UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended OCTOBER 2, 1999
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
-----------------------------------
Commission file number 1-8016
TULTEX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0367896
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 Commonwealth Boulevard, P. O. Box 5191, Martinsville, Virginia 24115
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 540-632-2961
------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No X
---- -----
<PAGE>
2
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
34,675,681 shares of Common Stock, $1 par value, as of December 3, 1999
<PAGE>
3
PART I. FINANCIAL INFORMATION
ITEM 1.
TULTEX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED - $000'S OMITTED EXCEPT IN
SHARES AND PER SHARE DATA) OCTOBER 2, 1999 (AND OCTOBER 3, 1998)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- ---------------------------------
OCTOBER 2, 1999 October 3, 1998 OCTOBER 2, 1999 October 3, 1998
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net Sales $ 120,544 $ 136,409 $ 278,234 $ 369,075
Cost of Products Sold 131,432 118,347 271,961 307,968
--------- --------- --------- ---------
Gross Profit (10,888) 18,062 6,273 61,107
Selling, General and Administrative 13,959 14,929 39,607 60,818
Restructuring Costs (Note 10) 2,625 -- 2,625 --
--------- --------- --------- ---------
Operating Income (Loss) (27,472) 3,133 (35,959) 289
Other (Income) Expense:
Interest Expense 6,475 7,318 19,132 22,360
Interest Income and Other, Net 63 (261) (1,848) (1,029)
Asset Impairment (Note 10) 1,435 -- 1,435 --
Loss on Sale of Subsidiaries -- -- 945 16,304
--------- --------- --------- ---------
Income (Loss) Before Income Taxes and
Extraordinary Item (35,445) (3,924) (55,623) (37,346)
Provision (Benefit) for Income Taxes -- (1,530) (7,466) (14,565)
--------- --------- --------- ---------
Income (Loss) Before Extraordinary Item (35,445) (2,394) (48,157) (22,781)
Extraordinary Gain on Extinguishment of Debt
(Net of Income Tax of $15,285) (Note 4) -- -- 24,938 --
--------- --------- --------- ---------
NET INCOME (LOSS) (35,445) (2,394) (23,219) (22,781)
Preferred Dividend Requirement (Note 5) (31) (55) (92) (349)
--------- --------- --------- ---------
Balance Applicable to Common Stock $ (35,476) $ (2,449) $ (23,311) $ (23,130)
========= ========= ========= =========
Basic and Diluted Earnings Per Common Share:
Income (Loss) Before Extraordinary Item $ (1.04) $ (.08) $ (1.54) $ (.77)
Extraordinary Item -- -- .80 --
--------- --------- --------- ---------
Net Income (Loss) $ (1.04) $ (.08) $ (.74) $ (.77)
========= ========= ========= =========
Dividends Per Common Share (Note 5) $ .00 $ .00 $ .00 $ .00
</TABLE>
<PAGE>
4
TULTEX CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED - $000'S OMITTED)
OCTOBER 2, 1999 (AND JANUARY 2, 1999)
<TABLE>
<CAPTION>
Assets OCTOBER 2, 1999 January 2, 1999
- ------ --------------- ---------------
<S> <C> <C>
Current Assets:
Cash $ 1,119 $ 5,769
Accounts Receivable - Net of Allowance for Doubtful
Accounts $4,430 (1999) and $4,106 (1998) 87,974 74,599
Inventories (Note 3) 185,272 176,818
Prepaid Expenses 3,533 1,913
Income Taxes Refundable -- 8,782
Deferred Tax Assets -- 4,534
--------- ---------
Total Current Assets 277,898 272,415
Property, Plant and Equipment, Net of Depreciation 94,103 107,001
Intangible Assets 21,601 22,777
Deferred Tax Assets -- 2,419
Other Assets 38,619 42,716
--------- ---------
Total Assets $ 432,221 $ 447,328
========= =========
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Accounts Payable $ 29,187 $ 23,448
Accrued Expenses 19,155 12,815
Revolving Credit Facility (Notes 1, 4 and 12) 123,848 60,000
Long-Term Borrowings - Current Portion (Notes 1, 4, 9 and 12) 126,514 --
--------- ---------
Total Current Liabilities 298,704 96,263
Long-Term Borrowings (Notes 1, 4, 9 and 12) -- 199,405
Deferred Tax Liabilities 412 --
Other Liabilities 5,972 5,222
Stockholders' Equity:
5% Cumulative Preferred Stock (Note 5) 198 198
Series B, $7.50 Cumulative Convertible Preferred Stock (Note 5) 1,500 1,500
Common Stock (Note 5) 34,676 30,050
Capital in Excess of Par Value 6,375 7,095
Retained Earnings 89,768 113,079
Accumulated Other Comprehensive Income (5,085) (5,085)
Unearned Stock Compensation (21) (35)
--------- ---------
127,411 146,802
Less Notes Receivable - Stockholders 278 364
--------- ---------
Total Stockholders' Equity 127,133 146,438
--------- ---------
Total Liabilities and Stockholders' Equity $ 432,221 $ 447,328
========= =========
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
TULTEX CORPORATION
===================================================================================================================
CONSLIDATED STATEMENT OF CASH FLOWS (UNAUDITED - $000'S OMITTED)
NINE MONTHS ENDED OCTOBER 2, 1999 (AND OCTOBER 3, 1998)
Nine Months Ended
------------------------------------------
OCTOBER 2, 1999 October 3, 1998
<S> <C> <C>
Operations:
Net Income (Loss) $ (23,219) $ (22,781)
Items Not Requiring (Providing) Cash:
Depreciation 13,478 14,735
Amortization 4,573 2,747
Deferred Income Taxes 7,365 --
Loss on Sale of Subsidiaries 945 16,304
Extraordinary Gain (40,223) --
Asset Impairment 1,435 --
Other Non-Cash Items (53) 94
(Gain) Loss on Sale of Assets (210) (99)
Changes in Assets and Liabilities
Accounts Receivable (13,375) (2,701)
Inventories (8,454) (52,794)
Prepaid Expenses (1,466) 1,714
Accounts Payable and Accrued Expenses 11,134 (1,260)
Income Taxes Refundable 8,782 (17,256)
Other Long-Term Liabilities 750 695
--------- ---------
Cash Provided (Used) by Operations (38,538) (60,602)
--------- ---------
Investing Activities:
Capital Expenditures (3,834) (6,980)
Changes in Other Assets 2,382 (1,931)
Business Acquisition -- (2,743)
Proceeds from Sale of Subsidiaries -- 98,531
Proceeds from Sale of Property and Equipment 1,017 100
--------- ---------
Cash Provided (Used) by Investing Activities (435) 86,977
--------- ---------
Financing Activities:
Issuance (Payment) of Short-Term Borrowings -- (5,000)
Issuance (Payment) of Secured Revolving Credit Facility Borrowings 123,848 --
Issuance (Payment) of Unsecured Revolving Credit Facility (45,000) (15,600)
Borrowings
Payments on Long-Term Borrowings (41,131) (619)
Cost of Debt Issuance (3,480) --
Cash Dividends -- (321)
Proceeds from Stock Plans 86 181
Purchase of Preferred Stock -- (6,000)
--------- ---------
Cash Provided (Used) by Financing Activities 34,323 (27,359)
--------- ---------
Net Increase (Decrease) in Cash (4,650) (984)
Cash at End of Prior Year 5,769 2,507
--------- ---------
Cash at End of Period $ 1,119 $ 1,523
========= =========
</TABLE>
<PAGE>
6
TULTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 2, 1999
NOTE 1 - PETITION FOR REORGANIZATION UNDER CHAPTER 11
On December 3, 1999, the Company filed voluntary petitions to reorganize under
Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court for the
Western District of Virginia, Lynchburg Division, Case # 99-03626. The Company
has obtained $150 million of senior secured super priority debtor-in-possession
("DIP") financing from Bank of America, N.A. and other lenders ("BA"). The
Company also announced it closed six manufacturing facilities in Virginia, North
Carolina and Jamaica, closed its distribution center in Martinsville, Virginia,
downsized the manufacturing operation in Martinsville and is closing 25 retail
store outlets. This immediate downsizing of the Company resulted in the loss of
approximately 2,600 jobs. The downsizing plans were developed subsequent to
October 2, 1999 and, accordingly, the Company will record restructuring and
asset impairment charges relating to the plant closings and employee reductions
in the quarter ending January 1, 2000.
The Company is currently operating its business as a debtor-in-possession,
subject to the supervision of the Bankruptcy Court. As a debtor-in-possession,
the Company is authorized to operate its business but not engage in transactions
outside the normal course of business without approval, after notice and
hearing, of the Bankruptcy Court. In addition, the Company may reject executory
contracts and lease obligations, and parties affected by these rejections may
file claims with the Bankruptcy Court. As part of its "first day orders", the
Bankruptcy Court approved authorization to retain various professionals to
assist in the reorganization; to pay certain pre-petition employee wages,
salaries and related items; to pay certain pre-petition customer obligations; to
pay certain pre-petition claims of foreign creditors and certain critical
vendors; and to close certain stores, which will result in conducting store
closing sales and rejecting certain real property leases. The Court also
approved the Company's DIP financing on an interim basis.
The accompanying consolidated interim financial statements have been prepared on
a going concern basis, which contemplates continuity of operations, realization
of assets and satisfaction of liabilities in the ordinary course of business.
The DIP financing replaces the asset-based secured facility dated May 7,1999
with BA. The DIP financing will be used to refinance certain debt owed on the
previous asset-based secured facility, fund working capital requirements and
guarantee letter of credit obligations during the pendency of the Chapter 11
Case, and fund general corporate purposes in the ordinary course of business. BA
will lend funds subject to availability under a borrowing base calculated as a
percentage of eligible accounts receivable and inventories, provided that the
total amount advanced will not exceed $150 million. The Company has the option
of setting interest rates equal to either the Prime Rate or London Interbank
Offered Rate ("LIBOR") plus applicable margins. The applicable margin for a
Prime Rate loan is 1.75% and 3.75% for a LIBOR based loan. The Company shall pay
a fee of .375% per year on any unused borrowings. A $12 million sublimit under
the facility is available for letters of credit.
Significant financial covenants under the DIP financing include a minimum sales
covenant and a maximum loan balance covenant. Other covenants place restrictions
on the Company's ability to incur additional indebtedness, pay dividends, create
liens or other encumbrances, to make certain payments, investments,
<PAGE>
7
loans and guarantees and to sell or otherwise dispose of its assets.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements furnished in this
quarterly 10-Q Report reflect all adjustments, consisting only of normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair statement of the results of the interim periods. The unaudited consolidated
financial statements should be read in conjunction with the Company's annual
report on Form 10-K for the year ended January 2, 1999. The balance sheet,
statement of operations and statement of cash flows included in this 10-Q have
been prepared from the Company's records and are subject to audit and year-end
adjustments.
As a result of the Company's petition for reorganization under Chapter 11, the
Company will be required to present its future financial statements in
accordance with AICPA Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code."
Certain prior year amounts have been reclassified to conform with current year
presentation.
NOTE 3 - INVENTORIES
A summary of inventories by component follows.
(In thousands of dollars)
<TABLE>
<CAPTION>
OCTOBER 2, 1999 January 2, 1999
------------------------- --------------------------
<S> <C> <C>
Raw Materials $841 $2,952
Goods-in-Process 16,231 21,688
Finished Goods 159,476 143,506
Supplies 8,724 8,672
------------------------- --------------------------
Total Inventory $185,272 $176,818
========================= ==========================
</TABLE>
NOTE 4 - TOTAL BORROWINGS
Total borrowings at October 2, 1999 includes Senior Notes of $115.0 million,
$11.5 million of convertible subordinated notes and the Company's asset-based
secured credit facility, which has an outstanding balance of $123.8 million at
October 2, 1999.
On May 10, 1999 the Company entered into an asset-based secured facility which
had a maximum borrowing availability of $150 million with BA. This facilty has
now been replaced with the DIP financing discussed in Note 1. Proceeds from the
asset-based secured facility were used to pay all outstanding amounts under the
Company's former $87.5 million unsecured revolving credit facility and fund a
partial tender offer for the 9 5/8% and 10 5/8% Senior Notes. As a result of the
refinancing the Company purchased $70 million face value of the notes for $42
million and retired the former revolving credit facility borrowings and accrued
interest of $54.5 million by a payment of $39.5 million in cash and the
forgiveness of $15.0 million of borrowings by the former lenders. Interest
payments on these notes were changed to quarterly instead of semiannually.
Significant financial covenants of the asset-based secured facility included the
requirement to maintain a
<PAGE>
8
minimum fixed charge coverage ratio on a quarterly basis, the requirement to
maintain EBITDA at certain levels during the second and third quarters of fiscal
year 1999 and annual limitations on capital expenditures. Other covenants placed
restrictions on the Company's ability to incur additional indebtedness, pay
dividends, create liens or other encumbrances, to make certain payments,
investments, loans and guarantees and to sell or otherwise dispose of a
substantial portion of its assets.
The Company was not in compliance with financial covenants contained in its
asset-based secured credit facility and its Senior Notes as of October 2, 1999,
and did not obtain waivers relating to the non-compliance. On December 3, 1999
the Company filed voluntary petitions to reorganize under Chapter 11 of the
Federal Bankruptcy Code (See Note 1), which also constituted an event of default
under its convertible subordinated notes. Accordingly, all amounts under
the Senior Notes and convertible subordinated notes have been reported on
the balance sheet as current liabilities.
As a result of the refinancing on May 10, 1999 referenced above, the Company
recorded an extraordinary gain on the extinguishment of debt of $24.9 million,
or $.80 per share, net of income taxes of $15.3 million, in the quarter ended
July 3,1999.
On July 15, 1999 the holders of the Company's $14.4 million convertible
subordinated notes exercised their options to convert 20% of the original
principal amount of the notes into 4,609,600 shares of the Company's common
stock. The number of shares were determined by dividing the principal amount of
the notes converted by the closing price of the Company's common stock on the
business day prior to the submission of notes for conversion. The conversion
provision of the notes allows the noteholders to convert annually, beginning
April 15, 1999, up to 20% of the original principal amount of the notes into the
Company's common stock at the then market price. The annual option to convert up
to 20% of the original principal amount is noncumulative.
NOTE 5 - STOCKHOLDERS' EQUITY
The 5% cumulative preferred stock is $100 par value, with 22,000 shares
authorized, and 1,975 shares issued and outstanding as of October 2, 1999 and
January 2, 1999. The stated quarterly dividend has not been paid since July 1,
1998 due to restrictions in the indentures governing the Company's 9 5/8% and 10
5/8% Senior Notes.
The Series B, $7.50 cumulative, convertible preferred stock is $100 stated
value, with 150,000 shares authorized, and 15,000 shares issued and outstanding
as of October 2, 1999 and January 2, 1999. The stated quarterly dividend has not
been paid since July 1, 1998 due to restrictions in the indentures governing the
Company's 9 5/8% and 10 5/8% Senior Notes.
The common stock is $1 par value, 60,000,000 shares authorized, with shares
issued and outstanding of 34,676,129 as of October 2, 1999 and 30,050,155 as of
January 2, 1999. On July 15, 1999 the holders of the Company's $14.4 million
convertible subordinated notes exercised their options to convert 20% of the
original principal amount of the notes into 4,609,600 shares of the Company's
common stock (see Note 4).
Holders of the Company's 9 5/8% and 10 5/8% Senior Notes have been issued
warrants for 15,525,000 shares of the Company's common stock. Two-thirds of
these warrants have an exercise price of $.8125 per share, and the remaining
one-third have an exercise price of $1.425 per share. The warrants have an
8-
<PAGE>
9
year term, and may be exercised by payment of cash or by tender of notes for an
amount equal to the exercise price of the warrants.
NOTE 6 - EARNINGS PER SHARE
Income (loss) per common share is computed using the weighted average common
shares outstanding. The weighted average common shares outstanding for the three
months ended October 2, 1999 and October 3, 1998 were 34,117,384 and 30,004,249,
respectively. The weighted average common shares outstanding for the nine-month
periods were 31,405,724 and 29,923,542 respectively. The weighted average common
shares outstanding are the same for both basic and diluted earnings per share.
NOTE 7 - COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS 130 requires that the Company report comprehensive income (loss)
components in a full set of general-purpose financial statements. Comprehensive
income (loss) represents the change in stockholders' equity during the period
from non-owner sources. Currently, other comprehensive income (loss) consists of
a minimum pension liability adjustment. The Company adopted SFAS 130 on January
4, 1998. Total comprehensive loss for the three and nine months ended October 2,
1999 was $35.4 million and $23.2 million, respectively. Total comprehensive loss
for the three and nine months ended October 3, 1998 was $2.4 million and $22.8
million, respectively.
<PAGE>
10
Activity in Stockholders' Equity is as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
Capital Accumulated Unearned Notes Total
Current 5% Series B In Excess Other Stock Receivable- Stock-
Comprehensive Preferred Preferred Common of Par Retained Comprehensive Compen- Stock- holders'
Income Stock Stock Stock Value Earnings Income sation Holders Equity
(Loss) (Loss)
------------- -------- -------- -------- -------- -------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 2, 1999 $198 $1,500 $30,050 $7,095 $113,079 $(5,085) $(35) $(364) $146,438
Collections -
Stockholders'
Notes receivable 86 86
Stock
Compensation 14 14
Restricted
awards
Lost (2) (9) (11)
Issuance of
Common Stock 18 18 36
Conversion of
Convertible
Subordinated
Notes 4,610 (1,729) 2,881
Fair value
Assigned to
Warrants 1,000 1,000
Dividends on
Preferred stock (92) (92)
Comprehensive
Income (loss):
Net income
(loss) $(23,219) (23,219) (23,219)
-------- ---- ------ ------- ------ ------- ------- ---- ----- --------
Balance as of
October 2, 1999 $(23,219) $198 $1,500 $34,676 $6,375 $89,768 $(5,085) $(21) $(278) $127,133
======== ==== ====== ======= ====== ======= ======= ==== ===== ========
</TABLE>
NOTE 8 - SEGMENT REPORTING
The Company currently operates in a single business segment which designs,
manufactures and distributes fleece and jersey apparel. During the year ended
January 2, 1999, the Company exited its LogoAthletic, Inc. and
LogoAthletic/Headwear, Inc. ("LogoAthletic") licensed apparel business. The
segment information reported below reflects the operations of the Company's
ongoing apparel segment separate from the LogoAthletic business operations
("Other") through the date of sale (July 15, 1998). Management evaluates
performance based upon operating earnings before interest and income taxes.
<PAGE>
11
(in thousands of dollars) Apparel Other Consolidated
- --------------------------------------------------------------------------------
THREE MONTHS ENDED OCTOBER 2, 1999
Net sales $ 120,544 $ -- $ 120,544
Operating income (loss) (27,472) -- (27,472)
- --------------------------------------------------------------------------------
Three months ended October 3, 1998
Net sales $ 133,041 $ 3,368 $ 136,409
Operating income (loss) 4,335 (1,202) 3,133
NINE MONTHS ENDED OCTOBER 2, 1999
Net sales $ 278,234 $ -- $ 278,234
Operating income (loss) (35,959) -- (35,959)
- --------------------------------------------------------------------------------
Nine months ended October 3, 1998
Net sales $ 307,540 $ 61,535 $ 369,075
Operating income (loss) 4,494 (4,205) 289
- --------------------------------------------------------------------------------
Reconciling information between reportable segments and the Company's
consolidated totals is shown in the following table:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(in thousands) OCTOBER 2, 1999 October 3, 1998 OCTOBER 2, 1999 October 3, 1998
<S> <C> <C> <C> <C>
Total operating income (loss)
for reportable segments $(27,472) $ 3,133 $(35,959) $ 289
Interest expense 6,475 7,318 19,132 22,360
Interest income and other, net 63 (261) (1,848) (1,029)
Asset impairment 1,435 -- 1,435 --
Loss on sale of subsidiaries -- -- 945 16,304
-------- -------- -------- --------
Income (loss) before income taxes
and extraordinary Item $(35,445) $ (3,924) $(55,623) $(37,346)
======== ======== ======== ========
</TABLE>
<PAGE>
12
NOTE 9 - CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following financial information presents consolidated financial data which
includes (i) the parent company only ("Parent"), (ii) the wholly-owned guarantor
subsidiaries on a combined basis ("Wholly-owned Guarantor Subsidiaries"), (iii)
the wholly-owned non-guarantor subsidiaries on a combined basis ("Wholly-owned
Non-guarantor Subsidiaries"), (iv) the LogoAthletic subsidiaries whose assets
were sold during the third quarter of 1998 ("Subsidiaries Sold") and (v) the
Company on a consolidated basis.
<TABLE>
<CAPTION>
Wholly-owned Wholly-owned
(In thousands of Parent Guarantor Non-guarantor Subsidiaries
dollars) Subsidiaries Subsidiaries Sold Eliminations Consolidated
---------- -------------- -------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
For the three months
ended October 2, 1999
Net sales $108,835 $30,940 $ 20,056 $ - $ (39,287) $120,544
Cost and expenses 140,486 32,885 21,905 - (39,287) 155,989
---------- -------------- -------------- -------------- ------------ --------------
Pretax income (loss) $(31,651) $(1,945) $ (1,849) $ - $ - $(35,445)
---------- -------------- -------------- -------------- ------------ --------------
For the three months
ended October 3, 1998
Net sales $121,838 $5,850 $39,372 $3,358 $(34,009) $136,409
Cost and expenses 128,330 5,352 36,016 4,644 (34,009) 140,333
---------- -------------- -------------- -------------- ------------ --------------
Pretax income (loss) $ (6,492) $ 498 $ 3,356 $(1,286) $ - $ (3,924)
---------- -------------- -------------- -------------- ------------ --------------
For the nine months
ended October 2, 1999
Net sales $242,167 $91,257 $52,501 $ - $ (107,691) $278,234
Cost and expenses 289,318 97,022 55,208 - (107,691) 333,857
---------- -------------- -------------- -------------- ------------ --------------
Pretax income (loss) $(47,151) $(5,765) $(2,707) $ - $ - $ (55,623)
---------- -------------- -------------- -------------- ------------ --------------
For the nine months
ended
October 3, 1998
Net sales $263,562 $17,409 $120,675 $63,072 $ (95,643) $369,075
Cost and expenses 307,116 15,410 110,434 69,104 (95,643) 406,421
---------- -------------- -------------- -------------- ------------ --------------
Pretax income (loss) $(43,554) $ 1,999 $ 10,241 $ (6,032) $ - $ (37,346)
---------- -------------- -------------- -------------- ------------ --------------
As of October 2, 1999
Current assets $248,545 $54,561 $41,788 $ - $ (66,996) $277,898
Noncurrent assets 175,556 15,141 10,543 - (46,917) 154,323
---------- -------------- -------------- -------------- ------------ --------------
Total assets $424,101 $69,702 $52,331 $ - (113,913) $432,221
---------- -------------- -------------- -------------- ------------ --------------
<PAGE>
13
Wholly-owned Wholly-owned
(In thousands of Guarantor Non-guarantor Subsidiaries
dollars) Parent Subsidiaries Subsidiaries Sold Eliminations Consolidated
---------- -------------- -------------- -------------- ------------ --------------
Current liabilities $288,378 $17,212 $42,216 $ - $ (49,102) $298,704
Noncurrent liabilities 13,864 (573) (2,165) - (4,742) 6,384
---------- -------------- -------------- -------------- ------------ --------------
Total liabilities $302,242 $16,639 $40,051 $ - $ (53,844) $305,088
---------- -------------- -------------- -------------- ------------ --------------
As of January 2, 1999
Current assets $232,075 $53,958 $29,638 $ - $(43,256) $272,415
Noncurrent assets 190,194 14,908 10,865 - (41,054) 174,913
---------- -------------- -------------- -------------- ------------ --------------
Total assets $422,269 $68,866 $40,503 $ - $(84,310) $447,328
---------- -------------- -------------- -------------- ------------ --------------
Current liabilities $ 79,551 $11,002 $26,138 $ _ $(20,428) $ 96,263
Noncurrent liabilities 209,288 (495) (438) - (3,728) 204,627
---------- -------------- -------------- -------------- ------------ --------------
Total liabilities $288,839 $10,507 $25,700 $ - $(24,156) $300,890
---------- -------------- -------------- -------------- ------------ --------------
</TABLE>
NOTE 10 - RESTRUCTURING AND ASSET IMPAIRMENT
During the quarter ended October 2, 1999, the Company announced a company-wide
cost reduction plan that includes salaried personnel reductions and the closing
of its Bastian, Virginia sewing facility and its Asheville, North Carolina
fabric manufacturing operation. The Company recorded a pre-tax restructuring
charge of $2.6 million for severance and exit costs related to the personnel
reductions and plant closings. The Company also recorded a pre-tax charge of
$1.4 million to adjust the carrying value of the Bastain and Asheville
facilities to their estimated net realizable values.
NOTE 11 - NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires that an entity recognize
all derivative instruments in the balance sheet at fair value. As amended by
SFAS 137, the provisions of SFAS 133 are effective for fiscal years beginning
after June 15, 2000. Management has not determined the impact of the adoption of
SFAS 133.
NOTE 12 - SUBSEQUENT EVENT
On December 3, 1999, the Company filed voluntary petitions to reorganize under
Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court for the
Western District of Virginia, Lynchburg Division. The Company has obtained $150
million of DIP financing from BA. The Company is currently operating its
business as a debtor-in-possession, subject to the supervision of the Bankruptcy
Court (See Note 1).
<PAGE>
14
ITEM 2
TULTEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OCTOBER 2, 1999
RESULTS OF OPERATIONS
- ---------------------
The following table presents the Company's consolidated statement of operations
as a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------------------------
10/2/99 10/3/98 10/2/99 10/3/98
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Products Sold 109.0 86.8 97.8 83.4
----------- ---------- ----------- -----------
Gross Profit (9.0) 13.2 2.2 16.6
Selling, General and Administrative 11.6 10.9 14.2 16.5
Restructuring Costs 2.2 - .9 -
----------- ---------- ----------- -----------
Operating Income (22.8) 2.3 (12.9) .1
Interest Expense 5.4 5.4 6.9 6.1
Interest Income and Other, Net - (.2) (.6) (.3)
Asset Impairment 1.2 - .5
Loss on Sale of Subsidiaries - - .3 4.4
----------- ---------- ----------- -----------
Income (Loss) Before Income Taxes and (29.4) (2.9) (20.0) (10.1)
Extraordinary Item
Provision (Benefit) for Income Taxes - 1.1 (2.7) 3.9
----------- ---------- ----------- -----------
Income (Loss) Before Extraordinary Item (29.4) (1.8) (17.3) (6.2)
Extraordinary Gain on Extinguishment of Debt - - 9.0 -
=========== ========== =========== ===========
Net Income (Loss) (29.4) % (1.8)% (8.3)% (6.2)%
=========== ========== =========== ===========
</TABLE>
Note: Certain items have been rounded to cause the columns to add to 100%.
THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE EXCHANGE ACT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS INCLUDE THE
FINANCIAL STRENGTH OF THE RETAIL INDUSTRY, THE LEVEL OF CONSUMER SPENDING ON
APPAREL, THE COMPANY'S ABILITY TO PROFITABLY AND TIMELY SATISFY CUSTOMER DEMAND
FOR ITS PRODUCTS, THE COMPETITIVE PRICING ENVIRONMENT WITHIN THE APPAREL
INDUSTRY, THE COMPANY'S SUBSTANTIAL LEVERAGE AND THE RESTRICTIVE COVENANTS IN
ITS BORROWING DOCUMENTS, THE COMPANY'S ABILITY TO OPERATE UNDER THE SUPERVISION
OF THE FEDERAL BANKRUPTCY COURT, THE WILLINGNESS OF THE COMPANY'S VENDORS,
SUPPLIERS AND CUSTOMERS TO DO BUSINESS WITH A COMPANY OPERATING IN BANKRUPTCY,
THE WILLINGNESS OF THE COMPANY'S LENDERS TO WAIVE ANY FUTURE VIOLATIONS OF
FINANCIAL COVENANTS IN ITS BORROWING DOCUMENTS, FLUCTUATIONS IN THE PRICE OF
COTTON AND POLYESTER USED BY THE COMPANY IN THE MANUFACTURE OF ITS PRODUCTS, THE
COMPANY'S RELATIONSHIP WITH ITS PARTIALLY UNIONIZED WORKFORCE AND THE
SEASONALITY AND CYCLICALITY OF THE FLEECEWEAR INDUSTRY. SHOULD ONE OR MORE OF
THESE RISKS OR UNCERTAINTIES MATERIALIZE, ACTUAL RESULTS MAY VARY MATERIALLY
FROM THOSE ESTIMATED, ANTICIPATED OR PROJECTED. ALTHOUGH THE COMPANY BELIEVES
THAT THE EXPECTATIONS REFLECTED BY SUCH FORWARD-LOOKING STATEMENTS WERE OR ARE
REASONABLY BASED ON INFORMATION AVAILABLE TO THE COMPANY AT THE TIME SUCH
STATEMENTS WERE MADE, NO ASSURANCES CAN BE GIVEN THAT SUCH EXPECTATIONS WILL
PROVE TO HAVE BEEN CORRECT. CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S
EXPECTATIONS ARE SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED JANUARY 2, 1999, WHICH IS INCORPORATED HEREIN BY REFERENCE.
<PAGE>
15
Net loss applicable to common stock for the three months ended October 2, 1999
was $35.5 million, or $1.04 per share. Results for the period include a
restructuring and asset impairment charge of $4.1 million, or $.12 per share,
relating to the Company's cost reduction plan. This compares to a net loss
applicable to common stock of $2.4 million, or $.08 per share, for the three
months ended October 3, 1998. Net loss applicable to common stock for the first
nine months of fiscal 1999 was $23.3 million, or $.74 per share. Results for the
nine months include an extraordinary gain, net of income taxes, on the
extinguishment of debt of $24.9 million, or $.80 per share, relating to the
Company's debt refinancing on May 10, 1999. Excluding the extraordinary gain,
the Company reported a net loss applicable to common stock of $55.7 million, or
$1.54 per share. This compares to a net loss applicable to common stock of $23.1
million, or $.77 per share, for the same period in fiscal 1998. The results for
1998 include the operations of LogoAthletic, Inc. and LogoAthletic/Headwear,
Inc. ("LogoAthletic"), subsidiaries whose assets were sold on July 15, 1998, and
a pre-tax loss of $16.3 million (after-tax of $9.9 million, or $.33 per share)
on the sale of those assets. Excluding the loss on sale of LogoAthletic, the
first nine months 1998 net loss applicable to common stock was $13.2 million, or
$.44 per share.
Net sales for the three months ended October 2, 1999 were $120.5 million as
compared to $136.4 million in the comparable period of 1998. The sales decrease
resulted from lower sales in the Company's higher margin branded products and
lower average selling prices due to aggressive selling of excess inventory. For
the nine months to date, sales were $278.2 million as compared to $369.1 million
in the same period in 1998. The sales decrease was primarily due to the sale of
LogoAthletic. On a pro forma basis, excluding LogoAthletic, sales were $39.8
million lower than the comparable period in 1998. The sales decrease resulted
primarily from pricing pressure in jersey products, aggressive selling by the
Company to manage inventories, lower sales in the higher margin branded products
and shipping delays in the second quarter.
Gross profit percentage was a negative (9.0)% for the third quarter of 1999
compared to 13.2% for the same period in 1998. For the nine-month period, the
gross profit percentage was 2.2% as compared to 16.6% for the nine-month period
in 1998. The primary reasons for the decreases were the aforementioned lower
sales in the Company's higher margin products, aggressively selling of excess
inventory, shipping delays involving higher margin products in the second
quarter and pricing pressures in both jersey and fleece products. Also
contributing to the decline was the establishment of inventory reserves related
to the Company's initiatives to reduce inventory levels, and unfavorable
variances related to short running schedules in the first six months of 1999.
Gross profits for the last three months of 1999 will be adversely impacted by
short running schedules in the fourth quarter of 1999 and by aggressive pricing
strategies to further reduce inventories.
Selling, general and administrative expenses ("S,G&A") of $14.0 million
represent a decrease of $.9 million as compared to the third quarter of 1998. As
a percentage of sales, S,G&A expenses were 11.6% compared to 10.9% for the third
quarter of 1998. The percentage of sales was higher in 1999 due to the lower
sales level. For the nine-month period S,G&A expenses were $39.6 million, or
14.2% of sales, compared to $60.8 million, or 16.5% of sales, in the same period
in 1998. The primary reason for the decrease was the sale of LogoAthletic. A
reduction of $1.6 million in advertising and royalty expenses in the activewear
business was offset by higher computer equipment and software amortization of
$1.8 million.
The restructuring charge of $2.6 million represents severance and exit costs
related to the personnel reductions and the closing of the Bastian and Asheville
facilities.
<PAGE>
16
Interest expense for the third quarter of 1999 was $6.5 million compared to $7.3
million in the comparable period of 1998. The decrease for the third quarter
over the comparable period of 1998 is due to lower average borrowings, partially
offset by higher borrowing rates. Total borrowings for the third quarter
averaged $249.3 million as compared to $304.1 million in the third quarter of
1998. Third quarter 1999 working capital borrowings averaged $122.5 million at
an average rate of 9.4% compared to $104.7 million and 8.5%, respectively, for
the comparable period in 1998. The increase in the working capital borrowings
resulted from the purchase, of $70 million face value for $42 million, of the 9
5/8% and 10 5/8% Senior Notes on May 10, 1999. Interest expense for the
nine-month period was $19.1 million as compared to $22.4 million for the
comparable period in 1998. Total borrowings for the nine-month period averaged
$248.4 million as compared to $314.0 in 1998. The reduction in average
borrowings reflects the proceeds received from the sale of LogoAthletic during
the third quarter of 1998 and the debt refinancing on May 10, 1999. Working
capital borrowings for the first nine months of 1999 averaged $87.2 million at
an average rate of 9.2% compared to $114.6 million and 8.2%, respectively, for
the comparable period in 1998. The nature of the Company's business requires
extensive seasonal borrowings to support its working capital needs.
The asset impairment charge of $1.4 million represents an adjustment of the
carrying costs of the Bastian and Asheville facilities to their estimated net
realizable values.
The loss on sale of subsidiaries of $.9 million for the nine months ended
October 2, 1999 represents an estimated final purchase adjustment negotiated in
connection with the sale of LogoAthletic as allowed for in the Asset Purchase
Agreement. In the second quarter of 1998 an estimated loss of $16.3 million was
recorded for the sale of LogoAthletic.
The Company did not book an income tax benefit for the three months ended
October 2, 1999. The Company increased its deferred tax asset valuation
allowance due to the uncertain ability of the Company to generate future taxable
income and the resulting uncertain realization of tax loss carryforwards and
other deferred tax assets. The Company's effective tax rate of 13.4% for the
first nine months of 1999 differs from the federal statutory rate primarily due
to the increase in the valuation allowance. The effective tax rate for both
periods of 1998 was 39%.
YEAR 2000
- ---------
The Year 2000 issue is the result of computer systems and other equipment with
embedded chips using two digits, rather than four, to define the applicable
year. If a company's computer systems are not Year 2000 compliant, they may
recognize a date using "00" as the Year 1900 rather than the Year 2000. If not
corrected, computer applications could fail or create erroneous results which
could have a material adverse impact on a company's business, operations or
financial condition in the future.
The Company began addressing the Year 2000 issue in 1995 with the formation of a
Y2K Team. The Company is in the process of addressing Year 2000 compliance, both
internally and with third parties. The Company's objective is to confirm
compliance by December 23, 1999. Third parties that are not compliant at that
time may delay compliance. The Year 2000 Project is comprised of four phases:
1. Inventory of all hardware, software, local area networks, personal
computers,
<PAGE>
17
telecommunications equipment and software (data and voice), program
logic controllers (PLC) and non-information technology embedded
software and equipment.
2. Assessment of the inventory through testing for Year 2000
compliance.
3. Remediation of all affected systems. Systems will be modified,
upgraded or replaced as appropriate for compliance. Contingency
plans will be established for areas of concern.
4. Testing of internal system compliance and testing with customers and
suppliers will be performed on an ongoing basis until project
completion.
The Company has completed the inventory and assessment phases. The remediation
phase is scheduled for completion by December 23, 1999. The testing phase will
be ongoing as hardware and software are remedied, upgraded or replaced.
As part of the Year 2000 Project, the Company has implemented a new Enterprise
Resource Planning system (ERP), which has replaced 80% of the Company's Legacy
systems with Year 2000 compliant software. All major infrastructure, computers,
PC's and telecommunications equipment have been replaced with Year 2000
compliant hardware and software as part of the project. Additionally, the
Company has implemented the Year 2000 compliant versions of electronic data
interchange (EDI) systems with 80% of the Company's EDI customers. The company
is currently testing for compliance with the balance of its EDI customers with
completion scheduled for December 23, 1999. The remaining Legacy non-compliant
software has been identified. Upgrades or replacements for non-compliant
software and hardware are being implemented with testing to be completed by
December 23, 1999.
The Company relies on third party suppliers for raw materials, water, utilities,
transportation and other services. Interruption of supplier operations due to
Year 2000 issues could affect Company operations. The Company has initiated
efforts with all major suppliers to gauge compliance and exposure in these
areas. The Company has formally requested written confirmation of Year 2000
compliance from its major contractors and vendors. Approximately 95% have
responded to date. Should any vendor, supplier, equipment or process not be able
to conform within the prescribed timeframes, the Company will take appropriate
action to ensure continuity of its business. Contingency plans will be developed
for any area not able to conform within the prescribed timeframe. While
approaches to reducing risks of interruption due to supplier failures will vary
by facility, options include identifying of alternate suppliers, stockpiling raw
materials and adjusting operating schedules. Costs associated with any
contingency will be determined as this assessment continues.
Year 2000 Project costs are linked with the ERP implementation costs. Total
costs for both the Year 2000 Project and the ERP system implementation are
expected to be approximately $21.5 million. Of this total, $20.5 million has
been incurred and capitalized as part of the ERP implementation as of October 2,
1999. The remaining $1.0 million is specifically related to Year 2000 project
costs and is being expensed as incurred. These costs include external testing
with banks, vendors and customers, as well as EDI software upgrades. The Company
believes the remaining costs relating to the Year 2000 issue will not have a
material impact on the Company's consolidated financial position, results of
operations or cash flows.
Due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the readiness of third-party suppliers and customers, the Company is
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on the Company's results of operations,
<PAGE>
18
liquidity or financial condition. The Year 2000 Project is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
problem and about the Year 2000 compliance of its major suppliers and customers.
The Company believes that, with the implementation of its new ERP systems and
the completion of the Year 2000 Project as scheduled, the possibility of
interruptions of normal operations is reduced.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
For the first nine months of 1999, net cash used by operations of $38.5 million
reflects the net loss of $23.2 million and the seasonal increase in inventories
and accounts receivable of $8.5 million and $13.4 million, respectively.
Inventories traditionally increase during the first half of the year to support
second half shipments. Receivables normally build to a peak in September and
October and begin to decline in December as shipment volume decreases and cash
is collected. Increases in accounts payable and accrued expenses of $11.1
million and refunds of income taxes of $8.8 million partially offset these uses
of cash. Cash used by investing activities was $.4 million in 1999. The cash
used in 1999 reflects capital expenditures of $3.8 million, partially offset by
the sale of non-operating properties of $1.0 million and the surrender of
certain life insurance policies. Cash provided by financing activities of $34.3
million in 1999 was primarily used for working capital requirements.
On December 3, 1999, the Company filed voluntary petitions to reorganize under
Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court for the
Western District of Virginia, Lynchburg Division, Case # 99-03626. The Company
has obtained $150 million of senior secured super priority debtor-in-possession
("DIP") financing from Bank of America, N.A. and other lenders ("BA"). The
Company also announced it closed six manufacturing facilities in Virginia, North
Carolina and Jamaica, closed its distribution center in Martinsville, Virginia,
downsized the manufacturing operation in Martinsville and is closing 25 retail
store outlets. This immediate downsizing of the Company resulted in the loss of
approximately 2,600 jobs. The downsizing plans were developed subsequent to
October 2, 1999 and, accordingly, the Company will record restructuring and
asset impairment charges relating to the plant closings and employee reductions
in the quarter ending January 1, 2000.
The Company is currently operating its business as a debtor-in-possession,
subject to the supervision of the Bankruptcy Court. As a debtor-in-possession,
the Company is authorized to operate its business but not engage in transactions
outside the normal course of business without approval, after notice and
hearing, of the Bankruptcy Court. In addition, the Company may reject executory
contracts and lease obligations, and parties affected by these rejections may
file claims with the Bankruptcy Court. As part of its "first day orders", the
Bankruptcy Court approved authorization to retain various professionals to
assist in the reorganization; to pay certain pre-petition employee wages,
salaries and related items; to pay certain pre-petition customer obligations; to
pay certain pre-petition claims of foreign creditors and certain critical
vendors; and to close certain stores, which will result in conducting store
closing sales and rejecting certain real property leases. The Court also
approved the Company's DIP financing on an interim basis.
The DIP financing replaces the asset-based secured facility dated May 7,1999
with BA. The DIP financing will be used to refinance certain debt owed on the
previous asset-based secured facility, fund working capital requirements and
guarantee letter of credit obligations during the pendency of the Chapter 11
Case, and fund general corporate purposes in the ordinary course of business. BA
will lend funds subject to availability under a borrowing base calculated as a
percentage of eligible accounts receivable and
<PAGE>
19
inventories, provided that the total amount advanced will not exceed $150
million. The Company has the option of setting interest rates equal to either
the Prime Rate or London Interbank Offered Rate ("LIBOR") plus applicable
margins. The applicable margin for a Prime Rate loan is 1.75% and 3.75% for a
LIBOR based loan. The Company shall pay a fee of .375% per year on any unused
borrowings. A $12 million sublimit under the facility is available for letters
of credit.
Significant financial covenants under the DIP financing include a minimum sales
covenant and a maximum loan balance covenant. Other covenants place restrictions
on the Company's ability to incur additional indebtedness, pay dividends, create
liens or other encumbrances, to make certain payments, investments, loans and
guarantees and to sell or otherwise dispose of its assets.
While under bankruptcy protection, the Company does not expect to pay the
interest obligations on the 10 5/8% Senior Notes, 9 5/8% Senior Notes or the
convertible subordinated notes unless ordered to do so by the Bankruptcy Court.
The Company believes that cash generated from operations together with the DIP
financing will be adequate to meet its working capital and capital expenditure
needs, although no assurances can be given in this regard. The Company is in the
process of communicating with principal vendors and customers. Management
believes the Company's customer relationships will continue and that it will
have adequate sources of raw materials and services available during the
reorganization period. However, the loss of major vendors or customers could
have a material adverse effect on the Company's results of operations and
financial condition.
Total borrowings at October 2, 1999 includes Senior Notes of $115.0 million,
$11.5 million of convertible subordinated notes and the Company's asset-based
secured credit facility, which has an outstanding balance of $123.8 million at
October 2, 1999. Total debt as a percentage of total capitalization was 66.3% as
of October 2, 1999 compared to 63.9% as of January 2, 1999.
On May 10, 1999 the Company entered into an asset-based secured facility which
had a maximum borrowing availability of $150 million with BA. This facilty has
now been replaced with the DIP financing discussed above. Proceeds from the
asset-based secured facility were used to pay all outstanding amounts under the
Company's former $87.5 million unsecured revolving credit facility and fund a
partial tender offer for the 9 5/8% and 10 5/8% Senior Notes. As a result of the
refinancing the Company purchased $70 million face value of the notes for $42
million and retired the former revolving credit facility borrowings and accrued
interest of $54.5 million by a payment of $39.5 million in cash and the
forgiveness of $15.0 million of borrowings by the former lenders. Interest
payments on these notes were changed to quarterly instead of semiannually.
Significant financial covenants of the asset-based secured facility included the
requirement to maintain a minimum fixed charge coverage ratio on a quarterly
basis, the requirement to maintain EBITDA at certain levels during the second
and third quarters of fiscal year 1999 and annual limitations on capital
expenditures. Other covenants placed restrictions on the Company's ability to
incur additional indebtedness, pay dividends, create liens or other
encumbrances, to make certain payments, investments, loans and guarantees and to
sell or otherwise dispose of a substantial portion of its assets.
The Company was not in compliance with financial covenants contained in its
asset-based secured credit facility and its Senior Notes as of October 2, 1999,
and did not obtain waivers relating to the non-
<PAGE>
20
compliance. On December 3, 1999 the Company filed voluntary petitions to
reorganize under Chapter 11 of the Federal Bankruptcy Code, which also
constituted an event of default under its convertible subordinated notes.
Accordingly, all amounts under the Senior Notes and convertible subordinated
notes have been reported on the balance sheet as current liabilities.
On July 15, 1999 the holders of the Company's $14.4 million convertible
subordinated notes exercised their options to convert 20% of the original
principal amount of the notes into 4,609,600 shares of the Company's common
stock. The number of shares were determined by dividing the principal amount of
the notes converted by the closing price of the Company's common stock on the
business day prior to the submission of notes for conversion. The conversion
provision of the notes allows the noteholders to convert annually, beginning
April 15, 1999, up to 20% of the original principal amount of the notes into the
Company's common stock at the then market price. The annual option to convert up
to 20% of the original principal amount is noncumulative.
TULTEX CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
The following reports on Form 8-K were filed during the quarter for which
this report was filed:
1. Current report on Form 8-K dated July 15, 1999 and filed on August 5, 1999
reporting under Item 5 the conversion of 20% of the Registrant's $14.4
million of subordinated notes into 4,609,600 shares of the Registrant's
common stock.
2. Current report on Form 8-K dated August 13, 1999 and filed on August 17,
1999 reporting under Item 5 the press release issued by the Registrant
announcing the appointment of a new President and CEO.
3. Current report on Form 8-K dated December 3, 1999 and filed on December 8,
1999 reporting under Item 3, the filing of voluntary petitions to
reorganize under Chapter 11 of the Federal Bankruptcy Code.
4. Current report on Form 8-K/A dated December 3, 1999 and filed on December
9, 1999 reporting Amendment No. 1 to Form 8-K filed on December 8, 1999.
Items 1, 2, 3, 4 and 5 are inapplicable and are omitted.
<PAGE>
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TULTEX CORPORATION
(Registrant)
Date December 14, 1999 /s/ O. R. Rollins
----------------- ------------------
O. R. Rollins, President and Chief
Executive Officer
Date December 14, 1999 /s/ P. W. Harris, Jr.
----------------- ----------------------
P. Woolard Harris, Jr.,
Vice President and Chief Financial Officer
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-1-2000
<PERIOD-END> OCT-2-1999
<CASH> 1,119
<SECURITIES> 0
<RECEIVABLES> 92,404
<ALLOWANCES> 4,430
<INVENTORY> 185,272
<CURRENT-ASSETS> 277,898
<PP&E> 315,899
<DEPRECIATION> 221,796
<TOTAL-ASSETS> 432,221
<CURRENT-LIABILITIES> 298,704
<BONDS> 0
0
1,698
<COMMON> 34,676
<OTHER-SE> 90,759
<TOTAL-LIABILITY-AND-EQUITY> 432,221
<SALES> 278,234
<TOTAL-REVENUES> 278,234
<CGS> 271,961
<TOTAL-COSTS> 310,648
<OTHER-EXPENSES> 3,157
<LOSS-PROVISION> 920
<INTEREST-EXPENSE> 19,132
<INCOME-PRETAX> (55,623)
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<EXTRAORDINARY> 24,938
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