book value $ 6.40 $ 5.83 9.8%
Year-End Status:
Working capital $275,491 $274,844 .2%
Property, plant and equipment-net $136,426 $129,002 5.8%
Total assets $500,780 $475,799 5.3%
Long-term debt $223,616 $227,540 (1.7)%
Common stockholders' equity $187,730 $173,859 8.0%
Shares of common stock outstanding 29,333,571 29,824,371 (1.6)%
Number of stockholders 2,585 2,932 (11.8)%
Number of employees 6,618 6,835 (3.2)%
Other:
Depreciation $ 21,497 $ 23,163 (7.2)%
Capital expenditures $ 29,048 $ 17,337 67.5%
Interest expense $ 21,742 $ 21,952 (1.0)%
Cash dividends - common and preferred $ 1,135 $ 1,986 (42.8)%
</TABLE>
(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.
See Notes to Financial Statements.
1
<PAGE>
TO OUR STOCKHOLDERS
By aggressively sticking to the strategies we imple-
mented in 1994, we are able to report good results to
our company owners. In spite of relatively high raw
material costs, our margins improved. We are now
clearly benefiting from our investment in our Discus
Athletic (R) and LogoAthletic (R) brands and our cost
reduction initiatives.
Overall, our branded and premium private label busi-
ness was up 24% over 1995 levels. We are particularly
pleased with the results of our licensed apparel busi-
ness which was up 16% in 1996, achieving results
comparable to 1993, the year prior to the hockey
lockout and baseball strike. We saw dramatic increases
in both our NFL and NBA business in 1996 over 1995.
Additionally, our business with screen printers and
distributors grew 10% in the year. Our people have
done a good job in growing this sector of our business,
which carries high margins. Increased penetration into
this channel of distribution will continue as a key growth
strategy for us in 1997.
Sales for the year were $636.3 million versus $585.3
million during the previous 12 months. Net income for
the year ended December 28, 1996 was $16.7 million,
or 53 cents per share, compared with $1.8 million, or 2
cents per share, for the year ended December 30,
1995. In 1995, Tultex incurred a $6.8 million, or 23 cents
per share, after-tax charge related to the company's
debt refinancing and a required change in the method
of recording advertising costs.
At year-end, our debt was $229.7 million which repre-
sents a modest improvement in our debt-to-capital ratio.
This reduction was achieved even while acquiring a
dyeing plant in Asheville, N.C., repurchasing 500,000
Tultex shares, and increasing our investment in Track
Gear, our licensed apparel subsidiary focused on the
motorsports industry.
<TABLE>
<CAPTION>
Net Sales Operating Income
(in millions) (in millions)
(Bar Chart Appears Here) (Bar Chart Appears Here)
<S> <C> <C> <C>
Year Net Sales Year Operating Income
1994 $565.4 1994 $28.2
1995 $585.3 1995 $35.9(1)
1996 $636.3 1996 $48.7
(1)Excludes a $5 million charge relating to a required change
in the method of recording advertising costs.
</TABLE>
2
<PAGE>
The Asheville dyeing facility provides us with 25% more
capacity. We are experiencing increased demand for
our premium, heavier-weight products, and this new
facility gives us the ability to better serve our custom-
ers' quality and service requirements.
As mentioned, almost 500,000 Tultex shares were
repurchased during 1996, all at below book value.
Acquiring those shares is an excellent investment for
our shareholders, particularly now as the market is
starting to recognize our potential. We will look for
additional opportunities to enhance your investment
through this repurchase program.
TrackGear provides us with a tremendous growth
opportunity in NASCAR, a rapidly-expanding segment
of the licensed business. We recently announced our
primary sponsorship of Roush Racing's Grand National
Series car, driven by Jeff Burton. No other apparel
company currently has this level of investment in the
sport of racing. Given the increasing popularity and fan
loyalty of NASCAR, we feel this sponsorship is a wise
investment and contributes to the authenticity of the
TrackGear TM brand.
As we enter into our 60th year after 59 profitable years,
we will be focused on continuing to aggressively grow
our business as we did in 1996. We expect revenue
growth to come from our Discus Athletic and
LogoAthletic brands and premium private label prod-
ucts, as well as increased penetration in the wholesale
channel of distribution.
(Photograph of Troy Aikman, Dallas Cowboy football player)
Caption: Sales of licensed products in 1996 were a record $228 million, a
16% increase over the previous year. While headwear sales
remained consistent with the previous year, apparel sales
increased dramatically in 1996. We saw our sales volume for
licensed apparel restored to 1993 levels, the year prior to the
baseball strike and hockey lockout.
Increasing brand awareness for LogoAthletic (R) will continue to be
an integral part of the Tultex growth strategies. Marketing and
promotional campaigns have propelled this brand into the
marketplace, developing consumer and retailer interest. Highly
effective commercials and endorsements with high-profile
athletes like Dallas Cowboys Quarterback Troy Aikman reinforce
the authenticity of our products.
3
<PAGE>
Growth in Branded/Premium
Private Label Sales
(Tultex sales in millions)
(Bar Chart appears here)
<TABLE>
<CAPTION>
Year Total Sales Branded/Premium Private Label
(in millions) (% of total sales)
<S> <C> <C>
1993 $534 14%
1994 $565 25%
1995 $585 33%
1996 $636 38%
</TABLE>
(Photo of recreational baseball player appears here)
Caption: In 1996, Tultex continued to experience success
in growing its branded and premium private
label business. In 1996, this better margin
business grew to $239.3 million of sales versus
$193.4 million in 1995, for a 23.7% increase.
A key part of this branded strategy is to
continue building awareness of the Discus
Athletic (R) name. As in 1996, Discus Athletic will
reach a large number of consumers through
national television advertising, with a concen-
tration on high-visibility national sports
programming. Other marketing strategies to
promote Discus will include support of college
sports efforts through sponsorships and
increasing the brand's presence on college
campuses.
4
<PAGE>
We believe there are more opportunities to continue to
drive our costs down, while increasing the value of our
products-a combination that is critical to our success.
This includes continuing to invest in offshore production
while improving the productivity of our domestic opera-
tions. Sourcing more and more products, particularly as
we diversify our branded lines, will also present value-
added, cost-saving opportunities for us in the future. In
addition, more normal fiber prices will further reduce
our costs and help to improve our bottom line in 1997.
In order to sustain revenue growth and gain market
share, however, we must become bigger. Our industry
continues its consolidation trend and growth through
acquisition is inevitable. In 1997 and into the next
century, we will be looking for synergistic opportunities
that will strengthen our company and enhance our
competitive position.
On a more personal note, we would like to express our
appreciation to Mr. Don Shook, Vice President-Admini-
stration, for his many years of service to Tultex. Mr. Shook
retired at the end of 1996 after more than 20 years with
the company. We also take this opportunity to welcome
Mr. Seth Bernstein of J.P. Morgan to our Board. We
have no doubt that Mr. Bernstein's experience will be
beneficial to us as our company continues to grow.
We believe 1997 offers good prospects to continue the
trend of improvement we saw in 1996, and we look
forward to the opportunities ahead.
Sincerely,
(Signature of John M. Franck appears here)
John M. Franck
Chairman
(Signature of Charles W. Davies, Jr. appears here)
Charles W. Davies, Jr.
President and Chief Executive Officer
5
<PAGE>
TULTEX CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
DEC. 28, DEC. 30,
1996 1995
-------- --------
(IN THOUSANDS OF
DOLLARS
EXCEPT SHARE
DATA)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents........................................ $ 1,654 $ 1,981
Accounts receivable, less allowance for doubtful accounts
of $3,762 (1996) and $4,227 (1995)......................... 160,107 142,732
Inventories (Note 2)........................................ 162,283 157,946
Prepaid expenses............................................ 7,877 12,498
-------- --------
Total current assets......................................... 331,921 315,157
Property, plant and equipment, net of depreciation (Note 3).. 136,426 129,002
Intangible assets............................................ 24,333 25,550
Other assets................................................. 8,100 6,090
-------- --------
TOTAL ASSETS................................................. $500,780 $475,799
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 4)............................. $ 5,628 $ --
Current maturities of long-term debt (Notes 5 and 19)....... 424 145
Accounts payable--trade..................................... 33,981 27,017
Accrued liabilities--other.................................. 14,429 11,868
Dividends payable (Note 6).................................. 284 2
Income taxes payable........................................ 1,684 1,281
-------- --------
Total current liabilities.................................... 56,430 40,313
-------- --------
Long-term debt, less current maturities (Notes 5 and 19)..... 223,616 227,540
-------- --------
Deferrals:
Deferred income taxes (Note 8).............................. 12,890 12,603
Other....................................................... 4,916 6,286
-------- --------
Total deferrals.............................................. 17,806 18,889
-------- --------
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 (1996 and 1995)....... 198 198
Series B, $7.50 cumulative convertible preferred stock;
authorized, issued and outstanding--150,000 shares (1996
and 1995).................................................. 15,000 15,000
Common stock, $1 par value; authorized--60,000,000 shares,
issued and outstanding --29,333,571 shares (1996) and
29,824,371 shares (1995)................................... 29,334 29,824
Capital in excess of par value.............................. 3,416 5,347
Retained earnings........................................... 155,663 140,099
-------- --------
203,611 190,468
Less notes receivable from stockholders.................... 683 1,411
-------- --------
Total stockholders' equity................................... 202,928 189,057
-------- --------
Commitments and contingencies (Notes 11, 12 and 13)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................... $500,780 $475,799
======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
statement.
6
<PAGE>
TULTEX CORPORATION
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FISCAL YEARS ENDED:
---------------------------
DEC. 28, DEC. 30, DEC. 31,
1996 1995 1994
(52 (52 (52
WEEKS) WEEKS) WEEKS)
-------- -------- --------
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales and other income....................... $636,341 $585,289 $565,433
-------- -------- --------
Costs and expenses:
Cost of products sold........................... 469,715 432,062 419,769
Depreciation.................................... 21,497 23,163 23,973
Selling, general and administrative (Note 16)... 96,454 99,164 93,510
Gain on sale of facilities...................... -- -- (4,405)
Interest........................................ 21,742 21,952 18,151
-------- -------- --------
Total costs and expenses......................... 609,408 576,341 550,998
-------- -------- --------
Income before income taxes and extraordinary loss
on early extinguishment of debt................. 26,933 8,948 14,435
Provision for income taxes (Note 8).............. 10,234 3,400 5,485
-------- -------- --------
Income before extraordinary loss on early
extinguishment of debt.......................... 16,699 5,548 8,950
Extraordinary loss on early extinguishment of
debt (Net of income taxes of $2,296) (Note 5)... -- (3,746) --
-------- -------- --------
NET INCOME....................................... $ 16,699 $ 1,802 $ 8,950
======== ======== ========
Income per Common Share:
Income before extraordinary loss on early
extinguishment of debt.......................... $ .53 $ .15 $ .26
Extraordinary loss on early extinguishment of
debt............................................ -- (.13) --
-------- -------- --------
NET INCOME....................................... $ .53 $ .02 $ .26
======== ======== ========
DIVIDENDS PER COMMON SHARE (NOTE 6).............. $ .00 $ .00 $ .05
======== ======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
statement.
7
<PAGE>
TULTEX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL
IN
5% SERIES B EXCESS NOTES TOTAL
PREFERRED PREFERRED COMMON OF PAR RETAINED RECEIVABLE- STOCKHOLDERS'
STOCK STOCK STOCK VALUE EARNINGS STOCKHOLDERS EQUITY
--------- --------- ------- ------- -------- ------------ -------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 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 pur-
chases................. 754 3,390 (4,144) --
Collections--stockhold-
ers' notes
receivable............. 728 728
Dividends on common
stock.................. (1,490) (1,490)
Dividends on preferred
stock.................. (284) (284)
---- ------- ------- ------ -------- ------ --------
BALANCE AS OF DECEMBER
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--stockhold-
ers' notes
receivable............. 2,055 2,055
Dividends on preferred
stock.................. (1,986) (1,986)
---- ------- ------- ------ -------- ------ --------
BALANCE AS OF DECEMBER
30, 1995............... 198 15,000 29,824 5,347 140,099 (1,411) 189,057
Net income for the 52
weeks ended Dec. 28,
1996................... 16,699 16,699
Exercise of stock op-
tions.................. 7 28 35
Repurchase of common
stock.................. (497) (1,959) (2,456)
Collections--stockhold-
ers' notes
receivable............. 728 728
Dividends on preferred
stock.................. (1,135) (1,135)
---- ------- ------- ------ -------- ------ --------
BALANCE AS OF DECEMBER
28, 1996............... $198 $15,000 $29,334 $3,416 $155,663 $ (683) $202,928
==== ======= ======= ====== ======== ====== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
statement.
8
<PAGE>
TULTEX CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED:
-----------------------------------------------
DEC. 28, 1996 DEC. 30, 1995 DEC. 31, 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS)
--------------- --------------- ---------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income.................... $16,699 $ 1,802 $ 8,950
Items not requiring (provid-
ing) cash:
Depreciation................. 21,497 23,163 23,973
Gain on sale of facilities... -- -- (4,405)
Deferred income taxes........ 287 (2,290) 879
Amortization of intangible
assets....................... 1,217 1,216 1,217
Unamortized deferred debt is-
suance costs................. -- 3,109 --
Other deferrals.............. (1,370) 1,526 (942)
Changes in assets and liabili-
ties:
Accounts receivable ......... (17,375) (2,989) (23,360)
Inventories.................. (4,337) (27,763) 27,095
Prepaid expenses............. 4,621 2,636 (5,929)
Accounts payable and accrued
expenses..................... 9,525 8,151 (3,093)
Income taxes payable......... 403 (1,683) 179
------- -------- -------
Cash provided by operating ac-
tivities..................... 31,167 6,878 24,564
------- -------- -------
INVESTING ACTIVITIES:
Additions to property, plant
and equipment................ (29,048) (17,337) (8,624)
Change in other assets........ (2,010) (838) 1,264
Sales and retirements of prop-
erty and equipment........... 127 56 5,947
------- -------- -------
Cash used by investing activi-
ties......................... (30,931) (18,119) (1,413)
------- -------- -------
FINANCING ACTIVITIES:
Issuance (payment) of short-
term borrowings.............. 5,628 (1,000) 1,000
Issuance (payment) of revolv-
ing credit facility
borrowings................... (3,900) 13,500 (17,000)
Issuance of long-term debt.... 400 110,052 2,054
Payments of long-term debt.... (145) (111,222) (9,137)
Cost of debt issuance......... -- (4,038) --
Cash dividends................ (853) (1,986) (1,774)
Net proceeds (payments) from
issuance (repurchases) of
common stock................. (2,421) 85 --
Proceeds from stock plans..... 728 2,055 728
------- -------- -------
Cash provided (used) by fi-
nancing activities........... (563) 7,446 (24,129)
------- -------- -------
Net decrease in cash and
equivalents.................. (327) (3,795) (978)
Cash and equivalents at begin-
ning of year................. 1,981 5,776 6,754
------- -------- -------
CASH AND EQUIVALENTS AT END OF
YEAR......................... $ 1,654 $ 1,981 $ 5,776
======= ======== =======
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
statement.
9
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995 AND DECEMBER 31, 1994.
NOTE 1--THE COMPANY AND SIGNIFICANT 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 lines include fleeced sweats, jersey products
and decorated jackets and caps. The significant accounting policies followed
by Tultex Corporation and its subsidiaries in preparing the accompanying con-
solidated 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 equiva-
lents have original 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.
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 28, 1996. Depreciation
is provided on the straight-line method for all depreciable assets over their
estimated useful lives as follows:
<TABLE>
<CAPTION>
ESTIMATED
CLASSIFICATION USEFUL LIVES
-------------- ------------
<S> <C>
Land improvements........................................ 20 years
Buildings and improvements............................... 12-50 years
Machinery and equipment.................................. 3-20 years
</TABLE>
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 28, 1996 and December 30, 1995.
Accumulated amortization of goodwill was $782,000 and $625,000 at December 28,
1996 and December 30, 1995, respectively. The gross amount of licenses was
$26,507,000 at December 28, 1996 and December 30, 1995. Accumulated amortiza-
tion of licenses was $5,301,000 and $4,241,000 at December 28, 1996 and Decem-
ber 30, 1995,respectively.
Pensions--Pension expense includes charges for amounts not less than the ac-
tuarially 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 fi-
nancial 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 and dilutive common equivalent
shares outstanding during the period after deducting the preferred dividend
requirements which accrued during the period. The weighted average number of
common shares outstanding were 29,589,000 , 29,810,000 and 29,685,000 for fis-
cal 1996, 1995 and 1994,
10
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
respectively. Fully diluted net income per common share is not materially dif-
ferent from primary net income per common share for fiscal 1996, 1995 and
1994. The dilutive effect of stock options is computed using the treasury
stock method.
Fiscal Year--The company's fiscal year ends on the Saturday nearest to De-
cember 31, which periodically results in a fiscal year of 53 weeks.
Fair Value of Financial Instruments--Statement of Financial Accounting Stan-
dards No. 107, "Disclosures about Fair Value of Financial Instruments," re-
quires disclosure about the fair value of certain instruments. Cash, accounts
receivable, accounts payable, accrued liabilities and variable rate debt are
reflected in the financial statements 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 preparation of
financial statements in conformity with generally accepted accounting princi-
ples requires management to make estimates and assumptions that affect the re-
ported 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.
NOTE 2--INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
DEC. 28, DEC. 30, DEC. 31,
1996 1995 1994
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Raw materials........................................ $ 31,253 $ 20,803 $ 25,704
Goods in process..................................... 21,464 17,645 13,453
Finished goods....................................... 103,269 113,290 87,436
Supplies............................................. 6,297 6,208 3,590
-------- -------- --------
Total inventories.................................... $162,283 $157,946 $130,183
======== ======== ========
</TABLE>
NOTE 3--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
DEC. 28, DEC. 30,
1996 1995
-------- --------
(IN THOUSANDS OF
DOLLARS) ---
<S> <C> <C> <C>
Land and improvements..................................... $ 4,193 $ 3,779
Buildings and improvements................................ 64,991 68,757
Machinery and equipment................................... 235,499 219,352
Construction in progress.................................. 18,657 6,494
-------- --------
323,340 298,382
Less accumulated depreciation............................. 186,914 169,380
-------- --------
Net property, plant and equipment......................... $136,426 $129,002
======== ========
</TABLE>
NOTE 4--SHORT TERM AGREEMENTS
The company currently has short-term lines of credit with two banks totaling
$8,000,000. Borrowings outstanding at December 28, 1996 were $5,000,000 with
interest at 6.9%. There were no borrowings outstanding under these lines at
December 30, 1995.
The company's TrackGear, Inc. subsidiary had revolving credit facility
borrowings of $628,000 outstanding at December 28, 1996.
11
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The company utilizes letters of credit for foreign sourcing of inventory.
Trade letters of credit outstanding were $3,206,000, $3,648,000 and $ 2,026,000
at December 28, 1996, December 30, 1995 and December 31, 1994, respectively.
NOTE 5--LONG TERM DEBT
<TABLE>
<CAPTION>
DEC. 28, DEC. 30,
1996 1995
-------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Amount due under revolving credit agreements................. $113,600 $117,500
10 5/8% senior notes due March 15, 2005...................... 110,000 110,000
Other indebtedness........................................... 440 185
-------- --------
224,040 227,685
Less current maturities...................................... 424 145
-------- --------
Total long-term debt......................................... $223,616 $227,540
======== ========
</TABLE>
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 un-
amortized 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 ex-
isting two-year facility due to expire on October 5, 1995. The agreement pro-
vides for borrowings at or below prime.
All subsidiaries of the company fully and unconditionally guarantee the
company's obligations under the 10 5/8% senior notes on a joint and several ba-
sis.
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 28, 1996, the company was in compliance with all
debt covenants. Consolidated retained earnings free of dividend restrictions
imposed by the debt covenants amounted to $6,830,000 at December 28, 1996.
Interest paid by the company in 1996, 1995 and 1994 was $21,654,000,
$22,412,000 and $18,598,000, respectively. The weighted average interest rates
on borrowings under the revolving credit facility at December 28, 1996 and De-
cember 30, 1995 were 6.9% and 7.6%, respectively.
The aggregate maturities of long-term debt for each of the next five fiscal
years are as follows:
<TABLE>
<CAPTION>
TOTAL
-------------
(IN THOUSANDS
OF DOLLARS)
<S> <C>
1997........................................................ $ 424
1998........................................................ 113,609*
1999........................................................ 6
2000........................................................ --
2001........................................................ --
</TABLE>
* Includes maturity of $113,600 outstanding under revolving credit fa-
cility.
At December 28, 1996 and December 30, 1995, the fair value of the 10 5/8% se-
nior notes exceeded the carrying amount by approximately $10,800,000 and
$2,100,000, respectively. Such fair values were deter-
12
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
mined using valuation techniques that considered cash flows discounted at cur-
rent market rates in effect at the end of the year.
NOTE 6--DIVIDENDS
At December 28, 1996, dividends payable represented amounts paid on the
company's 5% cumulative preferred stock and Series B cumulative preferred stock
on January 2, 1997.
During the second quarter of 1994, the company suspended the payment of divi-
dends on its common stock. As of December 28, 1996, 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 grant-
ed, which means the closing price of a share of common stock as reported on the
New York Stock Exchange composite tape on such day. Some options remain unexer-
cised 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 option grants
to certain officers and employees. Options granted under the 1990 Plan may be
incentive stock options ("ISOs") or nonqualified stock 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 par-
ticipant may be granted options in any calendar year for more than 50,000
shares of common stock.
On April 30, 1996, the company's stockholders ratified the 1996 Stock Incen-
tive Plan under which 700,000 shares of common stock were reserved for stock
option grants and other awards.
A summary of the changes in the number of common shares under option for each
of the three previous years follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 28, 1996
---------------------
PER SHARE
NUMBER OF OPTION
SHARES PRICE
--------- -----------
<S> <C> <C>
Outstanding at beginning of year......................... 1,298,400 $5.00-$9.75
Granted.................................................. 293,000 $4.88
Exercised................................................ 7,000 $4.88-$6.00
Expired.................................................. 30,000 $8.25-$8.38
Cancelled................................................ 90,800 $4.88-$9.75
--------- -----------
Outstanding at end of year............................... 1,463,600 $4.88-$9.75
========= ===========
Exercisable at end of year............................... 1,333,600 $4.88-$9.75
========= ===========
Shares reserved for future grant:
Beginning of year........................................ 23,000
=========
End of year.............................................. 517,800
=========
</TABLE>
13
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 30, 1995
---------------------
PER SHARE
NUMBER OF OPTION
SHARES PRICE
--------- -----------
<S> <C> <C>
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
=========
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
---------------------
PER SHARE
NUMBER OF OPTION
SHARES PRICE
--------- -----------
<S> <C> <C>
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
=========
</TABLE>
The company has adopted the disclosure-only provisions of Statement of Finan-
cial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensa-
tion," which establishes a fair value-based method of accounting for stock-
based compensation. Accordingly, no compensation cost has been recognized for
the stock option plans. Had compensation cost for the company's three stock op-
tion plans been determined based on the fair value at the grant date for awards
in 1996 and 1995 consistent with provisions of SFAS 123, the company's net in-
come and net income per share would have been reduced to the pro forma amounts
indicated in the table below:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------
DEC. 28, 1996 DEC. 30, 1995
------------- -------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Net income--as reported............................. $16,699 $1,802
Net income--pro forma .............................. $16,316 $1,491
Net income per share--as reported................... $.53 $.02
Net income per share--pro forma .................... $.51 $.01
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in 1996 and 1995: dividend yield of 0.0%; expected volatility of 36.16%;
weighted average risk-free interest rate of 6.67% for 1996 and 6.57% for 1995;
and expected lives of 5 years.
14
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--INCOME TAXES
The components of the provision for federal and state income taxes are
summarized as follows:
<TABLE>
<CAPTION>
DEC.28,1996 DEC.30,1995 DEC.31,1994
------------- ------------- -------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Currently payable:
Federal............................... $ 8,437 $ 4,965 $4,072
State................................. 1,510 725 534
------- ------- ------
9,947 5,690 4,606
------- ------- ------
Deferred:
Federal............................... 297 (1,778) 590
State................................. (10) (512) 289
------- ------- ------
287 (2,290) 879
------- ------- ------
Total provision....................... $10,234 $ 3,400 $5,485
======= ======= ======
</TABLE>
Deferred income taxes resulted from the following temporary differences:
<TABLE>
<CAPTION>
DEC.28,1996 DEC.30,1995 DEC.31,1994
------------- ------------- -------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Depreciation......................... $(1,109) $ 63 $ 579
Inventory............................ 264 (1,593) 1,388
Pension.............................. 435 (395) 31
Intangible assets.................... 299 608 299
Postretirement benefits.............. (12) (156) (58)
AMT credit carryforward.............. 362 1,255 (1,617)
Bad debt and other allowances........ 201 (1,133) 99
Accrued liabilities.................. (239) (512) --
Other................................ 86 (427) 158
------- ------- -------
Total................................ $ 287 $(2,290) $ 879
======= ======= =======
</TABLE>
Significant components of the deferred tax liabilities and assets are as fol-
lows:
<TABLE>
<CAPTION>
DEC.28,1996 DEC.30,1995
------------- -------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation.......................... $15,523 $16,632
Intangible assets................................... 1,631 1,332
------- -------
Gross deferred tax liabilities...................... 17,154 17,964
------- -------
Deferred tax assets:
Bad debt and other allowances....................... 1,398 1,599
Inventory reserves.................................. 376 640
Postretirement benefits............................. 402 390
Pension obligations................................. 891 1,326
Worker's compensation............................... 155 227
AMT credit carryforward............................. -- 362
Accrued liabilities................................. 751 512
Other............................................... 291 305
------- -------
Gross deferred tax assets........................... 4,264 5,361
------- -------
Net deferred tax liabilities........................ $12,890 $12,603
======= =======
</TABLE>
15
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of the statutory federal income tax rates with the company's
effective income tax rates for 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
DEC.28,1996 DEC.30,1995 DEC.31,1994
------------- ------------- -------------
<S> <C> <C> <C>
Statutory federal rate................ 35% 35% 35%
State rate, net....................... 3 3 3
--- --- ---
Effective income tax rate............. 38% 38% 38%
=== === ===
</TABLE>
Income tax payments were $8,597,000, $4,895,000 and $4,659,000 for fiscal
1996, 1995 and 1994, respectively.
NOTE 9--EMPLOYEE BENEFITS
All qualified employees of the parent company and its LogoAthletic/Headwear,
Inc. subsidiary are covered by a noncontributory, defined benefit plan. The
benefits are based on years of service and the employee's highest five consecu-
tive 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 28, 1996 and December 30, 1995 was as fol-
lows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS
OF DOLLARS)
<S> <C> <C>
Fair value of plan assets, primarily listed stocks and
corporate and government debt............................... $38,218 $35,631
------- -------
Accumulated benefit obligation, including vested benefits of
$33,652 and $33,735, respectively.......................... 34,457 34,320
Additional benefits based on estimated future salary
levels...................................................... 4,834 4,512
------- -------
Projected benefit obligation................................ 39,291 38,832
------- -------
Projected benefit obligation in excess of plan assets....... (1,073) (3,201)
Unrecognized net loss....................................... 669 2,025
Unrecognized net transitional assets........................ (899) (1,369)
Unrecognized prior service cost............................. 445 502
------- -------
Accrued pension liability................................... $ (858) $(2,043)
======= =======
</TABLE>
The following rate assumptions were made for the plan:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Discount rate of return on projected benefit obligation........... 7.75% 7.75%
Rate of return on plan assets..................................... 10.00% 10.00%
</TABLE>
The long-term rate of salary progression for 1996 reflected an increase of
3.5% for the first year, followed by 4% for six years with an ultimate rate of
increase of 5% thereafter. The long-term rate for 1995 reflected an increase of
3.5% for the first two years, followed by 4% for six years with an ultimate
rate increase of 5% thereafter.
Pension expense in 1996, 1995 and 1994 included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C> <C>
Service cost-benefits earned during the period....... $ 1,591 $ 1,285 $ 1,707
Interest on projected benefit obligation............. 2,862 2,814 2,808
Actual gain (loss) on plan assets.................... (5,307) (4,542) 4,587
Net deferral......................................... 1,415 719 (9,000)
------- ------- -------
Net periodic pension cost............................ $ 561 $ 276 $ 102
======= ======= =======
</TABLE>
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.
16
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The company has a nonqualified, unfunded supplementary retirement plan for
which it has purchased cost recovery life insurance on the lives of the partic-
ipants. 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 earn-
ings and other factors are realized. Expenses related to the plan were $557,000
in 1996, $577,000 in 1995 and $536,000 in 1994. The actuarially determined lia-
bility which has been included in other deferrals was $3,051,000 at December
28, 1996, $3,434,000 at December 30, 1995 and $3,506,000 at December 31, 1994.
The following table sets forth the supplementary plan's status and amounts
recognized in the company's financial statements at December 28, 1996 and De-
cember 30, 1995:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Fair value of plan assets......................... $ -- $ --
Accumulated benefit obligation, including vested
benefits of $2,883 and $3,288, respectively...... 3,051 3,434
Additional benefits based on estimated future sal-
ary levels....................................... 344 402
------------ ------------
Projected benefit obligation...................... 3,395 3,836
------------ ------------
Projected benefit obligation in excess of plan as-
sets............................................. (3,395) (3,836)
Unrecognized net loss............................. 866 1,229
Unrecognized prior service cost................... 240 260
Unrecognized transitional obligation.............. 801 892
Adjustment required to recognize minimum liabili-
ty............................................... (1,563) (1,979)
------------ ------------
Unfunded accrued supplementary pension costs...... $ (3,051) $ (3,434)
============ ============
</TABLE>
Net supplementary pension cost for the three years included the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(IN THOUSANDS
OF DOLLARS)
<S> <C> <C> <C>
Service cost-benefits earned during the period.................. $102 $ 85 $139
Interest on projected benefit obligation........................ 275 309 255
Net amortization................................................ 180 183 142
---- ---- ----
Net periodic supplementary pension cost......................... $557 $577 $536
==== ==== ====
</TABLE>
Substantially all employees meeting certain requirements are eligible to par-
ticipate in the company's employee savings (401-K) plan. Employee contributions
are limited to a percentage of their compensation, as defined in the plan. The
plan does not provide for any company contributions.
Substantially all employees are eligible to receive certain bonuses or prof-
it-sharing amounts, the amounts of which are determined by the labor contract
for employees covered by the collective bargaining agreement, the 1996 Tultex
Corporation Consolidated Incentive Plan for certain salaried employees, and
management discretion for all other employees. The 1996 Tultex Corporation Con-
solidated Incentive Plan was designed to provide a performance-based incentive
for employees of the company who are in a position to contribute materially to
the success of the company and its subsidiaries. Awards under the plan are de-
termined by the company's performance against established performance goals.
Total bonus expenses amounted to $3,734,000 in 1996, $2,044,000 in 1995 and
$1,791,000 in 1994.
The company also provides certain postretirement medical and life insurance
benefits to substantially all employees who retire with a 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
17
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
are dependent on the participant's length of service, age at the date of re-
tirement 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 Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
The standard requires 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 tran-
sitional obligation over a 20-year period. At January 3, 1993, the actuarially
determined accumulated postretirement benefit obligation was $5,101,000.
The amounts recognized in the company's balance sheet at December 28, 1996
and December 30, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS
OF DOLLARS)
<S> <C> <C>
Accumulated postretirement benefit obligation................ $(7,634) $(6,973)
Unrecognized transitional obligation......................... 4,077 4,334
Unrecognized loss............................................ 2,499 1,770
------- -------
Accrued liability............................................ $(1,058) $ (869)
======= =======
</TABLE>
Net periodic postretirement benefit costs for 1996, 1995 and 1994 included
the following components:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ----
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C> <C>
Service cost-benefits earned during the period............. $ 198 $ 207 $198
Interest on accumulated postretirement benefit obligation.. 523 564 398
Amortization of accumulated postretirement benefit obliga-
tion...................................................... 256 256 256
Amortization of loss....................................... 63 63 --
------ ------ ----
Total periodic postretirement benefit cost................. $1,040 $1,090 $852
====== ====== ====
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.75% for 1996 and 1995. The assumed medical cost trend rate
was 9% and 10% in 1996 and 1995, respectively, declining by 1% per year until
an ultimate goal of 5.5% is achieved. The effect of a 1% increase in the as-
sumed health care cost trend rates for each future year would have increased
the aggregate of 1996 service cost and interest cost by $77,000, and would
have increased the December 28, 1996 accumulated postretirement benefit obli-
gation by $588,000.
The adoption of Statement of Financial Accounting Standards (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 postemployment benefits.
18
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information
for the years ended December 28, 1996 and December 30, 1995.
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS OF
DOLLARS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net Sales and Other Income
1st quarter............................................. $ 95,303 $ 84,138
2nd quarter............................................. 138,198 120,986
3rd quarter............................................. 215,390 207,911
4th quarter............................................. 187,450 172,254
-------- --------
Total..................................................... $636,341 $585,289
======== ========
Gross Profit
1st quarter............................................. $ 20,005 $ 20,445
2nd quarter............................................. 27,556 25,275
3rd quarter............................................. 53,263 46,303
4th quarter............................................. 45,943 39,833
-------- --------
Total..................................................... $146,767 $131,856
======== ========
Income Before Income Taxes and Extraordinary Loss on
Early Extinguishment of Debt
1st quarter............................................. $ (8,901) $(12,882)
2nd quarter............................................. 1,120 (88)
3rd quarter............................................. 21,011 14,889
4th quarter............................................. 13,703 7,029
-------- --------
Total..................................................... $ 26,933 $ 8,948
======== ========
Income Before Extraordinary Loss on Early Extinguishment
of Debt
1st quarter............................................. $ (5,520) $ (7,987)
2nd quarter............................................. 689 (62)
3rd quarter............................................. 13,025 9,239
4th quarter............................................. 8,505 4,358
-------- --------
Total..................................................... $ 16,699 $ 5,548
======== ========
Net Income
1st quarter............................................. $ (5,520) $(11,733)
2nd quarter............................................. 689 (62)
3rd quarter............................................. 13,025 9,239
4th quarter............................................. 8,505 4,358
-------- --------
Total..................................................... $ 16,699 $ 1,802
======== ========
Income per Common Share Before Extraordinary Loss on
Early Extinguishment of Debt
1st quarter............................................. $ (.19) $ (.27)
2nd quarter............................................. .01 (.01)
3rd quarter............................................. .43 .30
4th quarter............................................. .28 .13
-------- --------
Total..................................................... $ .53 $ .15
======== ========
Net Income per Common Share
1st quarter............................................. $ (.19) $ (.40)
2nd quarter............................................. .01 (.01)
3rd quarter............................................. .43 .30
4th quarter............................................. .28 .13
-------- --------
Total..................................................... $ .53 $ .02
======== ========
</TABLE>
19
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--COMMITMENTS
At December 28, 1996, the company was obligated under a number of
noncancellable, renewable operating leases as follows:
<TABLE>
<CAPTION>
MANUFACTURING
DATA FACILITIES
PROCESSING AND
EQUIPMENT OTHER TOTAL
---------- ------------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
1997........................................... $4,275 $ 5,755 $10,030
1998........................................... 3,137 4,623 7,760
1999........................................... 1,651 3,127 4,778
2000........................................... -- 2,465 2,465
2001........................................... -- 2,156 2,156
2002 and after................................. -- 11,673 11,673
------ ------- -------
Total.......................................... $9,063 $29,799 $38,862
====== ======= =======
</TABLE>
Rental expense charged to income was $13,287,000 in 1996, $13,128,000 in 1995
and $13,358,000 in 1994.
The company has entered into various licensing agreements which permit it to
market apparel with copyrighted logos from the sports industry. 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 28, 1996 were approximately $2,800,000 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 executives 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 28, 1996 un-
der these agreements was approximately $4,489,000.
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 1996 or 1995. There was
one customer who constituted 10.4% of net sales in 1994. As disclosed on the
balance sheet, the company maintains an allowance for doubtful accounts to
cover estimated credit losses.
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 per-
sons 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 fol-
lowing the commencement of a tender offer or exchange offer that would result
in a person or a 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 com-
mon stock or certain other triggering events.
20
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15--STOCK PURCHASE PLAN
In February 1994, the company initiated the Salaried Employees' Stock Pur-
chase 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 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 are 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, $3,461,000 has been collected, leaving an outstanding balance at Decem-
ber 28, 1996 of $683,000. Interest income realized in 1996, 1995 and 1994 on
the loans was $64,000, $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 Stan-
dards 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 $21,614,000 in 1996, $22,706,000 in 1995 and $14,669,000 in 1994.
Selling, general and administrative expenses reported on the statement of in-
come increased by approximately $5,000,000 in 1995 as a result of adopting this
change in method of recording advertising costs.
NOTE 17--UNIONIZATION OF FACILITIES
In August 1994, hourly employees at the company's Martinsville, Virginia fa-
cilities voted for representation by the Amalgamated Clothing and Textile Work-
ers Union (now known as the Union of Needletrades, Industrial and Textile Em-
ployees 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 employees in the South Boston area.
NOTE 18--INVESTMENT IN JOINT VENTURE
In November 1995, the company and four other investors completed the forma-
tion of Wide Open Performance Wear, Inc., now known as TrackGear, Inc. Through
its investment of $750,000, the company acquired a minority ownership in this
newly-formed sportswear company. In September 1996, the company acquired major-
ity ownership of TrackGear, Inc. through an additional investment of $250,000.
The sportswear company manufactures and markets imprinted motorsports apparel.
21
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19--CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following financial information presents condensed consolidated financial
data which includes (i) the parent company only ("Parent"), (ii) the wholly-
owned subsidiaries on a combined basis ("Wholly-owned Subsidiaries"), (iii) the
majority-owned subsidiary (Majority-owned Subsidiary) and (iv) the company on a
consolidated basis.
<TABLE>
<CAPTION>
MAJORITY
WHOLLY-OWNED OWNED
PARENT SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ---------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
AS OF AND FOR THE YEAR
ENDED
DECEMBER 28, 1996
Current assets.......... $275,694 $158,955 $1,729 $(104,457) $331,921
Noncurrent assets....... 189,088 36,405 1,005 (57,639) 168,859
-------- -------- ------ --------- --------
Total assets............ $464,782 $195,360 $2,734 $(162,096) $500,780
======== ======== ====== ========= ========
Current liabilities..... $ 38,074 $116,763 $2,390 $(100,797) $ 56,430
Noncurrent liabilities.. 242,011 (161) (405) (23) 241,422
-------- -------- ------ --------- --------
Total liabilities....... $280,085 $116,602 $1,985 $(100,820) $297,852
======== ======== ====== ========= ========
Net sales............... $411,151 $253,318 $2,489 $ (30,617) $636,341
Costs and expenses...... 396,370 240,784 3,426 (31,172) 609,408
-------- -------- ------ --------- --------
Pretax income (loss).... $ 14,781 $ 12,534 $ (937) $ 555 $ 26,933
======== ======== ====== ========= ========
</TABLE>
<TABLE>
<CAPTION>
MAJORITY-
WHOLLY-OWNED OWNED
PARENT SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ---------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
<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 income (loss).... $ 12,834 $ (5,010) $ 608 $ 516 $ 8,948
======== ======== ====== ========= ========
</TABLE>
22
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
MAJORITY-
WHOLLY-OWNED OWNED
PARENT SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ---------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
<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 $152,821 $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 income (loss).... $ 13,489 $ 491 $ (287) $ 742 $ 14,435
======== ======== ====== ========= ========
</TABLE>
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Tultex Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of changes in stockhold-
ers' equity present fairly, in all material respects, the financial position
of Tultex Corporation and its subsidiaries (the company) at December 28, 1996
and December 30, 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 28, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the company's management; our responsi-
bility is to express an opinion on these financial statements based on our au-
dits. 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 reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evi-
dence supporting the amounts and disclosures in the financial statements, as-
sessing the accounting principles used and significant estimates made by man-
agement, and evaluating the overall financial statement presentation. We be-
lieve that our audits provide a reasonable basis for the opinion expressed
above.
In 1995, the company changed its method of recording advertising costs, as
discussed in Note 16 of Notes to Financial Statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
February 4, 1997
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents the Company's consolidated statement of operations
as a percentage of net sales and other income:
<TABLE>
<CAPTION>
-------------------------------------------------------
DECEMBER 28, 1996 DECEMBER 30, 1995 DECEMBER 31, 1994
(52 WEEKS) (52 WEEKS) (52 WEEKS)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales and other
income 100.0% 100.0% 100.0%
----- ----- -----
Cost of products sold 73.8 73.8 74.2
Depreciation 3.4 4.0 4.2
Selling, general and
administrative 15.2 16.9 16.5
Gain on sales of
facilities - - (0.7)
Interest 3.4 3.8 3.2
----- ----- -----
Total costs and
expenses 95.8 98.5 97.4
----- ----- -----
Income before income
taxes and
extraordinary loss on
early extinguishment
of debt 4.2 1.5 2.6
Provision for income
taxes 1.6 0.6 1.0
----- ----- -----
Income before
extraordinary loss on
early extinguishment
of debt 2.6 0.9 1.6
Extraordinary loss on
early extinguishment
of debt (net of
income taxes) - (0.6) -
----- ----- -----
Net income 2.6% 0.3% 1.6%
===== ===== =====
</TABLE>
- ----------
Note: Certain items have been rounded to cause the columns to add to 100%.
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Net sales and other income of $636.3 million for the year ended December 28,
1996, represents an increase of $51.1 million, or 8.7%, over the prior year.
This increase was primarily the result of increased sales volumes, and was fur-
ther supported by a shift in sales mix to premium products. Activewear sales of
$408.2 million in 1996 represent an increase of $20.4 million, or 5.3%, as com-
pared to 1995. Licensed sales of $228.1 million in 1996 represent an increase
of $30.7 million, or 15.5%, as compared to fiscal 1995. Licensed apparel sales
in 1995 were adversely effected by professional sports labor issues which were
resolved prior to fiscal 1996. During 1996, sales of higher margin branded and
premium private label products increased 23.7%, and sales to the screenprint
and distributor channels increased 10.2%. Sales of jersey products were $112.4
million for fiscal 1996, representing 27.5% of the Company's activewear sales
as compared to 24.0% for fiscal 1995.
Cost of products sold as a percentage of sales was 73.8% for both 1996 and
1995. The increased margins achieved from the sale of premium products in 1996
were offset by higher raw material costs and the increased percentage of jersey
product sales which are at lower margins. The higher raw material costs were
due to raw cotton and polyester prices which peaked in the first half of 1996.
These prices began to decline in the second half of the year, and the Company
expects its raw material prices for 1997 to decline from 1996 levels. As of
February 20, 1997, the Company has fixed the price on approximately 60% of its
planned cotton purchases for fiscal 1997.
Depreciation expense as a percentage of sales was 3.4% for fiscal 1996 and 4.0%
for fiscal 1995. The $1.7 million decline in depreciation expense from the 1995
amount of $23.2 million was the result of certain assets becoming fully depre-
ciated during 1996. This decrease was partially offset by depreciation expense
incurred on 1996 capital additions of $29.0 million.
25
<PAGE>
Selling, general and administrative ("SG&A") expenses decreased $2.7 million in
1996. As a percentage of sales, SG&A expenses were 15.2% in 1996 and 16.9% in
1995. The 1995 percentage includes a one-time charge of $5.0 million, or .8% of
sales, in deferred advertising costs which were charged off as required by the
Accounting Standards Executive Committee's Statement on Reporting Advertising
Costs. This statement first became effective for the Company at the beginning
of fiscal 1995. Excluding the effect of this charge in 1996, SG&A expenses re-
flect higher advertising costs which were used to support the increase in
sales. This increase in advertising spending was partially offset by a decrease
in the bad debt provision resulting from improved collection experience.
Operating income (income before interest and income taxes) increased 57.6% dur-
ing the 1996 fiscal year to $48.7 million compared to $30.9 million for fiscal
1995. This increase results from both the higher revenues achieved and the ef-
fects of improved cost controls.
Interest expense as a percentage of sales decreased from 3.8% in 1995 to 3.4%
in 1996. Interest expense decreased from $22.0 million to $21.7 million in
1996, primarily as a result of lower average rates. The nature of the Company's
primary business requires extensive seasonal borrowings to support its working
capital needs. During fiscal 1996, working capital borrowings averaged $137.5
million at an average rate of 6.9% compared to $136.4 million and 7.6% respec-
tively, for the comparable period of the prior year.
Provision for income taxes is a function of pretax earnings and the combined
effective rate of federal and state income taxes. This combined rate was 38% in
both 1996 and 1995. The provision for income taxes increased $6.8 million in
1996 as a result of higher pretax earnings, representing 1.6% of net sales as
compared to 0.6% in fiscal 1995.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Net sales and other income of $585.3 million for fiscal 1995 increased $19.9
million, or 3.5%, over the 1994 level of $565.4 million. The 1995 sales growth
was due to increased sales volume in the activewear line, and was partially
offset by decreases in licensed apparel and headwear sales volume which re-
sulted from professional sports labor issues. Sales of premium products in-
creased in 1995, with Discus Athletic activewear up 29.9% to $75.8 million, and
LogoAthletic licensed apparel up 42.8% to $92.0 million. Sales of jersey prod-
ucts were $93.1 million for 1995, representing 24.0% of the Company's
activewear sales as compared to 16.5% for 1994.
Cost of products sold as a percentage of sales improved in fiscal 1995, de-
creasing 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 mate-
rial 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.
Depreciation expense as a percentage of sales decreased from 4.2% for 1994 to
4.0% for 1995. Depreciation expense decreased from $24.0 million in 1994 to
$23.2 million in 1995, due to relatively low capital expenditures.
SG&A expenses increased as a percentage of sales to 16.9% for 1995 from 16.5%
for 1994. This increase is primarily due to the one-time charge of $5.0 million
for deferred advertising costs required to be recognized in 1995. In addition,
the bad debt provision was increased in 1995 in response to collection diffi-
culties.
Interest expense as a percentage of sales increased from 3.2% in 1994 to 3.8%
in 1995. Interest expense increased from $18.2 million in 1994 to $22.0 million
in 1995 due to higher interest rates. Average borrowing requirements of $136.4
million at an average rate of 7.6% in 1995 compared with $155.3 million and
5.2% for 1994, respectively.
Provision for income taxes reflects an effective rate for combined federal and
state income of 38% for both 1995 and 1994.
26
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net working capital at December 28, 1996 of $275.4 million was $0.6 million
higher than the December 30, 1995 amount of $274.8 million. Net accounts re-
ceivable increased $17.4 million from December 30, 1995 to December 28, 1996
due to the strong fourth quarter sales increase.
Inventories traditionally increase through the first half of the year to sup-
port second-half shipments. In 1996, inventories peaked on May 25, 1996 at
$220.9 million and then dropped to $162.3 million on December 28, 1996. As of
December 28, 1996, inventories had increased $4.3 million or 2.7% from December
30, 1995. This increase was primarily due to additional jersey inventories pro-
duced to meet anticipated first quarter 1997 demand. The current ratio (ratio
of current assets to current liabilities) at December 28, 1996, was 5.9 com-
pared to 7.8 for December 30, 1995. The decrease in the ratio was mainly due to
higher current liabilities required to meet the increase in receivables and in-
ventories.
Total indebtedness at December 28, 1996 consisted primarily of the 1995 Notes
totaling $110 million and $113.6 million outstanding under the Senior Credit
Facility. The Company's average credit facility borrowings during fiscal 1996
were $137.5 million and its peak borrowing was $175.5 million at September 11,
1996. At December 28, 1996, the Company was in compliance with all debt cove-
nants.
On March 20, 1996, the Company's Board of Directors authorized the purchase of
up to 750,000 shares of the Company's common stock. On October 29, 1996, the
Company's Board of Directors authorized the purchase of an additional 250,000
shares. As of December 28, 1996, a total of 497,800 shares had been purchased
and retired. Stockholders' equity increased $13.9 million during fiscal 1996 as
a result of net income for the period of $16.7 million and net proceeds from
the employee stock purchase plan of $0.8 million partially offset by repur-
chases of common stock totalling $2.5 million and preferred dividends of $1.1
million.
In fiscal 1996, net cash provided by operations was $31.2 million compared to
$6.9 million in fiscal 1995, reflecting the improved earnings in 1996. Cash
used for capital expenditures increased $11.7 million in fiscal 1996 from $17.3
million to $29.0 million primarily as a result of the purchase of the Asheville
dyeing facility. The Company has budgeted $21.0 million for capital expendi-
tures in fiscal 1997. Cash used by financing activities was $0.6 million for
fiscal 1996 compared to cash provided by financing activities of $7.4 million
in 1995 as a result of payments on the revolving credit facility and stock re-
purchases. The Company expects that its short-term borrowing needs, including
that required for the acquisition of California Shirt Sales, Inc., will be met
through cash generated from operations and borrowings under the Senior Credit
Facility. See "Business-Recent Development." Debt as a percentage of capital-
ization was 53.1% at December 28, 1996 compared to 54.6% at December 30, 1995.
27
<PAGE>
SELECTED FINANCIAL DATA Tultex Corporation
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
(In thousands of dollars except per share data) (52 Weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks)
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Net sales and other income $636,341 $585,289 $565,433 $533,611 $503,946
Costs and operating expenses 587,666 554,389 532,847 507,524 470,155
Operating income 48,675 30,900 32,586 26,087 33,791
Interest expense 21,742 21,952 18,151 16,996 13,540
Income before income taxes and extraordinary
loss on early extinguishment of debt 26,933 8,948 14,435 9,091 20,251
Provision for income taxes 10,234 3,400 5,485 3,188 7,060
Income before extraordinary loss on early
extinguishment of debt 16,699 5,548 8,950 5,903 13,191
Extraordinary loss on early extinguishment of debt - (3,746) - - -
Net Income 16,699 1,802 8,950 5,903 13,191
Less preferred dividend requirement 1,135 1,135 1,135 1,135 1,041
Balance to common stock $ 15,564 $ 667 $ 7,815 $ 4,768 $ 12,150
Weighted average number of common shares
outstanding 29,589 29,810 29,685 28,961 28,872
Shares outstanding at year end 29,334 29,824 29,807 29,053 28,878
Per Common Share:
Income before extraordinary loss on early
extinguishment of debt $ .53 $ .15 $ .26 $ .16 $ .42
Net income $ .53 $ .02 $ .26 $ .16 $ .42
Dividends declared (Note 6) $ .00 $ .00 $ .05 $ .20 $ .20
Book value $ 6.40 $ 5.83 $ 5.74 $ 5.64 $ 5.67
Year-End Data:
Current assets $331,921 $315,157 $289,907 $288,691 $249,327
Current liabilities 56,430 40,313 167,053 45,138 122,610
Working capital $275,491 $274,844 $122,854 $243,553 $126,717
Inventories $162,283 $157,946 $130,183 $157,278 $130,166
Property, plant and equipment (net) $136,426 $129,002 $134,884 $151,775 $153,188
Total assets $500,780 $475,799 $456,809 $474,965 $435,818
Bank notes payable $ 5,628 - $ 1,000 - $ 79,825
Current portion of long-term debt $ 424 $ 145 $132,353 $ 8,524 $ 2,268
Capital Invested:
Long-term debt $223,616 $227,540 $ 83,002 $230,914 $118,438
Stockholders' equity 202,928 189,057 187,101 179,197 178,793
Total capital invested $426,544 $416,597 $270,103 $410,111 $297,231
Return on average total capital invested 4.0% 0.5% 2.6% 1.7% 5.2%
Long-term debt as a percentage of total capital 52.4% 54.6% 30.7% 56.3% 39.8%
</TABLE>
1992 has been restated to reflect the acquisition of Universal Industries,
Inc. (now known as LogoAthletic/Headwear, Inc.) treated as a pooling of
interests, and to reflect a change in accounting method from LIFO to FIFO.
28
<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 28, 1996 52 Weeks ended December 30, 1995
Range of Quotations Range of Quotations
Quarter Ended Low High Close Low High Close
<S> <C> <C> <C> <C> <C> <C>
March 30 $3 7/8 $4 7/8 $4 5/8 $4 1/8 $5 1/8 $4 5/8
June 29 4 1/2 5 7/8 4 3/4 4 5/8 5 7/8 5 5/8
September 28 4 1/4 5 5/8 5 3/8 5 1/4 6 1/2 5 3/8
December 28 5 3/8 7 3/4 7 4 5 3/8 4 1/8
</TABLE>
See Note 5 to Consolidated Financial Statements for restrictions on
consolidated retained earnings imposed by debt covenants. At December 28, 1996,
$6,830,000 of consolidated retained earnings were free of such dividend
restrictions.
SHARES OF STOCK
The average number of shares of common stock for the year was 29,589,405. The
common shares outstanding at year-end amounted to 29,333,571.
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
29
<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
or by e-mail: [email protected]
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
FAX: 540-632-8000
Corporate Office
Tultex Corporation
101 Commonwealth Boulevard
Martinsville, VA 24112
540-632-2961
FAX: 540-632-8000
Internet Address: www.tultex.com
General Counsel
Hunton & Williams
P.O. Box 1535
Richmond, VA 23212
804-788-8200
Independent Accountants
Price Waterhouse LLP
200 W. 2nd Street
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
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-Distribution/Logistics and Systems
W. J. Gardner, Jr.
Vice President-Operations
B. A. Ratliff
Vice President-Resources
W. J. Caruba
Vice President-Sales and Marketing
A.J. Pichirallo
Vice President-Wholesale
S. H. Wood
Vice President and Chief Financial Officer
J.F. Kies
Controller
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.
S. P. Bernstein
Managing Director, Head of Leveraged Finance Group
J.P. Morgan & Company, Inc.
L. M. Ewers, Jr.
Partner
Hunton & Williams, Attorneys at Law
I. M. Groves, Jr.
Retired Chairman and Chief Executive Officer
Mainstreet BankGroup, Incorporated
H. R. Hunnicutt, Jr.
Retired Chairman and Chief Executive Officer of the Company
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
American Furniture Company
Committees of the Board
Audit Committee
I. M. Groves, Jr.
B. M. Jacobson
Executive Compensation Committee
L. M. Ewers, Jr.
B. M. Jacobson
R. M. Simmons, Jr.
Nominating Committee
J. M. Franck
H. R. Hunnicutt, Jr.
F. K. Iverson
<PAGE>
PLANT LOCATIONS
Yarn Manufacturing
Mayodan, North Carolina
Roxboro, North Carolina (2 Plants)
Fabric Manufacturing
Asheville, North Carolina
Martinsville, Virginia
Apparel Manufacturing
Bastian, Virginia
Chilhowie, Virginia
Martinsville, Virginia
Roanoke, Virginia
South Boston, Virginia
Dobson, North Carolina
Mayodan, North Carolina
Customer Service Center
Beaver Creek Industrial Park
Martinsville, Virginia
SUBSIDIARIES
Akom Limited
Montego Bay, Jamaica
Dominion Stores, Inc.
Martinsville, Virginia
LogoAthletic, Inc.
Indianapolis, Indiana
LogoAthletic/Headwear, Inc.
Mattapoisett, Massachusetts
TrackGear, Inc.
Charlotte, North Carolina
Tultex Canada, Inc.
Edmonton, Alberta, Canada
COMPANY-OWNED STORE LOCATIONS
Tultex Mill Outlet Stores
550 Franklin Street
Martinsville, Virginia
Hupps Mill Plaza
South Boston, Virginia
Riverside Shopping Center
Danville, Virginia
5327 Williamson Road
Roanoke, Virginia
3225 Old Forest Road
Lynchburg, Virginia
East Lee Highway
Chilhowie, Virginia
1105 Stafford Drive
Princeton, West Virginia
Meadow Green Shopping Center
Eden, North Carolina
905 North Madison Avenue
Roxboro, North Carolina
704C East Broad Avenue
Rockingham, North Carolina
3840 Reynolda Road
Winston-Salem, North Carolina
Willowdale Shopping Center
Durham, North Carolina
132 New Market Madison
Madison, North Carolina
The Sweatshirt Company
Outlets at Birch Run
Birch Run, Michigan
Horizon Outlet Center
Monroe, Michigan
Lake Erie Factory Outlet
Milan, Ohio
Horizon Outlet Center
Oshkosh, Wisconsin
Factory Stores of America at North Bend
North Bend, Washington
Factory Outlets
Post Falls, Idaho
Crossings Outlet Square
Tannersville, Pennsylvania
Rockvale Square
Lancaster, Pennsylvania
Factory Stores of America at Nuttree II
Vacaville, California
Pacific Outlet Center
Gilroy, California
Natoma Station Factory Outlets
Folsom, California
Horizon Outlet Center
Fremont, Indiana
Horizon Outlet Center
Edinburgh, Indiana
North Hampton Factory Outlet
North Hampton, New Jersey
Factory Stores of America
Nashville, Tennessee
Five Oaks Factory Stores
Sevierville, Tennessee
Bend Factory Outlets
Bend, Oregon
Ocean Outlets Seaside
Rehoboth Beach, Delaware
Sikeston Factory Outlet Stores
Miner, Missouri
Nebraska Crossing Factory Stores
Gretna, Nebraska
LogoAthletic Stores
5668 George Town Road
Indianapolis, Indiana
2333 Post Drive
Indianapolis, Indiana
<PAGE>
TULTEX
Tultex Corporation
PO Box 5191
Martinsville VA 24115
<PAGE>
Exhibit 21
----------
Subsidiaries of the Registrant
During fiscal 1996, 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)
LogoAthletic, Inc., a Virginia corporation (100% owned)
LogoAthletic/Headwear, Inc., a Massachusetts corporation (100% owned)
Tultex Canada, Inc., a Canadian corporation (100% owned)
Track Gear, Inc., a Virginia corporation (51% owned)
<PAGE>
Exhibit 23
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 4, 1997 appearing on page 19 of
the Annual Report to Stockholders which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears on page F-1 of this Form 10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
March 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 1,654
<SECURITIES> 0
<RECEIVABLES> 160,107
<ALLOWANCES> 3,762
<INVENTORY> 162,283
<CURRENT-ASSETS> 331,921
<PP&E> 323,340
<DEPRECIATION> 186,914
<TOTAL-ASSETS> 500,780
<CURRENT-LIABILITIES> 56,430
<BONDS> 0
0
15,198
<COMMON> 29,334
<OTHER-SE> 158,396
<TOTAL-LIABILITY-AND-EQUITY> 500,780
<SALES> 636,341
<TOTAL-REVENUES> 636,341
<CGS> 469,715
<TOTAL-COSTS> 491,212
<OTHER-EXPENSES> 92,692
<LOSS-PROVISION> 3,762
<INTEREST-EXPENSE> 21,742
<INCOME-PRETAX> 26,933
<INCOME-TAX> 10,234
<INCOME-CONTINUING> 16,699
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,699
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
<PAGE>
[LETTERHEAD OF TULTEX]
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Tultex
Corporation to be held on Tuesday, April 29, 1997 at 10:00 a.m. at our Customer
Service Center in Martinsville, Virginia. Your Board of Directors and management
look forward to greeting you personally and discussing the affairs of our
Company.
At this year's meeting, we are asking that you (1) elect a Board of Directors
and (2) ratify the appointment of Price Waterhouse LLP as auditors. In addition
to this usual business, the officers will present their reports and be available
for questions from stockholders.
THE DIRECTORS BELIEVE THESE PROPOSALS ARE IN THE BEST INTEREST OF ALL OF THE
COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR EACH OF THEM.
Please send in your proxy card as soon as possible. Thank you for your continued
interest and support.
Sincerely,
/s/ John M. Franck /s/ Charles W. Davies, Jr.
John M. Franck Charles W. Davies, Jr.
Chairman of the Board President and Chief Executive Officer
March 21, 1997
<PAGE>
[LETTERHEAD OF TULTEX]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Tultex
Corporation will be held at the Company's Customer Service Center, State Route
174, Martinsville, Virginia, on Tuesday, April 29, 1997 at 10:00 a.m. for the
following purposes:
1. To elect a Board of Directors, consisting of eight persons, to serve for the
ensuing year;
2. To ratify the Board of Directors' appointment of Price Waterhouse LLP,
independent accountants, as auditors for the Company for fiscal 1997 and
3. To transact such other business as may properly come before the meeting.
Your attention is directed to the accompanying proxy statement for further
information with respect to the matters to be acted upon at the meeting. Only
holders of Common Stock and Cumulative Convertible Preferred Stock, $7.50 Series
B, of record at the close of business on March 7, 1997, are entitled to notice
of and to vote on matters to be acted on at the Annual Meeting.
If you are present at the Annual Meeting, you may vote in person even though you
have previously delivered your proxy.
By Order of the Board of Directors
Kathy H. Rogers, Secretary
March 21, 1997
<PAGE>
[LETTERHEAD OF TULTEX]
PROXY STATEMENT DATED AND MAILED MARCH 21, 1997
GENERAL
Proxies in the form enclosed are solicited by the Board of Directors for the
1997 Annual Meeting of Stockholders to be held at 10:00 a.m. on Tuesday, April
29, 1997 at the Company's Customer Service Center, State Route 174,
Martinsville, Virginia. Any stockholder giving a proxy may revoke it at any time
before it is voted by written notice to the Company, P. O. Box 5191,
Martinsville, Virginia 24115, Attention: Kathy H. Rogers, Corporate Secretary,
by the execution of a proxy with a later date, or by voting in person the shares
represented by the proxy.
The cost of solicitation of proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone by
regular employees of the Company, but no special compensation will be paid to
any regular employees for personal solicitation of proxies. Banks, brokerage
houses and other institutions, nominees and fiduciaries will be requested to
forward the soliciting material to beneficial owners and to obtain authorization
for the execution of proxies. The Company will, upon request, reimburse such
parties for their reasonable expenses in forwarding proxy material to their
beneficial owners.
A majority of the votes entitled to be cast on matters to be considered at the
meeting constitutes a quorum. If a share is represented for any purpose at the
meeting, for quorum purposes it is present for all matters considered at the
meeting. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in determining the
number of votes present or represented at the meeting. Broker Shares that are
not voted on any matter at the meeting are not included in determining whether a
quorum is present. Directors are elected by a plurality of the votes cast by
holders of Common Stock and Series B Preferred Stock; the vote required on other
matters is disclosed under the caption for such matters. Votes that are withheld
and Broker Shares that are not voted (commonly referred to as "broker
non-votes") are not included in determining the number of votes cast in the
election of directors or on other matters.
OWNERSHIP OF EQUITY SECURITIES
On March 7, 1997, the date for determining stockholders entitled to notice of
and to vote at the Annual Meeting, there were outstanding and entitled to vote
29,464,071 shares of Common Stock and 150,000 shares of Cumulative Convertible
Preferred Stock, $7.50 Series B (the "Series B Preferred Stock"). The Common
Stock and the Series B Preferred Stock have one vote per share on all matters
and vote together on all matters, including those to be acted on at the Annual
Meeting.
1
<PAGE>
The table below presents certain information as of the Record Date regarding
beneficial ownership of shares of Common Stock by all directors and nominees for
director, by the Chief Executive Officer and the four next most highly
compensated executive officers, by all directors and executive officers as a
group, and by owners of 5% or more of the Common Stock. The Series B Preferred
Stock is owned by Simon Trust Partnership No. 3 (25%), Herbert Simon Trust No. 3
(25%) and L. G. Sale Corporation, Inc. (50%), respectively.
<TABLE>
<CAPTION>
SOLE VOTING AGGREGATE
AND INVESTMENT PERCENTAGE
NAME POWER (1) OTHER (2) OWNED
- ---- -------------- ----------- ------------
<S> <C> <C> <C>
Charles W. Davies, Jr.............................. 185,362 shs. 142 shs. * %
Seth P. Bernstein.................................. 0 -- *
Walter J. Caruba................................... 59,165 -- *
Lathan M. Ewers, Jr................................ 5,025 2,400 *
John M. Franck..................................... 756,860 141,233 3.04
Irving M. Groves, Jr............................... 60,802 44,386 *
H. Richard Hunnicutt, Jr........................... 35,000 -- *
F. Kenneth Iverson................................. 5,000 -- *
Bruce M. Jacobson (3).............................. 4,500 -- *
B. Alvin Ratliff................................... 95,015 -- *
O. Randolph Rollins................................ 95,286 472,008 1.93
Richard M. Simmons, Jr............................. 182,921 615 *
John J. Smith...................................... 62,264 47 *
Executive officers and directors as a group
(19 persons including those named above)......... 1,653,911 663,531 7.85%
Piedmont Company, c/o Piedmont Trust Bank
P. O. Box 4751, Martinsville, Virginia........... 1,597,625(4) 5.45%
Pioneering Management Corporation,
60 Main Street, Boston, Massachusetts............ 2,873,500(5) 9.80%
</TABLE>
________________
* Less than 1%
(1) Includes shares that may be acquired by certain of the Company's officers
within 60 days under the Company's stock option plans.
(2) Includes shares (a) owned by or with certain relatives; (b) held in various
fiduciary capacities; and (c) held by certain corporations.
(3) Mr. Jacobson is the designee of Simon Trust Partnership No. 3, Herbert Simon
Trust No. 3, and L. G. Sale Corporation, Inc., which own 37,500 shares,
37,500 shares and 75,000 shares, respectively, of the Series B Preferred
Stock which are convertible into an aggregate of 1,496,260 shares (4.78%) of
Common Stock.
(4) As reported in Schedule 13G filed by Piedmont Company dated January 30,
1997.
(5) As reported in Schedule 13G filed by Pioneering Management Corporation,
January 23, 1997.
2
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Corporation's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, file with the
Securities and Exchange Commission initial reports of ownership and reports of
change in ownership of Common Stock and other equity securities of the Company.
The same persons are also required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms that they file.
Based solely on its review of the forms required by Section 16(a) of the
Securities Exchange Act of 1934 that have been received by the Company or
written representations from certain reporting persons that no annual statements
on Form 5 were required because of late filing, the Company believes that all
filing requirements applicable to its officers, directors and beneficial owners
of greater than 10% of its Common Stock have been complied with.
ELECTION OF DIRECTORS
Proxies will be voted for the election of eight nominees as directors to serve
until the 1998 Annual Meeting of Stockholders. The election of each nominee for
director requires the affirmative vote of the holders of a plurality of the
shares cast in the election of directors. Votes that are withheld and shares
held in street name that are not voted in the election of directors will not be
included in determining the number of votes cast. All of the nominees are
presently members of the Board. The Board of Directors has no reason to believe
that any of the nominees will be unavailable for service if elected, but if any
are unavailable, proxies will be voted for such substitute as the Board may
designate.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
Seth P. Bernstein................................ 36 1997
Charles W. Davies, Jr............................ 48 1990
Lathan M. Ewers, Jr.............................. 55 1993
John M. Franck................................... 44 1984
H. Richard Hunnicutt, Jr......................... 58 1981
F. Kenneth Iverson............................... 71 1995
Bruce M. Jacobson................................ 47 1992
Richard M. Simmons, Jr........................... 70 1973
</TABLE>
SETH P. BERNSTEIN was elected a director by the Board of Directors on February
4, 1997. He is a Managing Director of and Head of the Leveraged Finance Group of
J. P. Morgan & Company, Inc., New York. Mr. Bernstein has been employed by J. P.
Morgan since 1984.
CHARLES W. DAVIES, Jr. became President and Chief Executive Officer on January
1, 1995, after serving as President and Chief Operating Officer since January
1991, and prior thereto as Executive Vice President since December 1989.
Lathan M. Ewers, Jr. has been a partner since 1976 in Hunton & Williams,
Richmond, Virginia, counsel to the Company.
JOHN M. FRANCK was Vice President of the Company from 1984 until November 1988,
at which time he became President and Chief Operating Officer. Effective January
1, 1991, he became Chairman of the
3
<PAGE>
Board of Directors and Chief Executive Officer. He retired as Chief Executive
Officer on January 1, 1995, and continues as Chairman.
H. RICHARD HUNNICUTT, JR. was Chairman and Chief Executive Officer of the
Company from November 1988 through December 1990, when he retired. He was
President and Chief Operating Officer from 1984 to 1988.
F. KENNETH IVERSON was Chairman and Chief Executive Officer of Nucor, Inc.,
Charlotte, North Carolina, a steel producer, from 1984 through January 1, 1996,
when he retired. He continues as Chairman of Nucor.
BRUCE M. JACOBSON has been a partner in Katz, Sapper & Miller, Indianapolis,
Indiana, certified public accountants, since 1977. In connection with the
Company's acquisition of Logo 7, Inc. on January 31, 1992 and the issuance of
the Series B Preferred Stock, the Company agreed that so long as the previous
shareholders of Logo 7 and their affiliates hold at least 3% of the voting
securities of the Company (on a fully-diluted basis), the Company has agreed to
nominate a designee of such shareholders for election to the Board. Mr. Jacobson
is the designee.
RICHARD M. SIMMONS, JR. is a retired business executive. He was President of
American Furniture Company from 1961 to 1987 and its Chairman from 1974 to 1986.
He is a director of MainStreet BankGroup Incorporated, a Martinsville-based bank
holding company.
COMMITTEES OF THE BOARD
The standing committees of the Board of Directors are the Audit Committee, the
Nominating Committee and the Executive Compensation Committee. The Audit
Committee reviews with management and the Company's auditors the scope of the
annual audit, the results of the audit and the Company's internal accounting and
control systems. The Audit Committee also recommends to the full Board of
Directors the auditors to be appointed by the Board (subject to stockholder
ratification) and reviews the auditors' services to the Company and their fees.
The Nominating Committee reviews the qualifications of possible candidates
recommended by stockholders, provided that stockholder recommendations are
submitted in writing addressed to the Secretary of the Company, are accompanied
by statements signed by the recommended candidates of their willingness to
serve, if elected, and are received not later than 120 days before the date that
proxy material is mailed to stockholders for the annual meeting of stockholders
at which the recommended candidates, if approved by the Nominating Committee and
the incumbent Board of Directors, would be nominated by the Board for election
by the stockholders. The Executive Compensation Committee administers the
Company's stock option plans and other incentive programs, approves or
recommends to the Board changes in compensation for the Chief Executive Officer
and approves all Company employee benefit programs.
The members of Committees of the Board are:
AUDIT COMMITTEE -- Irving M. Groves, Jr. and Bruce M. Jacobson
NOMINATING COMMITTEE -- H. Richard Hunnicutt, Jr., F. Kenneth Iverson and John
M. Franck
EXECUTIVE COMPENSATION COMMITTEE -- Lathan M. Ewers, Jr., Bruce M. Jacobson and
Richard M. Simmons, Jr.
<PAGE>
The Board of Directors held four regular meetings and two special meetings
during the fiscal year ended December 28, 1996. The Audit Committee held four
meetings during the year, the Executive Compensation Committee held two
meetings, and the Nominating Committee held one meeting.
COMPENSATION OF DIRECTORS
Directors of the Company who are not full-time employees are paid a fee of
$2,500 for each fiscal quarter. In addition, they are paid $1,000 for each Board
meeting attended and $1,000 for each Committee meeting attended which does not
occur on the same date as a Board meeting day. They are paid $500 for each
Committee meeting attended that does occur on the same day as a Board meeting.
The Board of Directors has adopted the 1997 Directors Compensation Plan, which
permits directors to defer their retainer and meeting fees for the purchase of
the Company's Common Stock. Deferred fees are credited with "phantom" Common
Stock valued at fair market value. Directors receive distribution of their
accounts at death, disability, termination of service as a director, or on
six-months' notice. Directors who participate are general unsecured creditors of
the Company for their account balances. At the time account balances are
distributed in the form of Common Stock, directors pay federal and state income
taxes on the Common Stock distributed valued at its fair market value, and the
Company is able to deduct as an ordinary business expense an amount equal to the
fair market value of the stock distributed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1996, Piedmont Trust Bank performed routine banking services for
the Company. John M. Franck is a director of Piedmont Trust Bank. Piedmont Trust
Bank is a subsidiary of MainStreet BankGroup Incorporated (formerly Piedmont
BankGroup). Richard M. Simmons is a director of MainStreet BankGroup.
Multitrade Group, Inc., of which Irving M. Groves, Jr., a director of the
Company, is a shareholder and director, provided the Company with steam energy
in fiscal 1996 for which it was paid $4,485,162.
The Company believes that the terms of the transactions described above are
comparable to terms available for similar transactions with entities
unaffiliated with its officers and directors.
Lathan M. Ewers, Jr. is a partner in the law firm of Hunton & Williams, counsel
to the Company.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table presents information relating to total compensation of the
Chief Executive Officer and the four next most highly compensated executive
officers of the Company during the fiscal year ended December 28, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
- ----------------------------------------------------------------------------- -----------------------------------------
(F) (H)
(A) (D) (E) RESTRICTED (G) ALL
NAME AND (B) (C) BONUS OTHER ANNUAL STOCK OPTIONS/ OTHER
PRINCIPAL POSITION YEAR SALARY (1) COMPENSATION AWARD(S)(1) SARS COMPENSATION
- ------------------ ---- ------- ------ ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles W. Davies, Jr. 1996 $300,000 $87,570 -- 3,020shs. 10,000 shs. --
President and 1995 300,000 -- -- -- 7,500 --
Chief Executive Officer 1994 246,541 -- -- -- 30,000 --
Randolph Rollins 1996 200,004 41,881 -- 1,444 10,000 --
Executive Vice President & 1995 200,004 -- $7,007(2) -- 7,500 --
General Counsel 1994 50,001 -- -- -- 50,000 --
B. Alvin Ratliff 1996 172,800 39,510 -- 1,248 10,000 $288(3)
Vice President, Resources 1995 172,800 -- -- -- 7,500 288(3)
1994 163,800 -- -- -- 10,000
Walter J. Caruba 1996 159,000 33,295 -- 1,148 10,000 --
Vice President, 1995 156,000 -- -- -- 7,500
Sales & Marketing 1994 138,000 -- -- -- 10,000 --
John J. Smith 1996 158,400 33,169 -- 1,144 10,000 --
Vice President, 1995 156,400 2,817 -- -- 7,500
Distribution/Logistics 1994 146,400 5,635 -- -- 10,000 --
and Systems
</TABLE>
________________
(1) Bonus represents cash Incentive Awards under the Consolidated Incentive Plan
(CIP) and Restricted Stock Awards represent Restricted Stock awarded under
the CIP. Shareholders approved the CIP at the 1996 Annual Meeting. The CIP
provides for cash Incentive Awards based primarily on return on assets, with
separate secondary goals for activewear and licensed apparel employees, and
for Restricted Stock Awards equal to 25% of the cash Incentive Award.
Restricted Stock Awards are valued at fair market value at the time of
grant, and vest 20% per year. Holders of Restricted Stock vote the shares
and receive any dividends paid thereon. Accelerated vesting of the shares
occurs in the event of a change in control, death, disability, normal
retirement or other circumstances determined by the Executive Compensation
Committee.
(2) Represents payment of residence relocation reimbursement.
(3) Represents payment of excess life insurance premiums.
6
<PAGE>
The following tables present information concerning stock options granted to the
Chief Executive Officer and the four next most highly compensated executive
officers of the Company and exercises of options by such persons.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------------------------------- ----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL OR BASE EXPIRATION
NAME (SHARES) YEAR PRICE DATE 5% 10%
- ---- -------- --------- -------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Davies, Jr....... 10,000 3.41% $4.875 7/30/01 $13,469 $29,762
O. Randolph Rollins......... 10,000 3.41 4.875 7/30/01 13,469 29,762
B. Alvin Ratliff............ 10,000 3.41 4.875 7/30/01 13,469 29,762
Walter J. Caruba............ 10,000 3.41 4.875 7/30/01 13,469 29,762
John J. Smith............... 10,000 3.41 4.875 7/30/01 13,469 29,762
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FY-END IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE (SHARES) FY-END
--------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Davies, Jr.............. -- -- 127,500 100,000 $ 66,250 $ --
Randolph Rollins................... -- -- 37,500 30,000 56,250 30,000
B. Alvin Ratliff................... -- -- 65,500 -- 48,050 --
Walter J. Caruba................... -- -- 61,000 -- 56,250 --
John J. Smith...................... -- -- 50,500 -- 46,250 --
</TABLE>
7
<PAGE>
RETIREMENT PLAN. The Company maintains for the benefit of its eligible employees
a defined benefit pension plan qualified under section 401(a) of the Internal
Revenue Code. The following table illustrates annual retirement benefits payable
under the plan at the indicated Final Average Compensation and Credited Service
levels, assuming retirement at age 65 in 1996:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS PAYABLE FOR CREDITED SERVICE OF
----------------------------------------------------------------------
FINAL AVERAGE EARNINGS 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- ---------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000................ $10,200 $20,400 $ 30,600 $ 35,600
150,000................ 16,200 32,400 48,600 56,100
200,000................ 22,200 44,400 66,600 76,600
250,000................ 28,200 56,400 84,600 97,100
300,000................ 34,200 68,400 102,600 117,600
400,000................ 46,200 92,400 138,600 158,600
</TABLE>
The benefits shown are annual payments based on an employee attaining age 65
during the 1996 plan year. Under current provisions of the Internal Revenue
Code, these amounts are limited to $120,000. Compensation is limited to
$150,000. The amounts in the table are based upon the formula in the current
Salaried Plan assuming retirement after attainment of normal retirement age. In
no case will the benefit amount be less than the minimum accrued benefit at May
31, 1994 based on the 401(a)(17) compensation limit of $235,840 plus additional
accruals for service after May 31, 1994. Benefits under the Retirement Plan are
not subject to any deduction for Social Security or other offset amounts.
The number of credited years of service for each person named in the Summary
Compensation Table are as follows: Charles W. Davies, Jr. -- 20 years, O.
Randolph Rollins -- 2 years, B. Alvin Ratliff -- 28 years, John J. Smith -- 12
years, and Walter J. Caruba -- 19 years.
The Company maintains a supplemental benefit plan to provide key management
personnel who have satisfied the eligibility requirements with supplemental
retirement benefits, including a retirement benefit which, when aggregated with
the benefit available under the retirement plan, is equivalent to 50% of their
final average earnings for 30 years of service.1 The eligibility requirements
include being 100% vested under the retirement plan. The majority of this
benefit will be funded through the retirement plan, with the balance being
funded by the Company through a supplemental nonqualified program which is
funded through the purchase of life insurance policies on each covered
individual. Benefits under the supplemental benefit plan are fully vested after
five years of service. The estimated annual benefits under the supplemental
benefit plan for each officer named in the Summary Compensation Table as of
December 28, 1996 are as follows: O. Randolph Rollins -- $0, Charles W. Davies,
Jr. -- $58,165, B. Alvin Ratliff -- $61,195, John J. Smith -- $18,715 and Walter
J. Caruba -- $27,510.
_______________________
/1/ N.B. The Plan actually provides an accrual of 1.66% per year for up to 40
years of service.
8
<PAGE>
EMPLOYMENT CONTRACTS AND EMPLOYMENT CONTINUITY AGREEMENTS
The Company has entered into employment continuity agreements with the five
officers named in the Summary Compensation Table, which provide for their
continued employment in the event of a change in control of the Company and the
payment of compensation and benefits if their employment is terminated following
a change in control. The Board of Directors believes that these agreements will
enable key employees to conduct the Company's business with less concern for
personal economic risk when faced with a possible change in control. The Board
believes the agreements also should enhance the Company's ability to attract new
key executives as needed.
The agreements define "change in control" as occurring when a person becomes the
owner of 20% or more of the Company's voting securities or when there is a
change in a majority of the members of the Board of Directors, direct or
indirect, as a result of a cash tender or exchange offer, a merger or other
business combination, a sale of assets, a contested election of directors or a
combination of such transactions. Upon a change in control, the Company agrees
to continue the employee's employment with responsibilities, compensation and
benefits identical to or greater than those prior to the change in control until
the earlier of the third anniversary following the change in control or the
employee's normal retirement date. If employment is terminated without cause by
the Company during this period, or if the employee voluntarily terminates
employment within six months after receiving lesser responsibilities,
compensation or benefits or after being relocated without his consent, and the
employee has made an offer to work that has been rejected by the Company, the
Company must pay the employee compensation as follows: (i) three times the
employee's annual base salary as of his termination date, (ii) three times the
employee's average incentive bonus payable for the two fiscal years prior to the
termination date, (iii) cash or property due as a result of exercise of stock
options, and (iv) amounts the employee is entitled to receive under the
Company's tax-qualified benefit plans and, at the employee's expense, health
care coverage under welfare plans. This compensation will be reduced, if
necessary, to assure that any payments would not be "excess parachute payments"
under the Internal Revenue Code, which imposes significant penalties on payments
under such severance agreements which equal or exceed 300% of an employee's
average annual compensation during the five most recent taxable years ending
prior to a change in control. The Company must pay all legal fees and expenses
incurred by the employee in seeking to obtain these benefits. All agreements
continue in effect from year to year unless the Company notifies the employee
before an anniversary date that the agreement will terminate. The Company has
entered into similar agreements with other members of management.
EXECUTIVE COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
THIS REPORT BY THE EXECUTIVE COMPENSATION COMMITTEE IS REQUIRED BY RULES OF THE
SECURITIES AND EXCHANGE COMMISSION. IT IS NOT TO BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT WHICH INCORPORATES BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934, AND IT IS NOT TO BE OTHERWISE DEEMED FILED UNDER EITHER
SUCH ACT.
Three directors comprise the Executive Compensation Committee of the Board of
Directors. None of these directors serves on the board of the other committee
member's company or organization and none of the
9
<PAGE>
executive officers of Tultex serve on the board of any committee member's
organization. The Committee has access to outside consultants and counsel.
The Committee oversees three elements of executive compensation: base pay or
salary, annual performance bonus, and long-term compensation, which consists of
a stock option plan approved by shareholders. The Committee seeks to provide a
competitive compensation package that enables the Company to attract and retain
key executives, to integrate pay programs with the business objectives of the
Company, and to link individual executive compensation with the Company's
performance. The Committee surveys other comparable companies and believes that
Tultex's current executive compensation generally is in line with comparable
companies.
In late 1995, the Company engaged William M. Mercer Incorporated, an executive
compensation consulting firm, to assist the Committee in devising a new
incentive program for executive officers. The resulting Consolidated Incentive
Plan was approved by the shareholders at the 1996 Annual Meeting, retroactive to
the beginning of the 1996 fiscal year. The incentive awards discussed below
reflect implementation of the Consolidated Incentive Plan in the fiscal year
ended December 28, 1996.
BASE PAY. The salary paid to the Company's executives is targeted to be
competitive with related industry companies of similar size, taking into account
the responsibilities and experience of individual officers. In general, the base
salaries are fixed at lower levels to emphasize result-oriented factors
reflected in a bonus potential and the value of stock options. The Committee
reviews salaries and pay ranges for the named executives, and salaries may be
increased based on the Committee's assessment of an individual's performance and
contributions to Tultex's goals. All of the Company's executive employees were
eligible for 1996 base pay increases and, upon the recommendation of the chief
executive officer, the Committee approved increases in salary for the officers
named in the Summary Compensation Table, other than the chief executive officer,
in the range of $8,000 to $20,000 a year, to become effective in the period
November 1, 1996 through February 1, 1997.
INCENTIVE AWARDS. The Consolidated Incentive Plan enables the Company's senior
executives to earn cash Incentive Awards based primarily on return on assets,
with separate secondary goals for activewear and licensed apparel employees.
Approximately 630 officers and employees are eligible to receive cash Incentive
Awards. Based on 1996 actual results, the Company paid cash Incentive Awards
shown in the Summary Compensation Table to the five named executives. As
discussed in the next paragraph, the Consolidated Incentive Plan also provides
for Restricted Stock Awards equal to 25% of the cash Incentive Award as
long-term incentive for executive officers.
LONG-TERM INCENTIVE. The Company awards long-term compensation through its Stock
Option Plan and as Restricted Stock Awards under the Consolidated Incentive
Plan. Approximately 630 officers and employees are eligible to receive grants
under the stock option plan, including the five named executives. Options
normally extend for 10 years, are priced at fair market value on the date of
grant, and are intended to provide incentive for future performance rather than
reward past performance. Together with base pay and cash Incentive Awards, the
Committee considers the record of comparable companies in determining grants to
be made to the named executives. In 1996, the Committee recommended and the
Board of Directors approved options for the named executives as reflected in the
Option Grants in Last Fiscal Year Table. The options granted to these five
officers represent 17.05% of options granted to employees in
10
<PAGE>
1996. Restricted Stock Awards equal to 25% of the cash Incentive Award are
valued at fair market value at the time of the grant, and vest 20% per year
commencing in 1997. Restricted Stock Awards for fiscal 1996 to the five named
executives are shown in the Summary Compensation Table. Holders of Restricted
Stock vote the shares and receive any dividends paid thereon, and accelerated
vesting of the shares occurs in the event of a change of control, death,
disability, normal retirement or other circumstances determined by the
Committee.
1996 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER. Charles W. Davies, Jr. was
appointed chief executive officer effective January 1, 1995. In recognition of
his increased responsibilities, Mr. Davies' annual salary was increased to
$300,000 effective January 1, 1995. In setting Mr. Davies' base salary, the
Committee compares his salary to the salaries of other chief executive officers
in the Company's peer group, including those included in the performance graph.
Mr. Davies was paid at the same annual rate in 1996, and is currently being paid
at the same annual rate in 1997. Mr. Davies is eligible to participate in the
same bonus and long-term executive compensation plans as the other named
executives. The Committee's approach to setting Mr. Davies' target annual
compensation is to set a compensation level commensurate with his
responsibilities and the objectives of his position that would be competitive
with other textile and apparel companies of comparable size.
EXECUTIVE COMPENSATION COMMITTEE
Lathan M. Ewers, Jr.
Bruce M. Jacobson
Richard M. Simmons, Jr.
Dated: March 21, 1997
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Lathan M. Ewers, Jr., a member of the Executive Compensation Committee, is a
partner of Hunton & Williams, counsel to the Company.
11
<PAGE>
PERFORMANCE OF COMPANY'S COMMON STOCK
The following graph compares the performance of the Company's Common Stock to
(1) the Standard & Poor 500 Index and (2) a Peer Group Index for the Company's
last five fiscal years. The Company's Peer Group consists of Oneita Industries,
Inc., Russell Corporation, Signal Apparel Co., Techknits, Inc. and the Company.
The graph assumes that $100 was initially invested on December 31, 1991 in the
Company's Common Stock and in each index and that all dividends were reinvested.
COMPARISON OF FIVE YEAR
CUMULATIVE SHAREHOLDER RETURN
[Performance Graph appears here]
<TABLE>
<CAPTION>
Dec. 91 Dec. 92 Dec. 93 Dec. 94 Dec. 95 Dec. 96
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Tultex $100.00 $130.83 $108.62 $76.33 $ 64.59 $109.61
S&P 500 Index 100.00 107.62 118.46 120.03 165.13 203.05
Peer Group 100.00 93.20 79.16 85.23 75.09 80.83
</TABLE>
12
<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Price Waterhouse LLP, independent certified
public accountants, to examine the financial statements of the Company for the
fiscal year ending January 3, 1998. Shareholders will be asked to ratify this
appointment at the Annual Meeting. Ratification of Price Waterhouse LLP requires
the affirmative vote of a majority of Common Stock and Series B Preferred Stock
(voting together) voted at the Annual Meeting. Price Waterhouse LLP has been the
Company's independent accountants since 1971.
Representatives of Price Waterhouse LLP are expected to be present at the
meeting and will be given an opportunity to make a statement if they desire to
do so. They are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF PRICE
WATERHOUSE LLP AS AUDITORS.
STOCKHOLDER PROPOSALS
Stockholders having proposals which they desire to present at next year's annual
meeting should, if they desire that such proposals be included in the Board of
Directors' proxy and proxy statement relating to such meeting, submit such
proposals in time to be received by the Company at its principal executive
offices in Martinsville, Virginia, not later than November 14, 1997. To be so
included, all such submissions must comply with the requirements of Rule 14a-8
of the Securities and Exchange Commission under the Securities Exchange Act of
1934 and the Board of Directors directs the close attention of interested
stockholders to that Rule.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matter to come before the meeting other than those stated in the notice of the
meeting. As to other matters, if any, that may properly come before the meeting,
it is intended that proxies in the accompanying form will be voted in accordance
with the best judgment of the persons named therein.
We hope that you will be able to attend this meeting in person, but if you
cannot be present, please execute the enclosed proxy and return it in the
accompanying envelope (no postage required) as promptly as possible. Your stock
will be voted in accordance with the instructions you give on the proxy, and in
the absence of any such instructions will be voted FOR election of directors and
FOR the ratification of appointment of auditors, as described herein.
Kathy H. Rogers
Secretary
Martinsville, Virginia
March 21, 1997
13
<PAGE>
COMMON STOCK PROXY
This Proxy is Solicited on behalf of the Board of Directors.
The undersigned hereby appoints John M. Franck, Kathy H. Rogers and Regina C.
Haynes, and each of them, with full power of substitution to each. Proceeds to
vote all Common Stock of the undersigned in Tulex Corporation at the annual
meeting to be held on April 29, 1997, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
(1) Election of Directors
[_] FOR Charles W. Davies, JR., Lathan M. Evers, Jr., John M.
Franck, Seth P. Bernstein, H. Richard Hunnicutt, Jr.,
F. Kenneth Iverson, Bruce M. Jocobson, Richard M.
Simmons, Jr., excepted as marked to the contrary.
[_] VOTE WITHHELD To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in
the 1st above.
(2) [_] FOR Ratification of the Board of Directors' appointment of
Price Waterhouse LLP, Independent accountants, as
auditors of the Company.
[_] AGAINST
[_] ABSTAIN
(3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
The proxy when properly executed will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted for
Proposals 1 and 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporation name
by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person. Please sign and return, whether or not
you plan to attend the meeting.
___________________________ ___________________________ --------, 1997
Signature Signature if held jointly Dated
