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 13 Weeks Ended April 5, 1996 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 May 13, 1996
Class A Common Stock-$.33 1/3 Par Value 2,701,727
Class B Common Stock-$.33 1/3 Par Value 3,515,415
---------
6,217,142
=========
HYDE ATHLETIC INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of April 5, 1996
and January 5, 1996
Condensed Consolidated Statements of Income for the
thirteen weeks ended April 5, 1996 and March 31, 1995
Condensed Consolidated Statements of Stockholders' Equity for
the thirteen weeks ended April 5, 1996 and March 31, 1995
Condensed Consolidated Statements of Cash Flows for the
thirteen weeks ended April 5, 1996 and March 31, 1995
Notes to Condensed Consolidated Financial Statements -
April 5, 1996
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signature
<TABLE> HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
<CAPTION> April 5, January 5,
1996 1996
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,549,816 $ 11,668,316
Marketable securities 150,390 307,500
Accounts receivable 28,506,090 17,361,195
Inventories 23,409,960 26,831,600
Prepaid expenses and other
current assets 3,493,788 3,021,479
------------ ------------
TOTAL CURRENT ASSETS 61,110,044 59,190,090
------------ ------------
PROPERTY, PLANT, AND EQUIPMENT, NET 8,117,279 8,122,937
------------ ------------
OTHER ASSETS
Investment in limited partnerships 753,433 753,433
Other assets 1,325,570 1,404,829
------------ ------------
TOTAL OTHER ASSETS 2,079,003 2,158,262
------------ ------------
TOTAL ASSETS $ 71,306,326 $ 69,471,289
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 4,314,080 $ 4,336,940
Accounts payable 4,174,132 5,055,967
Accrued expenses and other
current liabilities 4,492,297 3,136,653
Current maturities of long term debt 2,243,412 2,199,225
------------ ------------
TOTAL CURRENT LIABILITIES 15,223,921 14,728,785
------------ ------------
LONG TERM DEBT 4,529,533 4,205,568
------------ ------------
DEFERRED INCOME TAXES 2,020,828 2,001,655
------------ ------------
MINORITY INTEREST 345,103 170,227
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.33 1/3 par value 2,138,514 2,138,514
Additional paid in capital 15,521,470 15,521,470
Retained earnings 32,950,336 32,210,867
Accumulated translation (207,451) (257,694)
------------- -------------
Total 50,402,869 49,613,157
Less: Unearned compensation 162,138 194,313
Treasury stock 1,053,790 1,053,790
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 49,186,941 48,365,054
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 71,306,326 $ 69,471,289
============ ============
See notes to condensed consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED APRIL 5, 1996 AND MARCH 31, 1995
(Unaudited)
<CAPTION>
April 5, March 31,
1996 1995
---- ----
<S> <C> <C>
Net sales $31,891,893 $30,237,901
Other income 249,654 126,221
---------- -----------
Total revenue 32,141,547 30,364,122
---------- -----------
Costs and expenses
Cost of sales 22,587,788 20,376,734
Selling, general and
administrative expenses 7,889,063 8,478,030
Interest expense 263,198 435,168
---------- -----------
Total costs and expenses 30,740,049 29,289,932
---------- -----------
Income before income taxes
and minority interest 1,401,498 1,074,190
Provision for income taxes 526,618 417,103
Minority interest in income of
consolidated subsidiaries 135,411 28,148
---------- -----------
Net income $ 739,469 $ 628,939
========== ===========
Per share amounts:
Net income $0.12 $0.10
=========== ===========
Weighted average common shares
and equivalents outstanding 6,225,960 6,252,746
========== ===========
Cash dividends per share of
common stock 0 0
========== ===========
See notes to condensed consolidated financial statements
</TABLE>
<TABLE> HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THIRTEEN WEEKS ENDED APRIL 5, 1996 AND MARCH 31, 1995
(Unaudited)
<CAPTION> Stock-
Common Stock Paid-In Retained Treasury Stock Unearned Accumulated holders'
Class A Class B Capital Earnings Shares Amount CompensationTranslation Equity
------- ------- ------- -------- ------ ------ ----------------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $901,342 $1,236,705 $15,592,805 $30,619,761 180,700 ($ 977,103) ($447,211) ($171,471) $46,754,828
Amortization of unearned
compensation -- -- -- -- -- -- 55,302 -- 55,302
Net income -- -- -- 628,939 -- -- -- -- 628,939
Foreign currency translation
adjustments -- -- -- -- -- -- -- (195,858) (195,858)
------- ---------- ---------- --------- -------- ---------- ---------- --------- -----------
Balance, March 31, 1995 $901,342 $1,236,705 $15,592,805 $31,248,700 180,700 ($ 977,103) ($391,909) ($367,329) $47,243,211
======== ========== =========== =================== =========== ========== ======== ===========
Balance, January 5, 1996 $901,575 $1,236,939 $15,521,470 $32,210,867 198,400 ($1,053,790) ($194,313) ($257,694) $48,365,054
Amortization of unearned
compensation -- -- -- -- -- -- 32,175 -- 32,175
Net income -- -- -- 739,469 -- -- -- -- 739,469
Foreign currency translation
adjustments -- -- -- -- -- -- -- 50,243 50,243
------- ---------- ---------- --------- -------- ---------- ---------- -------- ----------
Balance, April 5, 1996 $901,575 $1,236,939 $15,521,470 $32,950,336 198,400 ($1,053,790) ($162,138) ($207,451) $49,186,941
======== ========== =========== =================== ============ ========== ========== ===========
See notes to condensed consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED APRIL 5, 1996 AND MARCH 31, 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
<CAPTION>
April 5, March 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 739,469 $ 628,939
------------- -------------
Adjustments to reconcile net income to
net cash
Provided (used) by operating activities:
Depreciation and amortization 365,645 274,480
Deferred income tax benefit (162,886) (217,656)
Provision for bad debts and discounts 1,786,267 1,652,865
Minority interest in income of
consolidated subsidiaries 135,411 28,148
Compensation from stock grants and
stock options 32,175 55,302
(Gain) loss on sale of equipment 4,372 (1,179)
Changes in operating assets and liabilities,
net of effects of foreign currency adjustments:
Decrease (increase) in assets:
Marketable securities 157,110 0
Accounts receivable (12,795,009) (4,892,398)
Inventories 3,512,645 1,888,125
Prepaid expenses and other current
assets (105,293) (1,093,658)
Increase (decrease) in liabilities:
Accounts payable (873,280) (1,029,366)
Accrued expenses 1,182,437 193,331
------------- -------------
Total adjustments (6,760,406) (3,142,006)
-------------- --------------
Net cash used by operating activities (6,020,937) (2,513,067)
-------------- --------------
Cash flows from investing activities:
Purchases of property, plant and
equipment (252,763) (106,558)
Increase in deferred charges,
deposits and other (35,289) (9,273)
Proceeds from sale of equipment 76,896 846
------------- -------------
Net cash used by investing activities (211,156) (114,985)
-------------- --------------
Cash flows from financing activities:
Net short-term borrowings (124,697) 1,850,830
Repayment of long term debt
and capital lease obligations (108,430) (665,357)
Payment of termination benefit payable 0 (26,866)
Proceeds from long-term borrowings 419,766 0
------------- -------------
Net cash provided by financing activities 186,639 1,158,607
Effect of exchange rate changes on cash
and cash equivalents (73,046) (168,452)
-------------- --------------
Net decrease in cash and cash equivalents (6,118,500) (1,637,897)
Cash and equivalents at, beginning of
period 11,668,316 3,349,776
------------- -------------
Cash and equivalents at, end of period $ 5,549,816 $ 1,711,879
============= =============
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Incomes taxes $ 76,595 $ 427,385
============= =============
Interest $ 60,611 $ 585,564
============= =============
Non-cash investing and financing activities:
Property purchased under capital leases $ 42,740 $ 98,103
============= =============
See notes to condensed consolidated financial statements
</TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 5, 1996
(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 thirteen weeks
ended April 5, 1996, are not necessarily indicative of the results for the
entire year.
NOTE B - INVENTORIES
Inventories at April 5, 1996 and January 5, 1996, consisted of the following:
April 5, January 5,
1996 1996
---- ----
Finished Goods $ 19,907,336 $ 22,954,048
Work in Process 82,948 20,243
Raw Materials and Supplies 3,419,676 3,857,309
------------- -------------
$ 23,409,960 $ 26,831,600
============= =============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Thirteen Weeks Ended April 5, 1996 Compared to Thirteen Weeks Ended March 31,
1995
The Company's net sales increased by 5.5% to $31,892,000 for the thirteen weeks
ended April 5, 1996 from $30,238,000 for the thirteen weeks ended March 31,
1995.
Net sales of the Company's Saucony products increased by 10%, to $25,709,000, in
the first quarter of 1996 over the comparable fiscal period in 1995, reflecting
both greater volume of units shipped and higher selling prices. Saucony
domestic sales were up 15% in the first quarter of 1996 over the comparable 1995
period due to a greater volume of units sold and higher selling prices, while
foreign sales were flat in the first quarter of 1996 in comparison with the
first quarter of 1995. Sales decreases were recognized by all foreign Saucony
subsidiaries, with the exception of Saucony Canada, in the first quarter of
1996 in comparison with the first quarter of 1995. Sales to the Company's
foreign Saucony distributors were down by 1% in the first quarter of 1996 in
comparison with the first quarter of 1995.
Net sales of the Company's Brookfield products decreased by 31%, to $3,254,000,
for the quarter ended April 5, 1996 compared with the first quarter of 1995.
Domestic sales decreased by 54% , primarily as a result of decreased unit sales
and lower selling prices. Brookfield's foreign sales increased by 117% in the
first quarter of 1996, reflecting a greater volume of units shipped compared
with the first quarter in 1995.
Other Income increased in the 1996 fiscal period to $250,000 from $126,000 in
the comparable period in fiscal 1995, due primarily to greater income from short
term investments and net currency exchange gains.
The Company's gross profit decreased by 5.7%, to $9,304,000, in the first
quarter of 1996 in comparison with the 1995 first quarter. The gross margin
decreased to 29.2% in the first quarter of 1996 in comparison with the gross
margin of 32.6% in the 1995 period. The margin decrease at Saucony resulted
from increased sales of lower priced, lower margin footwear in the 1996 period.
The decline in the Brookfield gross margin resulted from a greater ratio of
lower margin international and domestic product sales to higher margin
international and domestic product sales in the fiscal 1995 period.
Selling, general and administrative expenses as a percentage of net sales
decreased to 24.7% of net sales for the thirteen week period ended April 5, 1996
from 28% in the comparable 1995 fiscal quarter. Selling expenses were reduced
by approximately $300,000 primarily as a result of a decrease in commissions
during the quarter, as compared to the comparable 1995 fiscal quarter due to a
change in the sales mix to lower priced products, which are commissionable at
lower rates. General and administrative expenses decreased by $300,000
primarily due to reductions in professional fees, bad debt expense and payroll.
Interest expense decreased approximately 40% in the first quarter of 1996 in
comparison with the first quarter of 1995, reflecting the paydown of long term
debt and debt reduction realized as a result of the sale by the Company of its
limited partnership investment.
The provision for income tax of 37.6% in the first quarter of 1996 reflected a
decrease from 38.8% for the comparable quarter in 1995. The decrease resulted
from a shift in the composition of foreign and domestic pretax profits.
LIQUIDITY AND CAPITAL RESOURCES
As of April 5, 1996, the Company's cash and cash equivalents totalled
$5,550,000, a decrease of $6,118,000 from January 5, 1996. The decrease
resulted from an increase in accounts receivable of $11,009,000, net of the
provision for bad debts and discounts of $1,786,000, offset in part by a
decrease of $3,513,000 in inventory. The increase in accounts receivable was
due to increased net sales of the Company's Saucony product during the thirteen
week period ended April 5, 1996. Inventories decreased due to improved
inventory management and the sale of past season styles during the first
quarter. The Company's inventory turn ratio increased to 3.6 turns from 2.6
turns in the comparable thirteen week period in fiscal 1995. The Company's days
receivables outstanding decreased from the comparable period in fiscal 1995 to
81 days from 82 days.
For the thirteen weeks ended April 5, 1996 the Company used $6,021,000 of net
cash to finance operating activities, expended $253,000 to acquire capital
assets, received $77,000 from the sale of capital assets, reduced short-term
borrowings by $125,000, expended $108,000 to reduce long-term debt and borrowed
$420,000 on a long-term basis, secured by the Company's facility in St. Peters,
Australia.
Principal factors, other than net income, changes in accounts receivable and
inventory, affecting operating cash flows in the first quarter of 1996 include:
the sale of $157,000 of marketable securities; an increase in prepaid expenses
of $105,000 due to advertising payments; an $873,000 decrease in accounts
payable as a result of improved inventory management reducing required
purchases; and an increase in accrued expenses of $1,182,000 due primarily to
the higher selling, marketing and tax expenses associated with expanding the
business. The declining value of the U.S. dollar further decreased the value of
cash and cash equivalents by $73,000.
INFLATION AND CURRENCY RISK
The effect of inflation on the Company's results of operations over the past
three years has been minimal. The impact of currency fluctuation on the
purchase of inventory by the Company, from foreign suppliers, has been minimal
since the transactions were denominated in U.S. dollars. The Company, however,
is subject to currency fluctuation risk, with respect to the operating results
of the Company's foreign subsidiaries and certain foreign currency denominated
payables. The Company has entered into certain forward foreign exchange
contracts to minimize the transaction currency risk.
FASB 123
The Financial Accounting Standards Board issued Financial Accounting Standards
No. 123 `Accounting for Stock Based Compensation'' (SFAS No. 123) in October
1995. SFAS 123 establishes the financial accounting and reporting standards for
all stock-based compensation. SFAS 123 prescribes a fair value method of
accounting for stock options and other similar equity instruments and encourages
companies to adopt this accounting treatment for all stock-based compensation
plans. However, under SFAS 123, companies are permitted to continue to measure
compensation expense using the intrinsic value based method of accounting as
prescribed by APB Opinion No. 15, `Accounting for Stock Issued to Employees,''
provided that pro forma disclosures are made of net income and earnings per
share had the fair value method been adopted.
SFAS 123 is effective for fiscal years commencing after December 15, 1995. As
permitted by SFAS 123, the Company intends to continue to account for employee
stock compensation expense under the precepts of APB Opinion No. 25. The only
effect of adopting SFAS 123 will be the added disclosure requirements which will
be incorporated into the 10-K filing for the fiscal year 1996.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
11.00 - Computation of Earnings Per Share
27.00 - Financial Data Schedule
b. Reports on Form 8-K.
Form 8-K, dated March 21, 1996, was filed with the Securities and Exchange
Commission on March 21, 1996. The Form 8-K filed, under Item 5, included
certain `Cautionary Statements'' for the purpose of establishing a readily
available document which may be referenced pursuant to the `safe harbor''
provisions of the Private Securities Litigation Reform Act of 1995.
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: May 17, 1996 By: /s/Charles A. Gottesman
-----------------------
Charles A. Gottesman
Executive Vice President
Chief Operating Officer
(Duly authorized officer and
principal financial officer)
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
For the
Thirteen Weeks Ended
--------------------
April 5, March 31,
1996 1995
---- ----
<S> <C> <C>
PRIMARY
Net income applicable to common stock $ 739,469 $ 628,939
------------ ------------
Weighted average shares:
Average shares outstanding 6,217,142 6,233,442
Dilutive stock options based upon
application of the treasury stock
method using average market price 8,818 19,304
------------ ------------
Total shares 6,225,960 6,252,746
============ ============
Net income per share $ 0.12 $ 0.10
============ ============
FULLY DILUTED
Net income applicable to common stock $ 739,469 $ 628,939
------------ ------------
Weighted average shares
Average shares outstanding 6,217,142 6,233,442
Dilutive stock options based upon
application of the treasury stock method
using market price at end of period or
average market price, if greater 8,818 19,789
------------ ------------
Total shares 6,225,960 6,253,231
============ ============
Net income per share $ 0.12 $ 0.10
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Hyde
Athletic Industries, Inc. form 10-Q for the period ended April 5, 1996 and is
qualified in its entirety by reference to such 10-Q.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> APR-05-1996
<EXCHANGE-RATE> 1
<CASH> 5,549,816
<SECURITIES> 150,390
<RECEIVABLES> 28,506,090
<ALLOWANCES> 595,296
<INVENTORY> 23,409,960
<CURRENT-ASSETS> 61,110,044
<PP&E> 14,931,478
<DEPRECIATION> 6,814,199
<TOTAL-ASSETS> 71,306,326
<CURRENT-LIABILITIES> 15,223,921
<BONDS> 4,529,533
0
0
<COMMON> 2,138,514
<OTHER-SE> 47,048,427
<TOTAL-LIABILITY-AND-EQUITY> 71,306,326
<SALES> 31,891,893
<TOTAL-REVENUES> 32,141,547
<CGS> 22,587,788
<TOTAL-COSTS> 22,587,788
<OTHER-EXPENSES> 7,889,063
<LOSS-PROVISION> 184,765
<INTEREST-EXPENSE> 263,198
<INCOME-PRETAX> 1,401,498
<INCOME-TAX> 526,618
<INCOME-CONTINUING> 739,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 739,469
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
