SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the 26 Weeks Ended June 30, 1995 Commission File Number 0-05083
HYDE ATHLETIC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1465840
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
Centennial Industrial Park, 13 Centennial Drive, Peabody, MA 01960
(Address of principal executive offices)
508-532-9000
Registrant's telephone number (including area code)
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 [ ]
Class Outstanding as of July 31, 1995
Class A Common Stock-$.33 1/3 Par Value 2,701,027
Class B Common Stock-$.33 1/3 Par Value 3,532,415
---------
6,233,442
=========
HYDE ATHLETIC INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1995
and December 30, 1994
Condensed Consolidated Statements of Income for the
thirteen weeks and twenty-six weeks ended June 30, 1995
and July 1, 1994
Condensed Consolidated Statements of Stockholders' Equity
for the twenty-six weeks ended June 30, 1995 and July 1, 1994
Condensed Consolidated Statements of Cash Flows for the
twenty-six weeks ended June 30, 1995 and July 1, 1994
Notes to Condensed Consolidated Financial Statements -
June 30, 1995
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signature
Index Exhibit
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
<CAPTION>
June 30, December 30,
1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,912,138 $ 3,349,776
Accounts receivable 22,152,341 23,947,584
Inventories 29,584,551 31,863,443
Prepaid expenses and other current assets 3,675,594 2,460,952
----------- -----------
TOTAL CURRENT ASSETS 60,324,624 61,621,755
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT, NET 8,034,597 8,292,926
----------- -----------
OTHER ASSETS
Investments in limited partnerships 753,433 5,746,768
Other assets 1,303,879 1,420,882
----------- -----------
TOTAL OTHER ASSETS 2,057,312 7,167,650
----------- -----------
TOTAL ASSETS $70,416,533 $77,082,331
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 2,677,927 $ 2,825,120
Accounts payable 4,796,067 4,718,069
Accrued expenses and other current
liabilities 4,313,170 5,382,463
Current maturities of long term debt 2,130,413 2,732,208
----------- -----------
TOTAL CURRENT LIABILITIES 13,917,577 15,657,860
----------- -----------
LONG TERM DEBT 5,861,617 11,922,391
----------- -----------
DEFERRED INCOME TAXES 2,195,324 2,320,777
----------- -----------
MINORITY INTEREST 313,327 426,475
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.33 1/3 par value 2,138,514 2,138,047
Additional paid in capital 15,521,470 15,592,805
Retained earnings 32,087,737 30,619,761
Accumulated translation (274,930) (171,471)
------------ ------------
Total 49,472,791 48,179,142
Less: Unearned compensation 290,313 447,211
Treasury stock 1,053,790 977,103
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 48,128,688 46,754,828
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $70,416,533 $77,082,331
=========== ===========
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED JUNE 30, 1995 AND JULY 1, 1994
(Unaudited)
<CAPTION>
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
------- ------ ------- -------
<S> <C> <C> <C> <C>
Net sales $ 25,413,737 $ 24,744,815 $ 55,651,638 $ 50,859,025
Other income 859,868 240,981 986,089 370,831
------------- ------------ ------------- --------------
Total revenue 26,273,605 24,985,796 56,637,727 51,229,856
------------- ------------ ------------- --------------
Costs and expenses
Cost of sales 17,380,076 16,879,487 37,756,810 34,658,820
Selling, general and
administrative expenses 7,395,735 7,638,202 15,873,765 14,833,825
Interest expense 311,463 358,138 746,631 729,276
------------- ------------ ------------- --------------
Total costs and expenses 25,087,274 24,875,827 54,377,206 50,221,921
------------- ------------ ------------- --------------
Income before income taxes
and minority interest 1,186,331 109,969 2,260,521 1,007,935
Provision for income taxes 460,844 13,277 877,947 332,506
Minority interest in loss of
consolidated subsidiaries (113,550) (87,002) (85,402) (25,090)
-------------- ------------- -------------- ---------------
Net income $ 839,037 $ 183,694 $ 1,467,976 $ 700,519
============= ============ ============= ==============
Per share amounts:
Net income $0.13 $0.03 $0.23 $0.11
============= ============= ============= ==============
Weighted average common shares
and equivalents outstanding 6,245,913 6,457,466 6,249,313 6,456,682
============= ============= ============= ==============
Cash dividends per share of
common stock 0 0 $ 0 $ 0
============= ============ ============= ==============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE TWENTY-SIX WEEKS ENDED JUNE 30, 1995 AND JULY 1, 1994
(Unaudited)
<CAPTION> Additional
Common Stock Paid-In Retained Treasury Stock
Class A Class B Capital Earnings Shares Amount
------- ------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $ 915,937 $1,249,404 $16,287,197 $27,683,124 -- --
Issuance of 1,600 shares of
common stock, stock option
exercise 267 267 3,516 -- -- --
Retirement of 89,566 shares of
common stock (14,928) (14,929) (914,048) -- -- --
Issuance of below market options -- -- 237,925 -- -- --
Cancellation of below market
options -- -- (41,580) -- -- --
Amortization of unearned
compensation -- -- -- -- -- --
Net income -- -- -- 700,519 -- --
Foreign currency translation
adjustments -- -- -- -- -- --
--------- ---------- ---------- ---------- --------- ----------
Balance, July 1, 1994 $ 901,276 $1,234,742 $15,573,010 $28,383,643 -- --
========= ========== =========== =========== ========= ==========
Balance, December 31, 1994 $ 901,342 $1,236,705 $15,592,805 $30,619,761 $ 180,700 $ (977,103)
Issuance of 1,400 shares of
common stock, stock option
exercise 233 234 3,184 -- -- --
Cancellation of below market
options -- -- (74,519) -- -- --
Amortization of unearned
compensation -- -- -- -- -- --
Acquisition of 17,700 shares
of common stock, at cost -- -- -- -- 17,700 (76,687)
Net income -- -- -- 1,467,976 -- --
Foreign currency translation
adjustments -- -- -- -- -- --
--------- ---------- ---------- ---------- --------- ----------
Balance, June 30, 1995 $ 901,575 $1,236,939 $15,521,470 $32,087,737 198,400 $(1,053,790)
========= ========== =========== =========== ========= ============
<CAPTION>
Total
Unearned Notes Accumulated Stockholders'
Compensation Receivable Translation Equity
------------ ---------- ----------- ------
<S> <C> <C> <C> <C>
Balance, January 1, 1994 $ (950,354) $ (400,911) $ (74,573) $44,709,824
Issuance of 1,600 shares of
common stock, stock option
exercise -- -- -- 4,050
Retirement of 89,566 shares of
common stock 542,995 400,911 -- --
Issuance of below market options (237,925) -- -- --
Cancellation of below market
options 41,580 -- -- --
Amortization of unearned
compensation 26,968 -- -- 26,968
Net income -- -- -- 700,519
Foreign currency translation
adjustments -- -- (80,105) (80,105)
---------- ---------- ----------- ------------
Balance, July 1, 1994 $ (576,736) $ 0 $ (154,678) $45,361,256
=========== =========== =========== ===========
Balance, December 31, 1994 $ (447,211) $ -- $ (171,471) $46,754,828
Issuance of 1,400 shares of
common stock, stock option
exercise -- -- -- 3,651
Cancellation of below market
options 74,519 -- -- --
Amortization of unearned
compensation 82,379 -- -- 82,379
Acquisition of 17,700 shares
of common stock, at cost -- -- -- (76,687)
Net income -- -- -- 1,467,976
Foreign currency translation
adjustments -- -- (103,459) (103,459)
---------- ---------- ----------- ------------
Balance, June 30, 1995 $ (290,313) -- $ (274,930) $48,128,688
=========== ========== =========== ===========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 30, 1995 AND JULY 1, 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
<CAPTION>
June 30, July 1,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $1,467,976 $ 700,519
---------- ---------
Adjustments to reconcile net income to
net cash
Provided (used) by operating activities:
Depreciation and amortization 577,275 524,894
Deferred income tax benefit (375,806) (84,632)
Provision for bad debts and discounts 2,778,129 2,149,716
Minority interest in consolidated
subsidiaries loss (85,402) (25,090)
Compensation from stock grants and
stock options 82,379 26,968
Unrealized loss on marketable securities -- 41,686
Gain on sale of investment in limited
partnership (397,645) --
Changes in operating assets and liabilities:
Decrease (increase) in assets:
Marketable securities -- 2,470,444
Accounts receivable (1,030,190) (4,164,240)
Inventories 2,235,890 3,974,096
Prepaid expenses and other current
assets (964,996) 375,125
Increase (decrease) in liabilities:
Accounts payable 19,707 (250,925)
Accrued expenses (942,916) (411,647)
----------- ----------
Total adjustments 1,896,425 4,626,395
---------- ---------
Net cash provided by
operating activities 3,364,401 5,326,914
---------- ---------
Cash flows from investing activities:
Purchases of property, plant and
equipment (146,027) (204,829)
Increase in deferred charges,
deposits and other (51,652) (196,672)
Proceeds from sale of investment
in limited partnership 1,335,289 --
---------- ---------
Net cash provided (used) by
investing activities 1,137,610 (401,501)
---------- ----------
Cash flows from financing activities:
Net short term borrowings (177,511) 908,679
Repayment of long term debt
and capital lease obligations (2,695,918) (2,445,058)
Payment of termination benefit payable (26,866) (149,342)
Common stock repurchased (76,687) --
Issuances of common stock, including
options 3,651 4,050
---------- ---------
Net cash used by financing activities (2,973,331) (1,681,671)
Effect of exchange rate changes on cash
and cash equivalents 33,682 (226,142)
---------- ----------
Net increase in cash and cash equivalents 1,562,362 3,017,600
Cash and equivalents at, beginning of
period 3,349,776 10,013,166
---------- ----------
Cash and equivalents at, end of period $4,912,138 $13,030,766
========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Incomes taxes $1,204,406 $ 570,772
========== =========
Interest $1,015,067 $ 652,796
========== =========
Non-cash investing and financing
activities:
Property purchased under capital
leases $ 98,103 $ 65,512
Sale of investment in limited partnership
Cash received, net of broker fees $1,335,289 --
Investment in limited partnership (4,993,335) --
Current liabilities (796,568) --
Long-term debt (3,259,123) --
----------- ---------
Gain realized on sale 397,645 --
========== =========
Reconciliation of assets acquired
and liabilities assumed, business
acquisitions
Assets acquired $ 62,777 --
Liabilities assumed 62,777 --
---------- ---------
Cash paid for business acquisitions $ -- --
========== =========
<FN>
See notes to condensed consolidated financial statements
</TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principals. In the opinion of Management, all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation have been included. Operating results for twenty-six weeks
ended June 30, 1995, are not necessarily indicative of the results for the
entire year.
NOTE B - INVENTORIES
Inventories at June 30, 1995 and December 30, 1994 consisted of the following:
June 30, December 30,
1995 1994
---- ----
Finished Goods $ 25,550,405 $ 24,722,893
Work in Process 35,114 71,700
Raw Materials and Supplies 3,999,032 7,068,850
---------------- --------------
$ 29,584,551 $ 31,863,443
================ ==============
NOTE C - OTHER INCOME
On June 1, 1995 the Company sold its entire interest, as a limited partner, in
the Columbia Housing Partners Corporate Tax Credit II Limited Partnership, for
the sum of $5,501,000. Net proceeds totalled $1,335,000 resulting in a pre-tax
gain of $398,000, after transaction expenses, or $.03 per share after tax. The
after tax gain is based upon projected tax credits and passive losses provided
by the general partner. As a result of the sale, the Company realized
reductions in current and long-term debt of $4,056,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED JUNE 30, 1995 COMPARED TO THIRTEEN WEEKS ENDED JULY 1, 1994
Net sales increased approximately 3% to $25,414,000 for the thirteen weeks ended
June 30, 1995, compared to $24,745,000 for the thirteen weeks ended July 1,
1994, primarily as a result of increased international sales of both Saucony and
Brookfield products. An increase of approximately 57% in foreign sales of
Saucony products, reflecting both higher selling prices and greater unit volume,
was offset by a decrease of approximately 10% in Saucony domestic sales,
resulting in an overall Saucony sales increase of approximately 4%. Foreign
sales of Brookfield products increased by approximately 73% due to increased
volume of Barbie and other licensed product sales. Domestic Brookfield sales
declined by approximately 15%, resulting in overall Brookfield sales declining
approximately 4%.
The Company's gross profit increased by approximately 2%, to $8,034,000, in the
second quarter of 1995 in comparison with the comparable 1994 quarterly period.
The gross margin was 31.6%, which was .2% lower than the gross margin of 31.8%
in the comparable 1994 quarterly period. The gross margin from sales of Saucony
products increased over the 1994 period due primarily to lower levels of close-
out merchandise sales by foreign subsidiaries in 1995. The decrease in gross
margin from sales of Brookfield products resulted from the higher percentage of
international sales, which have a lower gross margin than domestic sales, in the
1995 quarterly period.
Selling, general and administrative expenses as a percentage of net sales
decreased by 1.8% to 29.1% of net sales for the 1995 quarterly period from 30.9%
in the comparable 1994 quarter. Advertising and promotion decreased by
approximately $770,000, primarily due to reductions in television production and
related costs, print ads and agency fees. Selling expenses increased by
approximately $400,000, due primarily to increases in payroll and trade show
costs. In addition, general and administrative expenses increased by
approximately $100,000 due to increased professional service costs and the
addition of the Company's German subsidiary, Saucony GmbH, which did not exist
in the comparable period in 1994.
Other income increased by approximately $600,000 or 256% for the quarter ended
June 30, 1995 compared with the same period in 1994, primarily as a result of
the gain on the sale of the Company's investment in a limited partnership and
increased royalty income.
Interest expense decreased by approximately $46,000 in the second quarter of
1995 in comparison with the comparable period in 1994, reflecting a paydown of
the Company's long term debt.The effective tax rate of 38.8% in the second
quarter of 1995 increased from 12.0% in the comparable period in 1994. The
tax rate of 12% in the quarterly period ended July 1, 1994 was due to the
relative effect of fixed tax credits,from the Company's tax related investment,
on lower levels of income before tax for the period.
TWENTY-SIX WEEKS ENDED JUNE 30, 1995 COMPARED TO TWENTY-SIX WEEKS ENDED JULY 1,
1994
For the twenty-six weeks ended June 30, 1995, net sales increased by 9.4% to
$55,652,000 from $50,859,000 for the twenty-six weeks ended July 1, 1994. Net
sales of Saucony brand products increased by approximately 8.5% to $41,846,000
for the twenty-six week period ended June 30, 1995, compared to $38,615,000 for
the twenty-six week period ended July 1, 1994. Foreign sales of Saucony
products increased by approximately 33% while sales in the domestic market
remained relatively flat in the comparable twenty-six week periods. Net sales
of Brookfield products increased by 9% to $9,839,000 from $9,027,000, during the
twenty-six week period ended June 30, 1995 in comparison with the comparable
period in fiscal 1994. Domestic Brookfield sales during the comparative periods
remained relatively flat while international sales nearly doubled.
The Company's gross profit grew by approximately 10% to $17,895,000 for the
twenty-six week period ended June 30, 1995 compared with the first twenty-six
weeks of 1994. The gross margin grew by .3% to 32.2% in the 1995 period from
31.9% in the 1994 period. Margin increases in the Saucony brand were largely
attributable to lower levels of close-out merchandise sales by foreign
subsidiaries in 1995. Brookfield margins remained flat over the comparable
twenty-six week periods.
Selling, general and administrative expenses decreased as a percentage of sales
by .7% to 28.5% of net sales for the twenty-six week period ended June 30, 1995
from 29.2% in the comparable 1994 period. Advertising and promotion was reduced
by approximately $500,000, due primarily to reductions in television production
and related costs, print ads and agency fees. Other selling expenses grew
mainly due to increases in sales commissions, payroll and trade show costs.
General and administrative expense increases of approximately $700,000 were due
to increased professional service costs, an increase in bad debt expense and the
addition of the Saucony subsidiary in Germany which did not exist in the 1994
period.
Other income increased by approximately $615,000 or 165% for the twenty-six week
period ended June 30, 1995 in comparison with the first twenty-six weeks of
1994, primarily as a result of the gain on the sale of the Company's investment
in a limited partnership and increased royalty income. The royalty payment was
the final payment under a litigation settlement; accordingly, income in future
periods will decrease from the current level.
Interest expenses increased by approximately $17,000 in the 1995 period.
Foreign interest expense grew due to increased borrowings by the Company's
foreign subsidiaries under their bank lines of credit while domestic interest
expense decreased due the paydown of the Company's long term debt.
The effective tax rate rose to 38.8% for the twenty-six week period ended June
30, 1995 compared with 33.0% for the comparable period in 1994. The lower tax
rate in 1994 is attributable to the relative effect of fixed tax credits, from
the Company's tax related investment, on lower levels of income tax for the
period.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, the Company's cash and cash equivalents totalled
$4,912,000, an increase of approximately $1,562,000 from December 30, 1994.
For the twenty-six weeks ended June 30, 1995, the Company generated $3,364,000
of net cash from operations, expended $146,000 for capital expenditures,
expended $2,723,000 to reduce long-term debt and other long-term commitments,
expended $77,000 to repurchase shares of the Company's Common Stock, reduced
short-term borrowings by $178,000 and received $1,335,000 in cash as the result
of the sale of an investment in a tax credit limited partnership. As part of
the sale of this investment, the Company realized a reduction of $4,056,000 of
debt, of which $3,259,000 was long-term.
Principal factors (other than net income) affecting the Company's cash flow from
operations in this period included a decrease in accounts receivable, net of the
increased provision for bad debts and discounts, of $1,748,000, as a result of
seasonal payment patterns, a decrease in inventories of $2,236,000 (due to lower
Saucony inventory requirements), an increase in prepaid expenses and other
current assets of $965,000 (due to advance payments for advertising and
promotions) and a decrease in accrued expenses of $943,000 (due to the payment
of year end bonuses, lower royalties payable due to the seasonality of the
retail industry and lower interest payable as the result of the reduction in
interest expense and the timing of interest payments). The increase in the
provision for bad debts resulted from the bankruptcy of a retailer.
INFLATION AND CURRENCY RISK
The Company has experienced minimal impact of inflation over the past three
years. The Company has also experienced minimal impact due to currency
fluctuations because substantially all purchases from foreign suppliers and
sales to customers to date have been denominated in United States dollars.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company held its Annual Meeting of Stockholders (the `Annual Meeting') on
May 16, 1995. At the Annual Meeting, the stockholders of the Company elected
James A. Buchanan, John H Fisher, Phyllis H. Fisher, Charles A. Gottesman,
Jonathan O. Lee and John J. Neuhauser as directors of the Company (by votes of
2,378,900 shares of Class A Common Stock in favor of each nominee and 38,662
shares of Class A Common Stock withheld from each nominee).
At the Annual Meeting, stockholders holding 2,395,510 shares of Class A Common
Stock voted to ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the 1995 fiscal year. Stockholders
holding 19,007 shares of Class A Common Stock voted against such ratification
and stockholders holding 3,045 shares of Class A Common Stock abstained. No
`broker non-votes' were recorded at the Annual Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.01 - Employment Agreement, dated as of June 1, 1995, between the
Registrant and Wolfgang Schweim.
11.00 - Computation of Earnings Per Share
27.00 - Financial Data Schedule
b. Reports on Form 8-K.
None.
SIGNATURE
Pursuant to the requirements 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.
HYDE ATHLETIC INDUSTRIES, INC.
Date: August 11, 1995 By: /s/Charles A. Gottesman
-----------------------
Charles A. Gottesman
Executive Vice President
Chief Operating Officer
(Duly authorized officer and
principal financial officer)
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.01 Employment Agreement, dated as of June 1,
1995, between the Registrant and Wolfgang
Schweim
11.00 Computation of Earnings Per Share
27.00 Financial Data Schedule
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of this 1st day of
June, 1995, is entered into by Hyde Athletic Industries, Inc., a Massachusetts
corporation with its principal place of business at Centennial Industrial Park,
13 Centennial Drive, Peabody, Massachusetts 01961 (the "Company"), and Wolfgang
Schweim, residing at Sagamore Road, Hamilton, Massachusetts (the "Employee").
The Company desires to employ the Employee, and the Employee desires to be
employed by the Company. In consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Employee,
and the Employee hereby accepts employment with the Company, upon the terms set
forth in this Agreement, for the period commencing on the date hereof (the
"Commencement Date") and ending on May 31, 1997, unless sooner terminated in
accordance with the provisions of Section 4 (such period, the "Employment
Period"). Notwithstanding the foregoing, the Company shall have no obligation
to employ the Employee in the United States prior to the time that the Employee
obtains a visa that will enable the Company to employ him. The Company shall
use its best efforts to obtain such a visa for the Employee.
2. Title; Capacity. During the Employment Period, the Employee shall
serve as President of the Company's Saucony athletic footwear operations (the
"Saucony Division"). During the Employment Period, the Employee shall be
subject to the supervision of, and shall have such authority as is delegated to
him by, the President and Chief Executive Officer and the Executive Vice
President and Chief Operating Officer of the Company, or each of them acting
singly (the "Office of the President"). The Employee shall be based at the
Company's headquarters in Peabody, Massachusetts, or such place or places in the
continental United States as the Office of the President shall determine. The
Company may transfer the Employee to its European offices from time to time.
Each such transfer shall last no longer than two months. The Employee's
compensation and benefits during such periods of transfer shall be no less those
provided under this Agreement.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Office of the President shall from time to time
reasonably assign to him. During the Employment Period, the Employee agrees to
devote his full business time, best efforts, business judgment, skill and
knowledge to the advancement of the Company and its interests and to the
discharge of his duties and responsibilities hereunder. The Employee shall not
engage in any other business activity, except as may be approved by the Office
of the President in advance. The Employee agrees to abide by the rules,
regulations, instructions, personnel practices and policies of the Company and
any changes therein which may be adopted from time to time by the Company.
3. Compensation and Benefits.
3.1 Salary. The Company shall pay the Employee, in installments
payable every two weeks, an annual base salary of $200,000 (the "Base Salary"),
subject to adjustment as provided in the next sentence. Commencing with the
contract year which begins on June 1, 1996, for each contract year during the
Employment Period, the Base Salary shall be increased over the Base Salary in
effect as of the end of the preceding contract year by the same percentage as
that by which the U.S. Consumer Price Index, 1982=100, for Urban Wage Earners
and Clerical Workers, published by the United States Department of Labor, Bureau
of Statistics (or its successor equivalent index), as of June 1st of the year
for which such increase is being determined has increased over said Index as of
June 1st of the preceding contract year. In the event that the Employee is, or
is to be, employed for less than a full calendar month, the biweekly
installments of the Base Salary shall be appropriately adjusted.
3.2 Bonus. For each fiscal year of the Company beginning with fiscal
1995, the Employee shall be eligible to receive a cash bonus of up to 50% of his
Base Salary for such fiscal year, as determined in the sole discretion of the
Board of Directors of the Company (the "Board"), provided, however, that nothing
contained herein shall preclude the Board, in its sole discretion, from awarding
the Employee a bonus for any fiscal year of greater than 50% of the Employee's
Base Salary. The Company shall pay the Employee any bonus due under this
Section 3.2 as to any fiscal year by the 90th day after the end of such fiscal
year.
3.3 Fringe Benefits; Vacation. The Employee shall be entitled to
participate in all benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that the Employee's position,
tenure, salary, health and other qualifications make him eligible to
participate. The Employee shall be entitled to four weeks paid vacation per
calendar year, to be taken at such times as may be approved by the Office of the
President.
3.4 Life Insurance. During the Employment Period, the Company shall
obtain so-called term life insurance coverage on the life of the Employee on
such terms as are acceptable to the Office of the President providing for a
death benefit of $1,000,000, the beneficiary to be selected by the Employee.
3.5 Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
amount available for such travel, entertainment and other expenses may be fixed
in advance by the Board.
3.6 Automobile. During the Employment Period, the Company shall
provide the Employee with the use of a Jeep Grand Cherokee or comparable
vehicle. The Company shall pay and be responsible for all normal expenses of
operation of such automobile, including insurance, repairs and maintenance.
3.7 Temporary Housing; Moving Expenses. The Company shall provide
the Employee with temporary housing accommodations in the Peabody, Massachusetts
area for up to six months from the date hereof. The Company shall also
reimburse the Employee for reasonable moving and travel expenses, not to exceed
$10,000, incurred by him in moving himself, his wife and his children from
Germany to the Boston, Massachusetts area.
3.8 Airfare. The Company shall provide the Employee or members of
his family, as the case may be, with the following business class (or
equivalent) airfare: (a) two round-trip tickets from Germany to Boston,
Massachusetts, for the Employee's wife, to enable the Employee's wife to search
for a home in the Boston, Massachusetts area; (b) one one-way ticket from
Germany to Boston, Massachusetts for each of the Employee's children; and (c)
one round-trip ticket from Boston, Massachusetts to Germany for each contract
year during the Employment Period for the Employee, the Employee's wife and each
of the Employee's children.
3.9 Professional Services. During the Employment Period, the Company
shall retain the services of an accounting firm, at the Company's expense, to
assist the Employee in the preparation of his requisite tax returns. In
addition, during the Employment Period, the Company shall reimburse the Employee
for reasonable legal expenses, not to exceed $5,000 per contract year, incurred
by the Employee in connection with general personal matters.
3.10 Stock Options.
(a) Option Grants. Subject to compliance with applicable
securities laws, the Company shall grant the Employee as of the date hereof
three options (individually, a "Stock Option" and collectively, the "Stock
Options") to purchase an aggregate of 22,500 shares (7,500 shares per Stock
Option) of the Company's Class B Common Stock, $.33-1/3 par value per share (the
"Class B Common Stock"), at a per share price equal to the closing price of the
Class B Common Stock on the Nasdaq National Market ("Nasdaq") on the date hereof
(the "Closing Price").
(b) Option Terms. Subject to the provisions of Section 3.10(c),
each Stock Option shall have a term of five years and shall become exercisable
in five equal annual installments, on the date hereof and on the first through
fourth anniversary dates of the date hereof (the "Vesting Schedule"), so long as
the Employee shall remain in the employment of the Company on such dates. Each
Stock Option shall contain such other terms as are customary in options awarded
by the Company to its employees.
(c) Additional Vesting Provisions. In addition to the
requirements set forth in Section 3.10(b), (i) one Stock Option shall not become
exercisable (notwithstanding that the shares have become exercisable pursuant to
the Vesting Schedule) until the first day (if any) on which the Average Closing
Price (as defined below) for the Class B Common Stock equals or exceeds the sum
of the Closing Price plus $2.50 per share (subject to adjustment for stock
splits, stock dividends, subdivisions, combinations or reclassifications), and
(ii) a second Stock Option shall not become exercisable (notwithstanding that
the shares have become exercisable pursuant to the Vesting Schedule) until the
first day (if any) on which the Average Closing Price for the Class B Common
Stock equals or exceeds the sum of the Closing Price plus $5.00 per share
(subject to adjustment for stock splits, stock dividends, subdivisions,
combinations or reclassifications).
(d) Average Closing Price. For purposes of this Agreement,
"Average Closing Price" means, as of a particular date, the average of the
closing sales prices for the Class B Common Stock on Nasdaq, or, if the Class B
Common Stock is then listed on a national securities exchange, of the closing
sales prices of the Class B Common Stock on such exchange, as published in The
Wall Street Journal, for a period of 20 consecutive trading days prior to such
date, or, if the Common Stock is listed on neither Nasdaq nor a national
securities exchange, as determined in good faith by the Board of Directors of
the Company.
4. Employment Termination. The employment of the Employee by the Company
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
4.1 Expiration of the Employment Period in accordance with Section 1.
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this
Section 4.2, "cause" for termination shall be deemed to exist solely upon
(a) the occurrence of dishonesty, gross negligence or misconduct by the
Employee, or (b) the conviction of the Employee of, or the entry of a pleading
of guilty or nolo contendere by the Employee to, any crime involving moral
turpitude or any felony. For purposes of clause (a) of the previous sentence,
"misconduct" shall include without limitation alcoholism and drug abuse if not
cured within 30 days following notice from the Company.
4.3 Upon the death or disability of the Employee. As used in this
Agreement, the term "disability" shall mean the inability of the Employee, due
to a physical or mental disability, for a period of 90 days, whether or not
consecutive, during any 360-day period to perform the services contemplated
under this Agreement. A determination of disability shall be made by a
physician satisfactory to both the Employee and the Company, provided that if
the Employee and the Company do not agree on a physician, the Employee and the
Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties.
4.4 At the election of the Company, upon 90 days' written notice to
the Employee.
5. Effect of Termination.
5.1 Termination for Cause. In the event the Employee's employment is
terminated for cause pursuant to Section 4.2, the Company shall pay to the
Employee the compensation and benefits otherwise payable to him under Section 3
(other than Section 3.2) through the last day of his actual employment by the
Company.
5.2 Termination for Death or Disability. If the Employee's
employment is terminated by death or because of disability pursuant to
Section 4.3, the Company shall pay to the estate of the Employee or to the
Employee, as the case may be, the compensation and benefits to which the
Employee would otherwise be entitled under Section 3 (including without
limitation a pro rata portion of the bonus provided for in Section 3.2) through
the last day of his actual employment.
5.3 Termination at the Election of the Company. If the Employee's
employment is terminated by the Company pursuant to Section 4.4, the Company
shall pay to the Employee the compensation and benefits payable to him under
Section 3 (other than Section 3.2) at the times provided in Section 3 through
May 31, 1997.
5.4 Survival. The provisions of Sections 5, 6 and 7 shall survive
the termination of this Agreement.
6. Non-Compete.
(a) So long as the Employee is employed by the Company, and for a
period of two years after the termination or expiration of such employment, the
Employee will not directly or indirectly:
(i) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than one percent (1%) of the
total outstanding stock of a publicly held company), engage in the business of
developing, producing, marketing or selling products or performing services
competitive with the products or services developed or being developed,
produced, marketed, sold or performed by the Company, or under active
consideration by the Company for development, production, marketing, selling or
performing, while the Employee was employed by the Company; or
(ii) recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company to terminate their employment with, or
otherwise cease their relationship with, the Company; or
(iii) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company or known to the Employee as a result of his employment by the Company;
or
(iv) interfere in any manner in the relationships between the
Company and its suppliers.
(b) If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 6 are necessary for
the protection of the business and goodwill of the Company and are considered by
the Employee to be reasonable for such purpose. The Employee agrees that any
breach of this Section 6 will cause the Company substantial and irrevocable
damage and therefore, in the event of any such breach, in addition to such other
remedies which may be available, the Company shall have the right to seek
specific performance and injunctive relief.
(d) If at any time or from time to time during the noncompetition
period provided for in Section 6(a) hereof the Employee accepts new employment
with a third party, the Employee immediately shall notify the Company of the
identity and business of the new employer. Without limiting the foregoing, the
Employee's obligation to give notice under this Section 6(d) shall apply to any
business ventures in which the Employee proposes to engage even if not with a
third-party employer (such as, without limitation, a joint venture, partnership
or sole proprietorship). The Employee hereby consents to the Company notifying
any such new employer of the terms of this Agreement.
7. Inventions and Proprietary Information.
7.1 Inventions.
(a) All inventions, discoveries, computer programs, data,
technology, designs, innovations and improvements (whether or not patentable and
whether or not copyrightable) related to the business of the Company which are
made, conceived, reduced to practice, created, written, designed or developed by
the Employee, solely or jointly with others and whether during normal business
hours or otherwise, during his employment by the Company pursuant to this
Agreement ("Inventions"), shall be the sole property of the Company. The
Employee hereby assigns to the Company all such Inventions and any and all
related patents, copyrights, trademarks, trade names, and other industrial and
intellectual property rights and applications therefor, in the United States and
elsewhere and appoints any officer of the Company as his duly authorized
attorney to execute, file, prosecute and protect the same before any government
agency, court or authority. Upon the request of the Company, the Employee shall
execute such further assignments, documents and other instruments as may be
necessary or desirable to fully and completely assign all such Inventions to the
Company and to assist the Company in applying for, obtaining and enforcing
patents or copyrights or other rights in the United States and in any foreign
country with respect to any such Invention.
(b) The Employee shall promptly disclose to the Company all such
Inventions and will maintain adequate and current written records (in the form
of notes, sketches, drawings and as may be reasonably specified by the Company)
to document the conception and/or first actual reduction to practice of any such
Invention. Such written records shall be available to and remain the sole
property of the Company at all times.
7.2 Proprietary Information.
(a) The Employee acknowledges that his relationship with the
Company is one of high trust and confidence and that in the course of his
employment by the Company he will have access to and contact with Proprietary
Information. The Employee agrees that he will not, during the Employment Period
or at any time thereafter, disclose to others, or use for his benefit or the
benefit of others, any Proprietary Information or any Invention.
(b) For purposes of this Agreement, "Proprietary Information"
shall mean all information (whether or not patentable and whether or not
copyrightable) owned, possessed or used by the Company, including, without
limitation, any Invention, formula, formulation, vendor information, customer
information, apparatus, equipment, trade secret, process, research, report,
technical data, know-how, computer program, software, software documentation,
hardware design, technology, marketing or business plan, forecast, unpublished
financial statement, budget, license, price, cost and employee list that is
communicated to, learned of, developed or otherwise acquired by the Employee in
the course of his employment by the Company.
(c) The Employee's obligations under this Section 7.2 shall not
apply to any information that (i) is or becomes known to the general public
under circumstances involving no breach by the Employee of the terms of this
Section 7.2, (ii) is generally disclosed to third parties by the Company without
restriction on such third parties, (iii) is approved for release by written
authorization of the Board, or (iv) is communicated to the Employee by a third
party under no duty of confidentiality to the Company.
(d) Upon termination of this Agreement or at any other time upon
request by the Company, the Employee shall promptly deliver to the Company all
records, files, memoranda, notes, designs, data, reports, price lists, customer
lists, drawings, plans, computer programs, software, software documentation,
sketches, research notebooks and other documents (and all copies or
reproductions of such materials in his possession or control) belonging to the
Company.
(e) The Employee represents that the Employee's employment by
the Company and the performance by the Employee of his obligations under this
Agreement do not, and shall not, breach any agreement that obligates him to keep
in confidence any trade secrets or confidential or proprietary information of
his or of any other party or to refrain from competing, directly or indirectly,
with the business of any other party. The Employee shall not disclose to the
Company any trade secrets or confidential or proprietary information of any
other party.
7.3 Remedies. The Employee acknowledges that any breach of the
provisions of this Section 7 shall result in serious and irreparable injury to
the Company for which the Company cannot be adequately compensated by monetary
damages alone. The Employee agrees, therefore, that in addition to any other
remedy it may have, the Company shall be entitled to seek to enforce the
specific performance of this Agreement by the Employee and to seek both
temporary and permanent injunctive relief (to the extent permitted by law)
without the necessity of proving actual damages.
8. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or two days
after deposit in the United States mail, by registered or certified mail,
postage prepaid, return receipt requested, addressed to the other party at the
address shown above (and, in the case of any notice to the Company, with a copy
to David E. Redlick, Esq., Hale and Dorr, 60 State Street, Boston,
Massachusetts 02109), or at such other address or addresses as either party
shall designate to the other in accordance with this Section 8.
9. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement. In
addition, the Employment Agreement dated October 24, 1993 between the Employee
and Saucony, Inc. is hereby terminated in its entirety.
11. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
12. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
14. Miscellaneous.
14.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver
or consent given by the Company on any one occasion shall be effective only in
that instance and shall not be construed as a bar or waiver of any right on any
other occasion.
14.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
14.3 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
14.4 This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14.5 All payments provided for in this Agreement shall be subject to
such tax withholding and other governmental contributions as are required under
applicable law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
HYDE ATHLETIC INDUSTRIES, INC.
By: /Charles Gottesman
Title: Executive Vice President
Chief Operating Officer
EMPLOYEE
/Wolfgang Schweim
The undersigned executes
this Agreement solely for
purposes of its rights and
obligations under
Section 10:
SAUCONY, INC.
By: /Charles Gottesman
Title: Executive Vice President
Chief Operating Officer
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
For the For the
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
---- ----- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Net income applicable to
common stock $ 839,037 $ 183,694 $ 1,467,976 $ 700,519
------------ ------------- -------------- ------------
Weighted average shares:
Average shares outstanding 6,232,105 6,447,276 6,232,774 6,449,732
Dilutive stock options
based upon application
of the treasury stock
method using average
market price 13,808 10,190 16,539 6,950
------------ ------------- -------------- ------------
Total shares 6,245,913 6,457,466 6,249,313 6,456,682
============ ============= ============== ============
Net income per share $ 0.13 $ 0.03 $ 0.23 $ 0.11
============ ============= ============== ============
FULLY DILUTED
Net income applicable to
common stock $ 839,037 $ 183,694 $ 1,467,976 $ 700,519
------------ ------------- -------------- ------------
Weighted average shares:
Average shares outstanding 6,232,105 6,447,276 6,232,774 6,449,732
Dilutive stock options
based upon application of
the treasury stock method
using market price at end
of period or average market
price, if greater 13,793 10,155 17,313 7,110
------------ ------------- -------------- ------------
Total shares 6,245,898 6,457,431 6,250,087 6,456,842
============ ============= ============== ============
Net income per share $ 0.13 $ 0.03 $ 0.23 $ 0.11
============ ============= ============== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Hyde
Athletic Industries, Inc. 2nd quarter 10Q for the period ending June 30, 1995
and is qualified in its entirety by reference to such 10Q.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-05-1996
<PERIOD-END> JUN-30-1995
<CASH> 4,912,138
<SECURITIES> 0
<RECEIVABLES> 22,152,341
<ALLOWANCES> 498,422
<INVENTORY> 29,584,551
<CURRENT-ASSETS> 60,324,624
<PP&E> 14,164,488
<DEPRECIATION> 6,129,891
<TOTAL-ASSETS> 70,416,533
<CURRENT-LIABILITIES> 13,917,577
<BONDS> 5,861,617
<COMMON> 2,138,514
0
0
<OTHER-SE> 45,990,174
<TOTAL-LIABILITY-AND-EQUITY> 70,416,533
<SALES> 55,651,638
<TOTAL-REVENUES> 56,637,727
<CGS> 37,756,810
<TOTAL-COSTS> 37,756,810
<OTHER-EXPENSES> 15,873,765
<LOSS-PROVISION> 411,813
<INTEREST-EXPENSE> 746,631
<INCOME-PRETAX> 2,260,521
<INCOME-TAX> 877,947
<INCOME-CONTINUING> 1,467,976
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,467,976
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
